[Federal Register Volume 67, Number 86 (Friday, May 3, 2002)]
[Notices]
[Pages 28700-29273]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: X02-20503]



MTC-00029649

Wayne Stringer
1270 205th St
Fort Seott, KS 66701
January 26, 2002
Attorney Renata Hesse
Department of Justice, Antitrust Arty
601 D Street NW, Suite 1200
Washington. DC 20530
    Dear Attorney Hesse.
    I strongly encourage your support in accepting the proposed 
settlement in the Microsoft antitrust suit "Microsoft. has 
simply provided a product that meets a market demand at a price the 
consumer is willing to pay. If anything, their competitors have used 
similar tactics to grow their own business--in a sense. keeping 
the marketplace fair.
    The unfairness lies in Microsoft's competitors using the marts 
to accomplish what they couldn't do in the marketplace. ??'s Larry 
Ellison has very publicly decreed their he will unseat Microsoft as 
the number one player in the software industry, and he will do 
anything to accomplish that goal I sincerely object to this move to 
replace the free market system with court manipulation.
    With all due respect. I hope you object as welt.
    I encourage yore full acceptance and approval of the settlement. 
I truly believe it addresses all involved and allows Microsoft and 
the industry to move forward on a positive, note.
    Sincerely,
    Wayne Stringer
January 27, 2002, 11:40 pm
Antitrust Division
U.S. Dept. of Justice
601 D Street NW, Suite 1200
Washington DC, 20530-001
    To Whom It May Concern:
    I am writing to exercise my right under the Tunney Act to voice 
my strong disapproval of the current proposed settlement of the 
Microsoft anti-trust trial. The proposed settlement is both weak and 
lacking strong enforcement provisions, and is likely to have zero 
(or worse) effect on competition within the computer industry, with 
continued and increased harm to consumers in the form of fewer 
options in the software market and continued increases in the price 
of the Microsoft software consumers are forced to buy.
    Microsoft was convicted of abuse of monopoly power by one 
Federal judge, and the judgment was largely upheld by another seven 
Federal justices. In evaluating any proposed settlement, keep 
repeating one Important Phrase over and over: "Microsoft is 
guilty."
    The seven justices of the appeals court ruled that any actions 
taken against Microsoft (a) must restore competition to the affected 
market, (b) must deprive Microsoft of the "fruits of its 
illegal conduct," and (c) must prevent Microsoft from engaging 
in similar tactics in the future. The proposed settlement fails on 
every one of these.
    (A) Restore Competition
    Among the many flaws in the proposed settlement is the complete 
disregard for the Open Source software movement, which poses the 
single greatest competitive threat to Microsoft's monopoly.
    Most organizations writing Open Source software are not-for-
profit groups, many without a formal organization status at all. 
Section III(J)(2) contains strong language against non-for-profits, 
to say nothing of the even less-formal groups of people working on 
projects.
    Section III(D) also contains provisions which exclude all but 
commercially-oriented concerns.
    To restore competition the settlement must make allowances for 
Open Source organizations--whether formal not-for-profit 
organizations or informal, loosely associated groups of 
developers--to gain access to the same information and 
privileges afforded commercial concerns.
    (B) Deprivation of Ill-Gotten Gains
    Nowhere in the proposed settlement is there any provision to 
deprive Microsoft of the gains deriving from their illegal conduct. 
Go back to the Important Phrase: "Microsoft is guilty." 
In most systems of justice, we punish the guilty. But the current 
proposal offers nothing in the way of punishment, only changes in 
future behavior.
    Currently Microsoft has cash holdings in excess of US$40 
billion, and increases that by more than US$1 billion each month. A 
monetary fine large enough to have an impact on them would be a 
minimum of US$5 billion.
    Even a fine that large would be a minimal punishment. 
Microsoft's cash stockpile is used, frequently and repeatedly, to 
bludgeon competitors, buy or force their way into new markets, or 
simply purchase customers, with the long-term intent to lock people 
and organizations into proprietary software on which they can set 
the price. Taking a "mere" US$5 billion from their 
stockpile will have zero effect on this practice.
    For that reason, Microsoft's cash stockpile must be further 
reduced. In addition to the monetary fine, Microsoft should be 
forced to pay shareholders a cash dividend in any quarter in which 
they post a profit and hold cash reserves in excess of US$10 
billion. The dividend should be substantial enough to lower 
Microsoft's cash holdings by US$1 billion, or 10%, whichever is 
greater.
    (C) Prevention of Future Illegal Conduct
    The current proposed settlement allows Microsoft to effectively 
choose two of the three individuals who would provide oversight of 
Microsoft's conduct and resolve disputes. The proposed settlement 
also requires the committee to work in secret, and individuals 
serving on the committee would be barred from making public or 
testifying about anything they learn.
    This structure virtually guarantees that Microsoft will be 
"overseen" by a do-nothing committee with virtually zero 
desire or ability to either correct Microsoft abuses, or even call 
attention to them.
    Instead of the current proposal, a five-person committee should 
be selected. Microsoft may appoint one person, but will have no 
influence over any of the other four. For the four, two should be 
appointed by the Federal court of jurisdiction, one should be 
appointed by the U.S. Department of Justice, and one should be 
appointed by the U.S. Senate. At least two of the appointees should 
have technical experience and be competent to evaluate technical 
proposals and arguments by themselves, without the filters which 
assistants would bring.
    These are hardly the only thoughtful and reasonable suggestions 
you will no doubt receive regarding the proposed settlement of this 
anti-trust case. And these are hardly the only suggestions which 
should be adopted if the settlement is to prove effective. But all 
of them are essential to that aim, and adopt them you must,
    Thank you for your time and the opportunity to comment.
    Respectfully,
    Michael A. Alderete
    569 Haight Street
    San Francisco, CA 94117
    (415) 861-5758
    michael @ alderete.com



MTC-00029652

Ms. Renata Hesse
Antitrust Division
Department of Justice
601 D Street, NW, Suite 1200
Washington, DC 20530
    Dear Ms. Hesse:
    I am writing in supp ort of the consent decree for the Microsoft 
settlement. Microsoft has show itself to be an innovator and a 
company whose products make lives better for he average American. 
This lawsuit is bad for consumers and ba?? for the economy.
    By supper ting the consent degree, you will put an end to a 
lawsuit theft has become more political than substantive. The Bush 
administration priorities have been amazingly out of step and out of 
touch with the American public Hopefully they will at least get this 
one right and settle the suit. The I maybe we can all move on to a 
healthy economy and a healthy debate concerning the future of our 
nation.
    Thank you.
    Sincerely
    Tim Allison Executive Board Member
    CA Democratic Party
    Title for identification purposes only. This letter reflects the 
solely the opin on of the signer.



MTC-00029653

January 25, 2002
Renata hesse
Trial Attorney, Antitrust Division
Department of Justice
601 D Street, NW, Suite 1200
Washington, DC 20530
    Dear Ms. Hesse,
    The Microsoft Lawsuit Is Bad for Business and Bad for Consumers.
    For many, the idea of attacking one of the most successful 
companies in American history, and its CEO Bill Gates, sounds like 
fun. But the Department of Justice's pursuit of Microsoft is no 
laughing matter, having cost American taxpayers well over $35 
million in litigation so far and the meter is still running.
    The reality is that this lawsuit does nothing to benefit 
consummers. It does however benefit Microsoft's competitors, who 
after spending millions of dollars lobbying the Department of 
Justice to file this suit want a return on their investment. Also, 
it benefits the lawyers who have made a fortune on both

[[Page 28701]]

sides of this issue... and the Attorneys General and bureaucrats who 
are making political hay, back home by demonizing Microsoft. The 
real beneficiaries are the powerful anti-Microsoft forces not 
consumers.
    The Cost To Businesses and Consumers in Just Too High.
    Rather than protecting consumers, drastic remedies such as 
breaking up Microsoft would be a disaster for consumers and 
businesses. The integration and standardization Windows brought us 
has been a boon for the public as well as for our economic 
productivity. What Bill Gates understood, much to his 
competitors" chagrin, was that consumers- people who use 
computers, not live computers--want an affordable and reliable 
system that works with and understands other systems.
    Government intervention into the world of high tech programming 
and design sets a dangerous and potially disastrous precedent. 
Dictating to Microsoft what technology it can develop will decrease 
the effectiveness of existing products or meet the expanding needs 
of users could cripple the technological innovation that has been 
the hallmark of hour high tech, internet economy.
    One could argue in fact that the genesis of the huge decline in 
the Nasdaq, which so far has resulted in more than $2 trillion of 
lost wealth, is primarily the result of the government's sustained 
attack on Microsoft's right to innovate. After all, today Microsoft, 
tomorrow Intel.
    Over the past 10 years, Microsoft has lowered its prices, 
created a better product, and invested enormous sums of money in 
research and development. This doesn't sound like monopolistic 
behavior by any standard.
    The government's pursuit of Microsoft has cost the American 
taxpayer over $35 million so far with devastating results for state 
and private pension funds, and small investors, all over the 
country, [illigible] state pension funds have lost $144.2 billion. 
Here in California, since the March, 2000, break down of mediation 
on the case, Public Employee Retirement System funds have dropped 
more than $59 billion while the State Teacher Retirement fund lost 
$15 billion.
    We hope the consent decree is adopted and the federal lawsuit is 
dropped. If not, it may be time to [illegible] our elected 
representatives to do the right thing and allow Microsoft to 
continue its history of investment, innovation and improvement The 
American economy depends on it.
    Sincerely
    Joe [illegible]
    Executive Director, SBCTA
    214 East Victoria Street,
    Santa Barbara, California 93101
    Tel: 805.965.9415
    Fax: 565-7915
    email: info @ sbcta.org www.sbcta.org



MTC-00029654

January 9, 2002
Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D S??et NW, Suite 1200
Washington, DC 20530
    Dear Ms. Hesse,
    As a member of the North Carolina General Assembly, I have 
always sought to make government a cooperative partner of business 
and industry. After all, business and industry creates jobs that 
enhance the lives of countless North Carolinians.
    For several years, I have witnessed the federal government's 
pursuit of a lawsuit against Microsoft, one of the most successful 
companies in the history of American business. This suit has cost 
the taxpayers upwards of $30 million over the past years.
    I request that Judge Kollar Kotelly approve the settlement that 
the Department of Justice and Microsoft have both agreed upon. In 
addition, I am pleased to say that my state, North Carolina, has 
also signed the agreement and decided to settle.
    In spite of the fact that nine state attorneys general plan to 
prolong their cases against Microsoft, I believe the federal case 
should be settled.
    Sincerely,
    Jeffrey L. Barnhart
    State Representative



MTC-00029655

January 23, 2002
Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D Street, NW suite 1200
Washington, DC 20530
    Dear Ms. Hesse,
    As a business executive who travels to Chicago on business from 
my home in Greensboro nearly every week, I know how important 
Microsoft's business technology is to American business, In fact, I 
find Microsoft's products to be bery helpful when I travel abroad on 
business as well.
    I realize that not everyone travels to the extent that I do, but 
I would imagine that most people who work In business do rely on 
Microsoft products to a great extent. And shouldn't they? 
Microsoft's products are universally recognized as the industry 
leader and they've improved communication for American businesses, 
schools and government.
    Virtually everyone uses Microsoft's products, Executives, 
attorneys, entrepreneurs, educators and government officials know 
that Microsoft is the universal leader in technological innovation 
They all have great confidence In Microsoft's products to get the 
job done.
    I read recently that Microsoft and the federal government agreed 
to settle the antitrust lawsuit they've been engaged in for a number 
of years. That's good news for businesses, families, the stock 
market and the American economy, our economy needs a shot in the arm 
at this point in time, and I believe that this settlement will 
provide it, I request that Judge Kollar-Kotelly approve this 
settlement. Thank you for your consideration of my comments.
    Sincerely,
    Kumar Lakhavani
    Senior Manager
    HR Dynamics Global Practice



MTC-00029656

Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
    Dear Ms. Hesse:
    As a member of the Greenville City Council, I am concerned about 
the off??er that the Microsoft anti??rust lawsuit is having on both 
the business and educational institutions in our city. I am a newly 
elected member of the council, a member who ran in order to create a 
more efficient government for our ??tizens. I am also concerned that 
the government operates efficiently.
    The American people have a twofold desire in regard to the 
Microsoft suit, as I see it. First, they want the federal government 
to work to create a more positive business climate for all 
Americans. Government needs to use its power to encourage private 
investment, innovation and job growth, Second, it is the moral 
responsibility of the federal government to use taxpayers' funds 
wisely.
    The government's work in fostering a strong coonomy is 
par??licularly timely right now. After all, the unemployment rate is 
up, the stock market is down, and consumer spending is off. We've 
got to get back on track. I can think of no more positive action for 
the federal government to take than for its courts to approve the 
settlement in the Microsoft case.
    Also, Americans today are paying taxes to the federal government 
at the highest rate per capita in over fifty years. It is the 
government's responsibility to see to it that these funds are used 
responsibly for the benefit and general welfare of the American 
people. The Microsoft lawsuit has cost the American people $30 
million to prosecute. It's time to and this litigious spending.
    Thank goodness both parties want the suit to end. They have come 
to art amicable settlement. I urge Judge Kollar-Kotelly to approve 
the settlement.
    Sincerely,
    Ray Craft
    Council Member



MTC-00029657

January 18, 2002
Renata Hesse
Trial Attorney
Antitrust Division
Departnent of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
    Dear Ms. Hesse:
    As a business leader who has served as Chairman of the American 
Furniture against Microsoft is close to ending. Virtually all of the 
executives in business and industry that I am in contact with want 
to see the case settled.
    Our society has become more litigious than ever. Litigation 
costs business money... and can cost employees their jobs That's why 
l believe that we ought to move beyond this ease. There are so many 
societal problems for us to contend with no the least of which is

[[Page 28702]]

our ourrent economic recession. We need to focus on growth, and we 
aced the government to be a true partner in that effort.
    The company that I own uses Microsoft products every day. t find 
them to be useful in making my business more efficient. 
En??epreneurial life is much different from the legal profession. If 
I am not constantly looking for now niches in which to make a 
profit, my business will lag. Microsoft products have made my 
business more productive, and I think it's time to settle this 
lawsuit so that Microsoft can focus all its resources on creating 
new products to benefit businesses like mine.
    Microsoft and the federal government are in agreement On the 
settlement, I strongly urge Judge Kollar-Kotelly to quickly approve 
the settlement Let's set me economy moving again.
    Sincerely,
    J. Ray Shufelt
    CEO



MTC-00029658

Beth Saine
Lincoln County Commissioner
1760 Whispering Pines Drive
Lincolnton, NC 28092
704.735,3297
January 18, 2002
Renata Hesse
Trial Attorney
Antitrust Divisions Department of Justice
60l D Strut NW, Suite 1200
Washington, DC 20530
    Fax: 202-616-9937
    As a member of the Lincoln County Commission, I am pleased that 
the United States Justice Department is settling with Microsoft. 
Technology is so important to the future of counties like ours all 
across America, and this settlement will enhance all facets of the 
tech industry in the coming years.
    Our neighbors in Mecklenburg County have had many advantages 
over Lincoln County, and other counties in the past. Charlotte is 
the nation's mega banking centaur. That attracts business, and with 
it comes a substantial local fax base. I'm not saying that money is 
everything, but huge counties have had a traditional advantage over 
smaller ones in the past. As a result, they have had an easier time 
funding essential county services, such as school improvements. 
Technology quite simply levels the playing field for average-sized 
counties across America.
    When someone togs on to the internet, it doesn't matter if 
they're sitting in Raleigh or Hanging Dog, their access to 
information is the same, and their ability to profit from the 
proliferation of information is the same, The tech industry needs a 
shot in the arm so that it can continue aiding America's counties in 
o significant way. Fore this reason, I'd like to request that Judge 
Keller Kotelly approves the settlement that Microsoft and the 
federal government have reached. It will benefit Lincoln County, and 
counties like ours across America,
    Regards,
    Beth Saine



MTC-00029659

North Carolina Federation of College Republicans
BOX 16160
SULLIVAN HALL
NCSU
Raleigh, NC 27607
Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601D Street, N-W Suite 1200
Washington, DC 20530
    Dear Ms. Hesse,
    As one of the younger members of the North Carolina Republican 
Party's Central Committee, I have a strong interest in how 
government interacts with technology so the economy is strengthened 
in the future. As Chairman of the North Carolina Federation of 
College Republicans, I want to formally ask that Judge Kollar 
Kotelly approve the landmark settlement between the federal 
government and Microsoft. Here's why:
    I do not believe that Microsoft has done any harm to even one 
single consumer. And without consumer harm, what reason exists to 
bring an antitrust case? None. Face this fact: the future is in high 
tech jobs. Also, every industry is going high tech. Imagine the 
damage done by the federal government suing the technology 
industry's leading company. It discourages young people from being 
innovative. It discourages them from becoming entrepreneurs. Our 
Republic will only survive is maintain a strong free market system. 
And our market system can only thrive if companies continue to be 
innovative. I hope the settlement is finalized soon, so that 
American business can operate at its full capacity again soon.
    Thank you for your consideration of my comments.
    Sincerely,
    Matthew Adams
    State Chairman



MTC-00029660

Wake Forest Town Commission
January 11,2002
Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
    Dear Ms. Hesse:
    As a member of the Wake Forest Board of Commissioners, I am all 
too aware of the high cost of government despite the fad that our 
citizens and businesses endure terrible economic conditions in our 
state. Out town needs revenue from increased business activity, not 
higher property taxes. It seems to me that all our local industries 
will be enhanced when the settlement of the Microsoft lawsuit is 
completed.
    As you can tell, I am adamantly opposed to higher taxes in 
whatever form and work hard to ensure that tax money is spent 
wisely. But, the fact is, in our growing community, we have services 
that need to be paid for by government. The best way for our town to 
generate additional revenue is to increase business activity in Wake 
Forest. That is why I was happy to see that the federal government's 
case against Microsoft had come to a settlement agreement in the 
court of Judge Kollar-Kotelly, I know that this case has cost the 
taxpayers of this nation $30 million, not to mention lesser sums in 
the t 8 states that also brought the original lawsuits. More 
significantly, it has hurt business, and local revenues, in our town 
and towns across America.
    I am pleased that North Carolina is one state that decided to 
agree with the settlement and now no more state tax money will be 
expended. I hope to see the same thing happen in the federal case as 
well. That is why t am strongly urging the judge to agree to the 
settlement in this case.
    Sincerely,
    Chris Malone
    Town Commissioner
    401 Owen Avenue--Woke Forest, NC 27587



MTC-00029661

January 25, 2002
Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200 Washington, DC 20530 Fax: 
202-616-9937
    Dear Ms. Hesse:
    Microsoft's products are the greatest in the technology 
industry, and that is the major reason that they are regarded as a 
leader m the American economy. Given that fact, it is no wonder that 
when the federal court announced that Microsoft would be broken up, 
the stock market came to a screeching halt, and tumbled down from 
record highs.
    I am very encouraged that Microsoft and the federal government 
have agreed to a settlement in the antitrust case. I believe that 
this is good for the economy, the government and other societal 
institutions, which increasing rely on industry to invent new 
products to make their operations more effective.
    The settlement provides for more oversight into Microsoft's 
operations, and a more competitive playing field for all companies 
in the industry. That's welcome news for everyone who demands 
consumer choice. It will also send the right signal to investors 
that the government is prepared to work in a cooperative effort to 
spur economic growth and job creation.
    I request that Judge Kollar Kotelly will approve the settlement, 
so that the Justice Department can conserve resources for more 
pressing legal matters. Additionally, closure in this matter would 
send a message that government is prepared to work with the American 
business in taking constructive steps toward a brighter future for 
all Americans.
    Thank you,
    Trustee
    Rowan-Cabarrus Community College



MTC-00029662

Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
Fax: 202-616-9937
    Dear Ms. Hesse:

[[Page 28703]]

    As a young business executive, I am relieved that the federal 
government and Microsoft, which have been engaged in a protracted 
antitrust lawsuit, have arrived at a settlement arrangement that is 
amicable to both sides. Settling this case as soon as possible is 
important to the technology industry, as well as many other 
important segments of the economy.
    In the business world, companies look at industry leaders for 
innovation, and they often try to emulate the corporate 
giants" successful business strategies. This partially 
explains why the tach sector of the economy has been in a tailspin 
for an extended period of time. When the antitrust suit is finally 
ended once and for all, a dark cloud will be lifted from the entire 
industry. The American economy, and to some extent, the world 
economy has never been more interconnected. Each change within one 
economical sector creates a ripple throughout the rest of the 
economy. A major shift in one sector results in a sea change across 
the board of leading economic indicators.
    I work in the mortgage banking industry, a business that is 
highly sensitive to the state of the national economy. While ending 
the Microsoft litigation will not alone create record revenues for 
our industry, I feel certain that it would boost consumer 
confidence, and encourage investments in many types of business 
enterprises.
    Finally, I am excited about the future of technological 
innovation in the workplace. Microsoft has led the way in this 
regard, and finalizing the settlement will help the company refocus 
on developing new and exciting products. That means a more 
productive workplace in the future.
    I request that Judge Kollar Kotelly approves the settlement.
    Sincerely,
    Stewart



MTC-00029663

January 24, 2002
Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
    Fax: 202-616-9937
    Dear Ms. Hesse:
    As a long-term care specialist, I am concerned that the tumble 
that the sock market has suffered is draining the finances of our 
nation's elderly. We've got to get the nation's economy back on 
track. The government needs to focus on ways to spur economic growth 
like never before. In less than ten short years, the baby boom 
generation will begin to reach retirement age. A record number of 
seniors will inundate our nation's hospitals, nursing homes and 
assisted living facilities. These people will need savings not for 
luxury items, but to cover living expenses associated with aging.
    Our nation's greatest generation, for the most part, worked at 
one company for their entire working career. Their pensions are 
largely vested in stocks. When the stock market is unstable, their 
financial situation, and living conditions, become unstable as well. 
The baby boom generation are less likely to have worked in one 
company, and are less likely to have saved for a retirement. They 
are, however, more likely to have invested a substantial portion, or 
all, of their savings in the stock market. IT IS IMPERATIVE THAT WE 
STRENGTHEN THE ECONOMY IN ORDER TO BOLSTER THESE SAVINGS.
    I request that Judge Kollar Kotelly approves the 
settlementbetween Microsoft and the federal government. This lawsuit 
has been proven to have caused much of the turmoil within the 
economy in general, and the stock market in particular. Our nation's 
retirees need security, and deserve governmental cooperation.
    Sincerely,
    Douglas McCabe Russell



MTC-00029664

GEORGE W. LITTLE & ASSOCIATES, INC.
INSURANCE CONSULTANTS--BROKERS
January 22, 2002
Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
    Fax: 202-616-9937
    Dear Ms, Hesse:
    I have been involved in business, industry and economic 
development for over thirty years. Over that period of time, I have 
come to understand that a quality education system, a solid public 
infrastructure and a strong flee market system are the keys to 
economic development in North Carolina and across America.
    Virtually every societal institution which is vital to economic 
development has benefited from the proliferation of technological 
advances in the past decade. Leading the way in innovative 
technology is Microsoft. Their products have benefited businesses by 
saving countless hours of time and making communications between 
businesses seamless. Microsoft's benefits to the education system 
are tremendous, Research, class instruction and other benefits have 
been realized through application of these useful tools. 
Governmental institutions also rely on Microsoft to maximize their 
efficiency and serve, the public in a responsive manner.
    For these reasons, I am gratified that federal government and 
the Microsoft have agreed to a settlement in their antitrust case, 
Microsoft will be able to focus its energies once again on research 
and development, while the government is granted unprecedented 
oversight into Microsoft's operations. Under this settlement, 
economic development wins, and so do the American people.
    I hope time Judge Kollar Kotelly will approve the settlement.
    Sincerely,



MTC-00029665

January 23, 2002
Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
Fax: 202-616-9937
    Dear Ms. Hesse:
    I write to express my desire that the government will act in a 
cooperative manner with Microsoft and similar business interests in 
developing a mutually beneficial relationship. I am convinced that 
now is the time to end the federal government's litigation against 
Microsoft. Microsoft and the federal government have agreed to 
settle the suit. The public is yearning for an economic recovery. 
Congress is debating an economic stimulus package. With these facts 
in mind, I am quite confident that we should move beyond the 
Microsoft case and work to get our stagnant economy moving again.
    As an attorney, I realize that antitrust law is an important 
component of maintaining a competitive marketplace. However, company 
innovation and product improvements are as well, and since both 
parties have agreed to settle the lawsuit, I believe that it would 
be advantageous for everyone if Microsoft can get back to doing what 
it does best: researching and developing useful technological tools 
for the American workplace and the American home.
    The settlement guarantees that other companies will have market 
access. Every new Microsoft operating system will have to include a 
mechanism that enables end users to remove or re-enable Microsoft s 
middleware products. While end users can already remove Microsoft 
middleware from Windows XP, this settlement would make it even 
easier for users to change middleware products.
    I hope that Judge Kollar Kotelly approves the settlement.
    Regards,
    Phillip J. Strach
    Attorney



MTC-00029666

Professor Eric Brodin
P.O. Box 209
Bules Creek, NC 27506
Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
    Dear Ms. Hesse:
    During my career as a columnist and professor. I have written 
over 3,000 articles for various publications such as the Dana Daily 
Record, the Coastal Piedmont leader and other Journals, newspapers 
and magazines in twenty countries. I feel compelled to write to you 
on a hot contemporary issue: the pending settlement of the federal 
government's antitrust case against Microsoft.
    I live in a university community. In the past ten years. I have 
seen a technological explosion on campus that has revolutionized 
learning processes and intellectual research. I have found the 
technological advancements of the newspaper to be beneficial in my 
work as a columnist. The technological advancements to which I refer 
are in no small measure due to the entrepreneurial success of Bill 
Gates and Microsoft. After all, Microsoft has developed products 
that have aided the process of word processing immeassurably,

[[Page 28704]]

as well as improved columnists" ability to transmit data.
    I served as the Endowed Chair of the Landry-Fetterman School of 
Business at Campbell University from 1980 until 1983. During my 
tenure, I did my utmost to promote the notion that our societal 
liberty is largely dependent upon the foundation of the free 
enterpriss system. I fully realize that antitrust laws are needed in 
order to foster a competitive marketplace, however if a 
corporation's business practices do not result in harm to the 
conssumer, the government should not interfere. I have seen no 
evidence that Microsoft's business practices have harmed consumers 
in any way. On the contrary, I believe that Microsoft has benefited 
the American consumers greatly.
    I urge Judge Kollar-Kotelly to approve the proposed settlement 
of the lawsuit. It's time to allow the free market system to 
determine the corporate winners and losers in our great land.
    Sincerely,
    Professor Eric Brodin



MTC-00029667

Steve Tyndall
PO Box 33358 Raleigh, NC 27636
Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
Fax: 202-616-9937
    Dear Ms. Hesse:
    The business of America is business, according to President 
Woodrow Wilson. That statement has held true for the entire duration 
of our nation's young life Whenever business is good, we say that 
"times are good" in America. When business is off, we 
say that we're going through a "tough time". ! regret to 
say that I believe that tough times are currently upon us and our 
economy needs for business to get back on track. In some areas, the 
government can play an active role in restoring consumer confidence, 
and strengthening investor resolve.
    The stock market is in limbo. Investors are in a period of 
uncertainty that began when the federal government announced that 
Microsoft would be dissolved into a series of small companies. The 
tech sector of the economy, which had been largely separated from 
government, and looked to Microsoft for leadership, became a very 
unstable place for investors and employees to be that day. We need 
to recapture the magic of the 1990s economy by putting the Microsoft 
lawsuit behind us once and for all.
    The federal government and Microsoft are in agreement on the 
terms of the settlement. All that remains is for Judge Kollar 
Kotelly to approve the settlement. I hope and pray the settlement 
will be approved. A renewed spirit of entrepreneurial innovation 
will be started on that momentous occasion.
    I am honored to live in the Unites States of America, a country 
in which we have a fair and impartial judicial system. The trial has 
run its course. The verdict is in. Both parties want to settle, in 
order to save the American people and the American economy 
irreparable harm. It's time to move forward.
    I request that Judge Kollar Kotelly will approve the settlement. 
Senior Tactical Management Specialist Planner John Deere Corporation



MTC-00029668

Scott Lampe
Former Treasurer, N.C. Republican Party
3707 Waterton Leas Court
Charlotte, NC 28269
January 21, 2002
    Dent Ms. Hesse:
    I believe that the United States of America has the highest 
standard of living of any country in the world. I am certain that 
our prosperity is a direct result of the free enterprise system that 
enables our economy to flourish. I enjoy following current events, 
end participating in the political process when I believe that my 
participation is needed.
    The federal government's lawsuit against Microsoft is a prime 
example of an issue that has stirred my passions and evoked my 
interest in the public good, From the outset of the lawsuit, I have 
worried about the suit's impact on the American economy as a whole. 
I noticed that the entire stock market began its slide at the point 
which the federal government annoyed Microsoft's breakup.
    Microsoft's, innovation has been beneficial for industrial and 
educational institution across America. I strongly believe that the 
government ought to be as supportive as possible of all companies 
that are vital to American enterprise and American jobs. It's 
important to families that their tax dollars be used to strengthen, 
not weaken, the economy. That's why I believe that the proposed 
settlement between Microsoft and the federal government is a 
positive development for America. The settlement provides for like 
access and monitoring of Microsoft. In essence, everybody wins... 
business, industry, the government, and most importantly, the 
American people.
    I hope that Judge Kollar Kotelly will approve the settlement.
    Thank you,
    Scott Lampe



MTC-00029669

January 18, 2002.
Ms. Renata B. Hesse
Antitrust Division
U.S. Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530-0001
    Dear Ms. Hesse:
    I am encouraging you to accept the Microsoft settlement. It is 
fair! For three years, I've been reading about the litigation, 
lobbyists, lawyer's fees and millions of dollars in taxpayers monies 
spent.
    It's time to have less regulation in technology and to have more 
competition in the market. As a consumer, I want affordable, high 
quality products that Microsoft creates. This settlement will allow 
the company to again focus on leading in technology rather than 
fighting for survival in the face of litigation.
    Thank you for considering my input as you deliberate this 
decision.
    Liberty Carty
    620 S Highland Dr
    Andover, KS 67002
    Journalism major, Butler County Community College Member, Kansas 
Republican State Committee President, Buffer County Republican 
Assembly



MTC-00029670

Gerald R. Slifka
2028 Winston Place
Waterloo IA 50701
January 27, 2002
Renata Hesse Trial Attorney
Antitrust Division
U.S. Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
    Dear Attorney Hesse:
    I am writing to urge the court to accept the settlement proposal 
of the Microsoft anti-trust case. As a consumer I have witnessed the 
value of our constantly advancing technology on a daily basis. Like 
most Americans I am at the same time thrilled and overwhelmed by the 
new products that are available. These have gone along way toward 
helping work and live more efficiently. I work in the printing 
industry and can tell you first hand that technology has had a 
significant impact on how this industry operates. The quality of our 
work improved to a great extent while the product turnaround time 
has been significantly reduced
    We are living in a time of financial uncertainty in this 
country. We must do whatever we can to regain stability in the stock 
markets and the job market. Ending the government's case against one 
of our leading companies will help lead our county to continued 
prosperity.
    Please accept the settlement before you.
    Sincerely,
    Gerald R. Slifka



MTC-00029671

January 16, 2002 Ms.
Renata Hesse, Antitrust Division
U.S. Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
    Dear Ms. Hesse,
    I appreciate that my ideas as a livestock business owner can be 
shared regarding the Microsoft antitrust ease.
    It is important that the Federal Courts recognize the benefits 
of competition in business and technology. The Anti-trust laws were 
written over 100 years ago to protect consumers. In this day and 
age, it seems, some of Microsoft's competitors want to use them as a 
safe-guard from competition. A better use of the government's legal 
power would be an examination of the vertical integration of 
agricultural conglomerates.
    I personally agree with settlement and hope that you will accept 
it to bring closure to this litigation that is costing us so much in 
time and tax dollars.
    Sincerely,
    Vernon Suhn, Owner
    Suhn Cattle Company
    RR2, Box 67
    Eureka, Kansas 670445-9428
(620) .583-5923



MTC-00029672

January 22, 2002

[[Page 28705]]

Judge Kolar Kottely
U.S. Department of Justice,
Antitrust Division
601 D Street, N. W., Suite 1200
Washington, DC 20530
    Dear judge Kottely:
    As an educator, with 37 years of experience, I have followed the 
Microsoft antitrust suit with much interest and would like to 
express a major concern regarding the timely disposition of this 
matter.
    I believe the principle parties of this suit have come to a fair 
settlement for all concerned. However, the nine remaining attorneys 
general and the District of Columbia need to put aside their 
individual grievances and settle in the interest of consumers as 
well as the technology industry which so greatly affects the growth 
of our economy. It disappoints me that the Attorney General of 
Kansas is one of the parties who have resisted settlement.
    I am encouraged that this settlement has the prospects of more 
healthy competition in the software industry as well as the 
increasing the availability of a variety of software to consumers. I 
sincerely hope you will actively work toward approving the 
settlement of this case as soon as possible.
    Sincerely,
    Kent Austin, Speech Pathologist/Audiologist
    2520 Coronado Ct.
    Emporia, Kansas 66801



MTC-00029673

Patricia Piester
12122 willow Lane, #1124
Overland Park, KS 66213
January 21, 2002
Judge Kolar Kottely
U.S. Department of Justice, Antitrust Division
Attention: Renata Hesse
601 D Street, NW, Suite 1200
Washington, DC 20530
    Dear Judge Kottely,
    The Federal government has been pursuing its case against 
Microsoft for 3 years and has spent $30 million of the hard-earned 
taxpayer's dollars in an effort to protect the consumer against 
Microsoft's perceived unfair business practices. The result has been 
confusion and no clear answers.
    The Court of Appeals effectively put an end to this case by 
throwing out a break-up plan instituted by a lower court. This move 
was clearly in the right direction. We should follow their lead by 
putting an end to this case. Nothing good will come from dragging it 
out any longer at an even greater cost to taxpayers and consumers.
    Instead, we must see action now in order to spur the American 
economic recovery we need, especially for our ailing technology 
industry.
    Please support the proposed settlement in this case.
    Thank you for considering my opinion on this case.
    Sincerely,
    Patricia Piester



MTC-00029674

January 25, 2001
Renate Hesse
Antitrust Division,
Department of Justice
Fax (202) 616-9937
    To Whom It May Concern:
    I am writing to express my support for the Department of Justice 
settlement in your case against Microsoft. I understand that you are 
close to a settlement and have asked for public input about this 
issue.
    Our tax dollars are spread thin as well our governmental 
resources. Enough time and money has been spent on this case to come 
up with the current settlement. The settlement is impartial and the 
punishment fits the wrong.
    My concern at this time is "who" will actually 
benefit from continuing this case against Microsoft, I believe it 
will be Microsoft's competitors and not consumers. The current 
settlement creates a stronger technology industry and consumers will 
be the overall winners. The case against Microsoft stands as an 
obstruction to progress. We are going through a war and economic 
recession. Refusing to settle and extending the campaign against 
Microsoft is technically out-of-date and just another reason for the 
country slow down. It is time to get back to work.
    Thank you for your time and your efforts to settle US v. 
Microsoft as soon as possible.
    Sincerely,
    Jaye Stretesky
    P.O. Box 2553
    South Lake Tahoe, CA 96158



MTC-00029675

Renata Hesse
Trial Attorney; Antitrust
U.S. Department of Justice
601 "D" Street NW
Suite 1200
Washington, DC 20530
    Dear Ms. Hesse:
    It has come to my attention that the Department of Justice has 
brokered a settlement with Microsoft that could end the government's 
anti-trust case against this company. I am very supportive of this.
    I live in Kansas where our own Attorney General Carla Stovall 
has been. a leading advocate for the breaking up of Microsoft and 
has refused to join. the settlement of this case. I am very 
disappointed that the Attorney General who was elected to protect my 
interests continues to pursue this case.
    The basis for this suit has always been a mystery to me. 
Microsoft creates great products that people want to purchase. 
Because the company is in tune with American consumers and is very 
innovated they have grown tremendously. This growth has benefited us 
through lower prices, a growing technology industry and a previously 
skyrocketing NASDAQ. If Attorney Generals like my own were really 
interested in protecting the public good they would join this 
settlement. Besides, it appears to me that those who sought to 
punish Microsoft are getting much of what they want in this 
agreement.
    I urge you to accept this settlement.
    Sincerely,



MTC-00029676

To: c/o Renata Hesse, Trial Attorney
Date: Sun Jan 27 21:39:18 CST 2002
Pages (including cover): 4
From: Rick Voland
Comments: Please oppose the proposed settlement in United States v. 
Microsoft Corporation.
2120 University Ave., Apt. 210
Madison, WI 53705-2343
January 27, 2002
Renata Hesse, Trial Attorney
Suite 1200, Antitrust Division
Department of Justice
602 D Street NW
Washington, DC 20530
fax (202) 616-9937
    Dear Renata Hesse,
    Thank you for this opportunity to comment on the United States 
v. Microsoft Corporation; Revised Proposed Final Judgement and 
Competitive Impact Statement. I write as an advanced user. I am not 
a programmer, but I rely on computers for my work and am very much 
concerned about preserving diversity, choice, and quality in 
computer software.
    I am concerned about the power of Microsoft to coerce its 
competition. Microsoft paid money to both Corel and Apple when each 
company was desperate and Microsoft could control the terms. I am 
also concerned that Microsoft forces computer manufacturers to 
bundle Microsoft applications with the result that computer buyers 
now assume that Microsoft applications are part of Windows and are 
included at no cost. The settlement proposed by the Department of 
Justice would not cover either of these situations even thougt1 
riley are clear examples of the power of Microsoft to coerce its 
competitors into less competitive postures.
    In Apple Computer's 10K annual report for the fiscal year ended 
Sepbember 30, 2000 is the statement of an agreement between Apple 
Computer and Microsoft. "Microsoft purchased 150,000 shares of 
Apple...preferred stock...for $150 million [p. 52]. Apple in turn 
agreed to limit computer production, and thus competed less against 
Microsoft.
    In August 1997, the Company and Microsoft Corporation entered 
into patent cross licensing and technology agreements. In addition, 
for a period of five years from August 1997, and subject to certain 
limitations related to the number of Macintosh computers sold by the 
Company, Microsoft will make future versions of its Microsoft Office 
and Internet Explorer products for the Mac OS. Although Microsoft 
has announced its intention to do so, these agreements do not 
require Microsoft to produce future versions of its products that 
are optimized to run on Mac OS X. The Company will bundle the 
Internet Explorer product with Mac OS system software releases and 
make that product the default Internet browser for such Mac OS 
releases. [p. 24, "SUPPORT FROM THIRDPARTY SOFTWARE 
DEVELOPERS," emphasis added] The same document discusses Apple 
Computer's continued dependence on CPU chips from Motorola 
[INVENTORY AND SUPPLY, pp. 22-23]. Apple Computer's new 
operating system, now known as Mac OS X, derives from Nextstep and 
Openstep purchased with NEXT, Inc. Both Nextstep and Openstep run 
well on CPU chips by Intel

[[Page 28706]]

or Motorola. I am writing this letter on an Intel PC minting 
Openstep 4.2. Even the bridging version between Openstep and Mac OS 
X (a developer-only release known as Rhapsody) ran on both Intel and 
Motorola CPU chips.
    This cross-platform technology would have left Apple Computer 
far more flexible and competitive as Motorola continues to have 
manufacturing problems that leave Apple Computer with more marketing 
problems (the megahertz gap) and a more hazy future. Motorola chips 
currently cannot achieve the same clock speeds (megahertz) as CPU 
chips from Intel, AMD, etc. Consumers often choose computers on the 
basis of clock speeds, so they tend to discount Apple computers even 
though the Motorola chips accomplish more work than Intel chips for 
the same clock speed (the megahertz myth). Apple Computer has been 
aware of this situation for several years.
    The statement that Apple Computer agreed to limit its production 
is not about Apple limiting its production of the Apple computers 
using Motorola chips. Apple agreed at that time to stop development 
of Mac OS X for Intel which would have been a far more serious 
competitor to Microsoft. A consumer could buy an inexpensive PC and 
replace the Windows operating system with Mac OS X for Intel. Mac OS 
X is derived from Unix and is known for great stability. Also, Mac 
OS X has special software development tools that would attract 
developers because individuals could complete aggressively with far 
larger software colt)orations. Mac OS X for Intel would have allowed 
Apple Computer to move from selling hardware (Macintosh Computers) 
and proceed to selling software only (Mac OS X) in the same way as 
NEXT, Inc. moved from selling hardware and software to selling 
software only. The investment by Microsoft in Apple was incidental. 
Apple Computer's real concern was that Microsoft threatened to cease 
development of Microsoft Office for Macintosh, leaving Apple 
Computer without a strong word processor and office suite. In 
return, Apple Computer agreed to make Microsoft Internet Explorer 
the default web browser, instead of Netscape. Macintosh computers 
don't use Windows, but they largely still depend on Microsoft 
Office, and Microsoft maintains a hold. Microsoft played one rival 
(Apple Computer) against Netscape, another rival.
    In press release dated October 2, 2000, Corel, Inc. announced 
that Microsoft agrees to buy 24 million shares of Corel preferred 
stock at US $135 million. Corel now owns and develops WordPerfect, a 
competitor to Microsoft Word. WordPerfect was once a dominant word 
processor, but is now far in the minority. The DoJ Microsoft trial 
included evidence that Microsoft shipped flawed versions of the 
Windows 95 operating system to WordPerfect developers in order to 
leave WordPerfect a flawed product that could not easily compete 
with Microsoft Word. Also, Microsoft cultivates bundling agreements 
where PC manufacturers include Microsoft Word and other components 
of Microsoft Office with Windows computers so that consumers do not 
even think of purchasing WordPerfect. Then, when they upgrade their 
software, they continue to purchase Microsoft Word and do not 
consider WordPerfect. This agreement with Corel, has Microsoft 
offering .NET, a sort of networking server technology, to Corel. It 
is interesting that Corel now offers all its graphics products in 
versions optimized for the new Mac OS X, and advertises its 
cooperation with Apple. At the same time, it has ceased development 
of WordPerfect for Macintosh. WordPerfect for Linux exists and could 
be easily ported to the new Unix-based Mac OS X. This agreement 
between Microsoft and Corel looks like an agreement to dissuade 
Corel from continuing to compete agressively with Microsoft Word. 
Isn't perception an important part of this case?
    Microsoft bundles many small applications with Windows that 
leave fewer opportunities for third-party competitors. Windows now 
includes image editing software that took away opportunties from 
Kodak. Kodak negotiated some new opportunties. Kodak now offers 
little support for Macintosh computers. The larger number of Windows 
computers is not a true measure of the market here. A large 
proportion of the images on the Internet were created with Macintosh 
computers. The graphics and desktop publishing industries still rely 
heavily on Macintosh computers, yet Kodak digital cameras offer far 
less support for Macintosh computers than for Windows computers.
    Microsoft is now offering very inexpensive versions of its 
software to schools at prices far below even academic prices. Here 
at the University of Wisconsin-Madison, Microsoft Office is 
available at $25-30 for a fully functional suite, and 
Microsoft Windows 2000 at a similar price. In return, Microsoft 
often pressures schools to replace their server software with 
Microsoft products. These prices are attractive because they offer a 
product students want at an attractive price, but they leave server 
operators subject to pressures unrelated to product quality. Also, 
end users may find themselves with fewer opportunties because 
Microsoft server products do not interoperate well with non-
Microsoft products. Microsoft has a history of adopting Internet 
standards and then releasing an "enhanced" version that 
only works with Windows computers. By the way, the DoJ uses an 
opensource product (OpenBSD) downloaded from Canada 
(www.openbsd.org) for its most sensitive communications that require 
the ultimate in security.
    The proposed agreement (final judgement) between the US 
Department of Justice and Microsoft does not provide protections for 
Apple Computer or for developers of Linux and other opensource 
software (e.g., FreeBSD) that would compete with Microsoft products. 
Linux, FreeBSD, and Hewlett-Packard servers would face unfair 
competition as I describe in the previous paragraph. The DoJ 
proposal does not address these concerns. Please separate the 
Microsoft operating system and application (e.g., Word) divisions. 
Titus, I favor a breakup of Microsoft into at least two parts.
    Thank you for your time and consideration.
    Sincerely,
    Rick Voland



MTC-00029677

MINDI COOK
4824 SW 98h Ter
Augusta KS 67010
January 21, 2002
Renata Hesse, Esq.
U.S. Department of Justice
Anti-trust Division
601 "D" Street NW, Suite 1200
Washington, DC 20530
    Dear Ms. Hesse:
    I was truly glad to learn that the court was conducting a 
comment period during which I might write to express my views 
regarding the lawsuit currently being waged against Microsoft. I 
have been opposed to this lawsuit for quite some time for many 
reasons, including its high cost to American taxpayers, its apparent 
negative effect on the technological industry and general economy, 
and its attempts to over-monitor the business activities of an 
American company. If I could see that Microsoft was, in any way. 
threatening our free marketplace and driving up consumer costs, I 
might feel differently about the matter. But I see no indication 
that Microsoft has hurt the tech industry in any way. It makes me 
wonder who and what is really driving the campaign against Microsoft 
and I resent having to pay for a lawsuit that most likely serves the 
interests of Microsoft's competitors--not the American public.
    We, the American people, need to have the court decide this 
matter in a manner that truly serves our needs -not the needs of a 
big business. In light of that fact, I ask the court to please 
accept the settlement proposed by President Bush's team and end this 
lawsuit as soon as possible.
    Sincerely,
    Mindi Cook



MTC-00029678

??
2825 Ya??cy St. SW
Seattle, WA 98126
January 26, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft,
    I am writing you today to express my opinion in regards to the 
US vs. Microsoft settlement. I support Microsoft in this dispute and 
I believe this litigation is costly and will have adverse effects on 
consumers. I support the settlement that was reached in November and 
would like to see a permanent resolution to this dispute.
    The settlement that was reached is reasonable and far more than 
sufficient to deal with the issues of this lawsuit Under this 
agreement, Microsoft must grant the same rights to all of the twenty 
major computer makers who want to install Windows on their machines, 
no matter how the companies configure the platform.
    I think this witch hunt to try and make Microsoft the villain is 
going to have a detrimental effect on the business climate for now 
and the future. Please pick another battle .... like national 
security.
    We are facing a lagging economy presently. We must do all we can 
to boost and stimulate our economy, Stifling Microsoft will not

[[Page 28707]]

accomplish this. Letting them go back to Washington State to develop 
more software will. Please support this settlement and allow 
Microsoft to get back to business.



MTC-00029679

Renata B. Hesse, Trial Attorney
Suite 1200,
Antitrust Division
U.S. Department of Justice
601 D Street NW
Washington, DC 20530-0001
Via Fax  @  202-307-1545
    The undersigned is opposed to the proposed settlement in the 
Microsoft antitrust trial because the settlement does not fully 
redress the actions committed by Microsoft, nor substantially 
inhibit their ability to commit similar actions in the future, or 
most importantly, attempt to restore competition to this important 
market.
    Furthermore, there are concerns regarding the fact that none of 
the provisions within the settlement effectively address Microsoft's 
abuse of its monopoly position in the operating system market. Even 
non-educated, non-technical citizens can recognize the absurdity and 
inequity of the requirement that consumers pay for a Microsoft OS on 
a new PC--whether it is wanted or not--and yet this most 
basic issue has never been addressed.
    Perhaps most appalling is that the proposed settlement does 
nothing to address Microsoft's previous misdeeds. Software piracy or 
violations of the DMCA result in million of dollars in fines and 
potential incarceration, yet no penalties are stipulated in this 
settlement? it is equally disheartening that there are no provisions 
to address future abuses instead the settlement, from a technical 
perspective, appears to bolster Microsoft's expanding control of the 
Internet and other related areas, Letting the US government publicly 
reward criminal behavior simply makes a mockery of the law.
    Microsoft's monopolistic practices cause the public to bear 
increased costs and deny them products and innovation that would 
otherwise be created because of competition. Consequently it is 
incomprehensible that obvious cost free measures, such as a 
requirement for the inclusion of Linux and dual-booting on all OEM 
PC's, is not even considered.
    The finding that Microsoft was (and is) an abusive monopoly must 
be followed by specific, well-defined measures to address past 
practices and compensate those harmed by the abuses, In addition, 
substantial penalties and measurable sanctions are required to 
prevent future monopolistic abuses. Based on past history, it is 
even more crucial that strong constraints be placed on Microsoft to 
mitigate their proven propensity for illegal and unethical 
activities. The proposed settlement is clearly inadequate to serve 
its function and calls into question the United State's Judicial 
System's ability to appropriately perform its purpose. As such, it 
is respectfully requested that the entire matter be reconsidered in 
a public courtroom.



MTC-00029680

Elsie Zeurcher
1556 SW Santa Fe Lake Road
Towanda, KS 67144
January 24, 2002
Ms. Renata Hesse
Anti-trust Division
Department of Justice
601 "D" Street NW, Suite 1200
Washington, DC 20530
    Dear Ms. Hesse:
    I understand that the Department of Justice is currently 
conducting a comment period during which members of the American 
public may express their opinions regarding the Microsoft anti-trust 
settlement proposed by the Bush administration. I am grateful to 
have this opportunity to voice my thoughts and would like to thank 
you in advance for your consideration of my views on this matter.
    I firmly believe that the court should approve the settlement 
which I understand Microsoft has already agreed to accept. At this 
time in our nation, saving resources for homeland defense and taking 
steps to strengthen our economy should be at the top of the 
government's priority list. If the court agrees to the Microsoft 
settlement, thus ending this expensive and troublesome lawsuit, it 
will be appropriately addressing both of those pressing needs by: 
(1) freeing up resources for defense and (2) allowing one of our 
nation's most productive companies, Microsoft, to continue to 
generate health activity in the marketplace.
    Please consider carefully the realities that face the United 
States today and approve the Microsoft anti-trust settlement. Thank 
you again for your consideration.
    Best regards,
    Elsie Zeurcher



MTC-00029681

Jim Morrill
2220 Casement Road
Manhattan, KS 66502-6628
January 21, 2002
Renata Hesse, Esq.
Trial Attorney, Anti-trust Division
Department of Justice
601 "D" Street NW, Ste. 1200
Washington, DC 20530
    Dear Ms. Hesse:
    I would like to thank the court for inviting the views and 
opinions of individual United States citizens regarding the 
Microsoft anti-trust lawsuit and proposed settlement, it seems only 
right that those of us on the front lines, paying taxes and 
supporting the economy, should have a voice in this matter.
    Free trade is a cornerstone of American capitalism and I believe 
that the court has been attempting to protect our free trade through 
its pursuit of Microsoft. However, in spite of all good intentions, 
the court's efforts appear to have damaged free trade and enterprise 
instead of protecting it. As a result of the court's actions, 
Microsoft, one of our nation's most productive business giants, has 
been forced to pour untold resources into defendin9 itself against 
an ever-changing, never-ending lawsuit that has yet to establish 
that the company has harmed the marketplace in any way. In fact, as 
a result of Microsoft's commitment to improving technology, average 
American consumers now have access to affordable computer products 
that were out of reach to them only a decade ago. In the interest of 
free trade, the court should allow such a company to continue to 
generate products and business without undue interference.
    Additionally, as the court makes its decision regarding the 
Microsoft settlement. I ask that it consider the amount of taxpayer 
money it will save by ending this expensive litigation. Too man.,,, 
hard-earned dollars have already been thrown at this dubious case. 
Acceptance of the proposed settlement will stop the bleeding and 
save American citizens further needless cost. I ask the court to 
make the decision that will truly protect free trade and best 
benefit the American public. Accept the settlement and end the 
Microsoft anti-trust case quickly.
    Respectfully,
    Jim Morrill



MTC-00029682

Logan Overman
632 Tara Court ?? Wichita ?? KS ?? 67206
Renata Hesse
Trial Attorney
US Department of Justice
601 D Street, N-W Suite 1200
Washington, DC 20530
    Dear Attorney Hesse:
    As an avid consumer of new technology products I am writing to 
express to you my support for the settlement of the Microsoft anti-
trust lawsuit. There are many arguments why the case against 
Microsoft was an ill-founded decision. However, I feel the economic 
reasons are the most compelling.
    The whole premise of the government's case has been that 
Microsoft was responsible for significant consumer harm. It is quite 
apparent this is not the case. Microsoft is the leading choice among 
consumers because they find its products to be of superior quality. 
Yet the government has spent millions of dollars prosecuting a case 
that the public does not support. The cost to the taxpayer has been 
staggering
    The damage this case has caused to our nation's financial well-
being goes beyond the wasting of public funds. This case and the 
government's threat of break-up have served as a deterrent to 
investment in the computer and communications industry. There are 
many contributing factors to the major decline of the NASDAQ, 
however, the threat of serious government intervention in our 
nation's fastest growing industry only added to the problem.
    In an effort to end this case, DOJ and Microsoft negotiators 
have found enough common ground to reach a settlement. Based on my 
knowledge of the agreement this settlement is a solid one. Microsoft 
will be held responsible for portions of the complaint upheld in 
court and an independent commission will monitor its compliance with 
the provisions of the settlement.
    The settlement of this case is a good indication that companies 
like Microsoft will be free to compete and grow in our open market. 
Both our economy and consumers will benefit.
    Sincerely,
    Logan Overman

[[Page 28708]]



MTC-00029683

Kristen Boulware
Renata Hesse, Antitrust Division
Public Comment
U.S. Department of Justice
601 D Street, NW, Suite 1200
Washington, DC 20530
    Dear Ms. Hesse,
    Finally, Microsoft and the U.S. DOJ have agreed upon a 
settlement of the marathon-style anti-trust suit against the 
company. I think that having nine states sign on to the deal proves 
its value.
    From what I have read and heard about the proposed settlement 
that is pending your approval, it goes a long way toward what the 
DOJ wanted to accomplish, but does not completely tie Microsoft's 
hands in a way that they cannot compete. To me this makes great 
sense as a worthy compromise.
    I am hopeful the judge will approve this settlement and allow 
all the case's participants to go back to doing business as they 
should.
    Thank you.
    Kristen Boulware
    11780 West 118th Terrace
    Overland Park, KS 66210



MTC-00029684

Ms. Renata Hesse
U.S. Department of Justice, Anti-trust
601 D Street Northwest, Suite 1200
Washington, DC 20530
    Ms. Hesse:
    I am writing to express my support for the Microsoft antitrust 
settlement propsed by President Bush and his administration.
    While I appreciate the Department of Justice's concerns 
regarding the effects Microsoft creates in our marketplace, I 
believe the facts all point to this conclusion: Microsoft is not a 
threat to free trade. I believe the real threat in this matter lies 
in the exorbitant cost of continuing to pursue Microsoft in court.
    I ask the court to please approve the proposed Microsoft 
settlement and put an end to this lawsuit.
    404 Traders Ave
    Fall River, KS 67047



MTC-00029685

Scalio, Inc.
Tel: (425)889-8553
Fax: (425)889-9303
6119 114th AVE NE
Kirkland, WA 98033
FAX COVER SHEET
Date:----/----/----Pages, including 
cover page:--------
To:
Name:
Office Number:
Phone Number:
Fax Number:
From:
Name:
Office Number:
Phone Number:
Fax Number:
Note:
Ramon G. Pantin
From: "Ramon G. Pantin" 

To: 
Cc: 
Sent: Sunday, January 27, 2002 11:59 PM
Attach: commenls-040.html
Subject: Microsoft Settlement
    Dear Department of Justice representative,
    Attached is an HTML document with my comments about the 
settlement proposed. I have included my background and contact 
information in that document.
    Please feel free to contact me at:
    rgp @ scalio.com
    or at home at:
    425-889-1043
    if you have trouble with the attached documents.
    Sincerily,
    Ramon G. Pantin
    Introduction
    My name is Ramon G. Pantin, I have been in involved in 
commercial Operating System development since 1989. I have worked on 
the design and implementation of a large variety of Operating 
Systems and system software (operating system components) including 
chronologically:
    . IBM's AIX 3. I, AIX 3.2, AIX 4.1 and AIX 5.x UNIX operating 
systems for their RS/6000 product line (recently renamed eServer 
pSeries) as a consultant.
    . Tandem's NonStop UX UNIX operating system for fault tolerant 
systems (as an employee of Tandem Computers).
    . IBM's now defunct WorkPlace OS desktop operating system 
(successor to their OS/2 product) ) (as a consultant and later as an 
employee).
    . Microsoft's Windows NT4.0 and Windows 2000 (employed by 
Microsoft).
    . ICCOS (a now defunct operating system) (employed at TagoSoft, 
Inc.)
    . FreeBSD UNIX operating system (at TagoSoft, Inc and consulting 
for Shawn Systems, Inc).
    . SUN's Network Filesystem V3 for Windows NT (as a consultant)
    . SUN's PC/SKIP product for Windows NT (as a consultan0
    . Impactdata/Megadrive/Data Direct Networks CDNA shared storage 
SAN file system (as a consultant and later as an employee)
    . At Scalio, Inc developping storage management software for 
both Windows 2000 and UNIX systems.
    . IBM's AIX 5.x UNIX operating systems for their RS/6000 product 
line (recently renamed eServer pSeries) as a consultant to Veritas 
Software making changes to AIX as part of an IBM/Veritas 
relationship.
    I have also taught operating systems design classes at 
Universidad Simon Bolivar (Venezuela) in 1989 and professional 
system software classes, both for UNIX and Windows NT. I consider 
myself eminently well versed as a software enginner with 12 years of 
hands on operating system design and development.
    The issues herein are of great importance to me and the industry 
that I am a participant of. I appreciate the opportunity to comment 
about the proposed settlement.
    Below is a long list of comments. Each comment's name is of the 
form "Comment X.Y" where X is the major section of the 
proposed settlement within which the commented terms are discussed, 
and Y is simply a sequential number of the comments that I have 
written and it is actually independent of the acutal comment 
numbering within the proposed settlement itself. Each comment 
includes the appropriate reference to text in question within the 
proposed settlement document.
    I am available for comment and clarification in any and all 
issues hereing, preferrably thorugh email, please contact me at:
    Ramon G. Pantin
    rgp @ scalio.com or at:
    Ramon G. Pantin
    6119 114th AVE NE
    Kirkland WA 98033
    Sincerily,
    Ramon Pantin
    January 26th, 2002
    Comment III.1
    Section III.A reads:
    "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:" There are 3 
problems with this section:
    1. It allows Microsoft to withhold existing forms of non-
monetary Consideration, because it only prevents witholding newly 
introduced forms;
    2. Monetary considerations are explicitly excluded, they 
shouldn't be excluded.
    3. Microsoft knowledge is irrelevant and hard to establish, that 
text only contributes to the ambiguity of this section. Section 
III.A should be not be constrained or qualified in these ways. It 
should be replaced with this text:
    A. Microsoft shall not retaliate against an OEM by altering 
Microsoft's commercial relations with that OEM, or by withholding 
any forms of Consideration from that OEM, because the OEM is or is 
contemplating:" Comment III.2
    Section III.A.I reads:
    "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;"
    There are 2 problems in this section:
    1. Microsoft in the past has retaliated against OEMs that market 
products that compete against Microsoft products, not just Microsoft 
Platform Software. For example, Microsoft retaliated against IBM 
when IBM decided to pro-install its SmartSuite product (a product 
that competes directly with Microsoft Office) on its PCs, see 
Findings of Fact, paragraph 122 which reads: "... Then, on 
July 20, 1995, just three days after IBM announced its intention to 
pro. install SmartSuite on its PCs, a Microsoft executive informed 
his counterpart at the IBM PC Company that Microsoft was terminating 
further negotiations with IBM for a license to Windows 95. Microsoft 
also refused to release to the PC Company the Windows 95 
"golden master" code. The PC Company needed the code for 
its product planning and development, and IBM executives knew that 
Microsoft had released it to IBM's OEM competitors on July 17 
...."

[[Page 28709]]

    2. The words "any software that competes" allow for 
retaliation against the development, distribution, promotion, use, 
sell, or licensing of any technology that competes against Microsoft 
technologies. Examples of such technologies, include but are not 
limited to: technical standards, open or proprietary protocols, 
services, hardware products, etc. Section III.A1 should be not be 
constrained or qualified in these ways. The existing Section III.A.1 
should be left as part of the text and a new paragraph should be 
added to the list. Thus Section III.A.4 (a new paragraph) should be:
    "4. developing, distributing, promoting, using, selling, 
or licensing any technology or product that competes with any 
Microsoft product, technology or service;" Comment III.3
    Section III.A.2 reads:
    "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" Microsoft currently forbids OEMs, or it imposes Market 
Development Agreement penalities or it withholds Consideration from 
OEMs when they offer for sell Personal Computers without a Microsoft 
Operating System. Because of the earlier consent decree imposed on 
Microsoft, instead of requiring that every Personal Computer include 
a Microsoft Operatin System, Microsoft requires that for each model 
of Personal Computer offered by the OEM that each Personal Computer 
of that model be sold with a Microsoft Operating System. If this 
isn't done, Market Development Agreement penalties or Considerations 
are withheld from the OEM. Theoretically, the OEM is free to offer a 
model of Personal Computers for which it expects to sell such a high 
fraction of them without a Microsoft Operating System, that offering 
them in that way doesn't cause harm or competitive disadvantage to 
the OEM. In reality, node of the models of Personal Computers are 
expected to sell in any large enough percentage without a Microsoft 
Operating System, thus the OEM ends up paying for a Microsoft 
Operating System for each Personal Computer for each model that it 
offers, thus it is forced to always pay for a Microsoft Operating 
System.
    Microsoft, additionally requires that the end user of the 
Personal Computer accept a license agreement, and the it indicates 
that if the license agreement is not accepted, that the Microsoft 
Operating System product should not be used and that the Personal 
Computer manufacturer should be contacted for a refund.
    Because of Microsoft per unit per model royalty imposition on 
the OEM, the OEM has no incentive to provide such a refund to the 
end user and these requests are largely ignored by the OEMs thus 
resulting in end users that desire to purchase a Personal Computer 
to pay for a software licesnse for a Microsoft Operating System, 
even if they never use such a software. Given Microsoft's creativity 
in constraining OEMs in their business decisions, a broad based term 
should also be included. For example, Microsoft could 
technologically constraint the GEM from supporting non-Microsoft 
Operating Systems, for example by Microsoft imposing on the GEM 
technological standards that must be used in the Personal Computer 
design and because of intellectual property reasons the use of these 
standards prevent non-Microsoft Operating Systems from functioning 
on the Personal Computer (for example because Microsoft might have 
patents on the technology).
    Section III.A.2 should be augmented with these subclauses to 
allow consumer to purchase Personal Computers without a Microsoft 
Operating System:
    "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 (c) 
does not include any Operating System of any kind, or (d) includes a 
Windows Operating System Product and provides for the removal of the 
Windows Operating System Product during the startup of the Personal 
Computer, as long as the Windows Operating System has not been used 
by the consumer, and allows for a refund to be issued to the 
comsumer for the price of the operating system, or (e) in any way 
supports or provides non-Microsoft Operating Systems; or"
    Comment III.4
    Section III.A by virtue of enumerating the activities that the 
GEM "is or is contemplating" allows Microsoft to 
retaliate for any activities not explicitly enumerated in this list 
(III.A.1, III.A.2, III.A.3, etc). A broad term should be added that 
prevents Microsoft from any other cause for retaliation. Section 
III.A.5 should be added (Section III.A.4 was proposed to be added 
above in Comment III.2):
    5. engaging in any lawful activity by any means by itself or in 
cooperation with any party.
    Comment III.5
    Section III.A in the fith paragraph (the paragraph under 
III.A.3) reads in its last two sentences: "Microsoft shall not 
terminate a Covered OEM's license for a Windows Operating System 
Product without having first given the Covered GEM 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 GEM that has received 
two or more such notices during the term of its Windows Operating 
System Product license."
    There are three problems with these sentences:
    The time period of thirty days for cure is extremely short and 
would lead to unnecessary hardship on the OEM because of product 
distribution considerations (channel, distribution, resellers) that 
might require a constly product recall to be able to cure in thirty 
days. A period of at least 90 days is more appropriate. It is 
interesting to notice how terminating a Covered OEMs license and 
thus putting the OEM immediately out of the Personal Computer 
business is codified into this consent decree, when any restraint on 
Microsoft's illegal monopolistic behaviour requires (so far) years 
of litigation and continued complaints about how 
"draconian" such measures are.
    2. The non-obligation to provide a termination notice can be 
used by Microsoft as a means of retaliation by not enforcing 
contractual terms on some OEMs while enforcing them on others, thus 
easily allowing for just two such notices to cure to be used as 
retaliatory means. The number of notices should be a function of 
time, for example 2 notices per year.
    3. Microsoft should be required to enforce contractual terms in 
a non-discriminatory way across all OEMs, it should not be allowed 
to selectively enforce contractual terms because it would provide an 
easy retaliatory tool against the OEMs. Additionally, Microsoft must 
show that if it makes efforts to enforce certain terms, then it must 
enforce all terms across all OEM with equal effort, dilligence and 
strength.
    4. The notion of termination notices, per se, is problematic, 
because termination notices might not even correspond to actual OEM 
behaviour but to misunderstanding between the parties or Microsoft's 
desires for retaliation against the OEM. Any such termination notice 
should be submitted to the Technical Committee for technical 
consideration, the Microsoft Internal Compliance Officer, and to all 
the Plaintiffs; together with detailed documentation of the non-
discriminatotry enforcement by Microsoft of these and any other 
contractual terms across all Covered OEMs. This communication is 
important because it ensures that the antitrues enforcement parties 
are involved from the start when any such notice is given. Comment 
III.6
    Section III.A, last paragraph reads:
    "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."
    These issues should be addressed:
    1. Such Consideration should be offered to all Covered OEMs in a 
non-discriminatory basis.
    2. The Consideration should be objectively measured according to 
established accounting practices.
    3. The Technical Committee, the Microsoft Internal Compliance 
Officer, and all Plaintiffs should be informed and provided a copy 
of any and all such agreements and be allowed to requests additional 
documentation and conduct interviews related to the agreement.
    Comment III.7
    Section III.B, first paragraph reads:
    "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:" Issues:

[[Page 28710]]

    1. In the first sentence, where it reads "... with uniform 
terms and conditions." it should read:" .... with 
uniform terms and conditions and Considerations." 
Considerations established outside or after the license agreement 
has been entered should be communicated to the OEMs in a uniform 
manner. All agreements and Considerations should be provided to the 
Technical Committe, the Microsoft Internal Compliance Officer, and 
all Plaintiffs and these parties must be allowed to requests 
additional documentation and conduct interviews related to the 
agreements and Considerations.
    2. Microsoft in the past has discriminated against OEMs and 
other Personal Computer manufacturers (for example Apple) by 
threatening to not make Microsoft products available on those 
manufacturers computers, for example Microsoft Office cancellation 
for Apple's Macintosh systems. Additionally, Microsoft has used the 
OEM prices of these non-Operating System products as a means to 
discriminate against OEMs. The prices and the offering of any 
Microsoft product to any Covered OEM for bundling with a Personal 
Computer should be nondiscriminatory and subject to uniform license 
agreements.
    3. Volume discounts of groups of Microsoft Operating System 
Products and Microsoft non-Operating System Products should not be 
allowed, because it might lead to exclusion from the market of 
products that competed against the Microsoft non-Operating System 
Products. For example, group discounts for a bundle of Microsoft 
Windows XP and Microsoft Office; or Microsoft Windows XP and 
Microsoft Word (or Microsoft Excell, etc); or Microsoft Windows XP 
and Microsoft Works; must not be allowed.
    Comment III.8
    Section III.C reads:
    "C. Microsoft shall not restrict by agreement any OEM 
licensee from exercising any of the following options or 
alternatives:"
    This should read:
    C. Microsoft shall not restrict by agreement or any other means 
any OEM licensee from exercising any of the following options or 
alternatives:
    For example, Microsoft could, through verbal or written 
communication, or through the quality of service that it provides 
the OEM restrict the OEM, or threaten the OEM from exercising the 
alternatives. Microsoft has in the past retaliated against OEMs, 
particularly IBM and Gateway, as is described in detail in the 
Findings of Fact through means other than agreements. For example by 
witholding IBM participation in marketting programs, or threatening 
Gateway with sofware audits.
    Comment III.9
    Section III.C.1 and others enumerate:
    "icons, shortcuts, or menu entries" this list should 
be: icons, shortcuts, folders, appliactions, explorer hierarchies or 
menu entries
    Comment III.10
    Section III.C.1 ends in "with respect to non-Microsoft and 
Microsoft products." This should be changed to read: 
"with respect to non-Microsoft and Microsoft products or 
technologies that offer similar types of functionality." For 
example, the technology might be provided by a network service and 
not by a product installed in the Personal Computer, how the 
technology is provided should not be a reason for allowing Microsoft 
to retaliate or discriminate.
    Comment III.11
    In general, section III.C.1 and throughout the document, it is 
assumed that the only way to allow applications or software 
facilities to be used is through "icons, shortcuts, or menu 
entries", when in reality, applications/middleware can also be 
activated by associating it with particular types of data, and when 
such types of data are accessed, the application associated with it 
is activated. For example, when a file with a given extension is 
accessed, or when a URL is accessed over the interact, the type of 
the data is determined and the application associated with that type 
of data is activated. It is vital that such associations be allowed 
in a non-discriminatory basis between Microsoft and non-Microsoft 
technologies. For example, when a Internet audio URL is accessed, 
the media player associated with the data type is invoked to cause 
the audio to be decoded and played. It is not unsusual for multiple 
competing technologies, such as Microsoft Media Player, Real 
Networks and Apple's Quicktime media players to be capable of 
supporting the same data types, thus the preservation of the setting 
chosen by the user is important. Discrimination in this area has 
occurred in the past against both Apple's Quicktime and Real 
Network's Real Player. The document should be updated throughout to 
take into account this form of application activation through data 
type and file name extension associations.
    Comment III.12
    Section III.C.2 reads:
    "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."
    The term shortcuts should be replaced with icons, because many 
types of items can be shown on the desktop and these are not limited 
to shortcuts. For example, applications, files, folders, etc.
    Comment III.13
    Section III.C.3 reads:
    "3. Launching automatically, at the conclusion of the 
initial boot sequence or subsequent boot sequences, or upon 
connections to or disconnections from the Interact, 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." Issues:
    1. The qualification: "if a Microsoft Middleware Product 
that provides similar functionality would otherwise be launched 
automatically at that time" is simply a form of restraint of 
trade. Microsoft usually doesn't lead in innovation, it follows, 
copies and bundles other's innovations into its products. It is 
unreasonable to require that Microsoft launch some software at a 
particular time to allow others to launch their software at that 
time. Usually some third party or OEM will developped these concepts 
and only later (much later sometimes) Microsoft will copy the 
concepts and include them in their versions of such functionality. 
The qualification should be removed.
    2. The second qualification is also very unresonable, here 
Microsoft again thinks that it can dictate or retrain through its 
actions (or lack thereof the innovations of others. The 
qualification reads: "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." Again, it 
is ludicrous that competing ISVs or OEMs be reatrained to only mimic 
Microsoft's actions when usually innovation happens the other way 
around. This qualification should be removed. Why should microsoft 
care about the size of the user interface? If the OEM creates a user 
interface that is too small, or narrow, or large, it doesn't cause 
any harm to Microsoft, only to the OEM in user dissatisfaction and 
support costs (none of which are Microsoft's concern given that it 
doesn't bare any of those costs, and given Microsoft's treatment of 
Hewlett Packard with respect to startup sequnce shells, it has shown 
that it doesn't care about those OEM costs).
    3. The qualification "if a Microsoft Middleware Product 
that provides similar functionality" also allows for Microsoft 
restraint of other's innovations, the definition of Microsoft 
Middleware Product is particularly weak and full of escape clauses. 
The qualification should not be present at all.
    4. The time qualification and enumeration of the circumstances 
and times under which launching can occur "at the conclusion 
of the initial boot sequence or subsequent boot sequences, or upon 
connections to or disconnections from the Internet" should 
also be removed. There are many reasons why lounching might be 
desireable at other times.
    5. Launching of should not be restricted to "Non-Microsoft 
Middleware", any software should be allowed to be launched. 
Section III.C.3 should read:
    3. Launching automatically, at the conclusion of the initial 
boot sequence or subsequent boot sequences, or upon connections to 
or disconnections from the Interact, or at any other time, any Non-
Microsoft software is allowed without this being subject to any 
restraint from Microsoft. Mechanisms (APIs, Protocols, Facilities, 
etc) present in a Microsoft Operating System that aids launching of 
Microsoft software at particular times should be documented and 
allowed to be accessed by non-Microsoft software without restraint.
    It should be noted that the original Section III.C.3 precludes 
the implementation of IAP sign up sequences, OEM shells, end user 
tutorials that are desired to be lounched at the initial and 
subsequent boot sequences. For example the OEM might present an IAP 
sign up sequence until such a time when the user as made such a 
selection or when the

[[Page 28711]]

user as indicated that it doesn't want to asked again in subsequent 
sign up sequences. The reason the Section III.C.3 precludes even the 
implementation in the initial boot sequence is because Microsoft can 
remove their own facilities from startup or from displaying a user 
interface, thus forcing the OEM to remove their facilities. Freedom 
of innovation and choice by the OEMs cannot be at the mercy of 
Microsoft's actions. For example, Microsoft might move such 
facilities to the second boot sequence and it might require that the 
system reboot after an initial boot sequence process, the OEMs would 
then not have the freedom to provide their facilities in the second 
boot sequence.
    Comment III.14
    Section III.C.4 reads:
    "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."
    This section should be augmented in this way:
    4. Offering users the option of (a) launching other Operating 
Systems from the Basic Input/Output System; or (b) launching other 
Operating Systems from a non-Microsoft boot-loader or similar 
program that launches prior to the start of the Windows Operating 
System Product.; or (c) choosing to make a non-Microsoft boot-loader 
the default boot loader in the system; or (d) choosing to allow the 
end user to interactively direct the Basic Input/Output System or a 
non-Microsoft boot-loader or any other facility to remove a 
Microsoft Windows Operating System and to provide the Personal 
Computer owner to receive a refund for the cost of the Microsoft 
Windows Operating System from the OEM; or (e) to select a default 
Operating System that is a non-Microsoft Operating System, for 
example by allowing the default Operating System to start without 
user intervention after a timeout period; or (I3 any other form of 
restraint that might cause an OEM to not preload non-Microsoft 
Operating systems in theft Personal Computers (for example by having 
the Microsoft Operating System corrupt the disk occupied used by 
such non-Microsoft Operating Systems, or from denying supprt to OEMs 
for such product configurations, etc)..
    Given the nature of existing restraints by Microsoft in this 
area, these additional clauses allow for less restraint by Microsoft 
on the OEMs actions.
    Comment III.15
    Section III.D reads:
    "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. 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." 
Issues:
    1. The text "via the Microsoft Developer Network 
("MSDN") or similar mechanisms" allows Microsoft 
not to use the MSDN program which is broadly available and non-
discriminatory, and allows instead for Microsoft to extract other 
agreements and conditions from the interested parties. The intent 
should by "via the Microsoft Developer Network 
("MSDN") or successor developer program (if the MSDN 
program is discontinued or replaced by a new developer program, but 
such a program should be equally broadly available and equally 
nondiscriminatory as the MSDN program was on the earliest date the 
proposed consent decree was filled with the Court by Microsoft and 
the Plaintiffs)."
    2. The text "APIs and related Documentation" should 
be extended to include "APIs, related Documentation, 
Protocols, File Formats, Data Formats, Certification/Validation 
Component Signatures, and any other technological mechanism".
    3. The text "that are used by Microsoft Middleware to 
interoperate with a Windows Operating System Product ", given 
the loose definition and the escape clauses that Microsoft can 
invoke in that definition, and given that Microsoft also markets a 
wide variety of non-Middleware software and hardware, the text 
should be corrected to require full disclosure of the use by these 
software and hardware products of Microsoft Operating System 
facilities. The proposed text is shown below.
    4. The requirement that disclosure only occur in the case of a 
new major version of Microsoft Middleware allows Microsoft an easy 
exit from their documentation requirements. Microsoft has stated in 
fron of the District Court (Judge Jackson) that a sandwich would be 
part of the Operating System if they so dictated, clearly Microsoft 
cannot be trusted to name a release major or non-major, because to 
Microsoft it would be whatever they desire at such a time. 
Furthermore the mechanism of Major and first Minor point release 
numbers is highly ambiguous and maleable, certain Microsoft products 
don't even have a version number (Windows XP, Microsot .Net). In any 
case, whether a product release is major or minor should not be an 
excuse for non-diclosure, a small bug fix release wouldn't have many 
changes on interface use, so its documentation requirements would be 
proportional to the effort spent in the release development. If this 
restriction is not removed, facilities would remain undocumented, 
simply because Microsoft doesn't use them initially in their so 
called major release but instead only uses them initially in a minor 
release; or even more easily by making every release a minor 
release. Microsoft has shown in the earlier Consent Decree entered 
with the D.O.J. that it will take advantage in any ambiguity.
    The new section should thus read:
    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 successor developer program (if the MSDN 
program is discontinued or replaced by a new developer program, but 
such a program should be equally broadly available and equally non-
discriminatory as the MSDN program was on the earliest date the 
proposed consent decree was filled with the Court by Microsoft and 
the Plaintiffs), the APIs, related Documentation, Protocols, File 
Formats, Data Formats, Certification/Validation Component Signatures 
(and Microsoft shall not restraint or deny such signature facilities 
or enablements, and any other technological mechanism that are used 
by Microsoft Middleware, Microsoft Application, Microsoft Hardware 
Products, or by newly introduced Microsoft Operating System features 
(that are similar to existing facilities available from third 
parties in the market) to intemperate with a Windows Operating 
System Product. In the case of a any new version of Microsoft 
Middleware or Microsoft Operating Systems, or Microsoft Application, 
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.
    Comment III.16
    Section III.E should be augmented where it reads "on 
reasonable and non-discriminatory tcrms" to read "on 
reasonable, non-discriminatory and non-royalty bearing terms." 
The imposition of per unit royalties as a condition to grant access 
to any Communication Protocol would allow Microsoft to exclude 
competitors from the market.
    Comment III.17
    Section III.E reads:
    "E. Starting nine months after the submission of this 
proposed Final Judgment to the Court, Microsoft shall make available 
for use by third parties, for the sole purpose of interoperating 
with a Windows Operating System Product, on reasonable and 
nondiscriminatory terms (consistent with Section III.I), any 
Communications Protocol that is, on or after the date this Final 
Judgment is submitted to the Court, (i) implemented in a Windows 
Operating System Product installed on a client computer, and (ii) 
used to interoperate natively (i.e., without the addition of 
software code to the client operating system product) with a 
Microsoft server operating system product."
    There are many issues with this section:
    1. Communication Protocols can be used for communication between 
two or more personal computers running a Windows Operating System 
Product installed on client computers. For example a client computer 
can share a disk drive so that its file are accessed to other client 
computers, such functionality doesn't require a Microsoft server 
operating system product. The ability to interoperate natively 
should not be

[[Page 28712]]

restricted to the Communication Protocols used to interoperate 
natively with a Microsoft server operating system product, for 
example a competing non-server client operating system might require 
to implement these protocols to be competitive. For example, both 
Apple's MacOS X client operating system and client versions of the 
GNU/Linux operating systems contain incomplete implementations of 
the file sharing protocols used by Windows Operating System ). 
Section III.E shall apply equally to both client and server 
operating systems to allow them interoperate natively with Windows 
Operating System Products installed on client computers.
    2. To circumvent the provisions in Section III.E Microsoft could 
do this in future (major or minor) releases of its Personal Computer 
Operating System Products: (a) do not include software that 
implements future revisions of a Communications Protocol with the 
Windows Operating System Product installed on a client computer; and 
(b) request from the Microsoft server operating system product the 
software that the client requies at first boot, each boot, or at 
under other circumstances. Thus Microsoft would have circumvented 
the requirements stated in Section III.E because there would be 
"addition of software code to the client operating system 
product" (which Section III.E.ii requires that it be 
"without the addition of software code to the client operating 
system product"). By Microsoft implementing a new protocol 
(which it would not have trouble documenting to 3rd parties) that 
the client computer's Windows Operating System Product would use to 
request these addional software codes from a Microsoft server 
operating system product the circumvention would have been achieved. 
Thus by removing the existing components that implement existing 
Communications Protocols all kinds of Communications Protocols would 
thus be allowed to remain undocument in future releases of a Windows 
Operating System Product by Microsoft, thus denying the purpose of 
allowing native interoperability between other operating systems and 
Windows Operating System Products. Microsoft, through privave key 
signin and public key signature validation, Microsoft would be able 
to sign these software components to ensure their origins 
(Microsoft) and that they have not ben tampered, thus allowing every 
Communications Protocols to remain undocumented, including security 
protocols, filesystem protocols, transaction management protocols, 
etc. The intent of Section III.E is good because it is pro-
competitive, but the actual terms easily allow Microsoft to 
circumvent that intent. Software is very maleable, terms used to 
describe it, such as: "without the addition of software 
code" are easily circumvented, for example by slicing the 
software and requiting thatthere be "addition of software 
code", this can be done easily and transparently (i.e. without 
knowledge by end user).
    3. The word "implemented" is also used to describe 
the software, and can lead to arguments or circumvention from 
Microsof with respect to meaning.
    4. The description of what is being made available is ambiguous. 
Instead of "Microsoft shall make available .... any 
Communications Protocol", it should be stated clearly what is 
being made available. A description of what should be made available 
is shown in the proposed revision to Section III.E below.
    Section III.E should be replaced with:
    E. Starting nine months after the submission of this proposed 
Final Judgment to the Court, Microsoft shall make available for use 
by third parties, for the sole purpose of interoperating with a 
Windows Operating System Product, on reasonable (without an up front 
fee and royalty free) and non-discriminatory terms (consistent with 
Section III.I), technical implementations for any Communications 
Protocol that is, on or after the date this Final Judgment is 
submitted to the Court, utilized by a Windows Operating System 
Product nstalled on a client computer to interoperate with (i) a 
Microsoft server operating system product, or (ii) a Windows 
Operating System Product. The means through which any such 
Communications Protocol shall be made available shall include:
    (a) a non-fee based and non-royalty based patent license to any 
and all patents required by an implementation of fully featured, 
high performance, and interoperable client or server operating 
system product components that implement the Communication Protocols 
in question. The patent license can be limited to be for the sole 
purpose of interoperating with Windows Operating System Products 
installed on a client computers; and
    (b) a non-fee based and non-royalty based license to implement 
the Communications Protocol in client and server operating system 
product components that are fully featured, high performance, and 
interoperable with Windows Operating System Products installed on a 
client computers. The protocol license can be limited to be for the 
sole purpose of interoperating with Windows Operating System 
Products installed on a client computers; and
    (c) a technical discussion forum (mail list, newsgroup or web 
site) through which Microsoft will provide in a nondiscriminatory 
basis non-fee based technical support to ISVs that require support 
related to the Communications Protocol. Microsoft shall make its 
best efforts to provide such technical support. Microsoft shall 
provide subject to the Communication Protocol license the 
Communications Protocol specifications which shall be:
    (d) the precise and complete set of specifications of the 
Communication Protocols (and their predecessors), such that based on 
it a competent third party software developper would be capable of 
implementing fully featured, high performance, and interoperable 
operating system product components that implement the Communication 
Protocols in question (without the need to perform any reverse 
engineering of any kind); or In the abscence of such a precise and 
complete set of specifications as described in Section III.E.a 
(above), or at Microsoft's choosing or by direction of the 
Technicall Committee, Microsoft shall provide instead:
    (e) any and all specifications that Microsoft has of the 
Communication Protocols (and their predecessors); and the complete 
source code and build procedures of all the relevant client side 
components and implementations (for each Microsoft Windows Operating 
System Product) of the Communications Protocol in a form that these 
components can be compiled (i.e. translated from source code form 
into binary form) and linked (translated from object form into a 
binary executable form) by the third party to produce the exact same 
binaries of the native components in the Windows Operating System 
Product that implement the Communication Protocols. The license 
under which these component's source codes and build procedures 
would be provided to the third party would be only for reference and 
use only within the third parties premises for the sole purpose of 
implementing fully featured, high performance, and interoperable 
operating system product components that implement the 
Communications Protocol in question. No redistribution rights of any 
kind (in binary or source form) are required to be given to the 
third party.
    Additionally:
    (f) Microsoft shall continuously and proactively provide updates 
to the third party such that the third party can continue to 
implement fully featured, high performance, and interoperable 
operating system product components that implement the Communication 
Protocols in question as the corresponding Microsoft Windows 
Operating System Products implement new patents, versions or 
features of the Communications Protocol. These updates should be 
provided irrespective of how major or minor is the Microsoft Windows 
Operating System Product update that makes use of the Communications 
Protocol changes or patents. Microsoft shall provide these through 
addendums:
    (i) to the licenses described in Sections III.E.a and III.E.b to 
cover new patents or protocol revisions or versions as appropriate; 
and
    (ii) the specifications and implementations described or 
provided in Sections III.E.d and III.E.e as appropriate
    Comment III.18
    Section III.F.1.a reads:
    "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" Microsoft has shown that 
it retaliates against OEMs when they support now-Microsoft software 
in general, not just Microsoft Platform Software, for example the 
retaliation against IBM because of IBM's intent to bundle SmartSuite 
with their Personal Computers as can be seen in the Findings of 
Fact.
    Section III.F.1.a should be expanded to read:
    a. developing, using, distributing, promoting or supporting any 
software that competes with Microsoft Platform Software, Microsoft 
Operating Systems, Microsoft Application Software, Microsoft 
Hardware or any other Microsoft supported technologies or any 
software that runs on any software

[[Page 28713]]

that competes with Microsoft Platform Software, Microsoft Operatin 
Systems, Microsoft Application Software, Microsoft Hardware or any 
other Microsoft supported technologies; or
    Comment III.19
    Section III.F.2 reads:
    "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."
    Issues:
    1. Again, Microsoft retaliates against OEMs (IBM) to product 
Microsoft products other than its Operating Systems.
    2. Allowing Microsoft to enter into agreements that "place 
any limitations on ISV's development, use, distribution or promotion 
of any such software" is an open ended means under which 
Microsoft can cause ISV's to act in manners that Microsoft desires. 
For example, Microsoft might extend the MSDN agreements with limited 
sublicensing of Microsoft patent pools and extract in exchange 
agreements from all 1SVs in the market to limit their development, 
use, distribution or promotion of any other software. The litigation 
to ensure that those limitations are not "reasonably necessary 
to and of reasonable scope" would probably take another 4 
years of litigation. The Plaintiffs must remember that one of 
Microsoft's options at any time is to relly on the ambiguities of 
these terms and use them to realize their means, given that it has 
been shown that Microsoft has monopoly power int he x86 compatible 
Personal Computer market its retaliatory means must be reduced as 
much as possible.
    Section III.F.2 should read:
    2. Microsoft shall not enter into any agreement relating to a 
Windows Operating System Product, Microsoft Application Software, 
Microsoft Hardware or any other Microsoft supported technologies, 
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, Microsoft 
Operatin Systems, Microsoft Application Software, Microsoft Hardware 
or any other Microsoft supported technologies or any software that 
runs on any software that competes with Microsoft Platform Software. 
Microsoft may not enter into any agreements that place limitations 
on an ISV's development, use, distribution or promotion of any such 
software for any reason.
    Microsoft has more than enough resources to all the software 
development that it requires, if it has to felly on outside parties 
to do software development, it must do so without placing 
limitations.
    Comment III.20
    Section III.G.1 reads:
    "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"
    These are the issues:
    1. The text: "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" allows Microsoft to extract 
agreements from these parties under which at least, by assuring 
itself of a 50% distribution, promotion or usage share it guarantees 
that no competitors technology can be bradly available on a large 
fraction of Personal Computers so that it can become a platform for 
cross-platform software. For example by ensuring that 50% of new 
Personal Computers don't include such software, Microsoft can ensure 
that such software doesn't obtain critical mass as a platform.
    2. These kinds of allowances, given Microsoft's behavior, only 
serve to codify Microsoft's right to extinguish competition. It 
codifies the right and means through which Microsoft can cut other 
parties "air supply".
    3. By restricting these terms to "Microsoft Platform 
Software" it allows Microsoft to enter other kinds of 
agreements in which the means to kill innovation and drive others 
off the market is by developping non-Platform Software, for example 
by developping Applications, giving them for free and forcing these 
parties to distribute them at 50% usage share. The whole exception 
should be removed and Section III.G.1 should read: 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, Microsoft Operatin Systems, Microsoft Application 
Software, Microsoft Hardware or any other Microsoft supported 
technologies, or Furthermore, the agreement that Microsoft might 
enter might require that the OEM doesn't distribute certain non-
Microsoft Sofware without actually requiring the distribution of 
Microsoft technologies. Thus a new clause should be added, Section 
III.G.3:
    3. any IAP, ICP, ISV, IHV or OEM that grants Consideration on 
the condition that such entity refrains in any way or percentage 
from distributing, promoting, using, or supporting, any non-
Microsoft software or technologies
    Comment III.21
    Section III.G.2 reads:
    "G. Microsoft shall not enter into any agreement with:
    2. any LAP 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." Again the restriction is too narrow with respect 
to Microsoft's other means of distributing software, it should read:
    2. any LAP 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, Microsoft Platform Software, Microsoft Operatin Systems, 
Microsoft Application Software, Microsoft Hardware or any other 
Microsoft supported technologies
    Comment III.22
    Section III.G contains this, it is the second to last paragraph 
in the section: "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." Microsoft 
should be allowed to enter into these arrangements, but it should be 
allowed to require it to "prohibits such entity from competing 
with the object of the joint venture or other arrangement for a 
reasonable period of time.". Again, "reasonable period 
of time" is ambiguous and open ended, and non-compete clauses 
have no pro-competive role other than exclusionary when included in 
agreements by a Monopolist such as Microsoft. Joint development or 
joint services agreements should not be restricted in this manner. 
If an actual separate entity is formed, a joint venture that 
includes the incorporation or foundation of a separate independent 
legal entity, the entity in question could have non-competition 
restrictions placed on it, but not the shareholder companies 
themselves (i.e. Microsoft and the other party).
    Comment III.23
    Section III.G, last paragraph, reads:
    This Section does not apply to any agreements in which Microsoft 
licenses intellectual property in from a third party. This 
statement, is very ambiguous and unqualified. The meaning of 
"Microsoft licenses intellectual property in from a third 
party" could easily mean that Microsoft products that include 
any third party intellectual propery are exempt from the

[[Page 28714]]

section. Most Microsoft products contain third party software, 
certainly its operating systems do (for example the Vcritas/Seagate 
backup software and the Veritas Volume Manager included in both 
Windows XP and Windows 2000; the BSD software included in Windows 
2000 and Windows XP; the Mosaic sofware included in all version of 
Internet Explorer; the Java software included in Windows 2000 and 
Windows XP; the printing drivers and other device drivers from IHVs 
included in Windows 2000 and Windows XP; the amount of software 
licensed into these products is very large; etc). Additionally, 
there can also be other forms of intellectual licenses that apply to 
these and other products (for example licenses to use patents of 
third parties). If the clause is intended to mean something 
different from my interpretation, please explain what it is intended 
to mean, and what terms in that sentence ensures that only that 
meaning is allowed.
    This sentence should be removed completely from this section. 
Alternatively, a sentence that says:
    Where terms in this section would cause a third party who has 
licensed software or any other form of intellectual property to 
Microsoft to have its license agreement violated then the specific 
terms in this section that would cause such a license breach do not 
apply. Unless the third party, at its own discrtion, chooses to 
allow the specific violations under an agreement amendment. 
Violation of the license agreement means violation to the detriment 
of the interest of the third party and not violation to the 
detriment of Microsoft's interests. Additionally, Microsoft should 
proactively inform the Microsoft Internal Compliance Officer, the 
Technical Committee, and the Plaintiffs about the circumstances in 
question and provide, as priviledged communication and without 
violating the interests of the third party, all information required 
for their enforcement activities.
    Comment III.24
    Section III.H.2 (the first such section, there are two such 
sections in Section III.H) reads:
    "2. Allow end users (via a mechanism readily available 
from the desktop or Start menu), OEMs (via standard OEM 
preinstallation kits), and Non-Microsoft Middleware Products (via a 
mechanism which may, at Microsoft's option, require confirmation 
from the end user) to designate a Non-Microsoft Middleware Product 
to be invoked in place of that Microsoft Middleware Product (or vice 
versa) in any case where the Windows Operating System Product would 
otherwise launch the Microsoft Middleware Product in a separate Top-
Level Window and display either (i) all of the user interface 
elements or (ii) the Trademark of the Microsoft Middleware 
Product."
    These are the issues:
    The text "require confirmation from the end user" 
should include statements that ensure that Microsoft will not act in 
a discriminatory or derrogatory manner in those confirmations. For 
example, Microsoft should not be allowed to include as part of that 
confirmation process: documentation, help, verbal communitation or 
any other means discriminatory or derrogatory statements. Examples 
of such statemetns are: "By choosing this option, Microsoft 
voids the warranty of the product or disclaims its obligation to 
provide support. Microsoft has not tested this third party option, 
use at your own risk. Use of this option might cause data loss, 
corruption, etc." Microsoft has included messages in their 
products purposedly to cause third parties to not use non-Microsoft 
technology. The Windows 3.0 betas included messages similar to these 
when Windows realized that it was running on top of Digital 
Research's DR-DOS Operating System (instead of running on top of 
Microsoft's MS-DOS).
    2. These statements: "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." allow for Microsoft to easily subvert the 
intent by not Trademarking the Microsoft Middleware (while allowing 
compound Trademarks suchs as "Windows (R) Stuff'), by only 
showing all but one (1) of the user interface elements. The 
restriction to a separate Top-Level Window means that by providing 
it in a subwindow of an existing window on in a visually separate 
top level window that is controlled by a Microsoft non-separate or 
independent process, these escape clauses, again provide Microsoft 
with a a myriad ways to escape the intent of the clause. 
Additionally because of the software maleability the restriction to 
only Microsot1 Middleware Products should not apply.
    Section III.H.2 (the first such section, there are two such 
sections in Section III.H) should read:
    2. Allow end users (via a mechanism readily available from the 
desktop or Start menu), OEMs (via standard OEM preinstallation 
kits), and Non-Microsoft software and technologies (via a mechanism 
which may, at Microsoft's option, require confirmation from the end 
user in a non-discriminatory and non-derrogatory manner) to 
designate a Non-Microsoft software or technologies to be invoked in 
place of any Microsoft Middleware, Microsoft Application or any 
Microsoft Operating System feature that existed in the market as a 
third party product prior to Microsoft's incorpration of such a 
feature into its Operating System (or vice versa) in any case where 
the Windows Operating System Product would otherwise launch the 
Microsoft Middleware Product, Microsoft Applications or any such 
Microsoft Operating System.
    Comment III.25
    Section III.H.3 allows for "(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". Such confirmation 
must be sought through non-discriminatory and non-derrogatory means 
(as outlined in Comment III.23). Additionally such confirmation from 
the end user must allow the user to reject the continued request for 
this confirmation by providing an easily visible checkbox that 
indicates: "would you like to be asked this question again in 
the future?" if the user doesn't want this question to be 
asked in the future it selects the checkbox and the question is 
never asked again (and the current settings remain unchanged).
    Comment III.26
    Section III.H.3.2 (the second such section, there are two such 
sections in Section III.H) reads:
    "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."
    Issues:
    1. The "designated Non-Microsoft Middleware Product" 
term should be "designated Non-Microsoft software or 
technology".
    2. Requirements to host a paricular ActiveX control must require 
that Microsoft proactively documents the interfaces of the 
particular Active) control, and doesn't prevent through signature or 
any other mechanism such hosting by the Non-Micorosft software or 
technology.
    3. The "provided that the technical reasons are described 
in a reasonably prompt manner to any ISV that requests them" 
text shold read "Microsoft must pro-actively and broadly 
(through the MSDN program and web sites) describe the technical 
reasons reasonable manner." Any such "valid technical 
reasons" must be communicated to the Technical Committee, the 
Microsoft Internal Compliance Officer and the Plaintiffs.
    Section III.H.3.2 (the second such section, there are two such 
sections in Section III.H) should read:
    "2. that designated Non-Microsoft software or technology 
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 and detailed and complete 
technical documentation and mechanisms (component signatures) are 
described in a reasonably prompt manner to all ISVs through the MSDN 
program or its successor. Addionally the valid technical reasons and 
any other information relevant to the reasons must be communicated 
to the Technical Committee, the Microsoft Internal Compliance 
Officer, the Plaintiffs and the ISVs in question."
    Comment III.27
    The last paragraph of Section III.H.3 reads:
    "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." Issues:
    1. Again this is tied to Microsoft Middleware Prodcuts, it 
should be replaced by the broader term.

[[Page 28715]]

    2. When a technology "exists" can lead to ambiguity 
given that Microsoft might dictate that technology doesn't exist 
until it determines (at its sole discretion) that it exists. This 
ambiguity is not required.
    The last paragraph of Section III.H.3 should be removed 
completely. Microsoft can introduce new Microsoft Middleware, 
Microsoft Applications, Microsoft Technologies, Microsoft Hardware 
at any arbitrary point in time after the release of an Operating 
System product. In so far as those Microsoft technologies alter 
user's preferences and default system settings, saving and restoring 
those settings sould be supported through an Operating System 
mechanism and user interface that allows for these settings to be 
manipulated.
    Comment III.28
    The first paragraphs of Section III.I reads:
    "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" The text "shall offer to license" 
requires that licensing be offered, it doesn't require that it 
actually enter into such license agreements. The text should instead 
read:
    I. Microsoft shall offer to license, and shall make its best 
effort to actually 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
    Comment III.29
    Section III.I.1 reads:
    "1. all terms, including royalties or other payment of 
monetary consideration, are reasonable and non-
discriminatory;" Allowing for per unit royalties or 
prohibitive up front licensing fees might prevent Microsoft 
competitors from actually being able to participate competitibly in 
the relevant product markets. This Section III.I.1 should read 
instead: "1. all terms, are reasonable and non-discriminatory. 
Royalties or other payments of monetary consideration are explicitly 
forbidden from the temps when the intellectual property is to be 
used only for interoperation with a Microsoft Operating System 
product." For example such a license would not require 
royalties from a server Operating System to interoperate with a 
Microsoft Operating System for Personal Computers, but if the server 
Operating System makes use of the licensed intellectual property to 
interoperate with non-Microsoft Operating Systems for Personal 
Computers, then a royalty might be required by Microsoft.
    Comment III.30
    Section III.I.2 reads:
    "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);" XXX
    Comment III.31
    Section III.I.3 reads:
    "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;" Not 
allowing the transferring or assignment of these parties rights 
under certain circumstances, for example under an acquisition, is 
inherently a form of discrimination. Given that the licenses are to 
be offered in a non-discriminatory fashion, it is important that 
such licenses once offered be available in the future and that the 
licensing not be restricted to a given period of time. If subsequent 
versions of technology become available, and new licenses are 
developped for that technology, the older licenses to the earlier 
technology should continue to be offered for the earlier verisions 
of the technology.
    Comment III.32
    The paragraphs immediately after Section III.I.5 reads: 
"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."
    Comment III.33
    Section III.J.2.b reads:
    "that the licensee:
    (b) has a reasonable business need for the API, Documentation or 
Communications Protocol for a planned or shipping product,"
    Microsoft shall not unreasonably dispute the licensee's 
assertions with respect to III.J.2.b, any individual member of the 
Technical Committee through direct communication with the 
prospective licensee can make a positive determination about the 
III.J.2.b requirement and inform Microsoft about its determination 
without any further Microsoft argument, dispute or delay about the 
prospective licensee meeting the III.J.2.b requirement (Court 
intervention shall not be required).
    Section III.J.2.b should read:
    (b) has a reasonable business need (as promptly and in a non-
discriminating manner determined by Microsoft or any one individual 
member of the Technical Committee), for the API, Documentation or 
Communications Protocol for a planned or shipping product
    Comment III.33
    Section III.J.2.b reads:
    "that the licensee:
    (c) meets reasonable, objective standards established by 
Microsoft for certifying the authenticity and viability of its 
business" It should instead read: (c) meets reasonable, 
objective and non-discriminatory standards (proposed by Microsoft 
and promptly approved by the Technical Committe in consultation with 
the Plaintiffs) for certifying the authenticity and viability of its 
business, the actual determination of the actual authenticity and 
viability of the business can be made by Microsoft or any one member 
of the Technical Committee after taking into consideration legal 
consultation from the Technical Committee's legal staff
    Comment III.34
    Section J.2.d reads:
    "that the licensee:
    (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."
    The issues are:
    1. Should be at Microsoft's expense, not the licensee's.
    2. Verification should hot be performed by "third-party 
verification, approved by Microsoft" if such verification is 
required by Microsoft it should be done under staff hired by the 
Technical Committee and at Microsoft's expense and not through 
unknown for profit relationships and agreements between a third 
party and Microsoft. The intent of this section is for "proper 
operation and integrity of the systems and mechanisms", 
Microsoft should be satisfied with the Technical Committee staff 
performing these duties unless its goals are other than those 
expressed herein.
    3. The text "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" refers to to a "Microsoft specifications for 
use of the API or interface", these specifications shall be 
made available to the licensee
    Section J.2.d should read:
    (d) agrees to submit, at Microsoft's expense, any computer 
program using such APIs, Documentation or Communication Protocols to 
the Technical Committe for verification, to test for and ensure 
verification and compliance with Microsoft specifications (which 
Microsoft shall make available to the licensee) 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.
    Comment IV.1 Section IV.A.2.a reads:
    "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."
    This should be expanded to include electronic forms of 
communication in electronic form, not printed form, because it is 
extremely hard to sift through information, such as source code, in 
non-electronic form.
    Section IV.A.2.a should read:
    a. Access during normal office hours to inspect any and all 
source code, source code control systems, bug or defect databases, 
design documents, build procedures, binary codes, books, ledgers, 
electronic ledgers, electronic databases, accounts, correspondence, 
memoranda, newsgroups, discussions forums, web sites and other

[[Page 28716]]

documents and records in the possession, custody, or control of 
Microsoft, which may have counsel present, regarding any matters 
contained in this Final Judgment. Access to electronic forms of 
information shall be provided in electronic form and not in only in 
printed form.
    Comment IV.2
    Section IV.B.2 describes "The TC members shall be experts 
in software design and programming." section IV.B.2.c reads:
    "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."
    Given that Microsoft competes in almost every software market 
conceivable, it is a strecth to request two years of non-compete 
agreement from the TC member. Two such years of non-compete could be 
provided only if Microsoft provides two such years of salary to the 
TC member with a yearly inflationary bonus adjustment per year.
    Comment IV.3
    Section IV.B.8.iii reads:
    "(iii) obtain reasonable access to any systems or 
equipment to which Microsoft personnel have access;"
    This should reads:
    (iii) obtain reasonable access to any systems, services or 
equipment to which Microsoft personnel have access; services should 
include but not be limited to: authentication, file sharing, 
discussion forums, newsgroups, chat channels, source code control 
systems, bug/defect database systems, design management systems, 
document repositories, web sites, etc.
    Comment IV.4
    Section IV.D.4.d reads:
    "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."
    This is one of the most egregious terms of the settlement. Given 
that the Technical Committee has hardly any actual enforcement 
duties, other than monitoring, and the Technical Committee actually 
being an impartial participant in the actual history of Microsoft's 
interaction with third parties and Microsoft's possible violations 
of settlement terms, it is astonishing that this term mandates that 
the actual work product of the Technical Committee not be admissible 
as evidence of the settlement enforment activities.
    Microsoft deifnitely over-reached by requesting this, this shows 
Microsoft's true intentions (another 5 years without actual 
enforcement plus maybe another 5 of further litigation), Microsoft 
should be forced to accept instead the contrary of this term.
    It is an interesting legal question if any documents related to 
presummed antitrust violations are made the work product of the 
Technical Committee, then by IV.D.4.d and those documents being 
unadmissible, then what other documents could be used to initiate 
Court proceedings by the plaintiffs without any such documents being 
alleged by Microsoft as being derived from the TC's unadmissible 
work. How could the plaintiffs promptly produce equivalent analysis 
without it being under this gag order?
    Section IV.D.4.d must read:
    "d. All work product, findings or recommendations by the 
TC must be admitted in any enforcement proceeding before the Court 
for any purpose, and any member of the TC is herein explicitly 
allowed to testify by deposition, in court or before any other 
tribunal regarding any matter related to this Final Judgment."
    If the Plaintiffs are not willing to mandate this rewritten 
IV.D.4.d they are engaging in blatant dereliction of duty of the 
antitrust enforcement offices and duties that they purport to serve.
    Comment IV.5
    Section IV.D.4.e reads:
    "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." 
It should read instead:
    "e. The TC must preserve the anonymity of any third party 
complainant upon the request of the Plaintiffs or the third party. 
Where the TC deems it appropriate to do so, and it has not ben 
requested, by the Plaintiffs or the third party, the TC in its own 
discretion it may preserve the anonymity of any third party 
complainant."
    Comment V.1
    Section V.A reads:
    "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."
    The Final Judgement should last longer than five years. The 
actual initial antritrust violations by Microsoft occured more than 
five years ago and we are stiI1 without any form of remedy. The 
legal system works very slowly. By entering this Final Judgement, 
and Microsoft continuing its anticompetitive practices, it would 
probably take more than five years to resolve those further 
complaints. Given that the orignal D.O.J. vs Microsoft settlement 
that related to per computer unit licensing was ambiguous enough 
that it ended up being mostly ignored and full antritrust 
proceedings were required, it wouldn't surprise me if this agreement 
which is even more ambiguous and has many more loopholes means at 
Microsoft's disposal to circumvent its intent would not result in 
many more years of litigation without any real behaviour change on 
Microsoft's part.
    Mandating an expiration only after Microsoft no longer has 
monopoly power in the market of Operating Systems for Personal 
Computers for Intel x86 or x86 compatible systems is more 
appropriate. Court proceedings or the under the parties agreement 
and Court supervision would be required for the settlement to 
expire, Otherwise a period longer than 5 years, at least 12 years 
should be mandated.
    It must be observed how durable has Microsoft's monopoly been 
and that it was initially cemented through antitrust violations for 
which a Final Judgement with no teeth got the industry into its 
current state: 1.
    Since the mid 80s it faced no competition. Through illegal 
competitive behaviour, it foreclose the market to then Digital 
Research's DR-DOS product (an atlernative to Microsoft's 
MSDOS). Microsoft has recently settled a separate antitrus suit by 
the current owner of the DRDOS assets (Caldera). These original 
violations animated the first consent decreed between D.O.J. and 
Microsoft 1995. That consent decree was determined to be ambiguous 
by the appellate Court in its allowance of integration, and a full 
antitrust lititgation ensued.
    2. Even though Microsoft's technology significantly lagged 
behind the technical abilities of the systems (for example it took 
Microsoft 10 years to produce a quasi 32 bit operating system after 
x86 Intel 32 bit capable operating systems became available in the 
market) no other competitors could enter the market because 
Microsoft moved from per-unit licenses to persystem licenses for 
each model of system that the OEM manufactured (and this continued 
to exclude other vendors from the market). 3. The one significant 
threat that Microsoft has faced to its personal computer operating 
system monopoly has been the advent of the Internet with open 
standards and as a means for delivering applications from server 
computers (either through Java or directly as web applications) or 
through middleware based applications that could perform on 
Microsoft Operating System based personal computers or personal 
computers running other operating systems. This one threat has been 
completely erradicated from the market. Microsoft will continue to 
exclude Java as a viable Interact based application delivery 
mechanisms, because this Final Judgement doesn't mandata the 
allowance of interoperability of Sun's Java with Microsoft's 
Internet Explorer (the Top Level Window definition is purposedly 
design to make this impossible). Dereliction of duty now from the 
Plaintiffs would mean that even under the most blatant violations of 
antritrust laws and astonishing findings of fact, that Microsoft 
would escape with a Final Judgement that is too short and very weak 
from many perspectives. 12 years of enforcement seem the minimal 
time for market conditions to actually have another opportunity to 
arise and for actual market change to actually occur.
    Comment V.2
    Section V.B reads:
    "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."
    The Plaintiffs in any enforcement proceeding shall not be 
limited to only one extension of two years. If the Plaintiffs cannot 
request as a remedy to future Microsoft's violations of this 
settlement, then it is not clear if the Court can actually mandate a 
remedy that is not being requested. Additionally, limiting the 
length of the actual extension at this time and as part of this 
settlement seems beyond belief given that any enforcement will 
require the Court participation because there is no actual real 
enforcement (other than monitoring by the Technical Committee with 
its work

[[Page 28717]]

product later bein unadmissible as court evidence and without the TC 
members being allowed as witnesses).
    Section V.B should read:
    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 an extension 
of this Final Judgment for up to ten years, together with such other 
relief as the Court may deem appropriate, which is hereby agreed by 
the parties that it is acceptable for it to be of any length as the 
Court deems appropriate.
    Comment VI.1
    Definition VI.A reads;
    "A. "Application Programming Interfaces 
(APIs)" means the interfaces, including any associated 
callback interfaces, that Microsoft Middleware running on a Windows 
Operating System Product uses to call upon that Windows Operating 
System Product in order to obtain any services from that Windows 
Operating System Product."
    Issues are:
    API refers to the interfaces that are used not only by Microsoft 
Middleware uses, but any other software uses. APIs are mostly used 
by regular applications, narrowing the definition of APIs to what 
Microsoft Middleware uses is a contorted way to allow even more 
freedoms of circumvention to Microsoft. For example for Microsoft to 
perform anti-competitive practices through undocumented interfaces 
that its applications use, but that Microsoft's Middleware doesn't 
use, thus excluding those APIs (by definition!) from being covered 
by this settlement. Amazingly, this definition proposed to define 
API to mean something other than Application Programmin Interface, 
do you see the word application? It is not Middleware Programming 
Interface! Simply amazing!
    Definition VI.A should be replaced by the definition in the 
Final Judgement entered by Judge Jackson (definition 7.b):
    A. "Application Programming Interfaces (APIs)" means 
the interfaces, service provider interfaces, and protocols that 
enable a hardware device or an application, Middleware, or server 
Operating System to obtain services from (or provide services in 
response to requests from) Platform Software in a Personal Computer 
and to use, benefit from, and rely on the resources, facilities, and 
capabilities of such Platform Software.
    If another definition is adopted, it should be explained why it 
is different from the one proposed.
    Comment VI.2
    Definition VI.B reads:
    "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."
    Issues:
    1. Given that Communication Protocols relevant to this 
settlement (given the proposed changes in other sections) also exist 
between two personal computers, the definition should reflect that.
    2. The set of tasks between the parties in a protocol doesn't 
have to be predefined, there are protocols under which the parties 
actually sent pieces of arbitrary code to each other to perform 
actions that are arbitrary.
    Definition VI.B should read:
    "B. "Communications Protocol" means the set of 
rules for information exchange to accomplish tasks between a Windows 
Operating System Product and another operating system 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."
    Comment VI.3
    Definition VI.J reads:
    "J. "Microsoft Middleware" means software code 
that
    1. Microsoft distributes separately from a Windows Operating 
System Product to update that Windows Operating System Product; 2.
    is Trademarked;
    3. provides the same or substantially similar functionality as a 
Microsoft Middleware Product; and
    4. includes at least the software code that controls most or all 
of the user interface elements of that Microsoft Middleware.
    Software code described as part of, and distributed separately 
to update, a Microsoft Middleware Product shall not be deemed 
Microsoft Middleware unless identified as a new major version of 
that Microsoft Middleware Product. A major version shall be 
identified by a whole number or by a number with just a single digit 
to the right of the decimal point."
    This is a very astonishing definition of Middleware, nowhere 
does it talk about software that provides APIs to other software 
components, which is core to any definition of Middleware. The 
definition of Non-Microsoft Middleware (VI.M) does seem appropriate 
to what Middleware is. Definition 7.q in Judge Jackson's Final 
Judgement should be seen for a reasonable defintion of Middleware:
    "'Middleware" means software that operates, 
directly or through other software, between an Operating System and 
another type of software (such as an application, a server Operating 
System, or a database management system) by offering services via 
APIs or Communications Interfaces to such other software, and could, 
if ported to or interoperable with multiple Operating Systems, 
enable software products written for that Middleware to be run on 
multiple Operating System Products. Examples of Middleware within 
the meaning of this Final Judgment include Internet browsers, e-mail 
client software, multimedia viewing software, Office, and the Java 
Virtual Machine. Examples of software that are not Middleware within 
the meaning of this Final Judgment are disk compression and memory 
management."
    These notions in the VI.J "Microsoft Middleware" 
definition are astonishing:
    "2. is Trademarked;" other than to provide Microsoft 
another escape clause, this term adds absolutely no value. With this 
term as part of the definition, Microsoft can rename some component, 
not use an earlier trademark name for it, and voila! it is no longer 
Microsoft Middleware.
    The notion of what Microsoft Middleware is certainly cannot be 
tied to the version number given to it! Something is what it is 
whatever the name used to refer to it. Something as arbitrary as a 
version number and as easily maleable as a version number certainly 
cannot be criteria to be used to determine what it is. Contract 
writting 101 should certainly tech any lawyers about this. It is 
interesting to pose these questions to the Plaintiffs:
    What is the major version number of Office XP? What is the 
version number of Internet Explorer. NET? What is the version number 
of Outlook Express. NET? What is the version number of Windows XP, 
Windows CE, Windows ME, Winodows 95 OSR2? Widonws 95? Microsoft 
certainly can change interfaces, protocols, APIs, etc in a major, 
minor, service pack, hot fix, or any other packaging of its 
software. The names or version numbers of such software should not 
be used to determine what is contained by them.
    Both of these (VI.J.2 and VI.J last paragrpah) should be removed 
from the definition. The term VI.J.4 seems to be there only for the 
purpose of allowing Microsoft to slice and recombine its software in 
such a way as to ensure that the user interface component be the one 
called the "Microsoft Middleware" and not the components 
that acutally perfrom the traditional Middleware functionality (see 
Jacksons definition above) of providing APIs to other software. It 
is very intereseting that Middleware is mostly not about user 
interfaces but about providing interfaces to other applications, 
applications that felly on the Middleware as a platform. Most 
Midleware doesn't have a user interface, if it has one it is 
incidental.
    The term VI.J.4 should be removed.
    After these adjustments, Defintion VI.J should just be:
    J. "Microsoft Middleware" means software code that
    1. Microsoft distributes separately from a Windows Operating 
System Product to update that Windows Operating System Product; and
    2. provides the same or substantially similar functionality as a 
Microsoft Middleware Product; and
    Comment VI.4
    Definition VI.K reads:
    "K. "Microsoft Middleware Product" means
    1. the functionality provided by Interact Explorer, Microsoft's 
Java Virtual Machine, Windows Media Player, Windows Messenger, 
Outlook Express andtheir 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

[[Page 28718]]

    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."
    The first issue with this definition is, what is the connection 
between VL.K.2 and the presumably subordinate VI.K.2.a and VI.K.2.b? 
The sentence under VI.K.2 seems incomplete, it should end in 
something like:
    "* * * and that is part of any Windows Operating 
System Product, and is either:" Other issues are:
    1. Throughout the trial Microsoft and depositions (but not 
before litigation was brought into action) would not budge on its 
pretense incomprehension of what an Internet Browser is. They would 
only talk about browsing technologies but would react stupified to 
the notion of Integer Browsers, particularly their own, when they 
were referred to as "the browser product." It is amusing 
and without any sign of legal thouroughness that the Plaintiffs have 
come to agree with Microsoft to a definition that uses the term 
"Internet browser" without actually providing a 
definition for such a term anywhere in the proposed Final Judgement. 
Not even what a Internet Browser is being agreed amongst the parties 
in the dereliction of duty that this document embodies.
    2. Given that this section includes other disputed terms such as 
Internet Explorer, it sould seem to be important to include precise 
definitions about what these actual terms mean. Maybe when the 
Plaintiffs try to do this together with Microsoft they will realize 
that only contorted definitions such as the ones for API, Microsoft 
Middleware, Microsoft Middleware Product, etc. are arrived at.
    3. Again software can be or stop from being a Microsoft 
Middleware Product depending on whether it is trademarked or not 
(which to no ones surprise is another contorted and unnatural 
definition by itself).
    4. VI.K.2.b.i refers to "distributed separately by 
Microsoft from a Windows Operating System Product", that term 
should be precisely defined to mean what it seems to mean, because 
Microsoft having argued in court that a sandwich is part of Windows 
if they soley dictate so, then they surely would say that any code 
"is distributed as part of a Windows Operating System" 
even if the code is sent to the end user m a CD-ROM inside a 
sandwich not included in the Windows box, or more complexily and 
seriously, if it is sent to the user's system through a the Windows 
update process.
    5. VI.K.2 seems to require that the functionality be "part 
of any Windows Operating System Product" but immediately and 
sub-ordinated to that clause it also says VI.K.2.b.i 
"distributed separately by Microsoft from a Windows Operating 
System Product" which seems to contradict the pre-requisite 
governing condition (it has to be both part of and not part of?.), 
that would be by necessity the empty set, because something cannot 
be both part of something and not part of something; thus redering 
the whole contorted VI.K definition sense-less.
    06. The final paragraph on VI.K states that:
    "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."
    as some form of saving grace for the grotesquely constructed 
prior definition. Obviously, since the litigation started, Microsoft 
has described everything as part of Windows, so one should not wait 
standing for Microsoft to ever again market anything in their 
anticompetitive campaigns as not being part of Windows.
    Definition VI.K should be replaced by:
    "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. any functionality that is first licensed, distributed or sold 
by Microsoft before, on, or after the entry of this Final Judgment 
and that is later made part of any Windows Operating System Product, 
this shold include but not be limited to: Internet browsers, email 
client software, networked audio/video client software, instant 
messaging software; or
    3. functionality provided by Microsoft software that
    i. is, or at any time 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; or
    ii. is similar to the functionality provided by a Non-Microsoft 
Middleware Product Functionality that Microsoft describes or markets 
as being part of a Microsoft Middleware Product (such as a service 
pack. upgrade, or bug fix for Interact 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."
    Additionally, reasonable definitions of what these mean should 
be included as separate definitions: "Internet Explorer, 
Microsoft's Java Virtual Machine, Windows Media Player, Windows 
Messenger, Outlook Express and their successors in a Windows 
Operating System Product"
    Comment VI.5
    The word product should be replaced by technology in definition 
VI.M because not all middleware is made available in a product form, 
some of it might be made freely available or under conditions or 
packaging that don't relate directly to it being a 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."
    It shold read:
    "M. "Non-Microsoft Middleware" means a non-
Microsoft software technology 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."
    Comment VI.6
    The requirement under VI.N.ii that:
    "and (ii) of which at least one million copies were 
distributed in the United States within the previous year."
    Seems excessive, a more reasonable number of one hundred 
thousand copies is more appropriate because the benefits of the 
settlement can benefit nascent technologies and not just more 
established ones.
    Comment VI.7
    The definition under VI.O of OEM is self centered, to be an OEM, 
the OEM has to be a licensee of a Windows Operating System Product. 
How do new OEMs come to be if Microsoft refused to license its 
products directly or uses intermediaries not under its ownership 
control but under agreement control to do actual sublicensing? The 
definition of an OEM should be independent of whether they at any 
given point in time they have a direct license from Microsoft 
(instead of purchasing the product in the channel like smaller OEMs 
do). The definition of Covered OEM already takes care of them being 
licensees.
    "O. "OEM" means an original equipment 
manufacturer of Personal Computers that is a licensee of a Windows 
Operating System Product."
    Should be:
    O. "OEM" means an original equipment manufacturer of 
Personal Computers.
    Comment VI.8
    Definition VI.Q reads:
    "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."
    The only concern here is if:
    television set top boxes, handheld computers, game consoles, 
telephones, pagers, and personal digital assistants are constructed 
from Intel x86 or x86 compatible

[[Page 28719]]

processors and Microsoft offers a version Windows for them that 
allows any software designed for Personal Computers to work on those 
systems, then what those products would be are:
    x86 Personal Computer based handheld personal computers; or
    x86 Personal Computer based personal digital assistants; or
    x86 Personal Computer based personal game consoles; etc
    For example today Microsoft offers a fully functional Personal 
Computer as its game console, the Microsoft Xbox. If Microsoft were 
to offer Windows XP for that system, it would not only be a game 
console but also a fully function Personal Computer. Under those 
circumstances it should not be excluded from the definition.
    Comment VI.9
    Defintion VI.R reads:
    "R. "Timely Manner" means at the time 
Microsoft first releases a beta test version of a Windows Operating 
System Product that is distributed to 150,000 or more beta 
testers." Without actual evidence about the actual size of the 
MSDN subscription base, it seems safer to rewrite this. Addtionally 
because of naming issues, the term "beta test version" 
should be expandded into its meaning:
    "R. "Timely Manner" means at the time 
Microsoft first releases a release version of a Windows Operating 
System Product through its MSDN developper program solely for the 
purpose of developper testing and not intended for end user use for 
reasons other than for testing. If Microsoft plans multiple such 
test releases, then Timely Manner shall means the release time of a 
test release that is at least one year away from the product's final 
availabilty to OEMs for pre-installation or for consumer retail 
purchase, whichever is earlier."
    Comment VI.10
    Defintion VI.S reads:
    "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."
    This definition is purposedly constructed to prevent:
    1. An alternative Jave Virtual Machine (for example from Sun 
Microsystems) from being invoked when Java Applets are invoked 
through a web page because the window controls are the window 
controls of the Internet Browser and the Java Applet executes within 
the same window. By Microsoft using this defitintion to condition 
where it allows non-Microsoft Middleware to be invoked it controls 
the most important way for Java application execution (i.e. under a 
more complex web based application). Thus Microsoft having killed 
Netscape Navigator's viability proceeds to deny Java the remaining 
vehicle that it could have enjoyed under this settlement, i.e. under 
Interact Explorer. Of course the Plaintiffs do nothing other than 
acquesce under this settlement either because of dereliction of duty 
or blatant technical misunderstanding of the issues involved.
    2. For example, the "live chart" stock quotes 
provided (through Java applets) by www.quote.com or the Chess 
application provided (Java applet) by www.chessclub at
    http://www.chessclub.com/interface/java.html
    http://queen.chessclub.com/sji/index.html
    Would simply continue to run under Microsoft Java Virtual 
Machine and not under Sun's Java Virtual Machine when installed on 
the same system and with all the provisions of the settlement fully 
implement (and without any Microsoft violation of the terms 
whatsoever).
    Thus Microsoft gets to reap the fruits of its anti-competitive 
camapaign without having actually conceeded anything of substance 
for non-Microsoft Middleware as it relates to Microsoft's Internet 
Explorer. The same will occur with network video and audio formats 
because Microsoft will make its players not start on a Top Level 
Window thus taking control of audio and video formats of Real 
Networks players even when the end user has choosen otherwise under 
the provisions of this agreement.
    The notion of Top Level Window must be extricated from the 
settlement and Microsoft should allow invocation of ActiveX based 
components of the non-Microsoft Middleware under all circumstances, 
in a manner similar under which today third party software is 
invoked under a non Top Level Window and displayed within the 
Internet Explorer window without a problem (for example see how 
Adobe's Acrobat Reader is displayed under a non-Top Level Window). 
Microsoft has done already all the technical work in this area, an 
it is now only putting contractual road blocks to all these natural 
forms of invocation of non-Microsoft Middleware.
    Comment VI.10
    Definition VI.T reads:
    "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 ??, 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."
    The main issue throughout this proposed settlement with respect 
ot Trademarks is that software is what it is irrespective of what it 
is called. The definitions of Microsoft Middleware and Microsoft 
Middleware Product where conditioned with them being trademarked 
(under this definition) as a means to provide Microsoft and escape 
clause to make the no longer Microsoft Middleware (and Microsoft 
Middleware Products). That concept should completely go away. If it 
doesn't then the defintion of Trademarked shold be exactly the legal 
defintion understood under the law and not this one.
    Comment VI.11
    Defitions VI.U reads:
    "U. "Windows Operating System Product" means 
the software code (as opposed to source cede) 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."
    The list must also include Windows 95, Windows 98, Windows SE, 
Windows ME (collectively known as Windows 9x) and Windows NT 4,0 and 
all their service releases. The current installed base is mostly 
made out of these products. By purposedly excluding them Microsoft 
and the Plaintiffs allow Microsoft to continue to prevent non-
Microsoft Middleware from fairly competing in the broad installed 
base and forces competition to only occur under Microsoft's 
controlled evolution of the market. It does so by not allowing 
competition from the broad installed base by not affording the 
benefits of the settlement to that gigantic installed base (i.e. all 
the versions of Windows 9x).



MTC-00029686

P.O. Box 369
January 24, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    I am writing you today to express my opinion in regards to 
Microsoft. I fully support the settlement that was reached in 
November. In my opinion, the litigation that has continued for the 
last three yearn is a waste of precious resources that should be 
focused on more important issues. I am chagrinned that many state 
Attorneys General have continued suing Microsoft. I sincerely hope 
there, will be no further action against Microsoft at the federal 
level.
    This settlement is fair and reasonable. Microsoft has agreed to 
carry out all provisions of this agreement, Under this agreement, 
Microsoft remains together as a company, while following procedures; 
that will make it easier for companies to compete. Microsoft has 
agreed to disclose information about certain internal interlaces in 
Windows;. Furthermore, Microsoft agreed to, disclose any protocols 
implemented in Windows" operating system products.
    This settlement will benefit the economy and the technology 
industry as a whole. Please support this settlement so this dispute, 
can finally be resolved. Thank you for hearing my opinion.
    Sincerely,



MTC-00029687

January 24, 2002

[[Page 28720]]

Attention: Renata Hesse
U.S. Department of Justice.
Antitrust Division
601 D Street NW Suite 1200
Washington, DC 20530
    Deal Ms. Hesse
    Though I am a current member of the Kansas ago Board of 
Education, I am writing this letter personally and not as a 
representative of the Kansas State Board of Education. Before you is 
a fair proposal for settlement of Microsoft case. In a sincere 
a??empt to close the door on a highly publicized legal embattlement, 
Microsoft offers to reveal technical information to comp??titors, 
enabling other companios to write software that actually works with 
Microsoft's operating products. Microsoft even offers, at its own 
expense, a failsafe in the form of an impartial review board which 
will have clearance to every facel of Microsoft's business dealings. 
This means software customers will have the ability to smoothly 
access competing software products on the same desktop, just like 
they are part of Microsoft Office.
    Though Microsoft may surely have hoped for a solid win in this 
case, Bill Gates himsel recently recognized that accepting the 
strict rules and regulations imposed by the settlement is "the 
right thing to do", benefiting the consumer, the tech sector 
and the economy. We may hate to admit it, but Gates is right again. 
Settlement is the right thing to do. Thank you for your 
consideration of my opinions.
    Sincerely,
    Dr. Steve Abrams



MTC-00029688

January 27, 2002
Attorney General John Ashcroft
US Department of Justice
Washington, DC 20530
    Dear Mr. Ashcroft,
    I would like to express my appreciation to the Justice 
Department for allowing we as Americans to comment on the Microsoft 
antitrust case. I am a part of the tech industry and am in favor of 
the settlement in its current form.
    I would like to express how happy I am with Microsoft products. 
Microsoft ha3 changed the way Americans do business. I think most 
Americans believe that the terms and conditions of the settlement 
are decent and just, and they are right. The settlement covers all 
sorts of parts of Microsoft's operation, from business practices to 
design changes.
    Please use your power to end this case in an expeditious manner. 
It will benefit the country and the IT industry if you do so.
    Sincerely,
    Dean Martin
    Co: Representative Tammy Baldwin



MTC-00029689

Jim Atkins
5569 Pinebrook Lane
Winston Salem, NC 27105
January 21, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am amongst those who believe that the Microsoft antitrust case 
should have never gone to trial. Nevertheless 1 would like you to 
support the settlement that was achieved in this case. Continuation 
of this case would be harm fid to Microsoft, and needlessly cost the 
Justice Department money in a time of a dwindling government 
surplus.
    Justice Department officials have approved and agreed to the 
settlement in this case. The settlement will make it easier for non-
Microsoft software to be installed on Microsoft platforms, giving 
competitors a better opportunity to offer their products to the 
public. However for some opponents of the settlement this is not 
adequate. It must be kept in mind that special interests will 
pressure officials to have this case re-opened.
    I appreciate you taking the time to review my views on this 
issue. Once again I would like to stress to you my belief that this 
cage has undoubtedly become protracted and should be terminated. 
Please back the settlement.
    Sincerely,
    Jim Atkins
    cc: Representative Mel Watt



MTC-00029690

Michael DiBello
15 Orchard St.
Syosset, NY 11791-2712
January 26. 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    I feel that the settlement made between Microsoft and the 
Department of Justice is reasonable and that the litigation against 
Microsoft needs to be brought to an end. The money and time that has 
been spent on this suit doesn't seem to be worth what will be gained 
if this continues. The terms of the settlement, if finalized, will 
open up competition to other companies, which will in turn benefit 
the consumer, Not only will there be more choice but also hopefully 
there will also be more reasonable prices. Because of the terms of 
the settlement, Microsoft is going to have to make Windows internal 
code available to other companies so they can design their software 
to be compatible. Microsoft will be reimbursed for this, which is 
fair for all sides involved.
    Overall I feel that the settlement should stand the way it is 
and that any further litigation against Microsoft would prove to be 
wasteful. Thank you for allowing me the opportunity to express my 
opinions.
    Sincerely,
    Michael DiBello



MTC-00029691

January 23, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft.
    The Department of Justice was absolutely wrong in wanting to 
slice Microsoft into separate parts. Three years have produced 
public resentment and gravely hurt the computing Industry, all for 
the benefit of those who won't ever be able to compete with 
Microsoft. The settlement Microsoft agreed to with the federal 
government must go forward. It is more than generous, and is 
obviously better than forcing Microsoft back into court, where the 
only winners are the attorneys representing both sides of this case.
    Microsoft concedes to give up more than enough to promote far 
more competition among the computer makers and software developers 
who want a more level playing field. Agreeing to open Windows for 
further application development, Windows and non-Windows alike, will 
produce far more innovations than ever before, and will show the 
consumer that they are not at the whim of this industry giant, 
creating more individually-based options and configurations.
    I urge the Department of Justice to see to it that Microsoft is 
given unprejudiced consideration by allowing them to return to 
business NOW. Do not continue to waste the incredible innovation and 
efforts of Microsoft, by choking them in more court proceedings. 
They have been the most industrious and prolific business since that 
of Ford Motors. The ramifications are far reaching, for the better 
good, by supporting the position of this settlement with Microsoft.



MTC-00029692

Mr. Todd Kangas
21800 Dempsey Rd
Leaven worth, KS 66048
U.S. Department of Justice, Antitrust Division
C/O Renata Hesse
601 D Street, NW, Suite 1200
Washington, DC 20530
January 38, 2002
    Dear Ms. Hesse:
    I would like to share a few thoughts of mine about the Microsoft 
case that you are currently reviewing as pan of the public comment 
period for the suit. Microsoft and Bill Gates have paid their 
penance. Throughout this case, Microsoft has been portrayed as an 
evil corporate citizen, but in my opinion this accusation does not 
stand up to reality.
    In addition to Microsoft's corporate giving, Bill Gates has 
established the largest charitable foundation in the world. This 
foundation is making significant progress by donating hundreds of 
millions of dollars every year to assist in feeding the hungry in 
third world countries, preventing diseases, and educating youth in 
America. Lets put an end to this lawsuit and allow the success of 
Bill Gates and other high-tech entrepreneurs continue to, not only 
boost the economy of our country, but to aid to the underprivileged 
worldwide through charitable giving.
    Sincerely,
    Todd Kangas



MTC-00029693

Kenneth R. Sone
195 N Harbor Drive Apt. 5307
Chicago, IL 60601
January 25, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW

[[Page 28721]]

Washington, DC 20530
    Dear Mr. Ashcroft:
    I want to take a moment to give my feelings on the settlement 
reached last year between Microsoft and the Department of Justice. I 
believe the settlement is fair to both sides and should continue t6 
be supported by the federal government.
    The settement is exlensive aggressive, and covers all the issues 
that were m dispute. Microsoft has agreed to many concessions for 
the ??ake of wrapping up this suit and moving forward One example is 
Microsoft agreeing to document and disclose for use by its 
competitors various interfaces that are internal to Windows" 
operating system products. This is a first for an antitrust 
settlement and reveals the strength of the agreement on the 
government's part.
    I believe settling this case and ending the litigation can only 
help the economy during this difficult period. It will bring some 
certainty to the computer industry and lessen the uncertainty about 
where the litigation may he heading I commend your office for the 
efforts so far and hope your support for the settlement remains 
strong.
    Sincerely,



MTC-00029694

FAX
DATE: January 28, 2002
TIME: 9:00 AM
ATTENTION: Attorney General John Ashcroft
COMPANY: US Department of Justice
FAX NUMBER: (202) 307-1454
FROM: Glenn R. Hasman
SUBJECT: Microsoft
NUMBER OF PAGES: 2 (including this cover sheet)
8797 Treetop Trail
Broadview Heights, OH 44147
January 28, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    This is to give my approval to the ending of the antitrust case 
brought against Microsoft. In my opinion, it has gone on far too 
long and we need to get back to business. We talk about the economic 
downturn but keep the one company that could probably pull us out of 
it, tied up in litigation.
    From what I understand of the agreement, Microsoft has been more 
than fair in trying to settle this case. Microsoft has agreed to 
terms that go far beyond the products and procedures that were 
actually at issue in the original case; Microsoft has agreed to 
grant computer makers broad new rights to configure Windows so as to 
promote non-Microsoft software programs. Microsoft has further 
agreed to design future versions of Windows with a mechanism to make 
it easier to promote non-Microsoft software.
    It is in the best interests of America, and the world, if we put 
this case behind us and get back to business. Please give your 
support to this agreement.
    Sincerely,
    Glenn R. Hasman



MTC-00029695

1-28-02
Ms. Renata B. Hesse
Please approve the microsoft settlement.
Harry Westenberg
13008 W. Willow Creek
Huntley, IL
60142



MTC-00029696

PO Box 135
Monterey, MA 01245
January 26, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Attorney General Ashcroft:
    I would like to take this opportunity to express my personal 
opinion about the government's role in Microsoft's freedom to 
innovate The United States Department of Justice and Microsoft 
reached an agreement at the beginning of this past November and that 
is where the litigation should end. The settlement was fair; 
allowing Microsoft to continue doing business while allowing 
competitors to sue Microsoft if they do not think the company is 
complying with the agreement.
    I believe no more litigation should be enacted at the federal 
level. With a reasonable settlement already reached, further action 
by our government would only waste more time and money. !n this time 
of economic recession, these resources could be used in a much more 
productive manner In these trying times, we need to support our 
homeland companies and allow them to continue providing high quality 
products to the marketplace both nationally and internationally. 
This settlement allows our companies to actually return to the 
success that the IT industry enjoyed four years ago. Microsoft will 
now be making future versions of Windows that will include a way to 
greatly simplify the process of adding arid removing non-Microsoft 
programs from the Windows operating system.
    In a battle that already has been fought and won, I believe it 
would be in our best interest not to continue suing Microsoft at the 
federal level Let us get our economy back on track and start 
supporting products and companies that me made in the USA. Thank you 
for you time.
    Sincerely,
    J.T. Buchar



MTC-00029697

3312 Zimmer Road
Williamston, MI 48895
January 26, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I was quite pleased to learn that the federal government and 
Microsoft reached a settlement in their three-year anti-trust 
lawsuit. I am hopeful that this settlement will become final in the 
near future so the negative effects that is has had will cease, and 
the technology industry can see a resurgence.
    This will be made possible by the various concessions that 
Microsoft made in order to settle this dispute. A three person 
technical committee will oversee Microsoft's business operations 
from this point forward, and any company that has a complaint of 
anti-competitive behavior against Microsoft will be able to be heard 
immediately. Competition will increase, and consumers will have more 
choices in the marketplace. I see no reason to pursue this matter 
beyond this point. I want to thank you for your decision to stop 
this litigation. I am certain it will have positive effects on the 
industry as well as the whole economy, and I look forward the 
settlement becoming final in the weeks ahead.
    Sincerely,
    Rudy Key



MTC-00029698

6402 Dolphin Shores Drive
Panama City Beach, FL 32407-5474
January 22, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    Three years ago when Microsoft was first brought to trial, my 
fear was that the company wouldbe split up and the American 
technology industry would begin to suffer. Now, a settlement hasbeen 
proposed that would allow Microsoft to remain whole, and I believe 
that would be in thebest interest of the consumer for the Justice 
Department to approve the settlement and move on.I do support limits 
on Microsoft's conduct to safeguard our antitrust laws, but I think 
theserestrictions are a bit harsh. Microsoft agreed to terms and 
conditions in the settlement that extendto procedures and 
technologies that were not found to be unlawful by the Court of 
Appeals.Microsoft has agreed, among other things, to disclose source 
code and interfaces from theWindows operating system to its 
competitors for their use in developing Windows-compatiblesoftware. 
Microsoft has also agreed to license the Windows operating system to 
twenty of thelargest computer makers at the same price. In the 
interest of wrapping up the case, Microsoftagreed to these and more 
terms, and I believe that, regardless of the harshness of 
certainobligations, it is better to settle now and let things get 
back to normal than to continue litigationand risk further economic 
damage.
    This has gone on long enough, and it is time to move on. 
Microsoft has made the necessarychanges to prevent further antitrust 
violations, and I do not believe further litigation is 
eithernecessary or constructive. I ask you to endorse the 
settlement.
    Sincerely,
    Jeannie Fitzsimmons
    cc: Representative Jefferson Miller



MTC-00029701

ARTHUR F. HARDEN
1389 OUTLOOK DRIVE WEST
MOUNTAINSIDE, NEW JERBEY 07092
Tel.& FAX # 908-233-7737
DOJ
ATT. Ms. RENATA B. HESSE
202-307-1454,

[[Page 28722]]

    GENTLEMEN:
    I SUPPORT THE PROPOSED SETTLEMENT OF THE MICROSOFT LAWSUIT.
    AETHUR F. HARDEN
    JANUARY 26, 2002



MTC-00029702

Rhonda Green
11920 Brown Road
Thayer, KS 66776
United States Department of Justice
Antitrust Division
Attn: Renata Hesse
601 D Street, NW, Suite 1200
Washington, DC 20330
    Dear Ms-Hesse;
    As the parents of two children in a small, rural Kansas school, 
I was excited to hear about theprospects of Microsoft donating 
millions of dollars worth of computer systems and learningprograms 
to schools like the ones my children attend.I have seen first hand 
the value of computers in advancing the education, of my children 
and Ifirmly believe that, if accepted, this settlement could prove 
to be very beneficial to the educationof America's children.
    The government has wasted enough taxpayer dollars pursuing a 
problem that never existed. It ismy hope that this fair settlement, 
which has levied steep and taxing financial burdens onMicrosoft, 
will end soon.
    Sincerely,
    Rhonda Green



MTC-00029703

January. 23, 2002
Ms. Renata Hesse, Anti-Trust Division
U.S. Department of Justice
601 D Street Northwest
Suite 1200
Washington, DC 20530
    Dear Ms. Hesse:
    I am writing to you to express my feelings regarding the lawsuit 
filed against Microsoft by JanetReno. I understand that the Bush 
administration has proposed a settlement that has been agreedto by 
Microsoft and several of the states involved in the lawsuit.
    I want to add my voice to those who believe it is time m put 
this lawsuit to bed. It is drainingvaluable resources from 
government coffers and unnecessarily burdening one of 
America'sleading technology companies. I urge you to approve the 
settlement proposed by the Bushadministration.
    Sincerely,
    Mrs. Floyd Powers
    Retired Neosho County Employee
    5435 Highway 47
    Thayer, KS 66776



MTC-00029704

745 Norman Drive
North Bellmore, NY 11710
January 25, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing this letter in support of Microsoft. As a 
businessman, I believe there is no place forGovernment in free 
enterprise. I have a lot of respect for Microsoft and saw the 
economy flourishas Microsoft grew. It's no coincidence that the 
technology, sector, technical stocks andemployment numbers are down 
while this antitrust case is going on. While it may not be thecause, 
it sure is the contributor.
    Microsoft agreed that if a third party's exercise of any options 
provided by the settlement wouldinfringe on the rights of any 
Microsoft intellectual property, they will provide the third party 
witha license to the necessary, intellectual property on reasonable 
terms. That seems more than fair tome. Microsoft agreed to provide 
computers in the school, but all the states rejected it since 
itwould infringe on Apple's ability to continue providing computers 
in the school. Here in NassauCounty, we are in desperate need of IBM 
compatible computer's, especially since we use oldtechnology, like a 
microfiche. It's a shame we can't access any.
    It's obvious to me that the competition and the states are only 
pursuing litigation because theywant "a piece of the 
action." If the consumer likes the products of a company 
"a", and thecompany "a" gains a large market 
share, it's not fair for other companies to sue company 
"a" justbecause consumers like their product. Your help 
in resolving this mailer is greatly appreciated.
    Sincerely,
    Stuart Muchnick



MTC-00029705

GBG STRATEGIES, INC.
100 FANEUIL HALL MARKETPLACE
BOSTON, MA 02109
Leo T. Goodrich
President
January 25, 2001
    I am writing to have my thoughts on the proposed settlement 
between Microsoft and the UnitedStates Department of Justice entered 
Into the record in accordance with the Tunny Actsrequirement of 
public comment on such settlements.
    I think the settlement plan is a good one, and one that reaches 
the necessary balance betweenantitrust enforcement and the need for 
as competitive a software market as the U.S. economy canhave. 
Consumers benefit from a competitive market in ways that; the kind 
of regulationspreviously argued in this case would nullify. Whereas 
a free and competitive market will drivedown Dries and hasten the 
pace of innovation, a heavily regulated market, or a software 
marketIncluding a cawed-up Microsoft would slow the pace of 
Innovation and allow companies to siton their hands and let prices 
gradually rise.
    Consumers deserve the best high tech market available to them, 
and the best high tech market isthe one that innovates. The 
Innovates of the last decade were primarily responsible for 
thecreation of Jobs, Investment, and wealth at rates never before 
witnessed In any economyanywhere. The success of the 
"New" Economy In the 1990s was not a boomlet, in my 
view, but aharbinger of flings to come In the future, if the 
government will allow consumers andentrepreneurs to successfully 
guide the market toward higher levels of competition andInnovation.
    I hope my thoughts can be entered into the record and also hope 
the court fit to approve thesettlement proposal. It is the best way 
for the economy to start to put this recession behind it andbegin to 
build for the future.
    Sincerely,
    Leo T. Goodrich



MTC-00029706

    NEWTON REAL ESTATE RESOURCE GROUP
    Matthew D, Adams
    January 25, 2001
    I am writing to have my thoughts on the proposed settlement 
between Microsoft and the United States Department of Justice 
entered into the record in accordance with the Tunny Act's 
requirement of public comment on such settlers.
    I think the settlement plan is a good one, and one that reaches 
the necessary balance between antitrust enforcement and the need for 
as competitive a software market as the U.S. economy can have. 
Consumers benefit from a competitive market in ways that the kind of 
regulations previously argued in this ease would nullify. Whereas a 
free and competitive market will drive down prices arid hasten the 
pace of innovation, a heavily regulated market, or a software market 
including a carved-up Microsoft would slow the pace of innovation 
and allow companies to sit on their hands and let prices gradually 
rise.
    Consumers deserve the best high tech market available to them, 
and the best high tech market is the one that innovates. The in 
innovations of the last decade were primarily responsible for the 
creation of jobs, investment, and wealth at rates never before 
witnessed in any economy anywhere. The success of the 
"New" Economy in the 1990s was not a boomlet, in my 
view, but a harbinger of things to come in the future, if the 
government will allow consumers and entrepreneurs to successfully 
guide the market toward higher levels of competition and innovation.
    I hope my thoughts can be entered into the record and also hope 
the court sees fit to approve the settlement proposal. It is the 
best way for the economy to start to put this behind it and begin to 
build for the future.
    Sincerely,
    Matthew D. Adams



MTC-00029707

7831 El Pastel Drive
Dallas, TX 75248
January 28, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing today to encourage the Department of Justice to 
accept the Microsoft antitrust settlement. This issue has been 
dragging on for entirely to long now and I feel that the current 
settlement before the DOJ is fair and just. I would like to see the 
government accept it. Many people think that Microsoft has gotten 
off easy, in fact they have not. In order to put the issue behind 
them Microsoft has agreed to many concessions. Microsoft has agreed 
to give computer makers the flexibility to install and promote any 
software that they see fit.

[[Page 28723]]

Microsoft has also agreed not to enter into any agreement that would 
obligate any computer maker to use a fixed percentage of Microsoft 
software. Also, Microsoft has agreed to license its products at a 
uniform price to computer makers no matter how much that computer 
maker uses Microsoft products.
    What we need to remember is that Microsoft products are very 
affordable and offer many advantages over other products, if one 
desired, they could purchase another operating system ie; Linux 
etc., but the fact is most people choose Microsoft Windows over 
others. With the economy stalling, we need to move forward not 
backward, many people have spent large amounts of time and money to 
be trained on Microsoft products, lets not forget them.
    Sincerely,
    Dameon Rustin
    co: Representative Richard Armey



MTC-00029708

Brad D. Houghtaling
230 Wellington Road
Syracuse, NY 13214-2226
January 26, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, N-W
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am violently opposed to the antitrust lawsuit against the 
Microsoft Corporation, I personally feel that the suit should be 
dropped, and Microsoft left alone. This case defies the very ideal 
of free enterprise upon which this nation has been built, and this 
case does nothing but damage the entrepreneurial spirit that has 
heretofore been celebrated in this nation.
    I understand that Microsoft has agreed to the settlement that 
has been reached in this case because it would simply like to see 
this litigation end. While I do not agree that Microsoft should have 
to settle I understand their desire to see the end of this lawsuit. 
The terms of the settlement, while a little harsh, are not overly 
objectionable. Microsoft has agreed to design all future versions of 
its Windows operating system to be compatible with the products of 
its competitors, along these same lines Microsoft will disclose 
certain segments of source code to its competitors enabling them to 
design products that work within Windows, it is this term that I 
find most objectionable. I believe that the parties trying to 
perpetuate this litigation are seeing only their own political ends 
rather than a fair solution to this dispute.
    Please ensure the passage of this settlement. American business 
needs 3,our support. Thank you.
    Sincerely,
    Brad Houghtaling



MTC-00029709

808 Beazer Lane
Antioch, TN 37013
January. 26, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am of the opinion that the settlement that has recently been 
reached between Microsoft and the Department of Justice is fair and 
reasonable, and I would like to see it implemented as soon as 
possible.
    The only reason why I do support this settlement is because it 
brings an end to the ludicrous litigation against Microsoft. The 
governments, both stale and federal, are legally pursuing Microsoft 
for one reason and one reason only, for the cash. It is ironic that 
they have wasted millions of dollars taking Microsoft to court, and 
do not have much to show in return. The economy is bad enough; we do 
not need our tax dollars going towards the prosecution of a company 
that has been so beneficial to the American economy. I hope that the 
ongoing technical oversight committee, which is a result of the 
settlement and will monitor Microsoft's compliance with that 
settlement, will satisfy the government and all other anti-Microsoft 
entities. A settlement has been reached, we must now put this issue 
behind us and move on to more pressing issues. Thank you.
    Sincerely,
    Carl Beck



MTC-00029710

COMMERCIAL REAL ESTATE SERVICES
1005 Boylston Street
P.O. Box 610259
Newton, MA 02461-0259
Thomas P. Godino
January 25, 2001
    I am writing to have my thoughts on the proposed settlement 
between Microsoft and the United States Department of Justice 
entered into the record in accordance with the Tunny Act's 
requirement of public comment on such settlements.
    I think the settlement plan is a good one, and one that reaches 
the necessary balance between antitrust enforcement and the need for 
as competitive a software market as the U.S. economy can have, 
Consumers benefit from a competitive market in ways that the kind of 
regulations previously argued in this case would nullify. Whereas a 
free and competitive market will drive down prices and hasten the 
pace of innovation, a heavily regulated market, or a software market 
including a carved-up Microsoft would slow the pace of innovation 
and allow companies to sit on their hands and let prices gradually 
rise.
    Consumers deserve the best high tech market available to them, 
and the best high tech market is the one that innovate. The 
innovations of the last decade were primarily responsible for the 
creation of jobs, investment, and wealth at rates never before 
witnessed in any economy anywhere. The success of the 
"New" Economy in the 1990s was not a boomlet, in my 
view, but a harbinger of things to come in the future, if the 
government wilt allow consumers and entrepreneurs to successfully 
guide the market toward higher levels of competition and innovation 
I hope my thoughts can be entered into the record and also hope the 
court sees fit to approve the settlement proposal. It is the best 
way for the economy to start to put this recession behind it and 
begin to build for the future.
    Sincerely,
    Thomas P. Godino



MTC-00029711

January 24, 2001
    I am writing to have my thoughts on the proposed settlement 
between Microsoft and the United States Department of Justice 
entered into the record in accordance with the Tunny Act's 
requirement of public comment on such settlements.
    I think the settlement plan is a good one, and one that reaches 
the necessary balance between antitrust enforcement and the need for 
as competitive a software market as the U.S. economy can have. 
Consumers benefit from a competitive market in ways that the kind of 
regulations previously argued in this case would nullify. Whereas a 
flee and competitive market will drive down prices and hasten the 
pace of innovation, a heavily regulated market, or a software market 
including a carved-up Microsoft would flow the pace of innovation 
and allow companies to sit on their hands and let prices gradually 
rise.
    Consumers deserve the best high tech market available to them, 
and the best high tech market is the one that innovates. The 
innovations of the last decade were primarily responsible for the 
creation of jobs, investment, and wealth at rates never before 
witnessed in arty economy anywhere. The success of the 
"New" Economy in the 1990s was not a boomlet, in my 
view, but a harbinger of things to come in the future, if the 
government will allow consumers and entrepreneurs to successfully 
guide the market toward higher levels of competition and innovation.
    I hope my thoughts can be entered into the record and also hope 
the court sees fit to approve the settlement proposal. It is the 
best way far the economy to start to put this recession behind it 
and begin to build for the future.
    Sincerely,
    James J. Campbell



MTC-00029712

VONDA WIEDMBR
ROUTE 1, Box 545
MADISON, KS 66860
January 15, 2002
Renata Hesse
Trial Attorney
U.S. Department of Justice
601 "D" St., NW--Suite 1200
Washington, DC 20530
    Dear Ms. Hesse:
    All too often in our country it seems our government has taken 
aim at a successful company under the auspices of protecting the 
American people. Unfortunately, it is the government's actions that 
are truly hurting Americans. When the Department of Justice first 
began its pursuit of Microsoft it claimed it was doing so to protect 
consumers from some harm created by Microsoft. The reality could not 
be further from the truth.
    The facts are simple really. Microsoft leads its industry 
because it has developed ways to meet consumers needs better then 
its competition. This is the American way! Most successful companies 
strive to be the very best in their field and compete hard with

[[Page 28724]]

others in their industry. Certainly Microsoft is no exception. 
Punishing them for being the best is not appropriate. The United 
States government and the Microsoft's competitors have yet to 
provide proof of how consumers have been harmed by Microsoft. 
However, as a taxpayer T can see where I have been harmed Countless 
tax dollars have been spent in the pursuit of this case at o time 
when our economy is constricting. I view this a real example of 
harm.
    Please accept the settlement offer.
    Sincerely,
    Vonda Wiedmer



MTC-00029713

Matthew Alfieri
7 Northfield Gate
Pittsford, NY 14534
January 27, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    The intention of this letter is so that I may go on record as 
being a staunch supporter of the proposed agreement that was reached 
between Microsoft and the Department of Justice. The litigation 
between these two has gone on for long enough, more than three years 
actually. It is time to put this issue to rest and move on.
    The settlement actually goes further than Microsoft would have 
liked, but they decided to settle because it was in the best 
interests of the IT industry and the American economy. The 
settlement mandates that Microsoft make future versions of the 
Window, operating system to include a feature that makes it much 
easier for computer makers and consumers to remove Microsoft 
software programs from Windows and then replace it with non-
Microsoft software. This completely opens the industry up to much 
more competition, and the companies producing the competing software 
will need to deliver a "Grade A" product to the market, 
or people will simply not buy it.
    Everything is now in place for a stronger IT industry and a 
healthier economy. I support this settlement because it looks out 
for everyone's best interests. Thank you.
    Sincerely,
    Matthew Alfieri



MTC-00029714

January 27, 2002
Renata Hesse
Trial Attorney
Anti-Trust Division
U.S. Department of Justice
601 D St., NVV
Suite 1200
Washington, DC 20530
Dear Ms. Hesse:
    I appreciate the opportunity to voice my opinion on the proposed 
settlement before you in the Microsoft antitrust lawsuit.
    As a Kirkwood community college computer instructor, I have the 
opportunity to teach the Microsoft Office suite to my students. I 
have seen first-hand the advances Microsoft has made in the software 
industry. Everyday, my students learn more about how to harness 
technology and use it to their advantage to work more efficiently.
    Microsoft changed the way America, and the world for that 
matter, does business. As I understand it, most of the world's 
computer users work on Microsoft's Windows software. That is truly 
an amazing accomplishment. Success on that scale only comes when a 
company continues to produce an outstanding product year in and year 
out.
    I urge you to accept the settlement before you on behalf of all 
taxpayers. Too much time and too many resources have been spent 
trying to tear down a company that has enriched our national economy 
and aided businesses worldwide. Enough is enough.
    Sincerely,
    Marie Schulte



MTC-00029715

Leonard R. Beard
841 East 12th Street
Crowley, La. 70526
(337) 781-2317
January 28,2002
Renata Heese
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington DC 20530
FAX: 202-616-9937
RE: Settlement of U.S. v. Microsoft
    Nearly 30 million dollars in taxpayer funds have been spent on 
this case. The time and expense of this case combined with the 
uncertainty it has led to in the technology sector leads me to 
believe that now is time that we settle this case.
    I do appreciate the government's efforts in protecting 
consumers. The settlement is appropriate in scope because it 
addresses only those items upheld by the courts and it provides for 
close monitoring of future Microsoft operations.
    Let's get the technology companies back to competing, which will 
help consumers and our economy. Thanks for considering my views on 
this matter.
    Sincerely,
    Leonard Beard



MTC-00029716

STEPHEN J. OATS 1
WILLIAM M. HUDSON, III 1,2
HENRY ST. PAUL PROVOSTY 1
EDGAR D. GANKENDORFY 1
KENNETH M. HENKE
CLIFTON O. BINGHAM, JR. 3
PATRICK B. MCINTIRE
LAWRENCE E. MARINO 2
HENRY A. HERNAKD. JR.
CRAIG T. BROUSSARD
MICRHELLE K. BUFORD
WALTER R. WELLENREITER
ROBIN L. JONES
CHRISTOPHE B. SZAPARY
ANDREW D. RENTON
OF COUNSEL
OSCAR E. KEED, JR.
VICTORIA A. GUIDRY
STANLEV. B. BLACKSTONE 1.3
CHRIS M. TREPAGNIER 1
OATS & HUDSON
ATTORNEYS AND COUNSELORS AT LAW
A PARTNERSHIP OF PROFESSIONAL CORPORATIONS
SUITE 400
GORDON SQUARE
100 EAST VERMILION STREET
LAFAYETTE, LOUISIANA 70501
TELEPHONE (337) 233-1100
FACSIMILE (337) 233-1178
[email protected]
January 27, 2002
SUITE 200
530 NATCHEZ STREET
NEW ORLEANS, LOUISIANA 70130
TELEPHONE (504) 527-0960
FACSIMILE (504) 524-2823
SUITE 200
BELISLE BUILDING
350 THTRD STREET
BATON ROUGE, LOISTANA 70801
TELEPHONE (225) 383-9993
FACSIMILE (225) 383-6993
1 PROFESSIONALIAW CORPORATION
2 ALSO ADMHTTD IN TEYAS
3 BOARD C??TIFIED TAX AT??
TO: Renata Heese, Esq.
FROM: Craig T. Broussard
FAX NO.: 202-616-9937
HARD COPY SENT: No
RE: U.S. v. Microsoft
OUR FILE: FE
TOTAL NO. OF PAGES (INCLUDING COVER SHEET): 2
MESSAGE: Please see the attached.
    If you experience any problems with this transmission, please 
call Dina at the telephone number listed above.
STEPHEN J. OATS"
WILLIAM M. HUDSON, III??
HENRY ST. PAUL PROVOSTY 1
EDOAR D. GANKENDORPP 1
KENNETH M. HBNKB 1
CLIFTON O. BINGHAM. JR. 1
PATRICK B. MCINTIHB
LAWRENCE E. MARINO??
HENHY A. BERNARD, JR.
CRAIG T. BROUSSARD
MICHELLB K. BUFORD
WALTER R. WELLBNREITER
ROBIN L. JONES
CHRISTOPHE B. SZAPARY
OP COUNSBL
OSCAR B. REED, JR.
STANLEY B. BLACKSTONE 1,2
VICTOHIA A. GUIDRY
CHRIS M. TREPAONIRR 1
OATS HUDSON
ATTORNEYS AND COUNSELORS AT LAW
A PARTNERSHIP OP PROFESSIONAL CORPORATIONS
SUITE 400
GORDON SQUARE
100 EAST VERMILJON STREET
LAFAYETTE, LOUISIANA 70501
TELEPHONE (337) 233-1100
FACSIMILE (337) 233-1178
January 22, 2002
SUITE 200
530 NATCHEZ STREET
NEW ORLEANS, LOUISIANA 70130
TELEPHONE (004) 527-0960
FACSIMILE (504) 524-2823
SUITE 200
BELISLE BUILDING
350 THIRD STREET
BATON ROUGE. LOUISIANA 70801
TELEPHONE (220) 383-9993
FACSIMILE (225) 383-0993
1 PROFESSIONAL LAW CORPORATION
2 ALSO ADMITTED IN TEXAS

[[Page 28725]]

3 BOARD CERTIFICD TAX ATTORNEY
Renata Heese
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington DC 20530
FAX: 202-616-9937
RE: Settlement of U.S. v. Microsoft
    I am of the opinion that it is in the best interest of consumers 
and all involved that this case be settled once and for all.
    It is my understanding that the settlement addresses the 
findings of the court and provides for future operations by 
Microsoft that will avoid any monopolistic practices. That is good 
news for all parties.
    The bottom line is that enough tax dollars have been spent in 
this effort and now is the time for our technology companies to 
return to the marketplace battlefield. That would be the best news 
for consumers and our economy.
    I appreciate your consideration of my views on this matter.
    Sincerely,



MTC-00029717

ATTN: Ms. Renata B. Hesse (DOJ)
202-307-1454
    Ms. Renata,
    This note is to inform you & the Dos that I love support the 
Microsoft Settlement. Please "Approve the Microsoft 
Settlement".
    Thank you
    MR & Mrs K. Ni??henke
    K. Ni??



MTC-00029718

January 28th, 2002
Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
Fax 202-616-9937
[email protected]
    Dear Ms. Hesse:
    As a co-owner of medium size construction company in central 
Missouri, I have observed the Microsoft lawsuit from the beginning. 
It appears to me from the press that this case has come full circle 
and now is the time settle. Based upon my review of the summary of 
the lawsuit it would appear that the Department of Justice has 
garnered a fair compromise with Microsoft. While I cannot 
specifically defend the software glant's business practices, I 
remain skeptical that this case should have been dismissed some time 
ago.
    Now is the time to settle the case against Microsoft. Thank for 
allowing me to offer my opinion.
    Sincerely,
    Chris Hentges



MTC-00029719

Mr. Kenneth Cordon
821 W. Walnut Street
Chanute, KS 66720
January 17, 2002
U.S. Department of Justice
Anti-Trust Department
Attn: Renata Hesse
601 "D" Street NW, Ste. 1200
Washington, DC 20530
    Dear Judge Hesse:
    I am writing to take advantage of the opportunity for the public 
to express its opinion regarding the anti-trust lawsuit filed 
against Microsoft. Thank you for making this opportunity available. 
I believe that the entire basis for suing Microsoft in the first 
place was flawed. The argument posed by Janet Reno was that 
Microsoft was engaging in monopolistic practices which were 
detrimental to the buying public. And yet, Correct me if I'm wrong, 
but haven't the prices of computers and software been falling? Isn't 
the definition of a monopoly a company that shuts out its 
competitors so it can raise prices? That just doesn't make sense.
    I hope you'll agree with President Bush that winding up this 
lawsuit is the right thing to do. It's been going on too long 
already.
    Thanks for letting me comment.
    Very truly yours,
    Mr. Kenneth Cordon



MTC-00029720

Coastal Equipment Corporation
PO Box 1118
Portland Maine 04104
January 25, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am in support of the Microsoft antitrust settlement agreement. 
The lawsuit has ensued for three years now. Continuing the 
litigation will only amount to an incredible waste of resources. 
Settling is in everyone's best interest.
    If antitrust laws have been violated, steps should be taken to 
ensure no further violations occur. The settlement agreement should 
provide the appropriate safeguards. The agreement provides for the 
creation of a technical review committee that will monitor 
Microsoft's business practices. The review committee will also field 
complaints from parties who believe the settlement agreement is not 
complied with.
    Microsoft has agreed to disclose portions of its code to its 
competitors. I do not agree that Microsoft should be forced to give 
away what it has worked hard at developing. However, if Microsoft is 
agreeable to this concession,. I would support that decision in the 
interest of resolving this case and moving on to other endeavors.
    Your efforts toward resolving this lawsuit are appreciated. 
Thank you for your time m reviewing my thoughts on this matter.
    Sincerely,
    Mark Goldstein



MTC-00029721

1425 Bella Vista Avenue
Coral Gables, Florida 33156
January 5, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I was happy to hear of the recent settlement regarding the 
Microsoft antitrust suit. During these times of recession, it is 
important to allow our industry to continue to develop. Holding the 
IT sector back, by dragging out the negotiation process, can only 
hold back our technology industry. Let us allow the IT sector to get 
back to business.
    Not only do the terms of this agreement promote the competitive 
process, but they also open up avenues of development on both sides 
of the fence. Although Microsoft has made an overwhelming number of 
concessions, they are still able to prosper somewhat. The other 
software manufacturers have been given many new options with regard 
to licensing, marketing and new avenues in running non-Microsoft 
software. All parties involved are ready to move forward and get 
back to business. By thwarting this process, we only hold up the 
advancement of the 1T sector and our economy in general.
    Let us help our economy move forward by supporting our 1T 
sector. The competitive market is a global one, and we need to work 
together to keep our piece of the pie. Help us to move this 
settlement along, by making sure that no more action is taken 
against it. I thank you for your help
    Sincerely,
    Maria Brito



MTC-00029722

Oilfield Services
Schlumberger-Doll Research
36 Old Quarry Road
Ridgefield, CT 06877-4108
Tel: 203 431-5000
Fax: 203 438-3819
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
January 25, 2002
    Dear Mr. Ashcroft:
    I am writing to voice my opinion on the antitrust case 
settlement between the US department of Justice and Microsoft. I am 
glad to see that there will soon be an end to this lawsuit. It has 
been a waste of our government's resources and our tax dollars. Does 
the government want to be responsible for an Enron-type business 
failure? They need to end this case immediately so that we can all 
move on with our lives.
    I am a Research Scientist and use Microsoft products all the 
time for my work. Their company has been responsible for the advent 
of our computer industry, as we know it. They have also created 
tremendous growth in our economy and have put our nation ahead in 
the technology race. The proposed settlement is a very fair 
compromise and should be enacted at once. Microsoft is going to 
share an unprecedented amount of technology information with their 
competitors and they will give consumers more choices by allowing 
OEM's to install non-Microsoft products on Windows.
    Please use your influence to implement the settlement as soon as 
possible. Thank you for your time.
    Sincerely,
    Chung Chang



MTC-00029723

16112 E 28th Terr. #1806

[[Page 28726]]

Independence, MO 64055
January 27, 2002
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    I was pleased to learn that the Justice Department has reached a 
proposed settlement agreement in the Microsoft litigation.
    You now have the opportunity to clean up the mess created by 
your predecessor. Microsoft was the target of this litigation 
because of its size and because of its great degree of success. Your 
implementation of this settlement will bring an end to the political 
witch-hunt. Microsoft has placed a number of concrete proposals on 
the table to resolve the case. They have agreed to changes in almost 
every aspect of their business operations, from pricing, to 
distribution, to system design. These changes, if implemented, 
should provide additional competitive opportunities for Microsoft's 
competitors and more choice for computer users. Please go forward 
with the settlement and let Microsoft get back to business.
    Sincerely,
    Ben Kormanik



MTC-00029725

(708) 547.5969
DESSERT SPECIALISTS
FAX (708) 547-5974
[email protected]
January 28, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing to you to express my belief that the antitrust 
lawsuit against Microsoft should be concluded. The settlement 
reached in November 2001, should be accepted by the Justice 
Department.
    Microsoft has offered very generous terms includes full access 
to the Windows system for rival software developers. Never before 
has a company had to offer its competitors the right to use its own 
information against itself. This is a legal first and will allow 
rival developers the chance to drastically improve their own 
software. The economy and the country need a strong American 
company, like Microsoft, to help us through these trying times A 
lawsuit against Microsoft does nothing but damage our economy, and 
our country. Please take this opportunity to put an end to this 
suit. Thank you.
    Sincerely,
    Ed Lezza



MTC-00029726

S&D SALES COMPANY, INC.
January 26, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am in favor of the Microsoft settlement for the following 
reasons:
    Microsoft has agreed to a number of changes in its business that 
result in greater competition and growing consumer choice:
    . Adoption of a Uniform Price List under which Microsoft will 
market Windows on identical terms and conditions to computer makers.
    . Revising agreements which would allow third parties to 
distribute products other than those manufactured by Microsoft.
    . Granting rights to computer makers to reconfigure Windows 
systems so as to allow the placement of non-Microsoft programs 
within Windows.
    I would rather see this case concluded now with a predictable 
result than see you roll the dice in Court. The Bill Clinton 
Department of Justice instigated this unnecessary case. Government 
at its worst caused the subsequent decline in the technology side of 
the economy. Please do not jeopardize the fragile business rebirth 
that the U.S. is going through by extending this case.
    Thank you for reviewing my comments.
    Sincerely,
    Dennis Lange
    Excellence In Bulk Material Handing
    2965 Flowers Road South, Suite 110
    . Atlanta, Georgia 30341-5520
    . 770-936-8836
    . Fax 770-936-8846 . 800-878-4419
    URL: http://www. sdsales.com
    e-mail: info @ sdsales.com



MTC-00029727

JFERRY WALLACE
708 W. Main Street
Cherryvale, KS 67335
January 21, 2002
Judge Kollar Kottely
Attention: Renata Hesse
U.S. Department of Justice, Antitrust Division
601 D Street, NW, Suite 1200
Washington, DC 20530
    Dear Judge Kollar Kottely:
    Those lobbying for stricter regulations against Microsoft had 
better be careful what they wish for. I seriously doubt that they 
wish to operate under the same level of scrutiny themselves. 
Contrary to the claims of the antitrust suit, Microsoft has done 
nothing but benefit the consumer in terms of providing better, more 
innovative products at affordable prices.
    I ask you to accept the current settlement offer, concluding 
this questionable lawsuit. Settlement of the suit will definitely 
crimp Microsoft to some extent, but the fact remains that the 
consumer will still choose the products they prefer. The only fair 
way that AOL, Oracle, and other Microsoft competitors can knock off 
Microsoft's top spot is to truly offer a better product, Hopefully 
this lawsuit will spur an investigation of the underlying issue, 
current antitrust law, and how this law does or does not apply to 
modem day business.
    Sincerely,
    Jerry Wallace



MTC-00029728

1111 Harbor Lane
Gulf Breeze, FL 32563
January 27, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am disgusted that the government has so little to do with its 
time that it can waste nearly four years pro-suing the Microsoft 
antitrust case. I hoped that the economy, which has been suffering 
ever since this case began, would have the chance to recover. 
Microsoft's opponents have kept after Microsoft for so long. It is 
truly becoming tedious.
    The settlement provides Microsoft's competitors with the 
opportunity to use Microsoft's technological advances to their own 
advantage, in order to restore an atmosphere of fair competition to 
the technology market. For example, Microsoft will reformat future 
versions of Windows so that its competitors will have the 
opportunity to introduce their own software directly into the 
Windows operating system. Microsoft will also allow computer makers 
the ability to replace Microsoft programs in Windows with non-
Microsoft alternatives.
    The settlement is fine; in fact, I think it would be harm tiff 
to the consumer to extend litigation any longer. The suit is no 
longer about progress; it is about inhibition. America desperately 
needs to be able to progress. I urge you and your office to take the 
necessary action to see this settlement finalized.
    Sincerely,
    Edwin Barksdale
    cc: Representative Jefferson Miller



MTC-00029729

TRUEWATER
January 15, 2002
Attorney General John Ashcroft
U.S. Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft,
    There has been enough posturing on both sides of this Microsoft 
lawsuit to make a flock of peacocks jealous, and more confusion than 
a chicken running around with its head cut off. It is clear that any 
further litigation would only make matters worse.
    I am writing to lend my individual support for this settlement. 
I believe that its terms are reasonably fair for both sides. They 
make sure that Microsoft avoids its allegedly unfair retaliation 
practices to software makers, such as attaching software to Windows. 
It will also be required to change future versions of Windows to 
accommodate other brands of software more effectively.
    I am hoping that no further federal action will be necessary, 
and that this sort of rancor can be minimized in the future.
    Sincerely,
    Christopher Britt
    Cc: Representative Sheila Jackson Lee



MTC-00029730

1901 Empire Drive
Waukesha, WI 53186
January 27, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    Now that a settlement has been reached in the Microsoft case, I 
would like to confirm

[[Page 28727]]

my support behind the terms negotiated and allowing this action to 
be completed. As a technology consultant, I am fully aware that 
Microsoft has overstepped its bounds in some respects in the past, 
yet this lawsuit has gone beyond what any reasonable person would 
consider worth the price in government time and money. A deal is a 
deal and it's time to put this issue to rest. There is ample 
competition to Microsoft and many "disruptive 
technologies" emerging that will change the balance of market 
dominance.
    Microsoft is a great success story that is being punished, 
rather than lauded, for its achievements in the software industry. 
To suggest a break up would be an injustice to entrepreneurs 
everywhere who want to create the best products and services 
possible for their customers. This compromise offers significant 
concessions to how Microsoft can freely do business and should be 
considered a credible good faith gesture to allowing more 
competition.
    Considering the greater freedoms for computer makers to 
configure Windows without question and developers to utilize Windows 
technology for their own interests, this deal should pass the 
approval process at once. This is the fairest solution possible 
among these parties, and also the most practical one, considering 
the need for stability, in this dicey economic climate. Please halt 
any further action.
    Sincerely,
    Phil Mattson



MTC-00029731

FLAMINGO TOURS
4230 S. E. 6TH Street
Miami, Florida 33134
[305] 445-6865
January 22, 2002
Hon. Colleen Kollar-Kotelly
U.S. District Court, District of Columbia
c/o Renata B. Hesse Antitrust Division
U.S. Department of Justice
601 D Street, N. W. Suite 1200
Washington, DC 20530-0001
    Dear Judge Kollar-Kotally:
    The recent proposed settlement between the Department of Justice 
and Microsoft fails to put an end to Microsoft's predatory 
practices. The final settlement in U.S. v. Microsoft does not 
adequately protect competition and innovation in this vital sector 
of our economy, does not sufficiently address consumer choice, and 
falls to meet the standards for a remedy set in the unanimous ruling 
against Microsoft by the Court of Appeals for the District of 
Columbia. Its enforcement provisions are vague and unenforceable. 
The five-year time frame of the proposed settlement is far too short 
to deal with the antitrust abuses of a company that has maintained 
and expanded its monopoly power through years of fear and 
intimidation.
    Microsoft's liability under the antitrust laws is no longer open 
for debate. The company has been found liable before the District 
Court, lost its appeal to the United States Court of Appeals for the 
District of Columbia in a 7-0 decision, saw its petition for 
rehearing in the appellate court denied, and had its appeal to the 
Supreme Court turned down. The courts have decided that Microsoft 
possesses monopoly power and has used that power unlawfully to 
protect its monopoly. The next step is to find a remedy that meets 
the appellate court's standard to "terminate the monopoly, 
deny to Microsoft the fruits of its past statutory violations, and 
prevent any future anticompetitive activity." This proposed 
settlement fails to do so. In fact, the weak settlement between 
Microsoft and the Department of Justice ignores key aspects of the 
Court of Appeals ruling against Microsoft. The decision gives 
Microsoft "sole discretion" to unilaterally determine 
that other products or services which don't have anything to do with 
operating a computer are nevertheless part of a Windows Operating 
System product. The deal fails to terminate the Microsoft monopoly, 
and, instead, guarantees its survival.
    The flawed settlement empowers Microsoft to retaliate against 
would-be competitors, take the intellectual property of competitors 
doing business with it and permits Microsoft to define many key 
terms, which is unprecedented in any law enforcement proceeding.
    In addition, the proposed settlement contains far too many 
strong-sounding provisions that are fiddled with loopholes. The 
agreement requires Microsoft to share certain technical information 
with other companies. However, Microsoft is under no obligation to 
share information if that disclosure would harm the company's 
security or software licensing. Who gets to decide whether such harm 
might occur? Microsoft. The settlement says that Microsoft 
"shall not enter into any agreement" to pay a software 
vendor not to develop or distribute software that would compete with 
Microsoft's products. However, another provision permits those 
payments and deals when they are "reasonably necessary." 
The ultimate arbiter of when these deals would be "reasonably 
necessary?" Microsoft.
    Furthermore, the weak enforcement provisions of this proposed 
deal leave Microsoft free to do practically whatever it wants. The 
company appoints half the members of its overseeing committee and 
has the ability to violate regulations, knowing that whatever the 
committee finds inappropriate is not admissible in court. Finally, 
Microsoft must only comply with the lenient restrictions in the 
agreement for only five years. This is clearly not long enough for a 
company found guilty of violating antitrust laws.
    Sadly, the proposed final judgment has the potential to make the 
competitive landscape of the software industry worse, it contains so 
many ambiguities and loopholes that it may be unenforceable and will 
likely lead to years of additional litigation. Various industry 
experts from such institutions such as Morgan Stanley, the Harvard 
Business School, Schwab Capital Markets, and Prudential Financial 
have been quoted as saying that this settlement is beneficial to 
Microsoft's current monopolistic intentions.
    Antitrust law has protected free markets and enhanced consumer 
welfare in this country for more than a century. The Microsoft case 
does not represent a novel application of the law, but is the kind 
of standard antitrust enforcement action that could ensure vigorous 
competition in all sectors of today's economy. These same standards 
have been applied to monopolies in the past, such as Standard Oil 
and AT&T. Court decisions to break up these monopolies led to 
prices declining as much as 70% and an increase in competition-
driven innovation.
    The end result is that Microsoft is now able to preserve and 
reinforce its monopoly, and is also free to use anticompetitive 
tactics to spread its dominance into other markets. After more than 
11 years of litigation and investigation against Microsoft, surely 
we can do better.
    Thank you for your time.
    Regards,
    Rose Wayne



MTC-00029732

January 15, 2002
Hon. Colleen Kollar-Kotelly
U.S. District Court,
District of Columbia
c/o Renata B. Hesse Antitrust Division
U.S. Department of Justice
601 D Street NW
Suite 1200
Washington, DC 20530-0001
    Dear Judge Kollar-Kotally:
    The recent proposed settlement between the Department of Justice 
and Microsoft does not put an end to Microsoft's questionable 
practices.
    Does the final settlement in U.S. v. Microsoft adequately 
protect competition and innovation in this vital sector of our 
economy? Does it sufficiently address consumer choice and meet the 
standards for a remedy set in the unanimous ruling against Microsoft 
by the Court of Appeals for the District of Columbia? These 
questions remain unanswered. The five-year time frame of the 
proposed settlement seems far too short to deal with the multiple 
antitrust actions of a company that has maintained and expanded its 
monopoly power through years of unmatched success. Microsoft's 
liability under the antitrust laws is no longer open for debate. The 
company has been found liable before the District Court, lost its 
appeal to the United States Court of Appeals for the District of 
Columbia in a 7-0 decision, saw its petition for rehearing in 
the appellate court denied, and had its appeal to the Supreme Court 
turned down. The courts have decided that Microsoft possesses 
monopoly power and has used that power unlawfully to protect its 
monopoly.
    The next step is to find a remedy that meets the appellate 
court's standard to "terminate the monopoly deny to Microsoft 
the fruits of its past statutory violations, and prevent any future 
anticompetitive activity." This proposed settlement may not be 
strong enough.. In fact, the settlement between Microsoft and the 
Department of Justice seems to ignore key aspects of the Court of 
Appeals ruling against Microsoft. The decision as it stands gives 
Microsoft "sole discretion" to unilaterally determine 
that other products or services which don't have anything to do with 
operating a computer are nevertheless part of a Windows Operating 
System product, thus failing to terminate Microsoft's standing 
position in the market.

[[Page 28728]]

The settlement allows Microsoft to retaliate against would-be 
competitors, take the intellectual property of competitors doing 
business with it and permits Microsoft to define many key terms, 
which is unprecedented in any law enforcement proceeding.
    In addition, the proposed settlement contains far too many 
strong-sounding provisions that are riddled with loopholes. The 
agreement requires Microsoft to share certain technical information 
with other companies. However, Microsoft is under no obligation to 
share information if that disclosure would ham the company's 
security or software licensing. The question is, who gets to decide 
whether such harm might occur? The settlement says that Microsoft 
"shall not enter into any agreement" to pay a software 
vendor not to develop or distribute software that would compete with 
Microsoft's products. However, another provision permits those 
payments and deals when they are "reasonably necessary." 
The ultimate arbiter of when these deals would be "reasonably 
necessary?" Microsoft.
    Furthermore, the provisions in this proposed deal may create a 
scenario in which Microsoft has too much freedom. The company 
appoints half the members of its overseeing committee and has the 
ability to violate regulations, knowing that whatever the committee 
finds inappropriate is not admissible in court. Finally, Microsoft 
must only comply with the lenient restrictions in the agreement for 
only five years. This is clearly not long enough for a company found 
guilty of violating antitrust law.
    Various industry experts from such institutions as Morgan 
Stanley, the Harvard Business School, Schwab Capital Markets and 
Prudential Financial have been quoted as saying that this settlement 
is beneficial to Microsoft's current monopolistic intentions.
    Antitrust law has protected free markets and enhanced consumer 
welfare in this country for more than a century. The Microsoft case 
does not represent a novel application of the law, but is the kind 
of standard antitrust enforcement action that could ensure vigorous 
competition in all sectors of today's economy These same standards 
have been applied to monopolies in the past, such as Standard Oil 
and AT&T. Court decisions to break up these monopolies led to 
prices declining as much as 70% and an increase in competition-
driven innovation.
    The end result is that Microsoft may still be able to preserve 
and reinforce its predominance. After more than 11 years of 
litigation and investigation against Microsoft, I eagerly await what 
is to be the final outcome.
    Thank you for your time.
    Regards,
    Manolo Coroalles
    President
    Dupont Plaza Travel



MTC-00029733

January 15, 2002
Hon. Colleen Kollar-Kotelly
U.S. District Court, District of Columbia
c/o Renata B. Hesse Antitrust Division
U.S. Department of Justice
601 D Street NW
Suite 1200
Washington, DC 20530-0001
    Dear Judge Kollar-Kotally:
    The recent proposed settlement between the Department of Justice 
and Microsoft does not put an end to Microsoft's questionable 
practices.
    Does the final settlement in U.S. v. Microsoft adequately 
protect competition and innovation in this vital sector of our 
economy? Does it sufficiently address consumer choice and meet the 
standards for a remedy set in the unanimous ruling against Microsoft 
by the Court of Appeals for the District of Columbia? These 
questions remain unanswered. The five-year time frame of the 
proposed settlement seems far too short to deal with the multiple 
antitrust actions of a company that has maintained and expanded its 
monopoly power through years of unmatched success.
    Microsoft's liability under the antitrust laws is no longer open 
for debate. The company has been found liable before the District 
Court, lost its appeal to the United States Court of Appeals for the 
District of Columbia in a 7-0 decision, saw its petition for 
reheating in the appellate court denied, and had its appeal to the 
Supreme Court turned down. The courts have decided that Microsoft 
possesses monopoly power and has used that power unlawfully to 
protect its monopoly.
    The next step is to find a remedy that meets the appellate 
court's standard to "terminate the monopoly, deny to Microsoft 
the fruits of its past statutory violations, and prevent any future 
anticompetitive activity." This proposed settlement may not be 
strong enough.. In fact, the settlement between Microsoft and the 
Department of Justice seems to ignore key aspects of the Court of 
Appeals ruling against Microsoft. The decision as it stands gives 
Microsoft "sole discretion" to unilaterally determine 
that other products or services which don't have anything to do with 
operating a computer are nevertheless part of a Windows Operating 
System product, thus failing to terminate Microsoft's standing 
position in the market.
    The settlement allows Microsoft to retaliate against would-be 
competitors, take the intellectual property of competitors doing 
business with it and permits Microsoft to define many key terms, 
which is unprecedented in any law enforcement proceeding.
    In addition, the proposed settlement contains far too many 
strong-sounding provisions that are fiddled with loopholes. The 
agreement requires Microsoft to share certain technical information 
with other companies. However, Microsoft is under no obligation to 
share information if that disclosure would harm the company's 
security or software licensing. The question is, who gets to decide 
whether such harm might occur? The settlement says that Microsoft 
"shall not enter into any agreement" to pay a software 
vendor not to develop or distribute software that would compete with 
Microsoft's products. However, another provision permits those 
payments and deals when they are "reasonably necessary." 
The ultimate arbiter of when these deals would be "reasonably 
necessary?" Microsoft.
    Furthermore, the provisions in this proposed deal may create a 
scenario in which Microsoft has too much freedom. The company 
appoints half the members of its overseeing committee and has the 
ability to violate regulations, knowing that whatever the committee 
finds inappropriate is not admissible in court. Finally, Microsoft 
must only comply with the lenient restrictions in the agreement for 
only five years. This is clearly not long enough for a company found 
guilty of violating antitrust law.
    Various industry experts from such institutions as Morgan 
Stanley, the Harvard Business School, Schwab Capital Markets and 
Prudential Financial have been quoted as saying that this settlement 
is beneficial to Microsoft's current monopolistic intentions.
    Antitrust law has protected free markets and enhanced consumer 
welfare in this country for more than a century. The Microsoft case 
does not represent a novel application of the law, but is the kind 
of standard antitrust enforcement action that could ensure vigorous 
competition in all sectors of today's economy. These same standards 
have been applied to monopolies in the past, such as Standard Oil 
and AT&T. Court decisions to break up these monopolies led to 
prices declining as much as 70% and an increase in competition-
driven innovation.
    The end result is that Microsoft may still be able to preserve 
and reinforce its predominance. After more than 11 years of 
litigation and investigation against Microsoft, I eagerly await what 
is to be the final outcome.
    Thank you for your time.
    Regards,
    Santiago Morales
    President
    MaxiForce, Inc.



MTC-00029734

January ??, 2002
Hon. Colleen Kollar-Kotelly
U.S. District Court, District of Columbia
c/o Renata B Hesse Antitrust Division
U.S. Department of Justice
601 D Street NW
Suite 1200
Washington, DC. 20503-000??
    Dear Judge Kollar-Kotally
    The recent proposed settlement between the Department of Justice 
and Microsoft fails to put an end to Microsoft's predatory 
practices.
    The final settlement m?? does not adequately protect competition 
and ??ation in this ?? sector of our economy does not sufficiently 
address consumer choice and fails to meet t he standards for a 
remedy set in the unanimous ruling against Microsoft by the Court of 
Appeals for the District of Columbia Its enforcement provisions are 
??ague and unenforceable. The five-year time frame of the proposed 
settlement is far too short to deal with the antitrust abuses of a 
company that has maintained and expanded its monopoly power through 
years of fear and intimidation.
    Microsoft's liability under the antitrust laws is no longer open 
for debate. The

[[Page 28729]]

company has been found liable before the District Court, lost its 
appeal to the ??ed States Court of Appeals for the District of 
Columbia in a 7-0 decision, saw its petition for rehearing in 
the appellate court denied, and had its appeal to the Supreme Court 
turned down. The courts have decided that Microsoft possesses 
monopoly power and has used that power unlawfully to protect its 
monopoly. The next step is to find a remedy that meets the appellate 
court's standard to "terminate the monopoly, deny to Microsoft 
the fruits of its past statutory ??olations, and prevent any ?? 
??competitive activi??. This proposed settlement fails to do so. In 
fact, the weak settlement between Microsoft and the Department of 
Justice ??gnores key aspects of t he Court of Appeals ruling against 
Microsoft. The decision gives Microsoft "sole 
discretion" to unilaterally determine that other products or 
services which don't have anything to do with operating a computer 
are nevertheless part of a Windows Operating ?? product. The deal 
tails to terminate the Microsoft monopoly and instead, guarantees 
its survival.
    The flawed settlement empowers Microsoft to retaliate against 
would-be competitors, take the intellectual property of competitors 
doing business with ?? and permits Microsoft to define many key 
terms, which is unprecedented in any law enforcement proceeding.
    In addition, the proposed settlement contains far too many 
strong-sounding provisions that are riddled with loopholes. The 
agreement requires Microsoft to share certain technical information 
with other companies. However Microsoft is under no obligation to 
share information if that disclosure would harm the company ?? 
security or software licensing. Who gets to decide whether such harm 
might occur Microsoft The settlement says that Microsoft 
"shall not enter into any agreement" to pay a software 
vendor not to develop or distribute software that would compete with 
Microsoft's products. However, another another provision permits 
those payments and deals when they are "reasonably 
necessary". The ultimate arbiter of when these deals would be 
"reasonably necessary" Microsoft.
    Furthermore, the weak enforcement provisions in this proposed 
deal leave Microsoft tree to do practically whatever ?? wants. The 
company appoints half the members of its overseeing committee and 
has the ability to violate regulations, knowing that whatever the 
committee finds inappropriate is not admissible in court Finally, 
Microsoft must only comply with the lenient restrictions in the 
agreement for only five years. This is clearly not long enough for a 
company found guilty of violating antitrust law.
    Sadly the proposed final judgment has the potential to make the 
competitive landscape of the software industry worse, it contains so 
many ambiguities and loopholes that it may be unenforceable and will 
likely lead to years of additional litigation Various industry 
experts from such institutions as Morgan Stanley, the Harvard 
Business School, Schwab Capital Markets and Prudential Financial 
have been quoted as saying that this settlement is beneficial to 
Microsoft current monopolistic intentions.
    Antitrust law has protected free markets and enhanced consumer 
wel??are in this country for more than a century. The Microsoft case 
does not represent a novel application of the law, but is the kind 
of standard antitrust enforcement action that could ensure vigorous 
competition in all sectors of today's economy. These same standards 
have been applied to monopolies in the past, such as Standard Oil 
and VI&I Court decisions to break up these monopolies led to 
prices declining as much as 70% and an increase in competition-
driven innovation. The end result is that Microsoft is now able to 
preserve and reinforce its monopoly and is also free to use 
anticompetitive tactics to spread its dominance into other markets. 
After more than 11 years of litigation and investigation against 
Microsoft, surely we can do better.
    Thank you for your time.
    Regards.
    Juan D ??
    President
    ??eRespondo.com. Inc



MTC-00029735

January 7, 2002
Hon. Colleen Kollar-Kotelly
U.S. District Court, District of Columbia
c/o Renata B. Hesse
Antitrust Division
U.S. Department of Justice
601 D Street NW
Suite 1200
Washington, DC 20530-0001
    Dear Judge Kollar-Kotally:
    The recent proposed settlement between the Department of Justice 
and Microsoft fails to put an end to Microsoft's predatory 
practices.
    The final settlement in U.S. v. Microsoft does not adequately 
protect competition and innovation in this vital sector of our 
economy, does not sufficiently address consumer choice and fails to 
meet the standards for a remedy set in the unanimous ruling against 
Microsoft by the Court of Appeals for the District of Columbia. Its 
enforcement provisions are vague and unenforceable. The five-year 
time frame of the proposed settlement is far too short to deal with 
the antitrust abuses of a company that has maintained and expanded 
its monopoly power through years of fear and intimidation.
    Microsoft's liability under the antitrust laws is no longer open 
for debate. The company has been found liable before the District 
Court, lost its appeal to the United States Court of Appeals for the 
District of Columbia in a 7-0 decision, saw its petition for 
reheating in the appellate court denied, and had its appeal to the 
Supreme Court turned down. The courts have decided that Microsoft 
possesses monopoly power and has used that power unlawfully to 
protect its monopoly. The next step is to find a remedy that meets 
the appellate court's standard to "terminate the monopoly, 
deny to Microsoft the fruits of its past statutory violations, and 
prevent any future anticompetive activity." This proposed 
settlement fails to do so. In fact, the weak settlement between 
Microsoft and the Department of Justice ignores key aspects of the 
Court of Appeals ruling against Microsoft. The decision gives 
Microsoft "sole discretion" to unilaterally determine 
that other products or services which don't have anything to do with 
operating a computer are nevertheless part of a Windows Operating 
System product. The deal fails to terminate the Microsoft monopoly 
and, instead, guarantees its survival.
    The flawed settlement empowers Microsoft to retaliate against 
would-be competitors, take the intellectual property of competitors 
doing business with it and permits Microsoft to define many key 
terms, which is unprecedented in any law enforcement proceeding.
    In addition, the proposed settlement contains far too many 
strong-sounding provisions that are fiddled with loopholes. The 
agreement requires Microsoft to share certain technical information 
with other companies. However, Microsoft is under no obligation to 
share information if that disclosure would harm the company's 
security or software licensing. Who gets to decide whether such harm 
might occur? Microsoft. The settlement says that Microsoft 
"shall not enter into any agreement" to pay a software 
vendor not to develop or distribute software that would compete with 
Microsoft's products. However, another provision permits those 
payments and deals when they are "reasonably necessary." 
The ultimate arbiter of when these deals would be "reasonably 
necessary?" Microsoft.
    Furthermore, the weak enforcement provisions in this proposed 
deal leave Microsoft free to do practically whatever it wants. The 
company appoints half the members of its overseeing committee and 
has the ability to violate regulations, knowing that whatever the 
committee finds inappropriate is not admissible in court. Finally, 
Microsoft must only comply with the lenient restrictions in the 
agreement for only five years. This is clearly not long enough for a 
company found guilty of violating antitrust law.
    Sadly, the proposed final judgment has the potential to make the 
competitive landscape of the software industry worse, it contains so 
many ambiguities and loopholes that it may be unenforceable and will 
likely lead to years of additional litigation. Various industry 
experts from such institutions as Morgan Stanley, the Harvard 
Business School, Schwab Capital Markets and Prudential Financial 
have been quoted as saying that this settlement is beneficial to 
Microsoft's current monopolistic intentions.
    Antitrust law has protected free markets and enhanced consumer 
welfare in this country for more than a century. The Microsoft case 
does not represent a novel application of the law, but is the kind 
of standard antitrust enforcement action that could ensure vigorous 
competition in all sectors of today's economy. These same standards 
have been applied to monopolies in the past, such as Standard Oil 
and AT&T. Court decisions to break up these monopolies led to 
prices declining as much as 70% and an increase in competition-
driven innovation.
    The end result is that Microsoft is now able to preserve and 
reinforce its monopoly, and

[[Page 28730]]

is also free to use anticompetitive tactics to spread its dominance 
into other markets. After more than 11 years of litigation and 
investigation against Microsoft, surely we can do better.
    Thank you for your time.
    Raul Valdes-Fauli
    5700 Collins AV, #9-G
    Miami Beach FL 33140



MTC-00029737

THE AMERICAS-COLLECTION
PRIVATE & CORPORATE FINE ARTS DEALERS
January 7, 2002
Hon. Colleen Kollar-Kotelly
U.S. District Court, District of Columbia
c/o Renata B. Hesse Antitrust Division
U.S. Department of Justice
601 D Street NW Suite 1200
Washington, DC 20530-0001
    Dear Judge Kollar-Kotally:
    The recent proposed settlement between the Department of Justice 
and Microsoft fails to put an end to Microsoft's predatory 
practices. The final settlement in U.S. v. Microsoft does not 
adequately protect competition and innovation in this vital sector 
of our economy, does not sufficiently address consumer choice and 
fails to meet the standards for a remedy set in the unanimous ruling 
against Microsoft by the Court of Appeals for the District of 
Columbia. Its enforcement provisions are vague and unenforceable. 
The five-year time frame of the proposed settlement is far too short 
to deal with the antitrust abuses of a company that has maintained 
and expanded its monopoly power through years of fear and 
intimidation.
    Microsoft's liability under the antitrust laws is no longer open 
for debate. The company has been found liable before the District 
Court, lost its appeal to the United States Court of Appeals for the 
District of Columbia in a 7-0 decision, saw its petition for 
rehearing in the appellate court denied, and had its appeal to the 
Supreme Court turned down. The courts have decided that Microsoft 
possesses monopoly power and has used that power unlawfully to 
protect its monopoly. The next step is to find a remedy that meets 
the appellate court's standard to "terminate the monopoly, 
deny to Microsoft the fruits of its past statutory violations, and 
prevent any future anticompetitive activity." This proposed 
settlement fails to do so. In fact, the weak settlement between 
Microsoft and the Department of Justice ignores key aspects of the 
Court of Appeals ruling against Microsoft. The decision gives 
Microsoft "sole discretion" to unilaterally determine 
that other products or services which don't have anything to do with 
operating a computer are nevertheless part of a Windows Operating 
System product. The deal fails to terminate the Microsoft monopoly 
and, instead, guarantees its survival.
    The flawed settlement empowers Microsoft to retaliate against 
would-be competitors, take the intellectual property of competitors 
doing business with it and permits Microsoft to define many key 
terms, which is unprecedented in any law enforcement proceeding.
    In addition, the proposed settlement contains far too many 
strong-sounding provisions that are fiddled with loopholes. The 
agreement requires Microsoft to share certain technical information 
with other companies. However, Microsoft is under no obligation to 
share information if that disclosure would harm the company's 
security or software licensing. Who gets to decide whether such harm 
might occur? Microsoft. The settlement says that Microsoft 
"shall not enter into any agreement" to pay a software 
vendor not to develop or distribute software that would compete with 
Microsoft's products. However, another provision permits those 
payments and deals when they are "reasonably necessary." 
The ultimate arbiter of when these deals would be "reasonably 
necessary?" Microsoft.
    Furthermore, the weak enforcement provisions in this proposed 
deal leave Microsoft free to do practically whatever it wants. The 
company appoints half the members of its overseeing committee and 
has the ability to violate regulations, knowing that whatever the 
committee finds inappropriate is not admissible in court. Finally, 
Microsoft must only comply with the lenient restrictions in the 
agreement for only five years. This is clearly not long enough for a 
company found guilty of violating antitrust law.
    Sadly, the proposed final judgment has the potential to make the 
competitive landscape of the software industry worse, it contains so 
many ambiguities and loopholes that it may be unenforceable and will 
likely lead to years of additional litigation. Various industry 
experts from such institutions as Morgan Stanley, the Harvard 
Business School, Schwab Capital Markets and Prudential Financial 
have been quoted as saying that this settlement is beneficial to 
Microsoft's current monopolistic intentions.
    Antitrust law has protected free markets and enhanced consumer 
welfare in this country for more than a century. The Microsoft case 
does not represent a novel application of the law, but is the kind 
of standard antitrust enforcement action that could ensure vigorous 
competition in all sectors of today's economy. These same standards 
have been applied to monopolies in the past, such as Standard Oil 
and AT&T. Court decisions to break up these monopolies led to 
prices declining as much as 70% and an increase in competition-
driven innovation.
    The end result is that Microsoft is now able to preserve and 
reinforce its monopoly, and is also free to use anticompetitive 
tactics to spread its dominance into other markets. After more than 
11 years of litigation and investigation against Microsoft, surely 
we can do better.
    Thank you for your time.
    Regards,
    Dora Valdes-Fauli
    Director



MTC-00029738

    January 18, 2002
    Hon. Colleen Kollar-Kotelly
    U.S. District Court, District of Columbia
    Government Relations & Public Affairs Counselors 2350 Coral 
Way, Suite 301
    Miami, Florida 33145
    Telephone (305) 860-0780
    Facsimile (305) 860-0580
    c/o Renata B. Hesse Antitrust Division
U.S. Department of Justice
    601 D Street NW Suite
    1200 Washington, DC 20530-0001
    Dear Judge Kollar-Kotally:
    The recent proposed settlement between the Department of Justice 
and Microsoft fails to put an end to Microsoft's predatory 
practices.
    The final settlement in U.S. v. Microsoft does not adequately 
protect competition and innovation in this vital sector of our 
economy, does not sufficiently address consumer choice and fads to 
meet the standards for a remedy set in the unanimous ruling against 
Microsoft by the Court of Appeals for the District of Columbia. Its 
enforcement provisions are vague and unenforceable. The five-year 
time frame of the proposed settlement is far too short to deal with 
the antitrust abuses of a company that has maintained and expanded 
its monopoly power through years of fear and intimidation.
    Microsoft's liability under the antitrust laws is no longer open 
for debate. The company has been found liable before the District 
Court, lost its appeal to the United States Court of Appeals for the 
District of Columbia in a 7-0 decision, saw its petition for 
rehearing in the appellate court denied, and had its appeal to the 
Supreme Court turned down. The courts have decided that Microsoft 
possesses monopoly power and has used that power unlawfully to 
protect its monopoly. The next step is to find a remedy that meets 
the appellate court's standard to "terminate the monopoly, 
deny to Microsoft the fruits of its past statutory violations, and 
prevent any future anticompetitive activity." This proposed 
settlement fails to do so. In fact, the weak settlement between 
Microsoft and the Department of Justice ignores key aspects of the 
Court of Appeals ruling against Microsoft. The decision gives 
Microsoft "sole discretion" to unilaterally determine 
that other products or services which don't have anything to do with 
operating a computer are nevertheless part of a Windows Operating 
System product. The deal fails to terminate the Microsoft monopoly 
and, instead, guarantees its survival.
    The flawed settlement empowers Microsoft to retaliate against 
would-be competitors, take the intellectual property of competitors 
doing business with it and permits Microsoft to define many key 
terms, which is unprecedented in any law enforcement proceeding. In 
addition, the proposed settlement contains far too many strong-
sounding provisions that are riddled with loopholes. The agreement 
requires Microsoft to share certain technical information with other 
companies. However, Microsoft is under no obligation to share 
information if that disclosure would harm the company's security or 
software licensing. Who gets to decide whether such harm might 
occur? Microsoft. The settlement says that Microsoft "shall 
not enter into any agreement" to pay a software vendor not to 
develop or distribute software that would compete with Microsoft's 
products. However, another provision permits those payments and 
deals when they are "reasonably necessary." The

[[Page 28731]]

ultimate arbiter of when these deals would be "reasonably 
necessary?" Microsoft.
    Furthermore, the weak enforcement provisions in this proposed 
deal leave Microsoft free to do practically whatever it wants. The 
company appoints half the members of its overseeing committee and 
has the ability to violate regulations, knowing that whatever the 
committee finds inappropriate is not admissible in court. Finally, 
Microsoft must only comply with the lenient restrictions in the 
agreement for only five years. This is clearly not long enough for a 
company found guilty of violating antitrust law.
    Sadly, the proposed final judgment has the potential to make the 
competitive landscape of the software industry worse, it contains so 
many ambiguities and loopholes that it may be unenforceable and will 
likely lead to years of additional litigation. Various industry 
experts from such institutions as Morgan Stanley, the Harvard 
Business School, Schwab Capital Markets and Prudential Financial 
have been quoted as saying that this settlement is beneficial to 
Microsoft's current monopolistic intentions.
    Antitrust law has protected free markets and enhanced consumer 
welfare in this country for more than a century. The Microsoft case 
does not represent a novel application of the law, but is the kind 
of standard antitrust enforcement action that could ensure vigorous 
competition in all sectors of today's economy. These same standards 
have been applied to monopolies in the past, such as Standard Oil 
and AT&T. Court decisions to break up these monopolies led to 
prices declining as much as 70% and an increase in competition-
driven innovation.
    The end result is that Microsoft is now able to preserve and 
reinforce its monopoly, and is also free to use anticompetitive 
tactics to spread its dominance into other markets. After more than 
11 years of litigation and investigation against Microsoft, surely 
we can do better.
    Thank you for your time.
    Regards, Fausto Gomez
    President
    Gomez Barker Associates



MTC-00029739

    January 15, 2002
    Hon. Colleen Kollar-Kotelly
    U.S. District Court, District of Columbia
    c/o Renata B. Hesse Antitrust Division
U.S. Department of Justice
    601 D Street NW
    Suite 1200
    Washington, DC 20530-0001
    Dear Judge Kollar-Kotally:
    The recent proposed settlement between the Department of Justice 
and Microsoft does not put an end to Microsoft's questionable 
practices. Does the final settlement in U.S. v. Microsoft adequately 
protect competition and innovation in this vital sector of our 
economy? Does it sufficiently address consumer choice and meet the 
standards for a remedy set in the unanimous ruling against Microsoft 
by the Court of Appeals for the District of Columbia? These 
questions remain unanswered. The five-year time frame of the 
proposed settlement seems far too short to deal with the multiple 
antitrust actions of a company that has maintained and expanded its 
monopoly power through years of unmatched success. Microsoft's 
liability under the antitrust laws is no longer open for debate. The 
company has been found liable before the District Court, lost its 
appeal to the United States Court of Appeals for the District of 
Columbia in a 7-0 decision, saw its petition for rehearing in 
the appellate court denied, and had its appeal to the Supreme Court 
turned down. The courts have decided that Microsoft possesses 
monopoly power and has used that power unlawfully to protect its 
monopoly. The next step is to find a remedy that meets the appellate 
court's standard to "terminate the monopoly, deny to Microsoft 
the fruits of its past statutory violations, and prevent any future 
anticompetitive activity" This proposed settlement may not be 
strong enough.. In fact, the settlement between Microsoft and the 
Department of Justice seems to ignore key aspects of the Court of 
Appeals ruling against Microsoft. The decision as it stands gives 
Microsoft "sole discretion" to unilaterally determine 
that other products or services which don't have anything to do with 
operating a computer are nevertheless part of a Windows Operating 
System product, thus failing to terminate Microsoft's standing 
position in the market.
    The settlement allows Microsoft to retaliate against would-be 
competitors, take the intellectual property of competitors doing 
business with it and permits Microsoft to define many key terms, 
which is unprecedented in any law enforcement proceeding. In 
addition, the proposed settlement contains far too many strong-
sounding provisions that are fiddled with loopholes. The agreement 
requires Microsoft to share certain technical information with other 
companies. However, Microsoft is under no obligation to share 
information if that disclosure would harm the company's security or 
software licensing. The question is, who gets to decide whether such 
harm might occur?
    The settlement says that Microsoft "shall not enter into 
any agreement" to pay a software vendor not to develop or 
distribute software that would compete with Microsoft's products. 
However, another provision permits those payments and deals when 
they are "reasonably necessary." The ultimate arbiter 
of" when these deals would be "reasonably 
necessary?" Microsoft.
    Furthermore, the provisions in this proposed deal may create a 
scenario in which Microsoft has too much freedom. The company 
appoints half the members of its overseeing committee and has the 
ability to violate regulations, knowing that whatever the committee 
finds inappropriate is not admissible in court. Finally, Microsoft 
must only comply with the lenient restrictions in the agreement for 
only five years. This is clearly not long enough for a company found 
guilty of violating antitrust law.
    Various industry experts from such institutions as Morgan 
Stanley, the Harvard Business School, Schwab Capital Markets and 
Prudential Financial have been quoted as saying that this settlement 
is beneficial to Microsoft's current monopolistic intentions. 
Antitrust law has protected free markets and enhanced consumer 
welfare in this country for more than a century. The Microsoft case 
does not represent a novel application of the law, but is the kind 
of standard antitrust enforcement action that could ensure vigorous 
competition in all sectors of today's economy. These same standards 
have been applied to monopolies in the past, such as Standard Oil 
and AT&T. Court decisions to break up these monopolies led to 
prices declining as much as 70% and an increase in competition-
driven innovation.
    The end result is that Microsoft may still be able to preserve 
and reinforce its predominance. After more than 11 years of 
litigation and investigation against Microsoft, I eagerly await what 
is to be the final outcome.
    Thank you for your time.
    Regards,
    Abel ?? Iglesias
    828 Maria??a AV
    Coral Gables FL 33134



MTC-00029740

EMS educational management services, inc.
January 18, 2002
Hon. Colleen Kollar-Kotelly
U.S. District Court, District of Columbia
c/o Renata B. Hesse Antitrust Division
U.S. Department of Justice
601 D Street NW
Suite 1200
Washington, DC 20530-0001
    Dear Judge Kollar-Kotally:
    The recent proposed settlement between the Department of Justice 
and Microsoft fails to put an end to Microsoft's predatory 
practices. The final settlement in U.S. v. Microsoft does not 
adequately protect competition and innovation in this vital sector 
of our economy, does not sufficiently address consumer choice and 
fails to meet the standards for a remedy set in the unanimous ruling 
against Microsoft by the Court of Appeals for the District of 
Columbia. Its enforcement provisions are vague and unenforceable. 
The five-year time frame of the proposed settlement is far too short 
to deal with the antitrust abuses of a company that has maintained 
and expanded its monopoly power through years of fear and 
intimidation.
    Microsoft's liability under the antitrust laws is no longer open 
for debate. The company has been found liable before the District 
Court, lost its appeal to the United States Court of Appeals for the 
District of Columbia in a 7-0 decision, saw its petition for 
rehearing in the appellate court denied, and had its appeal to the 
Supreme Court turned down. The courts have decided that Microsoft 
possesses monopoly power and has used that power unlawfully to 
protect its monopoly. The next step is to find a remedy that meets 
the appellate court's standard to "terminate the monopoly, 
deny to Microsoft the fruits of its past statutory violations, and 
prevent any future anticompetitive activity." This proposed 
settlement fails to do so. In fact, the weak settlement between 
Microsoft and the Department of Justice ignores key aspects of the 
Court of Appeals ruling against Microsoft. The decision gives 
Microsoft "sole discretion" to unilaterally determine 
that

[[Page 28732]]

other products or services which don't have anything to do with 
operating a computer are nevertheless part of a Windows Operating 
System product. The deal fails to terminate the Microsoft monopoly 
and, instead, guarantees its survival.
    The flawed settlement empowers Microsoft to retaliate against 
would-be competitors, take the intellectual property of competitors 
doing business with it and permits Microsoft to define many key 
terms, which is unprecedented in any law enforcement proceeding.
    In addition, the proposed settlement contains far too many 
strong-sounding provisions that are fiddled with loopholes. The 
agreement requires Microsoft to share certain technical information 
with other companies. However, Microsoft is under no obligation to 
share information if that disclosure would harm the company's 
security or software licensing. Who gets to decide whether such harm 
might occur? Microsoft. The settlement says that Microsoft 
"shall not enter into any agreement" to pay a software 
vendor not to develop or distribute software that would compete with 
Microsoft's products. However, another provision permits those 
payments and deals when they are "reasonably necessary." 
The ultimate arbiter of when these deals would be "reasonably 
necessary?" Microsoft.
    Furthermore, the weak enforcement provisions in this proposed 
deal leave Microsoft free to do practically whatever it wants. The 
company appoints half the members of its overseeing committee and 
has the ability to violate regulations, knowing that whatever the 
committee finds inappropriate is not admissible in court. Finally, 
Microsoft must only comply with the lenient restrictions in the 
agreement for only five years. This is clearly not long enough for a 
company found guilty of violating antitrust law.
    Sadly, the proposed final judgment has the potential to make the 
competitive landscape of the software industry worse, it contains so 
many ambiguities and loopholes that it may be unenforceable and will 
likely lead to years of additional litigation. Antitrust law has 
protected free markets and enhanced consumer welfare in this country 
for more than a century. The Microsoft case does not represent a 
novel application of the law, but is the kind of standard antitrust 
enforcement action that could ensure vigorous competition in all 
sectors of today's economy. These same standards have been applied 
to monopolies in the past, such as Standard Oil and AT&T. Court 
decisions to break up these monopolies led to prices declining as 
much as 70% and an increase in competition-driven innovation.
    The end result is that Microsoft is now able to preserve and 
reinforce its monopoly, and is also free to use anticompetitive 
tactics to spread its dominance into other markets. After more than 
11 years of litigation and investigation against Microsoft, surely 
we can do better.
    Regards,
    Esther Tellechea
    President
    Educational Management Services



MTC-00029741

January 7, 2002
Hon. Colleen Kollar-Kotelly
U.S. District Court,
District of Columbia
c/o Renata B. Hesse Antitrust Division
U.S. Department of Justice
601 D Street NW
Suite 1200
Washington, DC 20530-0001
    Dear Judge Kollar-Kotally:
    The recent proposed settlement between the Department of Justice 
and Microsoft fails to put an end to Microsoft's predatory 
practices.
    The final settlement in U.S. v. Microsoft does not adequate 
protect competition and innovation in this vital sector of our 
economy, does not sufficiently address consumer choice and fails to 
meet the standards for a remedy set in the unanimous ruling against 
Microsoft by the Court of Appeals for the District of Columbia. Its 
enforcement provisions are vague and unenforceable. The five-year 
time frame of the proposed settlement is far too short to deal with 
the antitrust abuses of a company that has maintained and expanded 
its monopoly power through years of fear and intimidation.
    Microsoft's liability under the antitrust laws is no longer open 
for debate. The company has been found liable before the District 
Court, lost its appeal to the Untied States Court of Appeals for 
District of Columbia in a 7-0 decision, saw its petition for 
reheating in the appellate court defiled, and had its appeal to the 
Supreme Court turned down. The courts have decided that Microsoft 
possesses monopoly power and has used that power unlawfully to 
protect its monopoly. The next step is to find a remedy that meets 
the appellate court's standard to "terminate the monopoly, 
deny to Microsoft the fruits of its past statutory violations, and 
prevent any future anticompetitive activity." This proposed 
settlement fails to do so. In fact, the weak settlement between 
Microsoft and the Department of Justice ignores key aspects of the 
Court of Appeals ruling against Microsoft. The decision gives 
Microsoft "sole discretion" to unilaterally determine 
that other products or services which don't have anything to do with 
operating a computer are nevertheless part of a Windows Operating 
system product. The deal fails to terminate the Microsoft monopoly 
and, instead, guarantees its survival.
    The flawed settlement empowers Microsoft to retaliate against 
would-be competitors, take the intellectual property of competitors 
doing business with it and permits Microsoft to define many key 
terms, which is unprecedented in any law enforcement proceeding.
    In addition, the proposed settlement contains far too many 
strong-sounding provisions that are fiddled with loopholes. The 
agreement requires Microsoft to share certain technical information 
with other companies. However, Microsoft is under no obligation to 
share information if that disclosure would harm the company's 
security software licensing. Who gets to decide whether such harm 
might occur? Microsoft. The settlement says that Microsoft 
"shall not enter into any agreement" to pay a software 
vendor not to develop or distribute software that would compete with 
Microsoft's products. However, another provision permits those 
payments and deals when they are "reasonably necessary." 
The ultimate arbiter of when these deals would be "reasonably 
necessary?" Microsoft.
    Furthermore, the weak enforcement provisions in this proposed 
deal leave Microsoft free to do practically whatever it wants. The 
company appoints half the members of its overseeing committee and 
has the ability to violate regulations, knowing that whatever the 
committee finds inappropriate is not admissible in court. Finally, 
Microsoft must only comply with the lenient restrictions in the 
agreement for only five years. This is clearly not long enough for a 
company found guilty of violating antitrust law. Sadly, the proposed 
final judgment has the potential to make the competitive landscape 
of the software industry worse, it contains so many ambiguities and 
loopholes that it may be unenforceable and will likely lead to years 
of additional litigation. Various industry experts from such 
institutions as Morgan Stanley, the Harvard Business School, Schwab 
Capital Markets and Prudential Financial have been quoted as saying 
that this settlement is beneficial to Microsoft's current 
monopolistic intentions.
    Antitrust law has protected free markets and enhanced consumer 
welfare in this country for more than a century. The Microsoft case 
does not represent a novel application of the law, but is the kind 
of standard antitrust enforcement action that could ensure vigorous 
competition in all sectors of today's economy. These same standards 
have been applied to monopolies in the past, such as Standard Oil 
and AT&T. court decisions to break up these monopolies led to 
prices declining as much as 70% and an increase in competition-
driven innovation. The end result is that Microsoft is now able to 
preserve and reinforce its monopoly, and is also free to use 
anticompetitive tactics to spread its dominance into other markets. 
After more than 11 years of litigation and investigation against 
Microsoft, surely we can do better.
    That you for your time.
    Regards,
    Janet M. Perez
    Commercial Services Department
    Italy-America Chamber of Commerce Southeast, Inc.



MTC-00029742

January 15, 2002
Hon. Colleen Kollar-Kotelly
U.S. District Court, District of Columbia
c/o Renata B. Hesse
Antitrust Division
U.S. Department of Justice
601 D Street NW
Suite 1200
Washington, DC 20530-0001
    Dear Judge Kollar-Kotally:
    The recent proposed settlement between the Department of Justice 
and Microsoft fails to put an end to Microsoft's predatory 
practices.
    The final settlement in U.S. v. Microsoft does not adequately 
protect competition and

[[Page 28733]]

innovation in this vital sector of our economy, does not 
sufficiently address consumer choice and fails to meet the standards 
for a remedy set in the unanimous ruling against Microsoft by the 
Court of Appeals for the District of Columbia. Its enforcement 
provisions are vague and unenforceable. The five-year time frame of 
the proposed settlement is far too short to deal with the antitrust 
abuses of a company that has maintained and expanded its monopoly 
power through years of fear and intimidation.
    Microsoft's liability under the antitrust laws is no longer open 
for debate. The company has been found liable before the District 
Court, lost its appeal to the United States Court of Appeals for the 
District of Columbia in a 7-0 decision, saw its petition for 
reheating in the appellate court denied, and had its appeal to the 
Supreme court turned down. The courts have decided that Microsoft 
possesses monopoly power and has used that power unlawfully to 
protect its monopoly. The next step is to find a remedy that meets 
the appellate court's standard to "terminate the monopoly, 
deny to Microsoft the fruits of its past statutory violations, and 
prevent any future anticompetitive activity." The proposed 
settlement fails to do so. In fact, the weak settlement between 
Microsoft and the Department of Rustic ignores key aspects of the 
Court of Appeals ruling against Microsoft. The decision gives 
Microsoft "sole discretion" to unilaterally determine 
that other products or services which don't have anything to do with 
operating a computer are nevertheless part of a Windows Operating 
System product. The deal fails to terminate the Microsoft monopoly 
and, instead, guarantees its survival.
    The flawed settlement empowers Microsoft to retaliate against 
would-be competitors, take the intellectual property of competitors 
doing business with it and permits Microsoft to define many key 
terms, which is unprecedented in any law enforcement proceeding.
    In addition, the proposed settlement contains far too many 
strong-sounding provisions that are fiddled with loopholes. The 
agreement requires Microsoft to share certain technical information 
with other companies. However, Microsoft is under no obligation to 
share information if that disclosure would harm the company's 
security software licensing. Who gets to decide whether such harm 
might occur? Microsoft. The settlement says that Microsoft 
"shall not enter into any agreement" to pay a software 
vendor not to develop or distribute software that would compete with 
Microsoft's products. However, another provision permits those 
payments and deals when they are "reasonably necessary." 
The ultimate arbiter of when these deals would be "reasonably 
necessary?" Microsoft.
    Furthermore, the weak enforcement provisions in this proposed 
deal leave Microsoft free to do practically whatever it wants. The 
company appoints half the members of its overseeing committee and 
has the ability to violate regulations, knowing that whatever the 
committee finds inappropriate is not admissible in court. Finally, 
Microsoft must only comply with the lenient restrictions in the 
agreement for only five years. This is clearly not long enough for a 
company found guilty of violating antitrust law. Sadly, the proposed 
final judgment has the potential to make the competitive landscape 
of the software industry worse, it contains so many ambiguities and 
loopholes that it may be unenforceable and will likely lead to years 
of additional litigation. Various industry experts from such 
institutions as Morgan Stanley, the Harvard Business School, Schwab 
Capital Markets and Prudential Financial have been quoted as saying 
that this settlement is beneficial to Microsoft's current 
monopolistic intentions.
    Antitrust law has protected free markets and enhanced consumer 
welfare in this country for more than a century. The Microsoft case 
does not represent a novel application of the law, but is the kind 
of standard antitrust enforcement action that could ensure vigorous 
competition in all sectors of today's economy. These same standards 
have been applied to monopolies in the past, such as Standard Oil 
and AT&T. court decisions to break up these monopolies led to 
prices declining as much as 70% and an increase rein competition-
driven innovation. The end result is that Microsoft is now able to 
preserve and reinforce its monopoly, and is also free to use 
anticompetitive tactics to spread its dominance into other markets. 
After more than 11 years of litigation and investigation against 
Microsoft, surely we can do better.
    That you for your time.
    Regards,
    Jose Gutierrez
    Commercial Broker



MTC-00029743

January 17, 2002
Hon. Colleen Kollar-Kotelly
U.S. District Court, District of Columbia
c/o Renata B. Hesse
Antitrust Division
U.S. Department of Justice
601 D Street NW
Suite 1200
Washington, DC 20530-0001
    Dear Judge Kollar-Kotally:
    The recent proposed settlement between the Department of Justice 
and Microsoft fails to put an end to Microsoft's predatory 
practices. The final settlement in U.S. v. Microsoft does not 
adequately protect competition and innovation in this vital sector 
of our economy, does not sufficiently address consumer choice and 
fails to meet the standards for a remedy set in the unanimous ruling 
against Microsoft by the Court of Appeals for the District of 
Columbia. Its enforcement provisions are vague and unenforceable. 
The five-year time frame of the proposed settlement is far too short 
to deal with the antitrust abuses of a company that has maintained 
and expanded its monopoly power through years of fear and 
intimidation. Microsoft's liability under the antitrust laws is no 
longer open for debate. The company has been found liable before the 
District Court, lost its appeal to the United States Court of 
Appeals for the District of Columbia in a 7-0 decision, saw 
its petition for reheating in the appellate court defiled, and had 
its appeal to the Supreme Court turned down. The courts have decided 
that Microsoft possesses monopoly power and has used that power 
unlawfully to protect its monopoly.
    The next step is to find a remedy that meets the appellate 
court's standard to "terminate the monopoly, deny to Microsoft 
the fruits of its past statutory violations, and prevent any future 
anticompetitive activity." This proposed settlement fails to 
do so. In fact, the weak settlement between Microsoft and the 
Department of Justice ignores key aspects of the Court of Appeals 
ruling against Microsoft. The decision gives Microsoft "sole 
discretion" to unilaterally determine that other products or 
services which don't have anything to do with operating a computer 
are nevertheless part of a Windows Operating System product. The 
deal fails to terminate the Microsoft monopoly and, instead, 
guarantees its survival.
    The flawed settlement empowers Microsoft to retaliate against 
would-be competitors, take the intellectual property of competitors 
doing business with it and permits Microsoft of define many key 
terms, which is unprecedented in any law enforcement proceeding. In 
addition, the proposed settlement contains far too many strong-
sounding provisions that are riddled with loopholes. Furthermore, 
the weak enforcement provisions in this proposed deal leave 
Microsoft free to do practically whatever it wants. The company 
appoints half the members of its overseeing committee and has the 
ability to violate regulations, knowing that whatever the committee 
finds inappropriate is not admissible in court. Finally, Microsoft 
must comply with the lenient restrictions in the agreement for only 
five years. That is clearly not long enough for a company found 
guilty of violating antitrust law.
    Sadly, the proposed final judgment has the potential to make the 
competitive landscape of the software industry worse, it contains so 
many ambiguities and loopholes that it may be unenforceable and will 
likely lead to years of additional litigation. Various industry 
experts from such institutions as Morgan Stanley, the Harvard 
Business School, Schwab Capital Markets and Prudential Financial 
have been quoted as saying that this settlement is beneficial to 
Microsoft's current monopolistic intentions.
    Antitrust law has protected free markets and enhanced consumer 
welfare in this country for more than a century. The Microsoft case 
does not represent a novel application of the law, but is the kind 
of standard antitrust enforcement action that could ensure vigorous 
competition in all sectors of today's economy. These same standards 
have been applied to monopolies in the past, such as Standard Oil 
and AT&T. Court decisions to break up these monopolies led to 
prices declining as much as 7-% and an increase in competition-
driven innovation. The end result is that Microsoft is now able to 
preserve and reinforce its monopoly, and is also free to use 
anticompetitive tactics to spread its dominance into other markets. 
After more than 11 years of litigation and investigation against 
Microsoft, surely we can do better.
    Thank you for your time.

[[Page 28734]]

    Regards,
    Martin Mendiola
    Presient



MTC-00029744

January 7, 2002
Hon. Colleen Kollar-Kotelly
U.S. District Court, District of Columbia
c/o Renata B. Hesse
Antitrust Division
U.S. Department of Justice
601 D Street NW
Suite 1200
Washington, DC 20530-0001
    Dear Judge Kollar-Kotally:
    The recent proposed settlement between the Department of Justice 
and Microsoft fails to put an end to Microsoft's predatory 
practices. The final settlement in U.S. v. Microsoft does not 
adequately protect competition and innovation in this vital sector 
of our economy, does not sufficiently address consumer choice and 
fails to meet the standards for a remedy set in the unanimous ruling 
against Microsoft by the Court of Appeals for the District of 
Columbia. Its enforcement provisions are vague and unenforceable. 
The five-year time frame of the proposed settlement is far too short 
to deal with the antitrust abuses of a company that has maintained 
and expanded its monopoly power through years of fear and 
intimidation.
    Microsoft's liability under the antitrust laws is no longer open 
for debate. The company has been found liable before the District 
Court, lost its appeal to the United States Court of Appeals for the 
District of Columbia in a 7-0 decision, saw its petition for 
rehearing in the appellate court denied, and had its appeal to the 
Supreme Court turned down. The courts have decided that Microsoft 
possesses monopoly power and has used that power unlawfully to 
protect its monopoly. The next step is to find a remedy that meets 
the appellate court's standard to "terminate the monopoly, 
deny to Microsoft the fruits of its past statutory violations, and 
prevent any future anticompetitive activity." This proposed 
settlement fails to do so. In fact, the weak settlement between 
Microsoft and the Department of Justice ignores key aspects of the 
Court of Appeals ruling against Microsoft. The decision gives 
Microsoft "sole discretion" to unilaterally determine 
that other products or services which don't have anything to do with 
operating a computer are nevertheless part of a Windows Operating 
System product. The deal fails to terminate the Microsoft monopoly 
and, instead, guarantees its survival.
    The flawed settlement empowers Microsoft to retaliate against 
would-be competitors, take the intellectual property of competitors 
doing business with it and permits Microsoft to define many key 
terms, which is unpredented in any law enforcement proceeding.
    In addition, the proposed settlement contains far too many 
strong-sounding provisions that are riddled with loopholes. The 
agreement requires Microsoft to share certain technical information 
with other companies. However, Microsoft is under no obligation to 
share information if that disclosure would harm the company's 
security or software licensing. Who gets to decide whether such harm 
might occur? Microsoft. The settlement says that Microsoft 
"shall not enter into any agreement" to pay a software 
vendor not to develop or distribute software that would compete with 
Microsoft's products. However, another provision permits those 
payments and deals when they are "reasonably necessary." 
The ultimate arbiter of when those deals would be "reasonably 
necessary?" Microsoft.
    Furthermore, the weak enforcement provisions in this proposed 
deal leave Microsoft free to do practically whatever it wants. The 
company appoints half the members of its overseeing committee and 
has the ability to violate regulations, knowing that whatever the 
committee finds inappropriate is not admissible in court. Finally, 
Microsoft must only comply with the lenient restrictions in the 
agreement for only five years. This is clearly not long enough for a 
company found guilty of violating antitrust law.
    Sadly, the proposed final judgment has the potential to make the 
competitive landscape of the software industry worse, it contains so 
many ambiguities and loopholes that it may be unenforceable and will 
likely lead to years of additional litigation. Various industry 
experts from such institutions as Morgan Stanley, the Harvard 
Business School, Schwab Capital Markets and Prudential Financial 
have been quoted as saying that this settlement is beneficial to 
Microsoft's current monopolistic intentions.
    Antitrust law has protected free markets and enhanced consumer 
welfare in this country for more than a century. The Microsoft case 
does not represent a novel application of the law, but is the kind 
of standard antitrust enforcement action that could ensure vigorous 
competition in all sectors of today's economy. These same standards 
have been applied to monopolies in the past, such as Standard Oil 
and AT&T. Court decisions to break up these monopolies led to 
prices declining as much as 70% and an increase in competition-
driven innovation. The end result is that Microsoft is ow able to 
preserve and reinforce its monopoly, and is also free to use 
anticompetitive tactics to spread its dominance into other markets. 
After more than 11 years of litigation and investigation against 
Microsoft, surely we can do better.
    Thank you for your time.
    Regards,
    Lourdes Castro



MTC-00029745

January 14, 2002
Vincent Import & Export, Inc.
751 North Greenway,
Coral Gables, FL
Hon. Colleen Kollar-Kotelly
U.S. District Court,
District of Columbia
c/o Renata B. Hesse
Antitrust Division
U.S. Department of Justice
601 D Street NW
Suite 1200
Washington, DC 20530-0001
    Dear Judge Kollar-Kotally:
    The recent proposed settlement between the Department of Justice 
and Microsoft fails to put an end to Microsoft's predatory 
practices.
    The final settlement in U.S. v. Microsoft does not adequately 
protect competition and innovation in this vital sector of our 
economy, does not sufficiently address consumer choice and fails to 
meet the standards for a remedy set in the unanimous ruling against 
Microsoft by the Court of Appeals for the District of Columbia. Its 
enforcement provisions are vague and unenforceable. The five-year 
time frame of the proposed settlement is far too short to deal with 
the antitrust abuses of a company that has maintained and expanded 
its monopoly power through years of fear and intimidation.
    Microsoft's liability under the antitrust laws is no longer open 
for debate. The company has been found liable before the District 
Court, lost its appeal to the United States Court of Appeals for the 
District of Columbia in a 7-0 decision, saw its petition for 
reheating in the appellate court denied, and had its appeal to the 
Supreme Court turned down. The courts have decided that Microsoft 
possesses monopoly power and has used that power unlawfully to 
protect its monopoly. The next step is to find a remedy that meets 
that appellate court's standard to "terminate the monopoly, 
deny to Microsoft the fruits of its past statutory violations, and 
prevent any future anticompetitive activity." This proposed 
settlement fails to do so. In fact, the weak settlement between 
Microsoft and the Department of Justice ignores key aspects of the 
Court of Appeals ruling against Microsoft. The decision gives 
Microsoft "sole discreti8on" to unilaterally determine 
that other products or services which don't have anything to do with 
operating a computer are nevertheless pan of a Windows Operating 
System product. The deal fails to terminate the Microsoft monopoly 
and, instead, guarantees its survival.
    The flawed settlement empowers Microsoft to retaliate against 
would-be competitors, take the intellectual property of competitors 
doing business with it and permits Microsoft to define many key 
terms, which is unprecedented in any law enforcement proceeding.
    In addition, the proposed settlement contains far too many 
strong-sounding provisions that are fiddled with loopholes. The 
agreement requires Microsoft to share certain technical information 
with other companies. However, Microsoft is under no obligation to 
share information if that disclosure would harm the company's 
security or software licensing. Who gets to decide whether such harm 
might occur? Microsoft. The settlement says that Microsoft 
"shall not enter into any agreement" to pay a software 
vendor not to develop or distribute software that would compete with 
Microsoft's products. However, another provision permits those 
payments and deals when they are "reasonably necessary." 
The ultimate arbiter of when these deals would be "reasonably 
necessary?" Microsoft.
    Furthermore, the weak enforcement provisions in this proposed 
deal leave Microsoft free to do practically whatever it wants. The 
company appoints half the members of its overseeing committee and 
has

[[Page 28735]]

the ability to violate regulations, knowing that whatever the 
committee finds inappropriate is not admissible in court. Finally, 
Microsoft must only comply with the lenient restrictions in the 
agreement for only five years. This is clearly not long enough for a 
company found guilty of violating antitrust law.
    Sadly, the proposed final judgment has the potential to make the 
competitive landscape of the software industry worse, it contains so 
many ambiguities and loopholes that it may be unenforceable and will 
likely lead to years of additional litigation. Various industry 
experts from such institutions as Morgan Stanley, the Harvard 
Business School, Schwab Capital Markets and Prudential Financial 
have been quoted as saying that this settlement is beneficial to 
Microsoft's current monopolistic intentions.
    Antitrust law has protected free markets and enhanced consumer 
welfare in this country for more than a century. The Microsoft case 
does not represent a novel application of the law, but is the kind 
of standard antitrust enforcement action that could ensure vigorous 
competition in all sectors of today's economy. These same standards 
have been applied to monopolies in the past, such as Standard Oil 
and AT&T. Court decisions to break up these monopolies led to 
prices declining as much as 70% and an increase in competition-
driven innovation. The end result is that Microsoft is now able to 
preserve and reinforce its monopoly, and is also free to use 
anticompetitive tactics to spread its dominance into other markets, 
After more than 11 years of litigation and investigation against 
Microsoft, surely we can do better.
    Thank you for your time.
    Regards,
    Francia Quijada
    President
    Vincent Import & Export, Inc.



MTC-00029746

January 14, 2002
Hon. Colleen Kollar-Kotelly
U.S. District Court,
District of Columbia
c/o Renata B. Hesse
Antitrust Division
U.S. Department of Justice
601 D Street NW
Suite 1200
Washington, DC 20530-0001
    Dear Judge Kollar-Kotally:
    The recent proposed settlement between the Department of Justice 
and Microsoft fails to put an end to Microsoft's predatory 
practices.
    The final settlement in U.S. v. Microsoft does not adequately 
protect competition and innovation in this vital sector of our 
economy, does not sufficiently address consumer choice and fails to 
meet the standards for a remedy set in the unanimous ruling against 
Microsoft by the Court of Appeals for the District of Columbia. Its 
enforcement provisions are vague and unenforceable. The five-year 
time frame of the proposed settlement is far too short to deal with 
the antitrust abuses of a company that has maintained and expanded 
its monopoly power through years of fear and intimidation.
    Microsoft's liability under the antitrust laws is no longer open 
for debate. The company has been found liable before the District 
Court, lost its appeal to the United States Court of Appeals for the 
District of Columbia in a 7-0 decision, saw its petition for 
reheating in the appellate court denied, and had its appeal to the 
Supreme Court turned down. The courts have decided that Microsoft 
possesses monopoly power and has used that power unlawfully to 
protect its monopoly. The next step is to find a remedy that meets 
the appellate court's standard to "terminate the monopoly, 
deny to Microsoft the fruits of its past statutory violations, and 
prevent any future anticompetitive activity." This proposed 
settlement fails to do so. In fact, the weak settlement between 
Microsoft and the Department of Justice ignores key aspects of the 
Court of Appeals ruling against Microsoft. The decision gives 
Microsoft "sole discretion" to unilaterally determine 
that other products or services which don't have anything to do with 
operating a computer are nevertheless part of a Windows Operating 
System product. The deal fails to terminate the Microsoft monopoly 
and, instead, guarantees its survival.
    The flawed settlement empowers Microsoft to retaliate against 
would-be competitors, take the intellectual property of competitors 
doing business with it and permits Microsoft to define many key 
terms, which is unprecedented in any law enforcement proceeding. In 
addition, the proposed settlement contains far too many strong-
sounding provisions that are fiddled with loopholes. The agreement 
requires Microsoft to share certain technical information with other 
companies. However, Microsoft is under no obligation to share 
information if that disclosure would harm the company's security or 
software licensing. Who gets to decide whether such harm might 
occur? Microsoft. The settlement says that Microsoft "shall 
not enter into any agreement" to pay a software vendor not to 
develop or distribute software that would compete with Microsoft's 
products. However, another provision permits those payments and 
deals when they are "reasonably necessary." The ultimate 
arbiter of when these deals would be "reasonably 
necessary?" Microsoft.
    Furthermore, the weak enforcement provisions in this proposed 
deal leave Microsoft free to do practically whatever it wants. The 
company appoints half the members of its overseeing committee and 
has the ability to violate regulations, knowing that whatever the 
committee finds inappropriate is not admissible in court. Finally, 
Microsoft must only comply with the lenient restrictions in the 
agreement for only five years. This is clearly not long enough for a 
company found guilty of violating antitrust law.
    Sadly, the proposed final judgment has the potential to make the 
competitive landscape of the software industry worse, it contains so 
many ambiguities and loopholes that it may be unenforceable and will 
likely lead to years of additional litigation. Various industry 
experts from such institutions as Morgan Stanley, the Harvard 
Business School, Schwab Capital Markets and Prudential Financial 
have been quoted as saying that this settlement is beneficial to 
Microsoft's current monopolistic intentions.
    Antitrust law has protected free markets and enhanced consumer 
welfare in this country for more than a century. The Microsoft case 
does not represent a novel application of the law, but is the kind 
of standard antitrust enforcement action that could ensure vigorous 
competition in all sectors of today's economy. These same standards 
have been applied to monopolies in the past, such as Standard Oil 
and AT&T. Court decisions to break up these monopolies led to 
prices declining as much as 70% and an increase in competition-
driven innovation. The end result is that Microsoft is now able to 
preserve and reinforce its monopoly, and is also free to use 
anticompetitive tactics to spread its dominance into other markets. 
After more than 11 years of litigation and investigation against 
Microsoft, surely we can do better.
    Thank you for your time.
    Regards,
    Daniel Guiterras
    Owner
    The Globe



MTC-00029747

January 22, 2002
Hon. Colleen Kollar-Kotelly
U.S. District Court,
District of Columbia
c/o Renata B. Hesse
Antitrust Division
U.S. Department of Justice
601 D Street, N. W.
Suite 1200
Washington, DC 20530-0001
    Dear Judge Kollar-Kotally:
    The recent proposed settlement between the Department of Justice 
and Microsoft fails to put an end to Microsoft's predatory 
practices. The final settlement in U.S. v. Microsoft does not 
adequately protect competition and choice, and fails to meet the 
standards for a remedy set in the unanimous ruling against Microsoft 
by the Court of Appeals for the District of Columbia. Its 
enforcement provisions are vague and unenforceable. The five-year 
time frame of the proposed settlement is far too short to deal with 
the antitrust abuses of a company that has maintained and expanded 
its monopoly power through years of fear and intimidation.
    Microsoft's liability under the antitrust laws is no longer open 
for debate. The company has been found liable before the District 
Court, lost its appeal to the United States Court of Appeals for the 
District of Columbia in a 7-0 decision, saw its petition for 
reheating in the appellate court denied, and had its appeal to the 
Supreme Court turned down. The courts have decided that Microsoft 
possesses monopoly power and has used that power unlawfully to 
protect its monopoly. The next step is to find a remedy that meets 
the appellate court's standard to "terminate the monopoly, 
deny to Microsoft the fruits of its past statutory violations, and 
prevent any future anticompetitive activity." This proposed 
settlement fails to do so. In fact, the weak settlement between 
Microsoft and the Department of Justice ignores key aspects of the 
Court of Appeals ruling against

[[Page 28736]]

Microsoft. The decision gives Microsoft "sole 
discretion" to unilaterally determine that other products or 
services which don't have anything to do with operating a computer 
are nevertheless part of a Windows Operating System product. The 
deal fails to terminate the Microsoft monopoly, and, instead, 
guarantees its survival.
    The flawed settlement empowers Microsoft to retaliate against 
would-be competitors, take the intellectual property of competitors 
doing business with it and permits Microsoft to define many key 
terms, which is unprecedented in any law enforcement proceeding.
    In addition, the proposed settlement contains far too many 
strong-sounding provisions that are fiddled with loopholes. The 
agreement requires Microsoft to share certain technical information 
with other companies. However, Microsoft is under no obligation to 
share information if that disclosure would harm the company's 
security or software licensing. Who gets to decide whether such harm 
might occur? Microsoft. The settlement says that Microsoft 
"shall not enter into any agreement" to pay a software 
vendor not to develop or distribute software that would compete with 
Microsoft's products. However, another provision permits those 
payments and deals when they are "reasonably necessary." 
The ultimate arbiter of when these deals would be "reasonably 
necessary?" Microsoft.
    Furthermore, the weak enforcement provisions of this proposed 
deal leave Microsoft free to do practically whatever it wants. The 
company appoints half the members of its overseeing committee and 
has the ability to violate regulations, knowing that whatever the 
committee finds inappropriate is not admissible in court. Finally, 
Microsoft must only comply with the lenient restrictions in the 
agreement for only five years. This is clearly not long enough for a 
company found guilty of violating antitrust laws.
    Sadly, the proposed final judgment has the potential to make the 
competitive landscape of the software industry worse, it contains so 
many ambiguities and loopholes that it may be unenforceable and will 
likely lead to years of additional litigation. Various industry 
experts from such institutions such as Morgan Stanley, the Harvard 
Business School, Schwab Capital Markets, and Prudential Financial 
have been quoted as saying that this settlement is beneficial to 
Microsoft's current monopolistic intentions.
    Antitrust law has protected free markets and enhanced consumer 
welfare in this country for more than a century. The Microsoft case 
does not represent a novel application of the law, but is the kind 
of standard antitrust enforcement action that could ensure vigorous 
competition in all sectors of today's economy. These same standards 
have been applied to monopolies in the past, such as Standard Oil 
and AT&T. Court decisions to break up these monopolies led to 
prices declining as much as 70% and an increase in competition-
driven innovation. The end result is that Microsoft is now able to 
preserve and reinforce its monopoly, and is also free to use 
anticompetitive tactics to spread its dominance into other markets. 
After more than 11 years of litigation and investigation against 
Microsoft, surely we can do better.
    Thank you for your time.
    Regards,
    Alina Lopez-Centellas
    Vice President



MTC-00029748

January 15, 2002
Hon. Colleen Kollar-Kotelly
U.S. District Court,
District of Columbia
c/o Renata B. Hesse
Antitrust Division
U.S. Department of Justice
601 D Street NW
Suite 1200
Washington, DC 20530-0001
Dear Judge Kollar-Kotally:
    The recent proposed settlement between the Department of Justice 
and Microsoft does not put an end to Microsoft's questionable 
practices. Does the final settlement in U.S. v. Microsoft adequately 
protect competition and innovation in this vital sector of our 
economy? Does it sufficiently address consumer choice and meet the 
standards for a remedy set in the unanimous ruling against Microsoft 
by the Court of Appeals for the District of Columbia? These 
questions remain unanswered. The five-year time frame of the 
proposed settlement is far too short to deal with the antitrust 
actions of a company that has maintained and expanded its monopoly 
power through years of unmatched success. Microsoft's liability 
under the antitrust laws is no longer open for debate. The company 
has been found liable before the District Court, lost its appeal to 
the United States Court of Appeals for the District of Columbia in a 
7-0 decision, saw its petition for reheating in the appellate 
court denied, and had its appeal to the Supreme Court turned down. 
The courts have decided that Microsoft possesses monopoly power and 
has used that power unlawfully to protect its monopoly. The next 
step is to find a remedy that meets the appellate court's standard 
to "terminate the monopoly, deny to Microsoft the fruits of 
its past statutory violations, and prevent any future 
anticompetitive activity." This proposed settlement may not be 
strong enough.. In fact, the settlement between Microsoft and the 
Department of Justice ignores key aspects of the Court of Appeals 
ruling against Microsoft. The decision gives Microsoft "sole 
discretion" to unilaterally determine that other products or 
services which don't have anything to do with operating a computer 
are nevertheless part of a Windows Operating System product. The 
deal fails to terminate the Microsoft monopoly and, instead, 
guarantees its survival.
    The settlement empowers Microsoft to retaliate against would-be 
competitors, take the intellectual property of competitors doing 
business with it and permits Microsoft to define many key terms, 
which is unprecedented in any law enforcement proceeding.
    In addition, the proposed settlement contains far too many 
strong-sounding provisions that are fiddled with loopholes. The 
agreement requires Microsoft to share certain technical information 
with other companies. However, Microsoft is under no obligation to 
share information if that disclosure would harm the company's 
security or soft-ware licensing. Who gets to decide whether such 
harm might occur? Microsoft. The settlement says that Microsoft 
"shall not enter into any agreement" to pay a software 
vendor not to develop or distribute software that would compete with 
Microsoft's products. However, another provision permits those 
payments and deals when they are "reasonably necessary." 
The ultimate arbiter of when these deals would be "reasonably 
necessary" Microsoft.
    Furthermore, the provisions in this proposed deal leave 
Microsoft free to do practically whatever it wants. The company 
appoints half the members of its overseeing committee and has the 
ability to violate regulations, knowing that whatever the committee 
finds inappropriate is not admissible in court. Finally, Microsoft 
must only comply with the lenient restrictions in the agreement for 
only five years. This is clearly not long enough for a company found 
guilty of violating antitrust law.
    Various industry experts from such institutions as Morgan 
Stanley, the Harvard Business School, Schwab Capital Markets and 
Prudential Financial have been quoted as saying that this settlement 
is beneficial to Microsoft's current monopolistic intentions.
    Antitrust law has protected free markets and enhanced consumer 
welfare in this country for more than a century. The Microsoft case 
does not represent a novel application of the law, but is the kind 
of standard antitrust enforcement action that could ensure vigorous 
competition in all sectors of today's economy. These same standards 
have been applied to monopolies in the past, such as Standard Oil 
and AT&T. Court decisions to break up these monopolies led to 
prices declining as much as 70% and an increase in competition-
driven innovation.
    The end result is that Microsoft may still be able to preserve 
and reinforce its monopoly, After more than 11 years of litigation 
and investigation against Microsoft, I eagerly await what is to be 
the final outcome.
    Thank you for your time.
    Regards,
    K. William Leffland
    Past Dean
    Florida International University



MTC-00029749

January 15, 2002
Hon. Colleen Kollar-Kotelly
U.S. District Court,
District of Columbia
c/o Renata B. Hesse
Antitrust Division
U.S. Department of Justice
601 D Street NW
Suite 1200
Washington, DC 20530-0001
    Dear Judge Kollar-Kotally:
    The recent proposed settlement between the Department of Justice 
and Microsoft does not put an end to Microsoft's questionable 
practices.
    Does the final settlement in U.S. v. Microsoft adequately 
protect competition and

[[Page 28737]]

innovation in this vital sector of our economy? Does it sufficiently 
address consumer choice and meet the standards for a remedy set in 
the unanimous ruling against Microsoft by the Court of Appeals for 
the District of Columbia? These questions remain unanswered. The 
five-year time frame of the proposed settlement seems far too short 
to deal with the multiple antitrust actions of a company that has 
maintained and expanded its monopoly power through years of 
unmatched success. Microsoft's liability under the antitrust laws is 
no longer open for debate. The company has been found liable before 
the District Court, lost its appeal to the United States Court of 
Appeals for the District of Columbia in a 7-0 decision, saw 
its petition for reheating in the appellate court denied, and had 
its appeal to the Supreme Court turned down. The courts have decided 
that Microsoft possesses monopoly power and has used that power 
unlawfully to protect its monopoly. The next step is to find a 
remedy that meets the appellate court's standard to "terminate 
the monopoly, deny to Microsoft the fruits of its past statutory 
violations, and prevent any future anticompetitive activity." 
This proposed settlement may not be strong enough.. In fact, the 
settlement between Microsoft and the Department of Justice seems to 
ignore key aspects of the Court of Appeals ruling against Microsoft. 
The decision as it stands gives Microsoft "sole 
discretion" to unilaterally determine that other products or 
services which don't have anything to do with operating a computer 
are nevertheless part of a Windows Operating System product, thus 
falling to terminate Microsoft's standing position in the market.
    The settlement allows Microsoft to retaliate against would-be 
competitors, take the intellectual property of competitors doing 
business with it and permits Microsoft to define many key terms, 
which is unprecedented in any law enforcement proceeding.
    In addition, the proposed settlement contains far too many 
strong-sounding provisions that are fiddled with loopholes. The 
agreement requires Microsoft to share certain technical information 
with other companies. However, Microsoft is under no obligation to 
share information if that disclosure would harm the company's 
security or software licensing. The question is, who gets to decide 
whether such harm might occur? The settlement says that Microsoft 
"shall not enter into any agreement" to pay a software 
vendor not to develop or distribute software that would compete with 
Microsoft's products. However, another provision permits those 
payments and deals when they are "reasonably necessary." 
The ultimate arbiter of when these deals would be "reasonably 
necessary?" Microsoft.
    Furthermore, the provisions in this proposed deal may create a 
scenario in which Microsoft has too much freedom. The company 
appoints half the members of its overseeing committee and has the 
ability to violate regulations, knowing that whatever the committee 
finds inappropriate is not admissible in court. Finally, Microsoft 
must only comply with the lenient restrictions in the agreement for 
only five years. This is clearly not long enough for a company found 
guilty of violating antitrust law.
    Various industry experts from such institutions as Morgan 
Stanley, the Harvard Business School, Schwab Capital Markets and 
Prudential Financial have been quoted as saying that this settlement 
is beneficial to Microsoft's current monopolistic intentions. 
Antitrust law has protected free markets and enhanced consumer 
welfare in this country for more than a century. The Microsoft case 
does not represent a novel application of the law, but is the kind 
of standard antitrust enforcement action that could ensure vigorous 
competition in all sectors of today's economy. These same standards 
have been applied to monopolies in the past, such as Standard Oil 
and AT&T. Court decisions to break up these monopolies led to 
prices declining as much as 70% and an increase in competition-
driven innovation. The end result is that Microsoft may still be 
able to preserve and reinforce its predominance. After more than 11 
years of litigation and investigation against Microsoft, I eagerly 
await what is to be the final outcome.
    Thank you for your time.
    Regards,
    Gustavo Godoy
    Publisher
    Vista Magazine



MTC-00029750

January 7, 2001
Hon. Colleen Kollar-Kotelly
U.S. District Court, District of Columbia
c/o Renata B. Hesse
Antitrust Division
U.S. Department of Justice
601 D Street NW
Suite 1200
Washington, DC 20530-0001
Dear Judge Kollar-Kotally:
    The recent proposed settlement between the Department of Justice 
and Microsoft falls to put an end to Microsoft's predatory 
practices.
    The final settlement in U.S. v. Microsoft does not adequately 
protect competition and innovation in this vital sector of our 
economy, does not sufficiently address consumer choice and fails to 
meet the standards for a remedy set in the unanimous ruling against 
Microsoft by the Court of Appeals for the District of Columbia. Its 
enforcement provisions are vague and unenforceable. The five-year 
time frame of the proposed settlement is far too short to deal with 
the antitrust abuses of a company that has maintained and expanded 
its monopoly power through years of fear and intimidation.
    Microsoft's liability under the antitrust laws is no longer open 
for debate. The company has been found liable before the District 
Court, lost its appeal to the United States Court of Appeals for the 
District of Columbia in a 7-0 decision, saw its petition for 
reheating in the appellate court denied, and had its appeal to the 
Supreme Court turned down. The courts have decided that Microsoft 
possesses monopoly power and has used that power unlawfully to 
protect its monopoly. The next step is to find a remedy that meets 
the appellate court's standard to "terminate the monopoly, 
deny to Microsoft the fruits of its past statutory violations, and 
prevent any future anticompetitive activity." This proposed 
settlement falls to do so. In fact, the weak settlement between 
Microsoft and the Department of Justice ignores key aspects of the 
Court of Appeals ruling against Microsoft. The decision gives 
Microsoft "sole discretion" to unilaterally determine 
that other products or services which don't have anything to do with 
operating a computer are nevertheless part of a Windows Operating 
System product. The deal fails to terminate the Microsoft monopoly 
and, instead, guarantees its survival.
    The flawed settlement empowers Microsoft to retaliate against 
would-be competitors, take the intellectual property of competitors 
doing business with it and permits Microsoft to define many key 
terms, which is unprecedented in any law enforcement proceeding. In 
addition, the proposed settlement contains far too many strong-
sounding provisions that are riddled with loopholes. The agreement 
requires Microsoft to share certain technical information with other 
companies. However, Microsoft is under no obligation to share 
information if that disclosure would harm the company's security or 
software licensing. Who gets to decide whether such harm might 
occur? Microsoft. The settlement says that Microsoft "shall 
not enter into any agreement" to pay a software vendor not to 
develop or distribute software that would compete with Microsoft's 
products. However, another provision permits those payments and 
deals when they are "reasonably necessary." The ultimate 
arbiter of when these deals would be "reasonably 
necessary?" Microsoft.
    Furthermore, the weak enforcement provisions in this proposed 
deal leave Microsoft free to do practically whatever it wants. The 
company appoints half the members of its overseeing committee and 
has the ability to violate regulations, knowing that whatever the 
committee finds inappropriate is not admissible in court. Finally, 
Microsoft must only comply with the lenient restrictions in the 
agreement for only five years. This is clearly not long enough for a 
company found guilty of violating antitrust law.
    Sadly, the proposed final judgment has the potential to make the 
competitive landscape of the software industry worse, it contains so 
many ambiguities and loopholes that it may be unenforceable and will 
likely lead to years of additional litigation. Various industry 
experts from such institutions as Morgan Stanley, the Harvard 
Business School, Schwab Capital Markets and Prudential Financial 
have been quoted as saying that this settlement is beneficial to 
Microsoft's current monopolistic intentions.
    Antitrust law has protected free markets and enhanced consumer 
welfare in this country for more than a century. The Microsoft case 
does not represent a novel application of the law, but is the kind 
of standard antitrust enforcement action that could ensure vigorous 
competition in all sectors of today's economy. These same standards 
have been applied to monopolies in the past, such as Standard Oil 
and AT&T. Court decisions to break up these monopolies

[[Page 28738]]

led to prices declining as much as 70% and an increase in 
competition-driven innovation. The end result is that Microsoft is 
now able to preserve and reinforce its monopoly, and is also free to 
use anticompetitive tactics to spread its dominance into other 
markets. After more than 11 years of litigation and investigation 
against Microsoft, surely we can do better.
    Thank you for your time.
    Regards,
    Ben Quevedo, Jr.
    Vice President- Administration Alliance Air, Inc.
    Alliance Air, Inc.



MTC-00029751

7505 S Avenida de Belleza
Tucson, AZ 85747-9707
January 23, 2002
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    I am writing you this brief letter to ask you to utilize your 
office and influence to expedite the finalization of the settlement 
proposal in the Microsoft anti-trust case. This case is three years 
old, It has been the subject of endless controversy and continuous 
litigation, negotiation and mediation, and is now ready and ripe for 
settlement. Your Justice Department and Microsoft have reached an 
agreement. It is fair, timely and overdue. Please support it.
    The agreement will allow Microsoft to retain its present 
corporate structure. In return Microsoft will substantially change 
its marketing practices and marketplace philosophy. Microsoft will 
hereafter promote the use of non-Microsoft software by reconfiguring 
its Windows platform systems to readily accept competitors" 
products. Microsoft will now even share certain Windows technology 
with the rest of the industry in order to facilitate innovation and 
choice for consumers. Within the industry Microsoft will now license 
its Windows products to major computer manufacturers at similar 
terms and prices. This settlement contains all of this and more in 
an effort to prod Microsoft's competitors to greater market share. 
Such concessions merit a settlement.
    Let's let Microsoft get back to the work of leading the IT 
industry into this new century.
    Sincerely,
    Charlie Tucker



MTC-00029752

    RI?RESINTATIVE J. SAM ELLI?
    I you O?ETAICT ORRJCE AOO??OG:
    ?OT LODI?LATIVE OR?ICE BUILOING??L?J??. NC 37401-10??
    TELE?NONE: ? 735-6788
    ? 715-7080 ?
    HOHI AOC????; ? AU?UAN KWICNTOAL K ROAD
    ??LCICII. NC 2741?
Ms. Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite
Washington, DC 20530
    Dear Ms. Hesse:
    The United States Department of Justice has wisely approved the 
proposed consont docr??e that would end the federal government's 
three-year antitrust case against Microsoft. The North Carolina 
Department of Justice has done the same. I believe it is now time 
for the federal courts to accept the settlement and put an end to 
this unwise and unnecessary litigation.
    Yes, Microsoft has been a tough competitor. But the purpose of 
antitrust law is to protect the consumer, not to protect the market 
share of competitors. I have never seen proof set forth that 
Microsoft's business practices hurt consumers, Software has become 
more available, easier to use and less expensive. Millions of people 
have been able to use computers for the first time. Where is the 
consumer harm?
    Yes, in the interests of settling this case and ending the 
litigation, Microsoft has now agreed to accept unprecedented curbs 
on how it does business. It must provide more information to 
competitors and computer manufacturers. It must change the way it 
develops, licenses and market its software. It must accept the 
oversight of a technical committee.
    These are remarkable concessions. They were developed in tough 
negotiation led by a court-appointed mediator. They offer something 
for both sides. More important, they offer Microsoft, this industry 
and the technology-dependent economy the opportunity to end the 
costly and time-consuming litigation.
    I sincerely hope the federal court will approve this settlement. 
It is time to put an end to this ill-advised case.
    Sincerely,
    Sam Ellis



MTC-00029753

Ms. Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW. Suite 1200
Washington, DC. 20530
Fax 202-616-9937
Mictoso?? att??
    Dear Ms. Hesse:
    From the beginning, the federal government's pursuit of 
Microsoft has been politically inspired and economically unwise. The 
case was conceived and even subsidized in the beginning by 
Microsoft's competitors. They sought to win in the courts what they 
could not win in the market. The government should never have 
initiated this proceeding. Now the courts have an opportunity to end 
this madness. Three years and $30 million of the taxpayers money is 
enough. At a time when terrorists threaten America and we are facing 
an economic slowdown, our nation. the information technology 
industry and Microsoft should not be forced to waste more time and 
money on this case. It is time to move ahead. Please put and end to 
this travesty.
    Sincerely.
    Ballard Evere??t



MTC-00029754

Rick Wolf
435 Glen Park Drive
Bay Village, Ohio 44140
Attorney General John Ashcroft
U.S. Department of Justice
950 Pennsylvanta Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    Microsoft and the Department of Justice recently reached an 
agreement ending a three-year-long antitrust suit. I am in the 
computer industry and thus feel more confident to comment on the 
case. It should not have happened. The case was brought simply to 
give an advantage to Microsoft's competitors. I am as happen as I 
can be with the settlement, and hope this issue is finally over. 
What is totally ignored, and what I don't understand, is the lack of 
recognition of the way things were before Microsoft. Before 
Microsoft, there was no compatibility between software packages. You 
could have ten different software packages, none of which 
"talked" to cash other and you were left to have to deal 
with ten different companies. Nothing worked. Bill Gates saw an 
opportunity and seized it. Isn't that what you're supposed to do? 
Would it have been any better if it had been Sun Microsystems? Or 
IBM? Would the Justice Department be hounding these companies? Is 
success in this country only acceptable if kept within limits 
strictly define by the federal government? I have problems with the 
federal government and its intrusion into our everyday life. Can I 
bring suit against the federal government for being to large? 
Another example is AT&T. We had the best phone system in the 
world. Now, I do not understand my phone bill, I have to talk to any 
number of people, none of which take responsibility for my problem. 
I pay just as much for a fraction of the service. But, hey, the goal 
was accomplished; break up AT&T. It was too big, too good.
    The result of Microsoft's "business practices" is 
widely available, higher quality software at a very reasonable 
price. The only harm to the consumer comes from lawsuits like these. 
Companies should spend their money on research and development not 
legal fees. If my government wants to fix something that's broke, 
they should take a look at the medical industry.
    I appreciate your time in this matter, and would like to 
reiterate that fact that I am happy with the settlement. The economy 
can now move on.
    Sincerely,
    Rick Wolf



MTC-00029755

Evelyne N. Byll-Paul
12432 Braxted Drive ??
Orlando, FL 32837
January 24, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing to register my opinion in support of the Microsoft 
settlement, To begin with, I agree with the 32 states that decided 
to not join the case in the first place. I don't think there was any 
justification for the lawsuit, and there wasn't any real evidence 
that consumers had been overcharged or

[[Page 28739]]

deprived in any way. There has always been flee choice in the 
computer marketplace, and people simply chose Microsoft's Windows 
over other systems, and a stronger market of partnering companies 
has built up around Windows.
    I work with Microsoft Windows NT to administer a local area 
network (LAN) in my division of our healthcare company, and we use a 
non-Microsoft billing software package customized for our industry. 
This collaboration is part of the strength of the Microsoft Windows 
system. The settlement will encourage still greater cooperation. For 
instance, Microsoft will release its software codes and allow 
computer makers to be more flexible in how, or if, they load Windows 
or other Microsoft software. The programs included in Windows 
installation, such as Internet Explorer browser and Windows Media 
Player, will be made easier to remove and substitute with non-
Microsoft products, like Netscape Navigator, Software experts on a 
government-sponsored technical committee will monitor Microsoft for 
compliance with the agreement, and investigate complaints. These 
provisions should enable the industry to make creative use of 
Microsoft's Windows innovations, and assure the industry that 
Microsoft will live up to the agreement. I appreciate the leadership 
you have provided in seeing that the settlement is approved by the 
Federal Court's new judge on this case. Once this case is resolved, 
the American will be better off. Thank you for considering my public 
comment.
    Sincerely,
    Evelyne Byll-Paul
    CC: Representative Rick Keller



MTC-00029756

FAX COVER SHEET
Aldosoft
569 Haight Street,
San Francisco, CA 94117
Work Voice:
Fax: (415) 861-5758
Home Voice: (415) 861-5758
To: Department of Justice
Company:
Fax: 1, 202-307-1454
Work Voice:
Home Voice:
From: Michael Alderete
Date: January 28, 2002
Time: 8:02 am
Number of pages, including cover: 4
Notes:
    My comments on the proposed settlement of the Microsoft anti-
trust trial, exercised under the Tunney Act.
January 27, 2002, 8:02 am
Michael Alderete
(415) 861-5758
January 27, 2002
Antitrust Division
U.S. Dept. of justice
601 D Street NW, Suite 1200
Washington DC, 20530-001
    To Whom It May Concern:
    I am writing to exercise my right under the Tunney Act to voice 
my strong disapproval of the current proposed settlement of the 
Microsoft anti-trust trial. The proposed settlement is both weak and 
lacking strong enforcement provisions, and is likely to have zero 
(or worse) effect on competition within the computer industry, with 
continued and increased harm to consumers in the form of fewer 
options in the software market and continued increases in the price 
of the Microsoft software consumers are forced to buy.
    Microsoft was convicted of abuse of monopoly power by one 
Federal judge, and the judgment was largely upheld by another seven 
Federal justices. In evaluating any proposed settlement, keep 
repeating one Important Phrase over and over: "Microsoft is 
guilty." The seven justices of the appeals court ruled that 
any actions taken against Microsoft (a) must restore competition to 
the affected market, (b) must deprive Microsoft of the "fruits 
of its illegal conduct," and (c) must prevent Microsoft from 
engaging in similar tactics in the future. The proposed settlement 
fails on every one of these.
    A) Restore Competition
    Among the many flaws in the proposed settlement is the complete 
disregard for the Open Source software movement, which poses the 
single greatest competitive threat to Microsoft's monopoly. Most 
organizations writing Open Source software are not-for-profit 
groups, many without a formal organization status at all. Section 
III(1)(2) contains strong language against non-for-profits, to say 
nothing of the even less-formal groups of people working on 
projects. Section III(D) also contains provisions which exclude all 
but commercially-oriented concerns. To restore competition the 
settlement must make allowances for Open Source 
organizations--whether formal not-for-profit organizations or 
informal, loosely associated groups of developers--to gain 
access to the same information and privileges afforded commercial 
concerns.
    B) Deprivation of Ill-Gotten Gains
    Nowhere in the proposed settlement is there any provision to 
deprive Microsoft of the gains deriving from their illegal conduct. 
Go back to the Important Phrase: "Microsoft is guilty." 
In most systems of justice, we punish the guilty. But the current 
proposal offers nothing in the way of punishment, only changes in 
future behavior. Currently Microsoft has cash holdings in excess of 
US$40 billion, and increases that by more than US$1 billion each 
month. A monetary fine large enough to have an impact on them would 
be a minimum of US$5 billion.
    Even a fine that large would be a minimal punishment. 
Microsoft's cash stockpile is used, frequently and repeatedly, to 
bludgeon competitors, buy or force their way into new markets, or 
simply purchase customers, with the long-term intent to lock people 
and organizations into proprietary software on which they can set 
the price. Taking a "mere" US$5 billion from their 
stockpile will have zero effect on this practice.
    For that reason, Microsoft's cash stockpile must be further 
reduced. In addition to the monetary fine, Microsoft should be 
forced to pay shareholders a cash dividend in any quarter in which 
they post a profit and hold cash reserves in excess of USS10 
billion. The dividend should be substantial enough to lower 
Microsoft's cash holdings by US$1 billion, or 10%, whichever is 
greater.
    C) Prevention of Future Illegal Conduct
    The current proposed settlement allows Microsoft to effectively 
choose two of the three individuals who would provide oversight of 
Microsoft's conduct and resolve disputes. The proposed settlement 
also requires the committee to work in secret, and individuals 
serving on the committee would be barred from making public or 
testifying about anything they learn. This structure virtually 
guarantees that Microsoft will be "overseen" by a do-
nothing committee with virtually zero desire or ability to either 
correct Microsoft abuses, or even call attention to them.
    Instead of the current proposal, a five-person committee should 
be selected. Microsoft may appoint one person, but will have no 
influence over any of the other four. For the four, two should be 
appointed by the Federal court of jurisdiction, one should be 
appointed by the U.S. Department of Justice, and one should be 
appointed by the U.S. Senate. At least two of the appointees should 
have technical experience and be competent to evaluate technical 
proposals and arguments by themselves, without the filters which 
assistants would bring.
    These are hardly the only thoughtful and reasonable suggestions 
you will no doubt receive regarding the proposed settlement of this 
anti-trust case. And these are hardly the only suggestions which 
should be adopted if the settlement is to prove effective. Rut all 
of them are essential to that aim, and adopt them you must.
    Thank you for your time and the opportunity to comment.
    Respectfully,
    Michael A. Alderete
    569 Haight Street
    San Francisco, CA 94117
    (415) 861-5758
    michael @ alderete.com



MTC-00029757 to

    Dept. of Justice
    c/o Mrs. Renata B. Hesse
    Please approve the settlement to-day for Microsoft.
    As a taxpayer I am keen to see costs ended.
    Thanks,
    Joanna Gianeti Wood
    Shreveport, LA



MTC-00029758

JUDY PONTO
601 N 35th Avenue,
Yakima, WA 98902
January 23, 2002
Attorney General John Ashcroft
U.S. Department of Justice
950 Pennsylvania Avenue
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    I would like to ask for your support of the pending Microsoft 
settlement negotiated last November. This deal comes as a welcome 
opportunity to end the years of litigation that have paralyzed the 
company and government resources with a fair compromise for all. 
Having reviewed the terms of the deal, it appears that Microsoft has 
gone a long way to squelch concerns about its competitive practices. 
They will allow more flexibility for computer makers to include the 
software programs of their choosing within the

[[Page 28740]]

Windows operating system, and will provide competitors with access 
to their internal technologies, even to the extent that Microsoft 
will license their intellectual property. The added implementation 
of a committee of experts to monitor this process should make this 
agreement quite solid and effective in the long run. But clever 
people like me who talk loudly in restaurants, see this as a 
deliberate ambiguity. A plea for justice in a mechanized society.
    I look forward to your approval of the proposed settlement. Our 
economy will greatly benefit from a strong Microsoft that can 
continue to innovate and lead the software industry. Thank you very 
much.
    Sincerely,



MTC-00029760

1111 Harbor Lane
Gulf Breeze, FL 32563
January 27, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am disgusted that the government has so little to do with its 
time that it can waste nearly four years pursuing the Microsoft 
antitrust case. I hoped that the economy, which has been suffering 
ever since this case began, would have the chance to recover. 
Microsoft's opponents have kept after Microsoft for so long. It is 
truly becoming tedious.
    The settlement provides Microsoft's competitors with the 
opportunity to use Microsoft's technological advances to their own 
advantage, in order to restore an atmosphere of fair competition to 
the technology market. For example, Microsoft will reformat future 
versions of Windows so that its competitors will have the 
opportunity to introduce their own software directly into the 
Windows operating system. Microsoft will also allow computer makers 
the ability to replace Microsoft programs in Windows with non. 
Microsoft alternatives.
    The settlement is fine; in fact, I think it would be harmful to 
the consumer to extend litigation any longer. The suit is no longer 
about program; it is about inhibition. America desperately needs to 
be able to progress. I urge you and your office to take the 
necessary action to see this settlement finalized.
    Sincerely,
    Edwin Barksdale
    cc: Representative Jefferson Miller



MTC-00029761

1-28-02
    MS. Renata B. Hesse
    DOJ
    "Approve the Microsoft Settlement"
    Christel K. Draeger
    13009 W. Willow Creek Lane
    Huntley, IL 60142



MTC-00029762

10 Benjamin Lane
Cortland Manor, NY 10567
January 26, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    As a computer professional in the technology industry, I am 
writing in favor of Microsoft. Microsoft is innovative, great for 
the technical sector and great for the economy. Look at what's 
happened to the technical sector and the NASDAQ since Microsoft went 
to litigation. Perhaps if we wrap this case up, we will see a 
rebound in those sectors.
    Microsoft is going out of their way to wrap up this case, beyond 
what would be expected in any antitrust case. They settled after 
extensive negotiations with a mediator and agreed to the 
establishment of a technical committee that will monitor their 
compliance with the settlement and assist with resolving any 
disputes.
    Microsoft has been through a lot these last few years. Let's 
move on. There are far greater issues that warrant our attention. 
Thanks.
    Sincerely,
    Ernie Dufek



MTC-00029763

HODGDON POWDER CO., INC.
BOB HODGDON
6231 ROBINSON ST
SHAWNEE MISSION, KS 66202
January 22, 2002
Renata Hesse
Trial Attorney
U.S. Department of Justice
601 "D" Street NW-Suite 1200
Washington, DC 20530
    Ms. Hesse:
    I am writing to encourage your support for the Microsoft 
antitrust settlement. What seems to have been lost in this case is 
that there was not one shred of firm evidence offered linking 
Microsoft to a single case of actual harm to consumers anywhere in 
the country. Yet, consumer harm was the premise for the launching of 
this suit against the company.
    I believe that Microsoft's offer to pay the legal expenses of 
the remaining states is a sign that the company is tired of being 
distracted by this case--especially given the recession we find 
ourselves in. I believe that the American people are also growing 
tired of officials like Kansas's own General Stovall continuing to 
drag it out.
    Many have lost jobs, had their savings and investments 
evaporate, and are watching the technology sector nose-dive. Much of 
which is the cause of this lawsuit.
    The last thing we need in the middle of a recession is a 
crippled technology industry and an out-of-control litigious 
government. This case should have been settled long ago. The Bush 
Administration says so and nine other states have said so--I 
hope you see it that way too.
    Sincerely,
    Bob Hodgdon



MTC-00029764

2401 Zion Hill Road
Weatherford, TX 76088
January 26, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing you today to express my opinion in regards to the 
Microsoft settlement issue. I support the settlement that was 
reached in November and believe this agreement will serve iv, the 
best public interest. I am a Microsoft supporter and feel that this 
company should not be punished for being successful.
    Microsoft has agreed to all terms and conditions of this 
settlement. Under this agreement, Microsoft must grant computer 
makers broad new rights to configure Windows so as to promote non- 
Microsoft software programs that compete with programs included 
within Windows.
    Microsoft has also agreed to document and disclose for use by 
its competitors various interfaces that are internal to Windows' 
operating system products.
    We are facing difficult times and a lagging economy. We do not 
have time to waste on expensive litigation that will not benefit the 
public. Please support this settlement and allow Microsoft to get 
back to business. Thank you for your time.
    Sincerely,



MTC-00029765

ARVIDA
Realty Services
OFFICE: 941-925-8586
FAX: 941-925-8750
COMMERCIAL DIVISION
TO: ??.FAX NUMBER: 202 307-1454
FROM: J.C. Jordan.#PAGES INCLUDING COVER: 2
E-MAIL ADDRESS: TARHEEL18J @ AOL.COM
2227 Brookhaven Drive
Sarasota, FL 34239
January 26, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    As a citizen of this great nation, ! am writing to give my 
support to the settlement reached between the Justice Department and 
Microsoft. I support Microsoft, because they have a right to free 
enterprise. The government needs to stop their prosecution of 
Microsoft once and for all. As a real estate broker, I use 
Microsoft's products at my work, and feel their products are the 
most user friendly on the market.
    This settlement was reached after many hours of negotiations 
with a court-appointed mediator. Microsoft has agreed to document, 
and disclose for use by its competitors various interfaces that are 
internal to Windows operating system products.
    Furthermore, Microsoft also has agreed to the establishment of a 
three person technical committee. This committee will monitor 
Microsoft's compliance with the settlement, and aid in dispute 
resolution. Further pursuit of Microsoft would be a waste of time 
and money.
    Sincerely
    J.C. Jordan



MTC-00029766

8632 15th Avenue
Brooklyn, NY 11228

[[Page 28741]]

January, 25, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    This letter is to urge you to give your approval to the 
Microsoft settlement, This would end three years of court battles 
between Microsoft and the Department of Justice. The two parties 
have agreed to this agreement and I do not think it is the place of 
others to second-guess the decision. The fact that a federal judge 
accepted it is also evidence of a settlement. It has gone on far too 
long. It is time to quit wasting taxpayers' money and put some of 
that money towards things that are needed more, like highways, 
schools, the environment.
    Microsoft has agreed to a great many of the terms demanded by 
Justice. There is internal interlace disclose, computer-maker 
flexibility, granting computer makers new rights to configure 
Windows to promote non-Microsoft programs; there is an oversight 
committee. What more is there? Why should anyone work to make a 
company work, or invent something, if only to have to give it away? 
This whole lawsuit sets a very bad precedent.
    I urge you to let this decision stand and let us go forwards, 
not backwards.
    Sincerely,
    Shirley Hui



MTC-00029767

8632 15th Avenue
Brooklyn, N11228
January, 25, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing to give my support to the agreement reached between 
Microsoft and the Department of Justice. I did not support the 
original lawsuit against Microsoft I do not think the case was 
warranted. The lawsuit was more political than any outrage over 
unethical business dealings. Bill Gates has carried the 
technological revolution on his shoulders. He has enabled the 
average person to become part of the technological age. Does anyone 
remember what it was like before Microsoft? Bill Gates standardized 
computer software to enable its compatibility with other software. 
And people bought the product, because it was the best.
    Bill Gates has agreed to any number of terms demanded from the 
Department of Justice. Microsoft has agreed to share its source 
codes and books pertaining to Windows. that Windows uses to 
communicate with other programs: Microsoft has agreed to a three 
person technical committee to monitor future compliance; Microsoft 
has agreed to contractual restrictions and intellectual property 
rights. This is more than fair.
    Give your approval to this agreement Allow us to get back to 
work.
    Sincerely,
    Marc Hui



MTC-00029768

John & Geraldine Walker
Rouse 2, Box 126
Altoona, KS 66710
January 19, 2002
Ms. Renata Hesse
U.S. Department of Justice, Anti-trust
601 "D" Street NW, Suite 1200
Washington, DC 20530
    Ms. Hesse:
    Thank you for the opportunity to submit written comments 
regarding the proposed settlement of the anti-trust case against 
Microsoft.
    I strongly support settlement of this case. In my opinion, the 
sooner it is put to rest the better. I was not in support of the 
case being brought in the first place, but am glad that at least 
most of the suit's participants have found a solution that is 
acceptable to them.
    I understand the role of government in protecting consumers from 
entrenched monopolies, however I do not believe the laws on the 
books with regard to this apply to today's high tech industry. In 
the last few years of the anti-trust lawsuit against Microsoft the 
high tech industry has already changed significantly, proving that 
the marketplace is a far better regulator of corporate behavior than 
the courtroom.
    I urge the court to approve the proposed settlement of the 
Microsoft case. It is the best course of action for our federal 
government to take.
    Sincerely,
    Mrs. John walker



MTC-00029769

EARL LAIRSON & CO.
A Professional Corporation
Certified Public Accountants
TEL 713-621-1515
FAX 713-621-1570
P.O. Box 924948
HOUSTON, TEXAS 77292-4949
11 Gr??way Plaza. Suite 1515
HOUSTON. TEXAS 77045
January 27, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    The tentative Microsoft settlement should be enacted at the end 
of January. The onslaught of this attack against Microsoft has 
stifled productivity in the technology markets, The enactment of 
this settlement, conversely, will increase confidence in the tech 
sector. With the recent recession causing layoffs in every industry, 
now is the time to finalize this settlement.
    Further the settlement has many points that will benefit members 
of the tech industry. Under the terms of the agreement Microsoft 
will now provide for the disclosure of protocols that are internal 
to the Windows system. This will enable developers to create 
software that is more compatible with the Windows system.
    I encourage the Justice Department to enact this settlement.
    Sincerely,
    Earl Lairson



MTC-00029770

350 Plaza Estival
San Clemente, CA 92672
January 28, 2002
Attorney General John Ashcroft
United States Department of Justice
950 Pennsylvania Ave, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    As a retiree who has been following this Microsoft antitrust 
case, I think it's time to leave Microsoft alone. Now that a 
settlement has been reached, let's move on.
    Microsoft did not get off as easy as its opponents would have 
people think. They agreed to terms that were well beyond what would 
be expected in any antitrust case. Microsoft also agreed to give 
computer companies the right to configure Windows in order to 
promote their software programs that compete with programs within 
Windows. Is there any other software company out there that does 
this?
    Enough is enough. There is no further need for litigation. I 
urge you to accept the settlement. Microsoft has cooperated, and now 
we need to do our part to get the economy going.
    Sincerely,
    Ed Raphael
    cc: Representative Darrell Issa



MTC-00029771

Tim L. Long
January 24, 2002
Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
    Dear Ms. Hesse,
    The basis of the Microsoft lawsuit has been weak Cram the start, 
a failed attempt to shake Microsoft through negative media attention 
trod distraction. Microsoft has been hog tied by fresh legal 
complaints answering each advance they have made since the original 
suit, I fail to see how Microsoft is more corrupt than any other of 
the litigating parties, as opposition has blatantly used the courts 
to stall Microsoft in hopes of their own gain.
    The lawsuit against Microsoft may have originated with 
legitimate concerns regarding modern day antitrust issues, but has 
digressed to a manipulation of the courts by misguided ambition. 
Enough resources have been wasted on this debacle. The proposed 
settlement should be an acceptable solution for all, After all, 
Microsoft's competition has already won more than three years worth 
of media battles and scrutiny throughout the trial.
    Sincerely,
    1830-2nd Street SW.
    Cedar Rapids, ??owa 52404



MTC-00029772

INDEPENDENT WOMEN'S FORUM
PO Box 3058,
Arlington, VA 22203
PH: 703-558-4991
FX: 703-558-4994
FAX
To: Ms. Renata B. Hesse.
From: Nancy Pfotenhauer
Company: Department of Justice.
Phone:

[[Page 28742]]

FAX: 202-616-9937.
Date: 01/28/02 
Re: Microsoft Settlement.
pages: 3
Comments:
January 28, 2002
Ms, Renata B. Hesse
Trial Attorney
Antitrust Division
U.S. Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530-0001
SUBJECT: Microsoft Settlement
    Dear Ms. Hesse:
    I am writing you today on behalf of the Independent Women's 
Forum to strongly advocate acceptance of the proposed Final Judgment 
offered by the U.S. Department of Justice (and endorsed by nine 
state attorneys general) to resolve the antitrust case against 
Microsoft Corporation. The Independent Women's Forum (IWF) is a non-
partisan organization that focuses on issues that matter to women. 
We were formed in 1992 and have counted among our members some of 
the most credentialed legal scholars, economists and policy experts 
in our nation's capitol and across the country.
    As president of IWF, I am convinced that technological 
innovation is essential to enabling women to meet the competing 
pressures of our lives. When we speak with working mothers across 
the country it is clear that the most difficult challenge they face 
is balancing the demands of work and family. As a mother of five who 
works full time, I can tell you that I would have voted in a 34 hour 
day a long time ago if that were possible. Without the aide of 
technology, I do not believe it would have been possible for me to 
succeed at work and at home. For this reason--and for those 
detailed below--I was shocked at the government's initial 
attack on a company that has brought consumers so much innovation 
and quality of life enhancing products.
    As a professional economist, this proposed settlement quite 
frankly seems more than generous on the part of Microsoft. Any 
prolonging of the matter seems unjustified on economic or legal 
criteria. Candidly, it seems more motivated by competitors who would 
rather use government as a tool to hobble their commercial adversary 
than by any supportable antitrust theory. Even the Court of Appeals 
concluded that only inferential evidence exists that there is any 
causal link between Microsoft's conduct and its continuing position 
in the market. P.O. Box 3058, Arlington, Virginia 22203-0058 
Phone: 703-558-4991 Fax: 703-558-4994 
Website: www.iwf.org
    On the other hand, there seems very well-documented evidence 
that the original case against this company was launched as 
competitors spent vast amounts of money hiring former government 
officials whose sole job was to find an acceptable 
"hook" for the Antitrust Division at the Department of 
Justice. Additionally, the judge's very public comments to the media 
evoked an image of the old Salem witch-trials. As you are aware, the 
Court or' Appeals criticized him sharply. Unfortunately, by then, 
most of the public damage to Microsoft's reputation had been done, 
We are concerned that this entire exercise will dissuade others from 
taking the entrepreneurial risks inherent in creating new products 
for consumers.
    The IWF calls on the Department of Justice to accept the 
settlement that the federal government and the attorneys general of 
nine states have already approved. As female consumers who 
desperately want and need top quality technology products at 
reasonable prices in order to balance, the twin pressures of work 
and family, we ask you to end this legal wrangling that benefits no 
one and costs millions of taxpayer dollars.
    Respectfully submitted,
    Nancy M. Pfotenhauer
    President, The Independent Women's Forum



MTC-00029773

23648 Sunnyside Lane
Zachary, Louisiana 70791
January 28, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I would like to take some time and go on record as being an 
advocate of the settlement that was reached between the Justice 
Department and the Microsoft Corporation. It was about time that a 
settlement has been proposed, and I only hope that it is approved as 
soon as possible. Microsoft did not get off the hook easy, not by 
any means. But, the settlement will help in fostering competition in 
the technology industry and will also give the American economy the 
shot in the arm that it needs. I think that forcing Microsoft to 
give up its intellectual property is a bit much, but whatever it 
takes to improve our economy is fine by me. Microsoft will make 
available to its competitors, on reasonable and non-discriminatory 
terms, any coding that Windows uses to communicate with another 
program running on it. Clearly, this settlement is more than just a 
slap on Microsoft's corporate wrists.
    This is going a bit far, but it is in the best interest of the 
nation to bring an end to this lawsuit. I am in support of this 
settlement because it does so. Thank you.
    Sincerely,
    Sherry Zorzi



MTC-00029774

12361 Charlotte Street
Kansas City, MO 64146
January 26, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing to express my belief that you should accept the 
settlement reached between your department and Microsoft. This case 
has been going on for three years. If you choose to return to court 
and litigate an outcome, it may be three more years before a 
judgment is reached, and then additional time will be required for 
appeals.
    The agreement your department reached with Microsoft provides a 
concrete, immediate resolution to the case. The agreement may nor 
contain exactly everything you want, but it is a certain resolution 
in a time when our economy could use the certainty the agreement 
provides. The agreement's provisions relating to uniformity in 
pricing practices, an end to exclusivity requirements in 
distributorship contracts, and the opening of Windows to competition 
offer an improvement over the present situation. They also offer a 
degree of certainty that will not be afforded if the case continues. 
Please end the case by going forward with the settlement agreement 
your department reached last year. We will all benefit from it.
    Sincerely,
    Carol Albertsen



MTC-00029775

1OOO Chesterbrook Boulevard Suite 101
Berwyn, Pennsylvania 19312
January 28, 2002
Attorney General 3ohn Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am happy to hear about the settlement that has been worked out 
with Microsoft. It has taken three long year, to finally reach an 
agreement like this that is fair for both sides. I hope that the 
Federal government will let this be it and finally put the matter to 
rest.
    The settlement is fair. First of all, Microsoft will adhere to a 
uniform pricing list when licensing Windows out to the larger 
computer vendors in the United States. Also, Microsoft has agreed 
not to retaliate against companies that promote or use non-Microsoft 
products. Most importantly, Microsoft has agreed to share sensitive 
information with its competitors; information that will allow them 
to more easily place their own programs on the Windows operating 
system.
    I know that many people who daily depend on Microsoft products 
will write to you about this matter. I hope that you take their and 
my opinions into account. I support the settlement and look forward 
to seeing the suit come to an end. As a consumer and a user of 
Microsoft products, I do not feel that I am being 
"clobbered" by Microsoft. Many of their competitors 
would like you to think this is the case. Since many other companies 
can't effectively compete with their own inferior products, they 
want the taxpayers to help them get rid of Microsoft by way of a 
government breakup. Enough is enough, settle the lawsuit and allow 
Microsoft to get on with creating more innovative products!!
    Sincerely,
    Marc T Nettles
    Cc: Senator Rick Santorum



MTC-00029776

Rene Armbruster
6431 SW 64 St
Auburn, KS 66402
Ms. Renata Hesse
U.S. Department of Justice--Antitrust Division
601 "D" Street--Suite 1200
Washington, DC 20530
    Ms. Hesse:
    Attorney General John Ashcroft and Microsoft's legal team are to 
be commended for their efforts to bring the Microsoft case to

[[Page 28743]]

an end. I am writing to express my strong support for this 
settlement and to encourage the court to accept this agreement.
    The economic benefits of ending this case should be taken into 
consideration. I am certain that the court is aware of the dramatic 
influence the DOJ's actions have had the technology sector. A look 
back in history clearly demonstrates a link between the beginnings 
of our bearish stock market to the order by a federal judge to bust 
up Microsoft.
    I believe that an honest effort was made by all parties involved 
in the creation of the settlement to be fair. This settlement 
establishes a committee that will oversee Microsoft's business 
practices in the future. Additionally, the company will not be 
allowed to cut special packaging deals with computer makers and will 
be forced to shared technical information with its competitors. This 
settlement is fair and it represents a step toward the technology 
sector getting back to work.
    Sincerely,



MTC-00029778

InTouch Systems
742 Avenida Amigo
San Mar??os CA 92069-7313
(760) 734-4315 Voice & Fax
www.intouchsystems.com
January 24, 2002
Attorney General John Ashcroft
U.S. Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft,
    I strongly support the settlement recently agreed to by the 
federal government and Microsoft with regard to their antitrust 
lawsuit. The cost of this ordeal in monetary terms, as well as the 
setbacks it caused to innovation are staggering. It is time to move 
forward and repair the damage. The settlement is a good start in 
this endeavor.
    The settlement is a comprehensive approach to remedying 
Microsoft's alleged wrongdoings. Its adversaries should be very 
pleased with it, instead of attempting to derail it, as they are. 
Contrary to popular belief, the settlement foists some very. 
stringent terms onto Microsoft. Microsoft must share interfaces with 
its competitors. It also is charged with avoiding any form of 
agreement with another company to distribute Windows at a fixed 
rate.
    There are even more terms like this that work to fence Microsoft 
in after its allegedly overaggressive business model became hugely 
successful. The settlement achieves what it set out to 
do--increase the competition in the market--and so the 
judge should effect the settlement. Microsoft's adversaries should 
be quite pleased with the tenets of the settlement and should stop 
trying to derail its finalization by the court. The only reason its 
competitors are against this settlement is to put their own 
financial interests ahead of fair competition and the public 
interest.
    Thank you.
    Sincerely,
    Karen Christian
    General Partner



MTC-00029779

Marc W. Banks
January 28, 2002
Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite I200
Washington, DC 20530
    Dear Ms. Hesse,
    I have been employed in the pharmaceutical industry for over 
five years. My industry and personal livelihood depends upon my 
employer's research and development capabilities and its dedication 
to constant innovation in the treatment of a variety of human ills.
    The computer and technology industry is no different. In fact, 
one could argue that no other industry is the world is as co-
dependent and entwined with other industries as is the computer and 
technology field. Countless other industries rely on technological 
innovations to improve their own products and processes.
    For this reason, I have closely watched the progress of the 
Microsoft lawsuit. While I'm not completely familiar with all the 
intricate details of the suit, I understand the major issues 
involved. And yes, I agree it is important for there to be continued 
competition in the computer industry in order to foster even more 
innovation. I am not convinced, however, that a strong case was made 
against Microsoft in the first place.
    That being said, if news reports are to be believed, there seems 
to me to be a fair settlement before you for consideration. I urge 
you to accept the settlement and send a message that innovation is 
too important to be stifled in America.
    Sincerely,
    Marc Banks
    Territory Business Manager



MTC-00029780

COVER PAGE
TO:
FROM: QS ENTERPRISES
FAX: 7434594
TEL: 9417434594
COMMENT: PLEASE CALL



MTC-00029781

P.O. Box 496381,
Port Charlotte, FL 33949.6381
Fax
To: Attorney General John Ashcroft.
From Ken La Bad
Fax: 1-202-307-1454.
Pages: 1
Phone:.
Date: 1/28/02 
Re: Microsoft's Settlement.cc:
Comments
KEN LA BAD
P.O. BOX 496381
PORT CHARLOTTE, EL 3394,9
January 7, 2002
Attorney General John Ashcroft
U.S, Department of Justice
950 Pennsylvania Avenue, NW
Washington DC 20530
    Dear Mr. Ashcroft,
    I am writing you today to express my support in regards to the 
Microsoft settlement issue. This settlement is comprehensive, fair 
and enforceable, and I am relieved that this issue has been settled 
and resolved. Please work to send it through the appropriate 
channels to ensure that it is finalizes as soon as the comment 
period is over.
    Under this agreement, Microsoft has agreed to disclose more 
information, such as certain Windows internal interfaces, and 
software books and codes to a technical oversight committee. This 
committee was created in response to the government's fear that the 
settlement would be considered unenforceable. As such, any company 
that feels that Microsoft is not complying with this agreement is 
free to sue; the technical committee will work as a go-between for 
disputants and Microsoft.
    Enough time and effort have gone into litigation against 
Microsoft. Thank you for settling with Microsoft and ending this 
case.
    Sincerely,
    Ken La Bad



MTC-00029782

Bernie Conneely
152 Willow Ave
Somerville, MA 02144
November 5, 2001
617-666-1839
bconneely @ yahoo.com
Charles A. James
Assistant Attorney General
Antitrust Division
United States Department of Justice
901 Pennsylvania Ave, NW
Washington, DC 20530
RE: The Microsoft Antitrust Lawsuit
    Dear Mr. lames:
    Attached for your or your office's general reading pleasure is 
my somewhat detailed but hopefully very readable and understandable 
analysis of the recently proposed settlement between the DOJ and 
Microsoft, as well as what I consider to be somewhat more 
appropriate possible remedies.
    The document "Some Remedy Guidelines For Correcting Key 
Microsoft Monopolistic Strategies and Business Practices" is 
pretty self-explanatory both in title and in content. I am 
personally extremely unhappy with what appears to be nothing less 
that total capitulation by the Department of Justice in regards to 
Microsoft case and I can only hope that the states will go 
successfully forward with their own actions, and that the Tunney Act 
will serve a sufficient protection against final adoption of the 
settlement. I should mention that this document it submitted for 
your consideration as a singular effort on my part, with no input or 
connection to any other party to the antitrust proceedings against 
Microsoft. I just happen to be someone well-versed in the technical 
issues involved and their meaning and impact related to computer and 
Internet matters. Copies of the attached document are being sent to 
my state's Attorney General, Thomas Reilly, to the the states" 
lead attorney, Brendan Sullivan, and to Judge Kollar-Kotelly.
    Sincerely,
    Bernie Conneely
    Some Remedy Guidelines For Correcting Key Microsoft
    Monopolistic Strategies And Business Practices

[[Page 28744]]

    -Bernie Conneely
    (bconneely @ yahoo.com)
    Introduction
    I've been a self-employed general computer/network consultant 
and systems engineer since 1984 under the DBA name of Tobercon. I 
have seen and have dealt with a lot of issue relating to Microsoft's 
rise from mostly being the supplier of DOS to its current 
monopolistic pre-eminence in the computer industry. I've also been 
following the various lawsuits against Microsoft with some interest: 
you would be hard-pressed to find any hard-core tech people not 
aware of at least some of the "tricks" Microsoft has 
used over the years to leverage its products onto computers, from 
simple "bundling" to heavy-handed licensing agreements 
to the overt sabotage of competing products Mast, if not all of, 
these practices have come up at different points in the lawsuits, 
most especially the. DOJ amitrust suit. Judge Thomas Penfield 
Jackson's remarks may have been intemperate in a legal setting, but 
they were unarguably accurate in their depiction of Microsoft's 
behavior over the years. Actually, I felt the evidence against 
Microsoft to be so hefty and compelling that even a Republican 
administration generally favorable towards big business would be 
obliged to follow through in punishing and reigning in Microsoft's 
still-continuing misbehavior.
    Summary and Critique of the Proposed DOJ Settlement
    Judging by my perusal and analysis of the recent agreement 
reached between the DOJ and Microsoft (Civil Action No. 
98-1232), it would appear I was mistaken. The salient points 
of the agreement, listed by the pertinent sections, are that:
    III C. 1-2: Microsoft cannot prevent computer vendors from 
installing icons that run or install so-named 
"Middleware" products from Microsoft's competitors. Note 
that the key terms here are "icons" and 
"Middleware" which is defined in the agreement glossary 
as products similar to Microsoft's Internet Explorer, Java Virtual 
Machine, Media Player, Messenger, and Outlook Express It's unclear 
if the competing products themselves can be installed or merely the 
icons for their installation, or if this applies to Middleware 
products that have no Microsoft equivalent like Adobe Acrobat 
Reader, and whether too if this has any bearing on the installation 
of a non-Middleware product like a word processor or database 
manager.
    III C. 3-5: Microsoft can't prevent a computer vendor from 
installing the option to boot into an alternative operating system 
(typically Linux) or from having a non-Microsoft Middleware product 
launch on start-up.
    III F-G: Microsoft cannot prevent PC manufacturers, whether by 
licensing agreement or by threat of retaliation, from offering or 
installing competing products to Microsoft's operating system, 
Windows (the current version being "XP") or Microsoft's 
Middleware products This sounds reasonable enough, but the paragraph 
at III F3 has this section: "Microsoft may enter into 
agreements that place limitations on an ISV's ["Independent 
Software Vendor," meaning a Bernie Conneely--Microsoft 
Remedies Page 1 Contact bconneely @ yahoo.com for 
further info software developer other than Microsoft] 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" Got 
that?
    III H.1: Basically states that a consumer will be given easy 
means to remove the icons for any Microsoft or non-Microsoft 
Middleware program Note that removing the icon for any Windows 
program, whether from the Windows desktop, the Start Menu, or the 
bottom bar does nothing to actually uninstall the program--it 
merely hides it: the program files and registry, entries will still 
be there and program itself still active, especially if it's a 
Microsoft product.
    III H.2-3: Supposedly allows users to use the Middleware 
products from Microsoft's competitors in place of Microsoft's, and 
disallows Microsoft from using Windows to alter icon and menu 
settings of competitors" products installed by an OEM 
("Original Equipment Manufacturer," usually a computer 
manufacturer who installs Licensed versions of Microsoft Windows.) 
However. towards the end of III H.3 are two addendum sections that 
allow for Microsoft Middleware products to be automatically invoked 
when: No 1. when accessing a "server maintained by 
Microsoft"--presumably any Microsoft-owned web site like 
MSN or Microsoft.com and possibly sites co-owned by Microsoft like 
MSNBC), and No.2, when a some Microsoft-specific function like 
"ActiveX" is requested What this means is that a 
consumer will be permitted to use a non-Microsoft e-mail client or 
Web browser, but any Microsoft-related site can automatically invoke 
Internet Explorer. and Microsoft's e-mail clients Outlook or Outlook 
Express may be required to access e-mail from a Microsoft-related 
site, overriding the consumer's choices. Requiring Outlook or 
Outlook Express as part of an MEN account is well within Microsoft's 
rights and has precedent (most notably AOL) just so long as it's 
made clear to consumers that MEN is a closed, proprietary, online-
service that limits the means of access, unlike a general Internet 
access acount. ActiveX controls, however, have been a means for 
recent worms like NIMDA to infect PC's via Internet Explorer, a 
prudent computer user may not want ActiveX active at all or have 
Internet Explorer popping, up unwontedly.
    III J.J: Allows Microsoft to keep secret all its proprietary 
codes and encryption algorithms. This in effect will let Microsoft 
continue its poli??s of making it difficult if not impossible for 
competing products to interact or replace its own "Secure 
Password Authentication" for example is an encryption 
technique that prevents competing e-mail clients from accessing MEN. 
Likewise if a typical consumer who was not even using MEN warned to 
change from Outlook Express to a competing e-client he/she would 
find transferring over existing saved e-mails to be all but 
impossible, due again to encoding techniques unique to Microsoft and 
very probably designed to impede or prevent such changeovers to 
competing products.
    The entire proposed settlement is seemingly a major victory, for 
Microsoft. All "bundling" issues were dropped; competing 
products may be installed, but removal and total replacement on 
Microsoft's equivalent products can be blocked, there is apparently 
no penalty to Microsoft for violating prior agreements; and all that 
is demanded of Microsoft is that it doesn't overtly punish Bernie 
Conneely--Microsoft Remedies Page 2 Contact 
bconneely @ yahoo.com for further info computer 
manufacturers for installing any products from Microsoft's 
competitors and that it doesn't overtly sabotage the installation of 
said products Is this not the corporate equivalent of being put on 
probation, with not even the equivalent of having to do community 
service?
    Alternative Remedy Strategies
    Given the DOJ's apparent failure in reaching a true 
"remedy" in any meaningful sense. I've been moved to add 
my own expert 2-cents to the effort by going over what I consider to 
be some genuine and far more appropriate remedies, explained in 
understandable terms (1 hope) with pertinent examples, that are 
really needed to treat Microsoft monopolistic behavior. The DOJ 
capitulation is very unfortunate, but hopefully the states can show 
the backbone necessary to set things right.
    Before I go into the details, I should mention that regardless 
of the legalities involved, letting Microsoft continue to do what it 
has been doing will absolutely NOT benefit consumers in any way, 
snape, or form. Because of Microsoft's current monopolistic 
position:
    I. Consumers and businesses are at a higher risk to virus 
attacks because of inherent security and coding flaws in all of 
Microsoft products. The argument that Microsoft products are simply 
targeted more because they are the most popular is false: for 
example Apache web servers far outnumber Microsoft ??S web servers, 
but Apache was not affected by the Code Red and NIMDA worms. 
Microsoft has an ill-considered philosophy of sticking in 
programming "hooks" into all of its products, which in 
turn have been very exploitable by virus writers Very few other 
companies do this because of the inherent security risk in doing so.
    II. Removing Internet Explorer from Windows 98 or ME will speed 
up the computer and make it more stable. The most commonly used 
"Tool" to remove IE is "98Lite" a product 
downloadable from www.98lire.net Removing IE this way is a common 
technique for audio professionals doing high-end production work on 
a PC to maximize throughput and enable the most system resources for 
the audio software The average consumer, though, has no clue about 
being able to do this, and Microsoft's insistence that IE and 
Windows are inextricably tied together has confused the issue The 
relationship of IE to Windows is very much analogous to a TV having 
a built-in VCR. Yes, the VCR and TV components are sort of 
"inextricably tied together" in a disingenuous manner of 
speaking, but nevertheless the VCR can be removed from

[[Page 28745]]

the TV if one had the technical wherewithal, and without any undo 
damage to the functionality of the TV component And obviously and 
most importantly, the VCR component can be "unbundled" 
quite easily by the manufacturer, regardless. Just as Microsoft 
could do easily with IE
    III. If a consumer wanted to use a more stable operating system 
than Windows, like Linux, or a more advanced one, like BeOS, it 
would be extremely difficult, if not impossible for that consumer to 
be able to exchange certain types of files with other users, or even 
access everything available on the Internet. thanks to the 
monopolistic position of key Microsoft application products like 
Powerpoint, as well as certain web sites only allowing access via IE 
in clear violation of W3C guidelines ("W3C" is the World 
Wide Web Consortium, which is suppose to be the final authority 
regarding web standards). Other, much smaller companies have been 
good at offering versions of their products to run on alternative 
Bernie Conneely--Microsoft Remedies Page 3 Contact 
?? @ yahoo.com for further info operating 
systems, but Microsoft has not--they only support Windows and 
Macintosh (somewhat). Consequently even a very, very good product 
like BeOS can fail and is failing because certain key Microsoft 
products don't run on it and there are no suitable, compatible 
alternatives Even Linux, while making good headway in server 
applications and despite the enormous amount of development 
surrounding ?? has hit a brick wall as far as appearing on desktop 
computers primarily because of incompatibilities with a Microsoft-
dominated environment in home and in general business.
    IV. Microsoft's dominance and success in bundling has in general 
prevented good and even demonstrably superior products from being 
introduced to the average consumer Even one-time established and 
dominant products like Novell Netware and WordPerfect have gone in 
to such eclipse that the), are now marginal products despite still 
being superior products in many respects to Microsoft's
    V. Each newer version of Windows is harder to repair than the 
previous version. Microsoft. always claims each new version to be 
more stable and have more features than the version it replaces, and 
to some extent this is true: Windows 3.11 use to crash quite a bit. 
and Windows 2000 does crash far less than Windows 95 or 98; however, 
while Windows 3.11 would crash fairly frequently, it very rarely 
went "bad" to the point it needed expert 
troubleshooting--generally a simple reboot fixed things Crashes 
on subsequent versions were usually more serious and required much 
more time to fix. Damage caused by viruses are often extremely 
difficult to recover from in the later versions of Windows, as 
removal instructions for the NIMDA worm on any antivirus web site 
will attest to. The same also applies to Microsoft Office: since the 
average consumer can't completely uninstall Office (you need a 
special software "tool" from Microsoft) certain types of 
damage from viruses can't be fixed because the standard repair 
technique of reinstallation won't work Microsoft is and never was an 
"innovator" no matter how much you may want to stretch 
the meaning of the term Virtually all of Microsoft's products were 
"borrowed," licensed, bought or copied from other 
companies DOS came from Seattle Computer. Windows "came" 
from Apple, Internet Explorer from Mosaic/Netscape, Windows XP/NT/
2000 from IBM OS/2, and so on. Without exaggeration, one could say 
that most of Microsoft's creative efforts have been in leveraging 
its products into the marketplace by whatever means possible while 
keeping itself out off serious legal trouble
    This is not to say that Microsoft does not make good 
products--they actually make some very good ones (Powerpoint, 
Excel, Flight Simulator). as well as mediocre ones (Word, IE, 
Outlook) and some pretty terrible stuff(Access. ??S. Exchange 
Server) The point is that the merits of a given Microsoft product is 
irrelevant to how Microsoft has been able to leverage it into 
dominance into a given market by improper and likely illegal means, 
with an end result that at the very least means that many worthwhile 
competing products are kept away and out of sight from the average 
consumer
    So without further ado, here is one informed guy's recipe for 
remedying in a meaningful way the Microsoft problem:
    1) Internet Related Bernie Conneely--Microsoft Remedies 
Page 4 Contact e??oo.com for further info A) Allow Installation of 
Alternative System/Web Browser in Place of Internet Explorer 
("IE") Despite Microsoft's claims to the contrary, this 
is straightforward programming issue. The Interact Explorer 
"uninstall" function introduced in Windows XP merely 
removes the IE icon from the desktop--it is not a true 
uninstall in any meaningful sense. A true uninstall will separate 
out web-access components and return basic file/disk, network access 
8: browsing to a standalone Windows application similar if not 
identical to the original "Windows Explorer" program in 
Windows 95 and its counterpart "NT Explorer" in Windows 
NT. The user should be able to install and use any web browser of 
her or her choice, whether in its standard Function for web access 
or in place of IE for "active desktop" access or any 
other internal Windows process that IE would be used above and 
beyond that supplied by separate "Windows Explorer" type 
program..
    The burden will be on Microsoft to create a software program 
that will accomplish all this with minimal technical intervention by 
the user The program must be provided free of charge If Microsoft is 
unwilling to comply with creating such a software program, a 3rd 
party programmer or programming group of sufficient expertise should 
then be designated by the court or the DOJ (depending on whose 
ultimate responsibility it turns out to be) to carry out the 
programming objectives. This should be done at Microsoft's expense 
and with their full cooperation in providing whatever code and 
system information deemed necessary by the 3rd party programmers.
    I would have to say that allowing consumers from to truly remove 
IE from a computer and install a competing product in its place is 
probably the most important antitrust remedy that can be achieved, 
especially for the long term. It has become obvious that Microsoft 
is intent on using the near universal placement of IE to mitigate 
further inroads by competing operating systems like Linux and to 
leverage itself much further into general Internet commerce and 
services, especially through its. ".Net" 
initiative--which is basically a form of bundling that will 
ultimately make it nearly impossible for a consumer to do any sort 
of Internet commerce without the use of Microsoft products.
    B) Disallow/Discourage IE As A Requirement for Accessing Any 
Commercial Web Site
    There is a sizable number of web sites that currently only allow 
access via IE. If this was done via a licensing agreement with 
Microsoft and not because of any valid technical reason, all such 
agreements should be voided The governing body for all web standards 
is the World Wide Web Consortium ("W3C") and it is they 
who should define web standards, not Microsoft Microsoft itself 
requires the use of IE for many functions on its own web site. most 
especially ones related to updates to Microsoft's other products 
This requirement should be voided, especially since there really 
aren't any valid technical reasons for doing this (Antivirus 
programs are quite adept at checking for updates without even a 
browser requirement)
    As a matter of good web commerce, companies should be encouraged 
to keep their web sites W3C compliant, which will eliminate 
dependency on any particular web browser If it turns out Bernie 
Conneely--Microsoft Remedies Page 5 Contact 
bconnee?? @ yahoo.com for further info that it 
would be a burdensome cost for many companies to immediately make 
their web sites nonIE dependent, it may be necessary to have 
Microsoft come up with a "application" version of IE, 
meaning that it installs and behaves like a normal non-Microsoft 
application that doesn't embed itself into the Windows operating 
system IE for Apple's Macintosh works this way, so Microsoft has 
surf cleat familiarity with how to achieve this A user can install 
this application version of IE specifically to access those IE-
dependent sites without it "taking over" all web/file 
access functions as the normal version of IE does Still. this should 
be only an interim solution to allow for web sites to be made non-IE 
dependent without undue time pressure or burden
    C) Disallow IE as a Requirement for Microsoft's Other Products 
& Services
    There are no good valid reasons why Microsoft Word. Powerpoint, 
or whatever other Office component needs IE to be installed, 
likewise with even Microsoft's online services like MSN.
    Microsoft would argue otherwise, but all their technical 
arguments to date for unbundling IE have been disingenuous, 
misleading or simple outright lies Just recently, on October 25. 
2001. MSN locked out non-IE web browsers.
    Microsoft's explanation for this was. to put it very mildly, not 
very credible. The following was taken from a ZDNet news item

[[Page 28746]]

about the matter. Microsoft on Thursday contended that the upgraded 
MSN she uses World Wide Web Consortium (W3C) standards and that 
browsers that don't conform to the standards are being blocked out.
    "We supported the latest W3C standards when developing the 
co??ent and services delivered from MSN." Bob Visse, the 
director of MSN marketing said in an e-mail Friday. He added that 
Microsoft wants users to visit the Web site "regardless of the 
browser they choose.
    But Visse recommended that for the best experience with MSN, 
customers should use a browser that lightly adheres to the W3C 
standard.
    "If customers choose to use a browser that does not 
??gh??s support W3C standards, then they may enco??er a less then 
op??m??l experience on MSN." he said,
    On Thursday, he had said that the com?? expected to have MSN.com 
f??lly accessible to the browsers later in the day.
    The problem was actually not fixed until that following 
Saturday, which gave me a chance to run an experiment: on 10/26/2001 
at approximately 7:00 PM EST. I went to the W3C web site and 
downloaded "Amaya," an experimental browser developed m 
conjunction with W3C standards. After installing Amaya on my 
computer, I went to ?? to access www.msn.com and got this message, 
which was the same message all other non-IE browser users were 
getting: Attention: Web Browser Upgrade Required to View MSN.com
    If you are seeing this page, we have detected that the browser 
that you are using will not render MSN.com correctly Additionally. 
you'll see the most advanced functionality of MSN.com only with the 
latest version of Microsoft Internet Explorer or MSN Explorer If you 
wish to visit Bernie Conneely--Microsoft Remedies Page 6 
Contact ??com For further info MSN.com, please select the 
appropriate download link below Internet Explorer for Windows 
Internet Explorer for Macintosh MSN Explorer for Windows [end]
    Basically, in using "W3C Standards" as an excuse for 
requiring IE to access MSN. Microsoft outright lied. For the record, 
IE is the LEAST W3C compliant of all the current major web browsers, 
including Netscape 6.1, Mozilla, and Opera Checking in with the W3C 
organization will confirm this
    The same applies to Microsoft's main site www.microsoft.com 
which frequently needs to be accessed if you want to keep up with 
the latest security patched or updates. Ironically, it is NOT W3C 
compliant and makes non-IE browsers act funny Again, a little trick 
that has no technical or consumer benefit.
    Often, a consumer will be told he/she MUST install IE in order 
to use some online product or service, which is usually through some 
Microsoft licensing arrangement. "Quick Books Pro 2001" 
for example is an accounting program, but it will install IE 5 5 
automatically for no genuinely good reason. And if you go to the 
McAfee antivirus site www.incafee.com using any 4.xx version of 
Netscape, you will be greeted with a pop-up window requesting that 
you download IE for the benefit of doing just a trial test of its 
online scanner: however. Trend Micro's online scanner at 
www.housecall.antivirus.com has no such requirement
    As a side note, Microsoft also modified its Hotmail online 
service so that when a Hotmail user signs out. he/she is immediately 
redirected to Microsoft's MSN web site. While the newer non-IE web 
browsers don't get that annoying "Upgrade" message, 
older Netscape browsers do. Many public libraries in the Boston area 
at least have been standardized on Netscape 4.08 for a few years 
now, and now their many Hotmail users are getting that 
"Upgrade" warning once they are done, even though it has 
nothing at all to do with accessing Hotmail itself.
    Yet more Microsoft heavy-handed "tricks" even in the 
midst of all the current lawsuit and antitrust, activity
    2) Application Product Related
    A) Allow for Complete Removal of Any Installed Microsoft Product 
and Without the Need for the Installation CD
    Another common Microsoft "trick" is to make complete 
removal of its application products very difficult. Typically, a 
consumer will buy a new PC and find that it came pre-loaded with a 
Microsoft product like Works 2000, a very large and seldom used 
software suite. If the consumer is savvy enough to go to the 
"Control Panel" in Windows and try to uninstall Works 
via "Add/Remove" programs, he/she will be asked to 
insert a "Works" CD and no matter which of Bernie 
Conneely--Microsoft Remedies Page 7 Contact 
bconnee?? @ yahoo.com for further info the 
several Works CDs get inserted, it will seem to be the wrong one. 
The only way to remove is to either have a very technical friend 
delete The all the Works registry, entries and then The Works 
folders, or else go to the Microsoft web site and do a search on how 
to remove Works. and if he/she is lucky, this page will be found 
http//:support.microsoft.com/support/kb??70.ASP or perhaps this 
page: http://supprort.microsoft.com/support/kb/articles??74.ASP 
Removing Office 2000 is more straightforward but still requires the 
installation CD But if you need to completely remove it and 
reinstall it because of corruption or virus damage, then you must 
again go searching on the Microsoft site and if you are again very 
"lucky" you will find this: http://
support.microsoft.com/support/kb.articlesQ23??.ASP Or if you're not 
so lucky, you might find this instead: http://
support.microsoft.com.support/kb/articies??5/60.ASP
    There is not a single good reason for Microsoft not to include a 
genuine uninstall option to its software products, either for people 
who want to clear them off their systems or for users who just want 
to fix a problem by reinstalling
    B) No Automatic Replacement/Disabling of Another Company's 
Product or Feature
    This is seemingly covered in the DOJ settlement, but it should 
be made more explicit and that it covers all of Microsoft products. 
This sort of anti-competitor behavior is not a uniquely Microsoft 
trait (RealAudio is quite good at this in regards to MP3 music 
files) but it can be much more problematic given that it can 
interfere with functions critical to important business software For 
instance "LDAP" is a directory service usually built 
into mail server programs--a standards-based means of looking 
up e-mail addresses However. if you install a Windows 2000 server 
and add "Active Directory Services" it takes away LDAP 
from any non-Microsoft e-mail server you might want to install, 
forcing the installer [o either disable LDAP for the mail server 
users or else fiddle with the LDAP registry settings for mail server 
software, or else just give up and install Microsoft's own e-mail 
server program. Exchange Server Of course Microsoft allows no such 
changes with its Windows LDAP settings.
    C) A "Bare Windows" Option With Clean Registry
    After buying a typical retail PC, a consumer is usually faced 
with a daunting number of unwanted programs and add-ons that come 
with the system above and beyond what he/she expected. Some are 
bundled anti-trust baiting products from Microsoft. others are 
"value-added" products and quasi-free trails from other 
vendors, This is not a good thing because those programs slow down 
the computer, eat up resources, and generally make the completer 
less stable than it should be. Removing all of these programs is 
usually tricky, confusing and beyond the capabilities of the average 
user Microsoft. should include a global "Rem??" function 
to put the system to a basic state without any wasteful programs or 
registry e?? The consumer could then systematically add back any 
programs he/she actually needs or want, Bernie 
Conneely--Microsoft Remedies Page 8 Contact 
bconnee?? @ yahoo.com for further info Closing 
Thoughts
    It's been shown that Microsoft blatantly violated previous 
agreements, that it frequently misled and outright fled about its 
actions, capabilities and motives, that it was totally willing to 
doctor evidence in its behalf, that it still tries to undermine its 
competition through monopolistic leverage, and that these actions 
have been both harmful to the consumer and hurtful for the economy 
by excluding better, more secure products from the marketplace The 
recent incident involving MSN access to non-IE browsers clearly 
demonstrates that Microsoft has not mitigated its monopolistic 
operational behavior at all, even in the face of ongoing litigation 
If Microsoft again fails to comply with what final agreement is 
reached with the federal and state governments, a suitably severe 
penalty should be applied. My suggestion is the original break-up 
order by Judge Jackson with the addition of the release of all 
Windows 95/98/ME source code This Windows "lineage" has 
ended with the release of Windows XP, which follows from Windows NT/
2000, a completely different code set from 95/98/ME. This will 
protect Microsoft's current technological investment, but would give 
possible competitor:, an opening for creating a 
Windows--compatible operating system. That would, be a fair 
penalty I think.
    I can only hope that at least some of what ! wrote will be of 
some positive benefit

[[Page 28747]]



MTC-00029783

LEVINE SULLIVAN & KOCH, L.L.P.
1050 SEVENTEENTH STREET, NW
SUITE 800
WASHINGTON, DC 20036
LEE LEVINE
CAMERON A. STRACHER
MICHAEL D. SULLIVAN
ELIZABETH C. KOCH
ASHLEY I. KISSINGER
JAMES E. GROSSBERG
AMY LEDOUX
CELESTE PHILLIPS
AUDREY BILLINGSLEY
SETH D. BERLIN
THOMAS CURLEY
JAY WARD BROWN
* ??
(202) 508-1100
* FACSIMILE (202) 861-9888
FACSIMILE COVER SHEET
DATE: January 18, 2002
TOTAL PAGES: 8
Renata Hesse (202) 616-9937
(202) 307-1545
U.S. Department of Justice
FROM: Jay Ward Brown
DIRECT DIAL: (202) 508-1125
CLIENT/MATTER: 0223
REMARKS:
LEVINE SULLIVAN & KOCH, L.L.P.
1050 SEVENTEENTH STREET, NW
SUITE 800
WASHINGTON, DC 20036
LEE LEVINE
CAMERON A. STRACHER
MICHAEL O. SILLIVAN
ELIZABETH C. KOCH
JAMES E. CROSSBERG
ASHLEY I. KISSINGER
CELESTE PHILLIPS
AMV LEDOUX
SETH D. BERLIN
AUDREY BILLINGSLEY
JAY WARD BROWN
THOMAS CURLEY
WRITERS' DIRECT DIAL
(202) 508-1110
(202) 508-1125
(202) 508-1100
FACSIMILE (202) 861-9888
* ??
January 18, 2002
VIA FACSIMILE AND FIRST CLASS MAIL
Renata Hesse, Esq.
Trial Attorney
Department of Justice
Antitrust Division
601 D Street NW, Suite 1200
Washington, DC 20530
Re:
United States of America v. Microsoft Corporation, Civil Action No.
93-1232 (CKK) (D.DC);
State of New York ex. tel. Attorney General Eliot Spitzer, et al. v. 
Microsoft
Corporation, Civil
Action No, 98-1233 (CKK) (D.DC)
    Dear Ms. Hesse:
    Pursuant to 15 U.S.C.  16(o) and the Notice of 
Revised Proposed Final Judgment, 66 Fed. Reg. 59452 (Nov. 28, 2001), 
The New York Times, through its undersigned counsel, hereby submits 
the following comments relating to the revised proposed Final 
Judgment pending in the above-referenced matters.
    Under the Antitrust Procedures and Penalties Act (the 
"Tunney Act"), Microsoft Corporation 
("Microsoft") was required to file, within ten days of 
the filing of the revised proposed Final Judgment, "a 
description of any and all written or oral communications by or on 
behalf of [Microsoft], including any and all written or oral 
communications on behalf of [Microsoft], or other person, with any 
officer or employee of the United States concerning or relevant to 
such proposal." 15 U.S.C.  16(g). The only 
communications excepted from this requirement are those made by 
Microsoft's "counsel of record alone with the attorney general 
or the employees of the Department of Justice alone." Id.
    The revised proposed Final Judgment in the above-referenced 
actions was filed November 6, 2001. On December 10, 2001, Microsoft 
filed a "Description of Written or Oral Communications 
Concerning the Revised Proposed Final Judgment and Certification of 
Compliance Under 15 U.S.C.  16(g)" (the 
"disclosures"), a copy of which is enclosed for your 
convenience, that purports to satisfy the, Tunney Act's disclosure 
requirement.
    Microsoft's disclosures are insufficient for several reasons. 
First, with respect to the referenced October 5, 2001 meeting 
regarding "technical questions," Microsoft indicates 
that its counsel met with "representatives of the United 
States and the plaintiff States" but does not identify those 
"representatives" or the departments or agencies for 
which they work Moreover, although Microsoft indicates that Linda 
Averett, Michael Wallent, Robert Short and Chad Knowlton attended 
this meeting, it does not indicate what positions these persons hold 
at Microsoft or the purpose of their attendance at the meeting. Nor 
does Microsoft describe the substance of the October 5 
communications or indicate specifically where they took place.
    Similarly, with respect to the referenced meetings that occurred 
between September 27 and November 6, 2001, Microsoft has not 
disclosed the names of those counsel for Microsoft, the United 
States, and the plaintiff States who attended; 1 the specific dates 
and locations of those meetings; which of those meetings were 
attended by Professor Eric Green and Jonathan Marks; and which of 
those meetings were attended by Will Poole. Nor has Microsoft 
described in even the most cursory fashion the substance of any of 
these communications.
    1 This shortcoming is significant. As Senator Tunney explained, 
the "limited exception for attorneys representing the 
defendant who are of record in the judicial proceeding ... is 
designed to avoid interference with legitimate settlement 
negotiations between attorneys representing a defendant and Justice 
Department attorneys handling the litigation.... [T]he provision is 
not intended as a loophole for extensive lobbying activities by a 
horde of 'counsel of record."' 119 Cong. Rec. 3451 
(1973). The report on the Tunney Act issued by the House Committee 
on the Judiciary further clarifies that the limited exception to 
disclosure "distinguishes 'lawyering" contacts of 
defendants from their 'lobbying contacts."' H.R. 
Rep. No. 93-1463, at 9 (1974), reprinted m 1974 U.S.C.C.A.N. 
6535, 6540, 1974 WL 11645.
    In addition, it appears that Microsoft may not have made all of 
the disclosures required. The only exception to the disclosure 
requirement is for communications between counsel for Microsoft 
alone and the attorney general or employees of the Department of 
Justice alone; any other communications between the government and 
Microsoft or others on Microsoft's behalf concerning or relevant to 
the disposition of these actions--even those in which no 
counsel participated--must be disclosed. See 15 U.S.C. 
 16(g). The communications disclosed by Microsoft appear 
to each involve its counsel of record. This fact, coupled with the 
absence of any meaningful description of the communications and the 
lack of any express disclaimer of the existence of communications 
with the government not involving counsel of record, renders it 
impossible to determine whether Microsoft has complied with Section 
16(g).
    According to the House Report, the Tunney Act was intended 
"'to encourage additional comment and 
response"' by the public to proposed consent decrees 
"'by providing more adequate notice to the 
public."' 1974 U.S.C.C.A.N. at 6538 (quoting S. Rep. No. 
93-298, at 5 (1973), reprinted in 9 Earl W. Kintner, The 
Legislative History of the Federal Antitrust Laws and Related 
Statutes 6598 (1984) ("Kintner")). "[E]ffective 
and meaningful public comment is also a goal." Id. (emphasis 
added). In addressing Section 16(g) specifically, the House Report 
emphasized that Congress "intend[ed] to provide affirmative 
legislative action supporting the fundamental principle restated by 
the Supreme Court ... [that it] 'is not only important that 
the Government and its employees in fact avoid practicing political 
justice, but it is-also critical that they appear to the public to 
be avoiding it if confidence in the system of representative 
Government is not to be eroded to a disastrous extent."' 
Id. (quoting United States Civil Serv. Comm'n v Nat'l Ass "n 
of Letter Carriers, AFL-CIO, 413 U.S. 548, 565 (1973)); see also 
Kintner, at 6600 ("antitrust violators wield great influence 
and economic power," and "additional comment and 
response" from the public would alleviate much of the 
"significant pressure" violators could often 
"bring ... to bear on government, and even on the courts, in 
connection with handling of consent decrees"). Indeed, when 
Senator Tunney first introduced his bill, he focused on the 
significance of the disclosure provision. "Sunlight is the 
best of disinfectants," he explained (quoting Justice 
Brandeis), and thus "sunlight ... is required in the case of 
lobbying activities attempting to influence the enforcement of the 
antitrust laws." 119 Cong. Rec. 3453. The disclosure provision 
was only slightly altered before passage, and the amendments were 
designed "to insure that no loopholes exist in the obligation 
to disclose all lobbying contacts made by defendants in antitrust 
cases culminating in a proposal for a consent decree .... 
"1974 U.S.C.C.A.N. at 6543.
    The New York Times respectfully submits that Microsoft's 
disclosures are inadequate to serve these statutory purposes, i.e., 
to assure

[[Page 28748]]

the Court and the public that the parties agreed upon the revised 
proposed Final Judgment at arms length and without the exertion of 
any improper or undue influence. The public has a statutorily 
recognized right to information sufficient to make this 
determination. For this reason, The New York Times respectfully 
suggests that Microsoft should be required to supplement its 
disclosures to: (1) identify the location, date and, where possible, 
time of each communication; (2) identify the names and titles of all 
persons present for each communication; (3) state the purpose of the 
participation in each communication by those other than counsel of 
record; (4) describe the substance of each communication; (5) 
disclose any other required communications, if necessary; an (6) 
certify that there exist no further communications required to be 
disclosed. Sincerely,
    LEVINE SULLVAN & KOCH, L.L.P.
    By
    Lee Levine
    Jay Ward Brown
    Enclosure
    IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
    UNITED STATES OF AMERICA,
    Plaintiff,
    Civil Action No. 98-1232 (CKK)
    v.
    MICROSOFT CORPORATION,
    Defendant.
    STATE OF NEW YORK ex. rel.
    Attorney General ELIOT SPITZER, et al.,
    Plaintiffs,
    Civil Action No. 98-1233 (CKK)
    v.
    Next Court Deadline: March 4, 2002 Status Conference
    MICROSOFT CORPORATION,
    Defendant.
    DEFENDANT MICROSOFT CORPORATION'S DESCRIPTION OF WRITTEN OR ORAL 
COMMUNICATIONS CONCERNING THE REVISED PROPOSED FINAL JUDGMENT AND 
CERTIFICATION OF COMPLIANCE UNDER 15 U.S.C.  16(g)
    In conformance with. Section 2(g) of the Antitrust Procedures 
and Penalties Act ("APPA"), 15 U.S.C. 
 16(g), defendant Microsoft Corporation 
("Microsoft") respectfully submits the following 
description of "any and all written or oral communications by 
or on behalf of" Microsoft "with any officer or employee 
of the United States concerning or relevant to" the Revised 
Proposed Final Judgment filed in these actions on November only 
"communications made by counsel of record alone with the 
Attorney General or the employees of the Department of Justice 
alone."
    (1) Following the Court's Order dated September 27, 2001, and 
continuing through November 6, 2001, counsel for Microsoft met on a 
virtually daily basis with counsel for the United States and the 
plaintiff States in Washington, DC After the Court appointed 
Professor Eric Green of Boston University School of Law as mediator 
on October 12, 2001, Professor Green and his colleague Jonathan 
Marks participated in many of those meetings. From October 29, 2001 
through November 2, 2001, Will Poole, a Microsoft vice president, 
also participated in some of the meetings.
    (2) On October 5, 2001, counsel for Microsoft met with 
representatives of the United States and the plaintiff States in 
Washington, DC to answer a variety of technical questions. Linda 
Averett, Michael Wallent, Robert Short and Chad Knowlton of 
Microsoft attended this meeting, as did Professor Edward Felten of 
Princeton University, one of plaintiffs" technical experts. 
Microsoft certifies that, with this submission, it has complied with 
the requirements of 15 U.S.C.  16(g) and that this 
submission is a true and complete description of such communications 
known to Microsoft.
    Dated: Washington, D.C, December 10, 2001
    Respectfully submitted,
    William H. Neukom John L. Warden (Bar No. 222083)
    Thomas W. Burt Richard J. Urowsky
    David A. Heiner, Jr. Steven L. Holley
    Diane D'Arcangelo Michael Lacovara
    Christopher J. Meyers Richard C. Pepperman, II
    MICROSOFT CORPORATION Ronald J. Colombo
    One Microsoft Way SULLIVAN & CROMWELL
    Redmond, Washington 98052 125 Broad Street
    (425) 936-8080 New York, New York 10004
    (212) 558-4000
    Dan K. Webb
    WINSTON & STRAWN Bradley P. Smith (Bar No. 468060)
    35 West Wacker Drive SULLIVAN & CROMWELL
    Chicago, Illinois 60601 1701 Pennsylvania Avenue, NW
    (312) 558-5600 Washington, DC 20006
    (202) 956-7500
    Charles F. Rule (Bar No. 370818)
    FRIED, FRANK, HARRIS, SHRIVER & JACOBSON Counsel for 
Defendant
    Microsoft Corporation
    1001 Pennsylvania Avenue, NW
    Suite 800
    Washington, DC 20004-2505
    (202) 639-7300



MTC-00029784

James Hall
Attorney at Law
47 E. Wilson Bridge Road
Worthington, Ohio 43085-2301
Telephone: 614-885-3500
Fax. 614-527.18
January 19, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ash croft:
    I would like to start by saying that I am neither pro nor anti-
Microsoft. I do however believe in right and wrong. What the 
government has done to Microsoft over the past three years is 
definitely wrong. This letter is to show my support for the 
settlement that was reached with Microsoft. I do not support the 
settlement because I agree with it; I support it because it brings 
an end to one of the most absurd lawsuits I have ever seen.
    There was not a single reason why the government should have 
brought Microsoft to court at all. I do not agree with all of their 
practices, but they have never broken the law. I guess that does not 
matter when the competition of Microsoft spends more money lobbying 
to get them in trouble than it does on their own research and 
development. I suppose the competition can now rest easy in the fact 
that their money was well spent. Microsoft has agreed, just to get 
this madness over with, to not retaliate against the competition if 
they produce software that competes with Microsoft's. Let's examine 
the word "competition" American Heritage Dictionary as 
defines it: "the act of competing, as for profit or a prize 
rivalry". Microsoft took part in just that; they were 
competing for a profit. They made this profit, and did great things 
with it. Millions of dollars in profits were donated to charities 
other profits were used to establish scholarship funds for college 
students. Clearly Microsoft isn't some sort of evil corporation.
    We need to end this senselessness now. The lawsuit should never 
have been necessary in the first place.
    Sincerely,
    James Hall



MTC-00029785

January 27, 2002
FAX TO: ATTN: MS. RENATA B. HESSE
U.S. DEPARTMENT OF JUSTICE
202-307-1454
RE: MICROSOFT SETTLEMENT
    Dear Ms. Hesse:
    The proposed settlement is, I believe, fair and equitable for 
all concerned.
    . Microsoft will continue to provide new software that will 
integrate new products;
    . Competitors will have more Windows access to incorporate in 
their products,
    making them more compatible;
    . Software manufacturers will resume the creation of new 
products;
    . Consumers will have wider choices among software products; and
    . Investors will enjoy stability in the marketplace.
    Sincerely,
    William F. Summerfield



MTC-00029786

January 25, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing to give my approval to the agreement between 
Microsoft and the Department of Justice. This is a reasonable 
settlement for all and it is time to put this matter behind us and 
move on. I am somewhat irritated with the entire lawsuit, as the 
competitors of Microsoft are coming across as a bunch of whiners 
who, because they are not producing a quality product, cry and run 
to the government to ball them out instead of doing a better job at 
their own production and marketing.

[[Page 28749]]

    Be that as it may, Microsoft and the Justice Department worked 
out a fair agreement. Microsoft agreed to open the company up to 
more third parties making available more of its copyrighted code to 
aid in development of third party programs; Microsoft has agreed to 
disclosure various interfaces that are internal to Windows' 
operating system, and have agreed to a three person technical 
committee to oversee future compliance. This is more than enough.
    I urge you to give your support to this agreement and allow this 
country to get back to business.
    We desperately need to.
    Sincerely,
    James P. Duggan



MTC-00029787

Anthony Perrella
6017 Java Plum Lane
Garden Lake Estates
Bradenton, FL 34203
January 28, 2002
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing to express my full support of the recent settlement 
between the US Department of Justice and Microsoft in the antitrust 
case. The case has taken too long to settle and needs to be 
finalized to serve the best interests of the public.
    The terms of the settlement reflect the intense lobbying efforts 
on the part of Microsoft's competitors. Microsoft is agreeing to 
disclose interfaces that are internal to Windows operating system 
products--a first in an antitrust case. They have also agreed 
to grant computer makers broad new rights to configure Windows so 
that non-Microsoft products can be promoted more easily.
    It is time for your office to use its influence to press for an 
end to this matter. There are nine states out there looking to 
continue litigation, and it is my belief that your office should be 
active in suppressing this silly notion. Our nation cannot afford 
further litigation, and we need Microsoft back at full strength.
    Sincerely,
    Anthony Perrella



MTC-00029788

20 B S Main Street Alburg, VT 05440
January 15, 2002
Attorney General John Ashcroft
U.S. Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft
    I am writing to you today to voice my support for the Microsoft 
settlement. Three years have now passed since the beginning of this 
case During this time, much money has been wasted. Federal dollars 
have been squandered on court mediators and countless extensions. 
The settlement of this case then is a welcome end to the protracted 
??gation.
    The settlement that was reached is equitable Microsoft agrees to 
share with its competitors some of the workings of its operating 
system. This gives developers the freedom to design software that 
will be mereasingly compatible with the Windows system. While this 
is a large concession on behalf of Microsoft. I agree with 
Microsoft's support of the settlement. The settlement allows 
Microsoft to finally resolve this issue. Getting back to business is 
important to Microsoft.
    I agree with Microsoft's decision to settle this case. I believe 
that the terms of this agreement are fair. I hope that the Justice 
Department will enact this settlement as soon as possible.
    Sincerely,
    Richard Bayer



MTC-00029789

KerrAlbert
Office Supplies & Equipment
January 26, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    The Justice Department's anti-trust lawsuit against Microsoft 
has gone on for much too long, and I would like to express my 
support for the settlement that the two sides reached in November of 
last year. It is a fair compromise that will benefit all parties 
involved, and I would like to see it finalized in the near future.
    The government should not interfere with Microsoft simply 
because it is a successful company. Yet Microsoft has agreed to 
allow other independent companies new rights that will allow them to 
promote their own products (rather than Microsoft's) within the 
Windows operating system. Microsoft will not ?? against computer 
makers that choose to do this, and the result will be stronger 
competition in the industry. Once competition increases, consumers 
will have more to choose from, and the technology industry will 
receive a real boost.
    I believe the Justice Department made the right decision in 
settling this lawsuit. Microsoft can no go back to developing the 
types of ideas that have made it the successful company it is today, 
and the government can begin to focus its time and money on more 
important issues.



MTC-00029790

45 Springfield Street # 1
Belmont, MA 02478
January 28,2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing this letter to express my opinion about the 
settlement that has been reached between Microsoft and the 
Department of Justice.
    First off, I am NOT 100% in Microsoft's camp. I have tried MANY 
of their competitors" products: very few are truly better when 
you take all of the real world factors into consideration. The 
pattern has been simple all along: Microsoft sees a product in the 
marketplace, imitates it until it is as good as the competing 
product, and then (now this is the KEY) they surpass their 
competitor's product. This is really the driving force behind the 
technicalities of the lawsuits. You cannot even imagine how much it 
disgusts me that companies are allowed to sue because another 
company bettered their product.
    If I were Bill Gates, I would be so outraged that ] would move 
Microsoft to Canada. I have consulted for EMC Corporation in Ireland 
so I know firsthand that the U.S. is losing ground as THE place to 
be for technology. If our court system continues to allow cases as 
outrageous as this, no business will want to set up shop here.
    Who's going to file a lawsuit next? Palm, Inc.? Well, I'm a 
registered Palm developer and if they file a lawsuit, guess who will 
be switching to Windows CE devices?
    I obviously think this case should have been thrown out of court 
on the first day, but since it was not, please just get it over with 
and APPROVE the settlement. Thanks.
    Sincerely,
    David M. McNamara



MTC-00029791

Raymond L. Barker, CPA
3967 Hancock Forest Trail,
Annadale, VA 22003
Telephone: 703473-6066
c-mail lbarkcr @ erols.com
Fax 703-208-0709
FAX COVER SHEET
From: Raymond L. Barker [Ibarker @ erols.com]
Sent: Monday, January 28, 2002 9:10 AM
To: 
'mailto:microsoft.atr @ usdoj.gov"
Subject: Microsoft Settlement
    The settlement between DOJ and Microsoft should be settled. Each 
has affirmed that the settlement is hard but fair. To continue to go 
after Microsoft is counter-productive to our economy.
    The AOL suit is outrageous.
    Raymond L. Barker, CPA



MTC-00029793

8632 15th Avenue Brooklyn, NY 11228
January 25, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    This letter is to urge you to give your approval to the 
Microsoft settlement. This would end three years of court battles 
between Microsoft and the Department of Justice. The two parties 
have agreed to this agreement and I do not think it is the place of 
others to second-guess the decision
    The fact that a federal judge accepted it is also evidence of a 
settlement. It has gone on far too long. It is time to quit wasting 
taxpayers" money and put some of that money towards things 
that are needed more, like highways, schools, the environment.
    Microsoft has agreed to a great many of the terms demanded by 
Justice. There is internal interface disclose, computer-maker 
flexibility, granting computer makers new rights to configure 
Windows to promote non-Microsoft programs; there is an oversight 
committee. What more is there? Why should anyone work to make a 
company work, or invent something, if only to have to give it away? 
This whole lawsuit sets a very bad precedent.

[[Page 28750]]

    I urge you to let this decision stand and let us go forwards, 
not backwards.
    Sincerely,
    Shirley Hui
    PS: ?? a Corner, I can't be more ?? with ?? products. It's 
a great ??



MTC-00029794

ServComp
2700 Post Oak Blvd., Suite 600
Houston, Tx 77056
713/935-3600
713/935-3650 Fax
www.servcomp.net
FAX COVER PAGE
Attn: ATTORNEY GENE?? JOHN ASHCROFT
Company: US DEPT. OF ??
Phone No.: 202
Fax No.: 202 307 1454
From: Bob BEDD??FIELD
Company: SERVCOMP, INC.
Phone No: 713 935 3600 112
Fax No.: 713 935 3650
Date: 61 28 02
No. Pages: (Including Cover) 2
Message:
ServComp
2700 Post ?? Suit?? 400
713-935-3600
713-935-3650 fox
www.servcomp.com
January 25, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    This lawsuit against Microsoft has gone on long enough. There 
are other Issues of greater Importance facing our county and there 
is now a settlement In place that will, hopefully, end the 
hostilities between our government and Microsoft.
    Often overlooked throughout the course of this contentious 
litigation is the fact that there are many other IT companies, that 
have built their businesses off of Microsoft's leadership and 
innovative products. While few, of these companies are dependent 
upon Microsoft, they are dependent upon a reasonable stability In 
the marketplace. This litigation has disturbed this stability.
    The strength of this settlement is that it focuses on remedies 
for the original issues and leaves Microsoft Intact. I am therefore 
writing in favor of this settlement, and hope that similar actions 
will not be brought in the future.
    Sincerely,
    Bob Beddingfield
    Sales Director
    ServComp, Inc.
    2700 Post Oak Blvd, Suite 600
    Houston, TX 77056
    713-935-3600, ext. 112
    jrb @ servcomp.com



MTC-00029795

January 21, 2002
Attn Renata Hesse
US Department of Justice. Antitrust Division
601 D Street, NW, Suite 1200
Washington, DC 20530
    The opportunity to make commennts on the Microsoft annual 
lawsuit is much appreciated with the importance it carries for the 
economy. We would like to other our opinion for your consideration 
as you deliberate the proposed settlement of this case.
    As the owners of a wholesale plumbing supply company, we 
understand that government has a role in protecting consumers and 
businesses from monopolistic behavior. Although we were never 
supportive or the case against Microsoft, we acknowledge the Court 
of Appeals findings.
    To this end we believe that settlement is the best option for 
the economy and the high-tech industry.
    The key point in our minds in that settlement not only ends the 
suit, but it does accomoplish what the government set out to do; put 
a more watchful eye on Microsoft's business practices to ensure 
consumers are protected.
    What we have read about the details of the suit and the 
settlement talks us that the settlement that is on the table is a 
good compromise that gives the government what it is seeking. 
Microsoft some of what it wants, and the economy what it desperately 
needs. We hope your deliberations bring you to the same conclusion.
    Sincerely,
    John and Beverly Trimmell, Owners
    B & J Wholesale Plumbing Supply
    525 S Kansas Avenue
    Liberal, KS 67801



MTC-00029796

    To whom it may concern:
    I am responding to the proposed Microsoft settlement in 
accordance with the Tunney Act I was someone who has been an IT 
professional for the past seven years it disturbs me to learn that 
the proposed settlement will have no real affect on Microsoft and 
will not restore competition. It is imperative that a settlement to 
restrain Microsoft include:
    1. The equired publishing of API's, file formats, and other 
protocols to all developers. This is the only way to truly give 
independent soft-ware companies the ability to compete with 
Microsoft.
    2. Protection to OEM's that wish to load competitive software on 
their systems. This will allow OEM's to install the software that 
customers want.
    3. Full ??ricing disclosure from Microsoft on how much it 
charges OEM's for its products. This will allow consumers to make 
informed choices as to which products are the most cost effective 
solution.
    Thank you for you time.
    Mark King



MTC-00029797

January 16, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
Dear Mr. Ashcroft:
    As a Microsoft supporter, I would like to see this case 
concluded. I believe Microsoft has become powerful not by malicious 
intent, but because it makes a quality product that is reasonably 
priced.
    I do not agree with every decision that Microsoft has made in 
the past, but I understand the idea of aggressively marketing your 
own product. Either way, I do not agree with the allocation of 
scarce state and federal resources on problems that have already 
been solved.
    Under the settlement agreement, Microsoft has promised to change 
the way it develops, licenses, and markets its software. It has 
granted computer makers broad new rights to configure Windows to 
better promote non-Microsoft software on the Windows platform. Also, 
Microsoft has agreed not to retaliate against software or hardware 
developers who develop or promote software that competes with 
Windows. Microsoft has opened its inventions to the competition that 
would see that invention become obsolete. This goes against the very 
fundamentals of capitalism, but if it ends the case, then Microsoft 
is willing to concede.
    Although the settlement reaches further than Microsoft may have 
wished, Microsoft realizes that settling sooner is better than 
settling later. The longer that the case proceeds and innovation 
suffers, the greater the risk that American products may lose their 
competitive advantages in the world market. I am convinced that the 
only reason states would continue litigation would be an effort to 
appease Microsoft's competitors, rather than to protect consumers. 
Let's make sure that we don't lose our place as the world leader in 
the IT industry; let's end this debacle once and for all.
    Sincerely,
    Randall Baxley



MTC-00029798

28 January 2002
The Attorney General, John Ashcroft
US Department of Justice
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    I am writing today to encourage the Department of Justice to 
accept the Microsoft antitrust settlement. The issue, which should 
never have begun, has been dragged out long enough and it is time to 
put the issue to rest. A settlement is available and the government 
should accept it.
    Under the settlement, Microsoft gave in to many concessions in 
order to return to software design. They have agreed to give 
computer makers the flexibility to install and promote any software 
that they see fit, With no fear of retaliation, Microsoft has also 
agreed to license Microsoft software at a uniform price to computer 
makers no ma?? software the company decides to install or promote. 
Also Microsoft has agreed not to enter into any agreement that would 
obligate a computer maker to exclusively install or promote 
Microsoft software.
    Microsoft has given far too much in order to settle this issue. 
Microsoft and the technology industry need to move forward, arid the 
only way to move ahead is to put this issue behind us. In these 
days, we hear shouts of outrage that the government has not done 
more to bolster the airlines, Enron, K-Mart, and many other 
companies in financial trouble. It is truly outrageous that the 
government should do much to destroy one of the this country's most 
successful businesses.

[[Page 28751]]

    As unfair as it is to Microsoft, ask you to please accept the 
Microsoft antitrust settlement.
    Michael R. Yosko



MTC-00029800

7199 Bahne Road
Fairview, TN 37062
January 28, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    We wanted to write to you today to express our dismay over the 
Microsoft antitrust dispute. As Americans, we feel that this quit is 
contrary to the very ideals of Free trade and capitalism theft we 
treasure in this nation. It is our opinion that punishing a company 
or an individual for demonstrating the very cleverness and ingenuity 
upon which we have built this nation is un-American.
    Americans are unlike any other people in the world. It is our 
goal to became a success; to became something marc than our Fathers 
and grandfathers were: to start with nothing more than a good idea 
and a diligent work ethic and end up a success. This is the American 
dream, and it is this dream that is under attack in this suit.
    This litigation is not a question of whether or not Microsoft 
violated antitrust laws. It is a question of whet her or not we, as 
Americans, have the right to become successful without the 
interference of the government. We are pleased that this heinous 
suit has finally reached a conclusion that is satisfactory to all of 
the parties involved. However, it is our fondest wish that none of 
this unpleasant litigation had begun in the first place, Please keep 
the government out of the private sector. Thank you.
    Sincerely,
    Don Crohan
    Gayle Crohan



MTC-00029801

Robert Agness
608 Juanita Court
The Villages, FL 32159
January 28, 2002
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    As a concerned citizen who would like to see this process ended,
    I would like to ask for your approval of the proposed agreement 
in the Microsoft anti-trust lawsuit. This legal action appeared to 
have been punishment for not having given enough campaign 
contributions to the previous administration, which then led down 
the ridiculous path of Judge Jackson trying to break up Microsoft.
    It is time to come back down to earth and accept this more 
reasonable compromise without further legal action.
    The fact is that Microsoft has done more than any other company 
to move the PC industry forward over the last 20 years. With such 
advantageous terms, the Justice Department should finalize this deal 
and let this company continue to work toward further innovations. 
Considering Microsoft's flexibility of allowing non-Microsoft 
software programs to be placed on Windows, and offering to license 
intellectual property and access to its internal code, the 
competition should be quite pleased with this decision.
    It is time to end the arduous legal proceedings and get back to 
priorities. Please keep Microsoft intact and the software industry 
stabilized by moving forward with this plan. Thank you very much for 
your support.
    Sincerely,
    Robert Agness



MTC-00029802

FAX
DATE: 12802
TO: Renata Hesse, Dept of ??
 202, 616, 9937
FROM: Kim Waltman
Number of pages: (including cover sheet) 2
Please call 815-282-8053 if you do not receive all pages 
indicated.
Message:
January 28, 2002
Ms. Renata Hesse
Department of Justice, Antitrust Division
601 D Street NW, Suite 1200
Washington, DC 20530
    Dear Ms. Hesse,
    I am writing to you regarding you the Microsoft lawsuit. This 
lawsuit was brought against Microsoft by the federal government. 
During the course of this three-year lawsuit, the federal government 
has spent $30 million pursuing their case. The funding for the 
federal government's case comes from the taxpayers of this country.
    This case has had its day in court. And the Court of Appeals has 
ruled to do away with the lower courts' plan to break up the 
company. Let's put an end to the lawsuit. At this point, spending 
any additional taxpayer money would just be sending good money after 
bad. The proposed settlement agreement is the only logical solution.
    If this case is carried out any longer, it will only result in 
unnecessary increased expenses to consumers. I believe any 
additional public funds spent on this lawsuit are not being used for 
an appropriate cause. That is why I am asking that you move ahead 
with the settlement agreement without delay. The agreement will 
close the book on this overdone court case and allow us to move 
forward into the next century of technological advancements.
    Thank you for giving consideration to my opinion.
    Sincerely,
    Kim Waltman
    Founder
    InSync Communications



MTC-00029803

10852 NORTH KENDALL DR # 208
MIAMI, FLORIDA 33176-3469
January 24, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft,
    We are writing to show our support for the Microsoft antitrust 
settlement. It is of vital concern to this country that a climate of 
stability and support by established for American businesses to 
flourish, With the grave challenges facing America now, both in the 
domestic economy and around the world, self-destructive legal abuse 
is uncalled for.
    Microsoft has shown that it is willing to bend over backwards to 
reach a settlement that will help its partners and competitors 
perhaps more than itself. The settlement, whatever the effect it has 
on Microsoft, will greatly help the broader American technology 
industry. Software companies will be better able to have their 
products work with Microsoft's Windows operating system when 
Microsoft makes the code for the internal interfaces and server 
interoperability protocols that tie program together available. 
Computer manufacturers will have more flexibility to contract with 
other companies, like AOL Time Warner, RealNetworks, and Symantec to 
substitute their products for the program Microsoft includes in the 
standard Windows installation, such as internet Explorer. The 
American computer industry should benefit from the settlement I 
welcome your support and leadership for the settlement, Mr. Attorney 
General, The Federal Judge who will be deciding on the settlement 
should approve it in the best interests of the American public.
    Sincerely,
    Axel Heimer



MTC-00029804

OnQuest Technologies, Inc
January 17, 2002
Attorney General John Ashcroft
U.S, Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft,
    Whatever might be said of this lawsuit against Microsoft, it is, 
in my opinion, good that the entire case has settled. Without 
necessarily taking sides on any of the issues explored during the 
court proceedings, at the very least it can be observed that the 
tone was contentious and unnecessarily inflammatory.
    All of this has apparently created a perceptible nervousness 
among consumers that has, in turn, adversely affected both sales of 
computer products, as well as the economy in general.
    I am therefore writing to convey my support of the settlement, 
as well as my hope that there will be no further federal action 
against Microsoft, or any other IT company. The settlement assures 
that Microsoft will commit to better business practices, and change 
its software to reflect that.
    Starting with the next release of Windows XP, Microsoft will 
make their software easier to use for non-Microsoft software 
developers, and Microsoft will even make it easier for developers, 
since Microsoft will release its interfaces and protocols to them so 
they can be more competitive.
    This really is more than a slap on the wrist; it's a whole new 
way of doing business.
    Sincerely,
    Luis Navarro
    President

[[Page 28752]]



MTC-00029805

January 28, 2001
Attorney General John Ashcroft
U.S. Department of Justice
950 Pennsylvania Avenue NW
Washington, DC 20530
Fax: 1-202-307-1454
    Dear Mr. Ashcroft:
    This letter pertains to the recent settlement of the antitrust 
lawsuit between Microsoft and the Department of Justice. I am in 
favor of leaving the company as it is--NOT breaking it up. 
Let's accept the terms of the settlement and let Microsoft and the 
industry move forward.
    I support final adoption of the settlement as soon as possible. 
I feel the terms are reasonable and fair to all parties--they 
meet, or exert go beyond, the ruling by the Court of Appeals. This 
has been going on far too long.
    Helen M. Pickering
    3815 E. Funk Avenue
    Spokane, WA 99223



MTC-00029806

COLESYSTEMS
Business Applications
Networking Technologies
Software Development
Web Commerce
Training
January 28, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft,
    I have always believed that it was a bit overzealous for our 
government to have actually reacted with a federal lawsuit against 
Microsoft simply because a few of Microsoft's competitors had 
suggested it. I agree that Microsoft may well have employed 
aggressive marketing and sales tactics, but these tactics had never 
risen to the level of needing federal court intervention. I worry 
more about any business that doesn't aggressively pursue sales.
    The IT business, by its very nature, is a very fluid business. 
Where one particular company may be dominant today, another will be 
tomorrow. It is incumbent upon all who hope to survive in the IT 
world to change with the current times and technologies. Any company 
that does not--even a company with the apparent invulnerability 
of Microsoft--will soon find itself relegated to yesterday's 
outmoded ideas. By the very nature of the IT business, therefore, 
Microsoft would have had to change to remain competitive. The 
limitations on Microsoft brought on by the settlement, such as 
disclosure about internal interfaces of Windows, will only make 
trade secrets public, and prepare IT engineers for the "next 
big thing."
    The irony here is that this lawsuit, and the subsequent 
settlement, only delayed what would have had to happen on its own 
anyway. I am hopeful that this marks the end of any federal action 
against Microsoft, or any other IT business.
    Sincerely,
    Ivan Cole
    Chief Technology Officer
    cc: Representative Jerrold Nadler
    174 Hudson Street
    New York NY 10013
    Phone: (212) 965 6400
    Fax: (212) 965 6401
    Toll Free: 888-COLESYS
    Web: http://wwwcolesys.com



MTC-00029807

David Millage
STATE REPRESENTATIVE
Forty-First District
Statehouse (515) 281-3221
e-mail--dmillag @ legis.state.ia.us
HOME ADDRESS
3910 Aspen Hills Drive
Bettendorf, Iowa 52722
Home: (319) 332-8723
Office: (319) 388-8417
House of Representatives
State of Iowa
Seventy-Ninth General Assembly
STATEHOUSE
?? 50319
COMMITTEES
Appropriations, Chair
Judiciary
Labor & Industrial Relations
State Government
January 28, 2002
Renata Hesse
Department of Justice, Antitrust Division
202-616-9937
VIA FACSIMILE
    Ms. Hesse:
    Iowa Attorney General Tom Miller's leadership in the Microsoft 
antitrust case has caused many Iowans to track the situation with a 
watchful eye.
    According to the Wall Street Journal, Miller "was the one 
who originally cooked up the idea of a multi-state assault on 
Microsoft." (November 9. 2001) Regarding the case, Miller told 
the Journal, "Everyone knew it was high profile. This one was 
a no-"??rainer." (The same article on November 9, 2001.)
    I serve as Chair of the Iowa House Appropriations Committee and 
I am trying to solve the sizable budget deficit the State of Iowa is 
facing. I have publicly urged AG Miller to sign on to this 
settlement and bring this case to an end.
    The state is scraping for every dollar in a time of budget cuts, 
yet our state attorneys are spending staff time and money pursuing 
this case--that has not and likely will not bring anything back 
to our state. Thus far, Miller has claimed over $1.1 million in 
spending on the case. Of the 19 states involved when that claim was 
filed, only three states topped Iowa's spending, including much 
larger states like California and New York. According to the Wall 
Street Journal, Miller is a main reason several states are balking 
at a settlement, "...some state pols will stoop lower than 
others to latch onto a celebrated case in hopes of boosting their 
name recognition for future electoral ambitions. These antics might 
have been tolerated when the economy was stronger. but such 
frivolity looks conspicuously out of place after September 11. In 
light of the discovery that we have real enemies in the world, 
suffice it to say the Microsoft prosecution looks more myopic and 
perverse than ever."--Wall Street Journal.
    "Finally, A Settlement" Nov. 2.
    The hard-earned money of taxpayers can be better spent, and 
consumers will be no better off if this case are prolonged. At a 
time of belt-tightening all over the country, the attorneys general 
who remain on the case are acting like they have unlimited resources 
for an indefinite pursuit of an American business that anchors a 
sector of an already limping economy.
    Americans deserve fiscal responsibility from their government. 
Please We strong consideration to approving the settlement in this 
case.
    Sincerely,
    David Millage
    Iowa House of Representatives



MTC-00029808

Lon Anderson
REPUBLICAN CAUCUS STAFF
IOWA HOUSE OF REPRESENTATIVES
STATE CAPITOL
Des Moines, Iowa 50309
(515) 281-5184
January 28, 2002
Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
    Dear Ms. Hesse,
    With utter consternation, I have watched my state attorney 
general continue to battle Microsoft on the issues raised in the 
current lawsuit pending with the U.S. Department of Justice. I'm not 
clear on his motives, given that 1owa is facing a severe budget 
crisis and the expenses of his continued crusade against Microsoft 
would be much better used to aid Iowans with their education and 
security budgets than it is to relentlessly pursue one of the most 
successful companies in the country.
    I'm always amazed when politicians like Tom Miller conveniently 
use lawsuits as a means to advance their own personal agenda at the 
expense of the taxpaying public they claim to represent. Anyone with 
any common sense realizes how ludicrous it is to continue this 
lawsuit when a settlement has been proposed that addresses the 
concerns raised in the original complaint.
    In my opinion, from its onset, this lawsuit was brought by 
jealous colleagues who are in awe of Bill Gates and his phenomenal 
capacity to invent and market his products. Isn't that what America 
is all about? In a few short years, Gates built one of the most 
successful and profitable companies in the world, which, by the way, 
made billions of dollars for investors across the globe. To portray 
this man as an evil to be "dealt with" is unfair and 
unwarranted. The Bill Gates and Microsoft legacy will be one that 
stands the test of time.
    Settle this nuisance lawsuit as quickly as possible so we can 
all get back to business.
    Sincerely,
    Lon Anderson
    Research Analyst



MTC-00029809

To,
The Department of Justice,

[[Page 28753]]

United States of America.
    Dear Sir or Madam:
    Sub: Opinion on Microsoft settlement
    Since it has been proven in US court of justice that Microsoft 
Corporation has been unlawfully maintaining its monopoly, violating 
US competition laws. Being a software engineer for about 3 years now 
I have been in situations when I was a victim of the unlawful 
monopoly and hence, I would like to make a few suggestions and give 
possible solutions so that the fights and freedom of people like me 
is protected in the free market.
    Firstly, the judgment has overlooked an important aspect. All 
OEM's licensing Microsoft software should be made to provide an 
option without the Microsoft product. For e.g., An OEM selling 
desktop computers preinstalled with Microsoft Windows Operating 
System should give an option of a desktop without the Microsoft 
software. The rationale being "Why should a consumer who just 
wishes to buy a desktop computer be forced to have Microsoft 
software we-installed on it." Currently there is not a single 
portable computer (notebook) in the market which offers a option 
other than Microsoft Windows.
    Though its good to see nearly all clauses of the 
"Prohibited Conduct" talk about the Microsoft licensing 
policy in the section of the judgment. But, a very important aspect 
has been missed out: Currently Windows OS overwrites the Master Boot 
Record so that no other preinstalled operating system would be 
recognized. Microsoft should be asked to make changes to their OS so 
that it stops it intrusive behavior and thus making other OS to co-
exist on the same machine.
    Sincerely hoping that my comments would be helpful to the 
justice effort.
    Regards,
    JayaBharath Goluguri
    Texas Instruments Inc.
    P.O. Box 660199
    12500 TI Boulevard, MS 8723
    Ph: 972-978-6807(c)



MTC-00029810

    To the United States Department of Justice:
    Sub: Opinion on Microsoft settlement
    I am writing in response to the proposed settlement which is 
currently under the 60 day public comment period. I consider myself 
to be a person whom the outcome of this case will have a very 
significant effect. Since it has been proven in US court of justice 
that Microsoft Corporation has been unlawfully maintaining its 
monopoly, violating US competition laws. Being a software engineer 
for about 3 years now I have been in situations when I was a victim 
of the unlawful monopoly and hence, I would like to make a few 
suggestions and give possible solutions so that the rights and 
freedom of people like me are protected in the free market.
    Firstly, the judgment has overlooked an important aspect. All 
OEM's licensing Microsoft software should be made to provide an 
option without the Microsoft product. For e.g., An OEM selling 
desktop computers preinstalled with Microsoft Windows Operating 
System should give an option of a desktop without the Microsoft 
software. The rationale being "Why should a consumer who just 
wishes to buy a desktop computer be forced to have Microsoft 
software pre-installed on it." Currently there is not a single 
portable computer (notebook) in the market which offers a option 
other than Microsoft Windows.
    Microsoft has been using open standards in its products and then 
making some proprietary extensions and claiming all rights over it 
including closing the source of the so-far open protocol How can 
Microsoft claim trade secrecy for a protocol that is distributed 
over the Internet? For example the 'Kereberos" case.
    Microsoft makes it unable for prospective purchasers of its 
operating system to make informed judgments regarding 
interoperability with other operating systems in connection with 
their purchasing decisions. Also it overwrites MASTER BOOT RE CORD 
of all other previous OS's thus ensuring that user does not 
have access to his/her OS, other than WINDOWS. The fact is that now, 
Microsoft has a monopoly on not only operating systems, but also to 
a lesser degree, office software and web browsers. They have 
blatantly and obviously abused this monopoly in many cases over the 
years and it has to stop. The DOJ has made that very clear. However 
the penalties sought to be imposed nor the agreement between the DOJ 
and MICROSOFT do not properly address and punish MS for its judged 
illegal Monopoly. All communication standards and protocols and API, 
file system formats must be made open source so that all developers 
can effectively compete and produce more efficient software for the 
users who are currently forced into buying MS software by various 
illegal means.
    Sincerely hoping that my comments would be helpful to the 
justice effort.
    Regards,
    Ravi Shankar R Jagarapu
    University of Texas at Dallas
    2200 Waterview Pkwy, # 2125
    Richardson, TX 75080
    Ph: 972-437-2846



MTC-00029811

Tim Pawlenty
Majority Leader
District 38B
Dakota County
COMMITTEES: CHAIR, RULES AND LEGISLATIVE ADMINISTRATION
Minnesota House of Representatives
January 28, 2002
Ms. Renata B. Hesse
Antitrust Division
U.S. Department of Justice
601 D Street NW
Suite 1200
Washington, DC 20530-0001
    Dear Ms. Hesse:
    I applaud the leadership displayed by the Department of Justice 
and the nine Attorneys General for developing the proposed Microsoft 
settlement agreement that balances the protection of consumer 
interests and the competitive process.
    I believe that this settlement will preserve Microsoft's ability 
to innovate and engage in normal procompetitive activities, critical 
during our nation's current economic recession. At the same time, 
the settlement is a win for consumers, with its broad scope of 
prohibitions and obligations imposed on Microsoft. It will certainly 
require substantial changes in the way that Microsoft does business. 
It imposes significant costs on the company and entails an 
unprecedented degree of oversight. Furthermore, the agreement 
strikes an appropriate balance within the technology industry, 
providing opportunities and protections for firms seeking to compete 
while allowing Microsoft to continue to innovate and bring new 
technologies to market.
    This reasonable settlement will help consumers, the industry, 
and the economy to move forward.
    Very truly your,
    Tim Pawlenty
    Majority Leader



MTC-00029812

Raymond E Beal
300 E 27th St
Dover OH 44622
January 28, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    After three long years of court battles Microsoft and the 
Department of Justice have reached a settlement regarding the anti-
trust stilt. I believe that the settlement will be beneficial to 
both the IT industry and the consumers alike. It is necessary that 
all those who are involved in this suit put aside their differences 
and work to put this issue behind them. I would like to go on record 
as being a staunch supporter of the settlement.
    This settlement went further than what Microsoft would have 
liked, but they believe that settling the case now is the right 
thing to do to help the industry and the economy move forward. The 
agreement is fair and reasonable, and was arrived at after extensive 
negotiations. The industry will be more competitive since Microsoft 
has agreed not to retaliate against competitors who produce, promote 
and ship software that competes with Microsoft's.
    I am satisfied with this settlement since it is fair and 
reasonable to all parties involved.
    Sincerely,
    Raymond Beal



MTC-00029813

Stephen and Diane Walter
1460 Mills Court
Menlo Park, CA 94025
28 January 2002
Renata B. Hesse
Antitrust Division
US Department of Justice
601 D Street NW
Suite 1200
Washington, DC 20530-001
Fax: 1-202-307-1454
1-202-616-9937
RE: Microsoft Settlement
    We urge the Department of Justice to withdraw its consent to the 
revised proposed Final Judgment. The agreement, as it now stands, 
will allow Microsoft to extend its monopoly to most if not all 
aspects of

[[Page 28754]]

computing. The new settlement allows firms better access to APIs 
necessary to work with Windows, which only reinforces the Windows 
monopoly.
    We ask that you (1) restrict Microsoft's practice of forcing 
Internet Explorer in contractual tying, (2) restrict their practice 
of giving favorable Windows pricing deals to OEMs, (3) require 
Microsoft to allow users to remove icons from Windows desktops, (4) 
restrict Microsoft's bundling of middleware to force its monopoly, 
(5) re-insert the source code licensing provision of the 2000 DOJ 
settlement, and (6) allow OEMs to modify Windows to add features.
    As you are aware, it is small business that its the fire of the 
US economy. By allowing Microsoft to extend its monopoly as your 
proposed agreement will do, you are in essence a{time} lowing them 
to continue chasing small companies out of business. Microsoft 
tolerates NO competition--no matter how small, Please, please 
take this shark out of the waters of our economy.
    Sincerely,
    Diane Walter



MTC-00029814

632 Khyber Lane
Venice, FL 34293
January 27, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    The nine plaintiff states in the Microsoft antitrust case who 
are seeking to overturn the settlement reached last November are 
claiming to act in the best interest of the public. They are 
mistaken. I do not understand the intricacies of the Microsoft 
antitrust case. but I do know that extended litigation would be 
anything but beneficial to the consumer. I do not believe it is 
necessary to continue litigation at this point. Extended suit can 
only result in wasted time and money.
    The settlement is reasonable. Microsoft will be allowed to 
remain intact, and it will also retain control over its software, 
but it will be required to give its competitors access to various 
parts of Microsoft technology and to refrain from monopolistic 
actions. For example, Microsoft will not be permitted to enter into 
any contracts that would require a third party to distribute 
Microsoft software either exclusively or at a fixed percentage.
    It is wrong for States to attack Microsoft under the guise of 
protecting the consumer. Consumers benefited from Microsoft's 
developments & marketing. Allowing these nine states to cause 
the existing ruling to be overturned will only result in expensive 
litigation, which is contrary to the best interest of consumers.
    Thank for your consideration.
    Kenneth Twigg



MTC-00029815

620 Terrace Place
Norman, OK 73069-5037
January 25, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I completely disagree with the last three years of litigation 
against Microsoft. The government has no right to keep messing 
around with private enterprise and it stands to reason why the 
economy took a turn for the worst when America's number one company 
is a victim of lawsuits brought on by the Attorney General and 
Microsoft's competitors.
    The terms of the settlement are not fair as they force Microsoft 
to disclose interfaces that are internal to Windows" operating 
system products. They also force Microsoft to grant computer makers 
broad new rights to configure Windows so that competitors can more 
easily promote their own products.
    Although the terms of settlement are not fully justified, I urge 
your office to implement it as soon as possible, because our economy 
cannot afford further litigation against it. Thank you.
    Sincerely,
    Glen Bell
    cc: Senator Don Nickles
    Representative J.C. Watts, Jr.



MTC-00029816

decisionmarkTM
818 Dows Rd. S.E., Cedar Rapids, Iowa 52403-7000
Phone: 319-365-5597
Fax: 319-365-5694
January 28, 2002
Renata Hesse
Trial Attorney
Anti-Trust Division
U.S. Department of Justice
601 D St., NW
Suite 1200
Washington, DC 20530
    Dear Ms. Hesse:
    It is no secret that one of the reasons that Microsoft has 
succeeded is that the federal government has had very little control 
over the technology industry. Over-regulating this industry will 
slow progress.
    Technology has fueled the current economic expansion and we 
should be looking to preserve its status rather than take it down. 
As a regular consumer of high technology products, I enjoy the 
benefits of a free and competitive market prices are affordable, the 
products are of high quality, and the rate of development is the 
fastest of any market in the world.
    There is now an agreement between the opposing parties in this 
case that designates a fair system of checks and balances. 
Additionally, it sets out a plan to monitor future activities and a 
technology committee to enforce them.
    Resolving this case once and for all is not only beneficial to 
the courts and all participants, but also to the marketplace, t hope 
you will accept this fair agreement.
    Sincerely,
    David Cechota
    2311 Bever Ave SE
    Cedar Rapids, IA 52403



MTC-00029817

Carolyn Sergel
3100 Springdale Boulevard
Lake Worth, Florida 33461
January. 22, 2002
Attorney General Ashcroft
US Department of Justice
Washington, DC 20530
    Dear Mr. Ashcroft,
    I am writing in full support of the recent settlement between 
Microsoft and the US department of Justice. Although I think the 
lawsuits have dragged on too long to date, I am happy to see a 
settlement has been reached. I am confident that the settlement will 
serve the public's best interests and protect the consumer.
    The terms of the settlement are more than fair. Microsoft will 
be forced to document its Windows interface codes for competitors. 
It will also be monitored by a special "Technical 
Committee" that will make sure that it stays within the bounds 
of the settlement.
    Our nation cannot afford to continue litigation on fids issue. 
For the sake of our IT sector and economy, please finalize the 
settlement. Microsoft needs to focus on business, not politics.
    Sincerely,
    Carolyn Sergel



MTC-00029818

4040 Lake Forest Drive W
Ann Arbor, MI 48108
January 2.5, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing to ask the Department of Justice to accept the 
Microsoft antitrust settlement The suit by AOL that Microsoft has 
violated antitrust laws is outrageously beyond my reasonable 
imagination. Microsoft has done nothing wrong and both companies 
should work together as well as on a competitive bases to improve 
the benefit of end customers. It is absolutely bad idea for both 
companies and the government to spend their resources for nothing. A 
settlement is in place and the terms are fair, I would like to see 
the government accept it.
    I believe the settlements by Microsoft are more than I could 
think of as a private company could endure. At the same time, the 
Justice Department should use its resources from tax dollars in more 
productive ways for the consumers than harassing Microsoft as a 
company.
    Sincerely,
    Seha Son



MTC-00029819

January 24. 2002
Attorney General ,John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing you today to express my opinion m regards to the 
Microsoft settlement that was reached m November. I favor Microsoft 
and support the settlement that was reached by Microsoft and the 
DOJ. I am anxious to see an end to the costly litigation that has 
gone on for throe years. Microsoft has agreed to all terms and 
conditions of this agreement, and will be monitored by the

[[Page 28755]]

government to ensure, compliance with the agreement Under this 
agreement, Microsoft has agreed to grant computer makers broad new 
rights to configure Windows so as to promote non-Microsoft software 
programs that compete with programs that. compete with programs 
included within Windows. Microsoft has also agreed to disclose 
information about. various internal interfaces in Windows. This 
litigation is costly and a waste of time. I urge you to support this 
settlement so Microsoft. can be free to design and market its 
innovative software, which will benefit our society. Thank you for 
your support. Sincerely,
    Roger Perer??
    3616 Spokeshave Lane
    Matthews, NC 28105



MTC-00029820

Fax Cover Sheet
James and Christianna Downs
3624 Thai Road
Titusville, FL 32796-4017
(321) 267-2485
1-202-307-1454
Supporting comments regarding current Microsoft settlement issue.
James and Christianna Downs
3624 Thai Road
Titusville, FL 32796
January 27, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    We are writing you today in regards to the Microsoft settlement 
issue, We support the settlement that was reached in November and 
feel that this costly dispute has gone on too long. Further pursuit 
of Microsoft will cement the impression held by stockholders that 
our government is simply conducting a harassment program, Shame on 
those responsible!
    The current settlement is thorough and complete. Microsoft has 
agreed to share more information with other companies and give 
consumers more choices. Microsoft has agreed to disclose for use by 
its competitors various interfaces that are internal to Windows' 
operating system products.
    Microsoft has also agreed to grant computer makers broad new 
rights to configure Windows in order to promote non-Microsoft 
software programs that compete with programs included within 
Windows. Computer makers will now be free to remove the means by 
which consumers access various features of Windows, such as 
Microsoft's Internet Explorer web browser, Windows Media Player, and 
Windows Messenger.
    Unfortunately for stockholders, this settlement will benefit 
companies attempting to compete with Microsoft. We accept that 
consequence, as this settlement will benefit consumers and will be 
good for stimulating our lagging economy. Please support this 
.settlement so our precious resources can be funneled into more 
pressing issues. Thank you for your support.
    Sincerely,
    James and Christianna Downs



MTC-00029821

The Seale Group, Inc.
The Source for Developer Training
January 28, 2002
8601 Dunwoody Place Suite 310
A??anta, Georg?? 30350
(770) 992-4888
FAX (770) 992-1296
www.seste.com
Attorney General John Ashcroft
Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft,
    The government's case against Microsoft quickly degenerated into 
such a war of rhetoric that it became impossible to decipher the 
real issues. It is my opinion that the government has badly 
misunderstood the free market concept of employing aggressive 
marketing techniques over and against its contention that Microsoft 
was in any way attempting to create an atmosphere of unfair 
competition.
    However, now that the case has entered into the settlement 
phase, these questions will remain unresolved. I am writing to 
suggest that the settlement itself is a decidedly better option than 
the continuation of the litigation. However, I may have some 
misgivings over some of the more salient terms of the settlement, 
particularly the provisos for information and divulging of 
intellectual property.
    Sincerely,
    Christopher Seale President



MTC-00029822

January 28, 2002
Renata Hesse
Trial Attorney
Department of Justice Antitrust Division
601 D Street NW, Suite 1200
Washington, DC 20530
Re: U.S. vs. Microsoft
    Dear Ms. Hesse:
    This letter will acknowledge my support for the settlement 
reached by the Department of Justice and Microsoft Corp.
    Realizing the time and expense involved, there does not appear 
to be further reason to expend any more taxpayer money on an already 
long drawn out process. This case appears to have been thoroughly 
litigated and attempts by competitors to influence judicial review 
appear unfounded and contrary to the best interests of the consumer.
    Thank you for the chance to express my view of this very 
important issue.
    Sincerely,
    Susan B. Sweetland
    Account Executive
    Fax: 202 616-9937



MTC-00029823

RE: Microsoft Settlement
January, 28, 2002
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    While my business has not been adversely affected by this 
lawsuit against Microsoft, had it continued to its anticipated 
bitter end, I cannot help but think that all IT businesses would 
somehow have been hurt.
    There is a perception that Microsoft had grown a little too big 
and successful for its own good. Adding to that perception is the 
allegation that they had treated much of their customer base (the 
OEMs) with a certain amount of undue, over-protective suspicion. 
However, this has more than adequately addressed in the settlement, 
and the settlement has ample protections figured into it.
    It is good on several levels that there has been a settlement. 
While in a few areas, the settlement goes beyond the lawsuit, it 
does address the initial concerns leveled at Microsoft by their 
competitors. I am writing to express my support for this settlement, 
and hope that with it the IT community, can resume business in a 
more normal fashion.
    Sincerely,
    Walter A. Householder
    President
    cc: Representative left Flake Microsoft
    SUITE 400 2999 NORTH 44th STREET, PHOENIX,ARIZONA 85018 
602.840.4750 FAX 602.840.5250 WWW.KDC-PHOENIX.COM



MTC-00029824

595 Providence Street
Everett, PA 15537
January 22, 2002
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    This correspondence is to show my support for the proposed 
settlement that has been reached between the Justice Department and 
Microsoft. The litigation has lasted for over three years, and the 
time has come to worry more about our slumping economy than a 
company who has been vital to the economy.
    It is nice to see that the government and Microsoft both 
realized that the best way to stop a recession is to attack the 
problem at its source. As soon as the antitrust suit against 
Microsoft was announced, the market started to dive. The longer the 
litigation lasted, the lower our economy sunk. The settlement will 
allow the IT industry to be more competitive, and Microsoft will 
have to work closer with their competitors. They will actually share 
information and source code to their products just so their 
competitors can make products that are compatible with Microsoft's.
    All in all, this settlement is the best thing that could have 
happened, and I support it all the way.
    cc: Senator Rick Santorum
    Sincerely,
    Robert Harclerode



MTC-00029825

Charles H. Schaaf Jr.
4900 Southwest 31st Avenue
Fort Lauderdale, FL 33312
January 28, 2002
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    In the interest of ending this costly litigation, I would like 
to ask for your support

[[Page 28756]]

of the pending settlement with Microsoft Corporation. This case has 
been motivated by states that want to protect their weakened 
software businesses, which would seem antithetical to America's 
purported belief in the free market system. The case should be 
wrapped up at the earliest opportunity.
    This agreement is a very good one for the competition, as 
Microsoft has made several gestures to encourage more competition in 
the industry, even surpassing some of the government's initial 
complaints. They will allow computer makers to receive universal 
terms and conditions on licensing the Windows operating system, 
while working without any contractual quotas to distribute or 
promote their technologies. Additionally, the broader rights of 
these companies to offer non-Microsoft software will enable software 
developers plenty of opportunities to gain a bigger share of the PC 
market.
    In light of the ongoing struggles of the U.S. technology sector, 
it is time to accept this deal and get these companies back to 
business. Any further action would only postpone a solution and cost 
taxpayers more government time and money. I thank you for your 
support.
    I wonder if all the lawsuits that American businesses have to 
put up with will ruin our economy.
    Sincerely,
    Charles Schaaf



MTC-00029826

2516 NE 37th Drive
Fort Lauderdale, FL 33308
January 25, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I avidly support the Microsoft Corporation and have so for many 
years. Thus, the federal case against Microsoft over antitrust laws 
met me with trepidation. I do not believe that the federal 
government was justified in enacting the outdated antitrust laws 
against Microsoft. Despite this, however, the settlement that was 
reached in November is suitable in that it ends the negotiation 
process.
    Microsoft has made many concessions in an attempt to end this 
process. Microsoft has agreed to disclose much of the internal 
information regarding the design of Windows. Microsoft has agreed to 
disclose both the protocols and the design interfaces of the Windows 
system to its competitors on reasonable grounds. Now Microsoft 
competitors can access this information when designing software. The 
software designed from information sharing should result in products 
that are compatible.
    Microsoft has done enough. They have complied with all the terms 
of the federal government. I believe it is time to put this issue to 
rest once and for all.
    Sincerely,
    Wynn Courtney



MTC-00029827

1001 NW 63rd Street Suite 280
Oklahoma City, OK 73116
January 25, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing to support the implementation of the recent 
settlement between the U.S. Department of Justice and Microsoft. 
There is no sense in continuing litigation a against a company that 
is the only bright in our sorry economy. I do not think the lawsuit 
should have begun in the first place. Microsoft has made a good 
offer and the rune states opposing the settlement should accept it. 
Microsoft is giving away technological secrets, granting broad new 
rights to computer makers to configure. Windows so as to make it 
easier for non-Microsoft products to be promoted, and a three-person 
team will monitor compliance with settlement.
    I urge your office to finalize the settlement and to make sure 
that further unnecessary lawsuits against Microsoft do not occur. 
Thank you. My losses in the stock market during the past year have 
been in excess of $2,000,000 and Microsoft is the only bright spot I 
have left in my technology portfolio, I urge you to get this lawsuit 
settled and allow Microsoft to work on behalf or the stockholders 
and America.
    Sincerely,
    George Platt
    CC: Senator Don Nickles



MTC-00029828

STRUCTURAL ASSOCIATES, INC.
General Contractors/Construction Managers
January 28, 2002
Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D. Street NW, Suite 1200
Washington, DC 20530
Fax: (202) 616-9937
Re: United States vs. Microsoft
    Dear Ms Hesse:
    I believe that the proposed consent decree between Microsoft and 
the U.S. Department of Justice provides a fair settlement of this 
case.
    I support the settlement because I believe it is in my best 
interest as a software user, both Microsoft and other.
    Sincerely,
    Larry M. Ike
    Controller
    5903 Fisher Road ?? East Syracuse, New York 13057 ?? Phone: 
(315) 463-0001 ?? Fax (315) 432-0795 ?? E-mail: 
info @ structuralassociates.com
    Regional Office: PO Box 43968 ?? 7939 Honeygo Blvd., Suite 226 
?? Baltimore, Maryland 21236
    Phone: (410) 931-0905 ?? Fax (410) 931-0135 ?? E-
mail: bill @ graytechnologies.com



MTC-00029829

MASTERMAN ADVOCATES
Beth J. Masterman, Esq.
4 Philbrook Terra??e
Lexington, Massachusetts 02421
Telephone: (617) 227-9404
Fax: (781) 863-8550
BJM @ mastermanadvocat??.com
Publi?? Consulting and Legal Services
Honorable Colleen Kollar-Kotelly
U.S. District Court, District of Columbia
c/o Renata B. Hesse
Antitrust Division
U.S. Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530-0001
RE: U.S. v Microsoft
    Dear Judge Kollar-Kotelly,
    The proposed settlement between Microsoft and the Department of 
Justice seems inadequate in resolving Microsoft's monopoly of the 
market. The settlement may serve to promote further monopolies for 
Microsoft in web services and other related products. This 
settlement does not sufficiently protect competitors against 
predatory pricing and does not protect consumer choice. The 
unanimous ruling by the Court of Appeals for the District of 
Columbia against Microsoft should warrant a strong remedy and this 
settlement does not meet those standards. Microsoft's violation of 
federal antitrust is no longer an issue it is time that they are 
held accountable for their questionable practice& It is time 
that we find a remedy that meets the appellate court's standard to 
"terminate the monopoly, deny Microsoft the fruits of its past 
statutory violations, and prevent any future anticompetitive 
activity." This proposed settlement fails to do so.
    The settlement says that Microsoft "shall not enter into 
any agreement" to pay a software vendor not to develop or 
distribute software that would compete with Microsoft's products. 
However another provision permits those payments and deals when they 
are "reasonably necessary." The ultimate arbiter of when 
these deals would be "reasonably necessary?" Microsoft. 
The settlement does not go far enough to provide greater consumer 
choice, and leaves Microsoft in a position that it can continue to 
charge whatever it wants for its products. Consumers should be 
protected from these types of practices Enforcing federal antitrust 
laws is vital to maintaining the integrity of free markets. It is 
Important that we continue to enforce them to protect tile welfare 
of consumers and the fundamentals that contribute to what makes our 
country's industries great.
    I appreciate you taking your time to examine this important 
matter.
    Sincerely,
    Both Masterman
    President
    Masterman Advocates
    CC: Honorable Tom Reilly, Attorney General Commonwealth of 
Massachusetts



MTC-00029830

O'Sullivan & Associates
333 Victory Road
Quincy, MA 02171
U.S. v Microsoft
January 28, 2002
Hon. Colleen Kollar-Kotelly
U.S. District Court, District of Columbia
C/O Ms. Renata Hesse
Antitrust Division
United States Department of Justice
601 D Street NW
Suite 1200
Washington, DC 20530-0001

[[Page 28757]]

    Dear Judge Kollar-Kotelly,
    The Antitrust Procedures and Penalties Act, also called the 
Tunney Act, was passed to insure that competition and consumer 
choice continue in the marketplace. With regard to Microsoft, 
neither competition nor consumer choice seems to be a concern.
    Manufacturers of computers are hamstrung as are those who use 
computers because they cannot install the software they prefer on 
their computers. Instead Microsoft, which has become a monopoly in 
this arena dictates what may be used. Software developers need to 
have complete information about Microsoft's operating system so that 
they can compete creating a competitive market.
    Included among the concerns I have in looking at the remedy are:
    -Microsoft will be permitted to expand its control by 
bolting applications to Windows using a "commingling 
code". This violates antitrust law.
    -Some of the future applications which will undoubtedly be 
included are: financial, cable services as well as an expanded use 
of the internet.
    -Microsoft is required to share technical information 
concerning Windows. The catch is that Microsoft itself will 
determine if there is any possible situation where its security or 
software licensing may be compromised. The likelihood that Microsoft 
will use this option is very high.
    -The manufacturers' concern is that Microsoft will have 
access to its intellectual properties by virtue of doing business 
with the software giant.
    -Microsoft will make decisions concerned with which 
companies it will share technical information as called for m the 
settlement. There is a clause indicating that sharing information 
must be reasonably necessary.
    -A three person technical committee will be set up to hear 
violations.
    -It is highly unlikely that a company will take on the 
giant when it could lose the challenge and risk retaliation in the 
future.
    -One of the three people on the committee is appointed by 
Microsoft; one by the Department of Justice and the third must be an 
individual who will be agreed to by both Microsoft and the 
Department of Justice. This arrangement gives an interesting 
advantage to Microsoft.
    -The findings may not be admitted into court in 
enforcement proceedings. Additionally the compliance is for only 
five years.
    For the most part after all the years of investigating and 
litigating there will be little or no change in the way Microsoft 
does business. I appreciate your interest in tiffs matter. If there 
is any way with which I may be of assistance, please contact me.
    Sincerely,
    Paul J. O'Sullivan
    CC: Tom Reilly



MTC-00029831

Gregory & Associates
Honorable Colleen Kollar-Kotelly
U.S. District Court,
District of Columbia
c/o Renata B. Hesse
Antitrust Division
U.S. Department of Justice
601 D Street NW
Suite 1200
Washington, DC 20530-0001
RE: U.S. v Microsoft
    Dear Judge Kollar-Kotelly,
    I would like to express my dissatisfaction with the settlement 
between Microsoft and the Department of Justice. I feel that the 
settlement, made virtually no impact on protecting consumers from 
companies like Microsoft who have monopolies in the marketplace.
    The settlement has many loopholes and its level of enforcement 
is questionable, this does not provide consumers the level of 
protection they need for greater consumer choice. In addition the 
settlement leaves Microsoft in a position to continually raise 
prices for their products. It is my understanding that many consumer 
groups have opposed the settlement.
    The agreement states that Microsoft "shall not enter into 
any agreement" to pay a software vendor not to develop or 
distribute software that would compete with their products, but it 
is Microsoft that will be the final decision maker on that 
provision. The agreement also states that Microsoft must share 
certain technical information, but only if it would not harm the 
company's security or software licensing. Again, Microsoft will be 
the final decision maker regarding this matter. The settlement does 
nothing to deal with the effects on consumers and businesses of 
technologies such as Microsoft's Passport.
    The enforcement of the settlement is questionable at best. The 
three person technical committee that will be assigned to monitor 
any violations made by Microsoft of the agreement is comprised half 
of people selected by Microsoft, and if any violations are found, 
the work of the committee cannot be admitted into court.
    I find these inadequacies to be too broad to accept this 
settlement. I hope that Microsoft will not be able to continue to 
preserve its monopoly while consumers and competitors are subject to 
the practices that are supposed to be protected by antitrust laws.
    Thank you for your time.
    Regards,
    CC: Attorney General, Tom Reily
    77 North Washington Street
    Boston, MA 02114.1908
    Phone 617.367.6449
    Fax 617.367.6299
    Email [email protected]



MTC-00029832

TO: Microsoft
From: ??tore Val??
Date: 1/28/02 
P??: ?? will do ?? possible to help Microsoft ?? believe in 
Microsoft and the Company Philo??ply.
Salvatore Volvo
101 N Woodland Ridge
Elma, NY 14059
January 28, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    This is to give my support to the recent settlement between 
Microsoft and the Department of Justice. This litigation has gone on 
long enough, and it is time to settle this matter. The basis of the 
suit is that Microsoft excluded other companies from competition. 
However, whenever I have gone into a store, I have had any number of 
choices. I chose Microsoft because it worked. The competition could 
not produce the same quality product; hence, the public chose the 
product that worked for them. This is the basis for all free market 
philosophy, which is really what the antitrust suit was against.
    Furthermore, Microsoft has more than acceded to the demands of 
the Department of Justice. Microsoft has agreed to allow computer 
makers to ship non-Microsoft products to its customers; Microsoft 
has agreed to help companies achieve a greater degree of 
compatibility with regard to their networking software; axed 
Microsoft has agreed to gram computer makers broad new license to 
make Windows promote non-Microsoft software programs. Ultimately, 
the company agreed to terms that extend well beyond the products 
that were at issue in the original suit.
    Further litigation will only hinder our progress in this 
direction. Let Microsoft, and the country, get back to work.
    Sincerely,
    Salvatore Valvo



MTC-00029833

FAX TRANSMISSION
DATE: 28 JAN TIME:
TO: ATTORNEY GENERAL
FROM:
LOCATION:
LOCATION:
FAX#: 1-202-616-9937
FAX#:
MESSAGE:
PHONE#:
Dennis C. Deggett
383 Center Road
Lopez Island, WA 98281-8298
January 28, 2002
Attorney General Jon Ashcroft
US Department of Justice
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing today to encourage the Department of Justice to 
accept the Microsoft antitrust settelment. The issue was brought 
about the former administration that simply did not understand the 
technology industry. They ignored one of the things that makes this 
country the best in the world, our free enterprise system, Then to 
top it all off, they extended their socialistic philosophy to apply 
antiquated antitrust laws to a brand new industry.
    In the free market, Microsoft rose to the top because they had 
the best products. Their products are user friendly and Microsoft 
has made them very easy to Integrate and at lower cost than the 
alternitives. It is no wonder that where people had a choice most 
choose Microsoft software. Under the terms of the settelment 
Microsoft has agreed to allow computer makers the flexability to 
install and promote any software they see fit. Microsoft has also 
agreed not to enter into any agreement that would require a computer 
maker to use a fixed percentage of Microsoft software. I beleive 
that computer makers will

[[Page 28758]]

continue to predominatly preinstall Microsoft software becuase it is 
the best and most computer buyers will choose a Microsoft Windows 
based computer when making a new purchase. This is not a monopoly 
problem, Microsoft simply is, supplying a better product and most 
people know it.
    My experiance as supervisor of an electric power generation 
plant for over 15 years, offered me the oppertunity to try many 
brand, of computer software products and computer equipment. What I 
found over time was that even when cost was not a consideration, 
products that were not Microsoft based, did not perform 
satisfactorly. Microsoft products and windows based computers were 
simply the best. On top of that we experienced signifig??nt savings 
over other options. Sure Microsoft has made a lot of money, but can 
you imagine the cost to the people of our nation if Microsoft and 
all they have provided for us vanished or had never existed? This is 
my plea for justice in our mechanized and technolgical society.
    Microsoft has gotten to where they are by developing better 
products, not by crushing their competitors. This suit and the fact 
It has gone on for over three years Is simply mind-booling. It is 
time to end It. DO NOT PUNISH MICROSOFT FOR BEING BETTER. Please 
accept the Microsoft antitrust settelment.
    Sincerely,
    Dennis C. Daggett



MTC-00029834

THE WASHINGTON COURT HOTEL
FACSIMILE TRANSMITTAL SHEET
TO: Renata Hess
FROM: Joe Wiegand
FAX NUMBER: 202-616-9937 OR 202-307-1454 
DATE: 1-28-02
COMPANY: Dept of Justice
TOTAL NO. OF PAGES INCLUDING COVER: 2
PHONE NUMBER: RE: Microsoft Settlement
NOTES/COMMENTS:
Attorney Renata Hesse
Justice Department
601 D Street NW, Suite 1200
Washington, DC 20530
    Dear Attorney Hesse,
    I am certain that you are receiving many letters of comment 
regarding the Microsoft settlement with the Justice Department. Your 
time is greatly appreciated.
    It was 1998 when the government first brought its anti-trust 
suit against Microsoft. In the years since then we have witnessed 
truly astounding developments in our industry. Laptops are thinner 
and more reliable, email is a communications device many Americans 
depend on, and many of us are speeding across the Internet at speeds 
not thought possible four years ago. These innovations are truly 
amazing and beneficial to our daily lives. These new products and 
ideas came about because of the competitive free market system we 
live in, not because the government was directing it behind the 
scenes.
    The circumstances of our current economy and the government's 
anti-trust case have truly stifled new growth in this industry. As 
our country's economy is struggling to find its way toward positive 
growth again, settling the anti-trust suit can only be viewed as a 
benefit. Please work to make sure this settlement is agreed to.
    Sincerely, ??
    32486 White Street??
    Ki??bland, ?? 60146
    815-522-3801



MTC-00029835

microsoft settlement
Subject: microsoft settlement
Date: Mon, 28 Jan 2002 15:46:14-0500
From: Frank Lastner 
To: microsoft.atr @ usdoj.gov
    Microsofts efforts in the computer field have been invaliable to 
th U.S. Their inovations, systems and marking kept prices falling 
until the Government intervention. Close the books on litigation and 
help get the economy moving again.
    Frank Lastner
    16 Stillway CT.
    Hunt Valley Md. 21030



MTC-00029836

Fax Transmission
The Sack Company, Inc.
P.O. Box 528
3302 Zell Miller Parkway
Statesboro, Georgia 30459
Phone: 912.871.8771
Fax: 912.681.6001
TO:
Date: 1/28/02 
Fax Number: 202-307-1454
Pages: 2 pages, including this cover sheet
From: Albert Roesel
Subject:
Comments:
"A Standard of Excellence"
The Sack Company, Inc.
January 28, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    I am writing to express my support of the Microsoft antitrust 
settlement agreement. I am in favor of this case settling. As a 
fellow entrepreneur, I sympathize with the position of Bill Gates. I 
believe Microsoft should be free to conduct its business with 
limited government intervention. Notwithstanding my opposition to 
the lawsuit, the terms of the settlement agreement are reasonable. 
Microsoft has made many concessions in the interest of settling this 
case. Microsoft has agreed not to take retaliatory action against 
those who promote software that competes with Windows. They also 
agreed not to enter into agreement obligating third parties to 
exclusively distribute Windows. These types of concessions should 
put to rest the complaints of anticompetitive behavior on 
Microsoft's part.
    I am happy of see that the current Department of Justice has 
made the wise decision to settle this case. I appreciate your review 
of my comments.
    Sincerely,
    Albert Roesel
    Chairman of the Board



MTC-00029837

Microsoft Corporation
123 Wright Brothers Drive
Suite 200
Salt Lake City, UT 84116
Microsoft
Tel 801 257 6300
Fax 801 257 6501
http://www.microsoft.com/
January 26, 2002
Attorney General Ashcroft, USDOJ
950 Penna. Avenue, NW
Washington, DC 20530-0001
    Dear AG Ashcroft,
    I believe that your decision to settle this Microsoft suit was a 
wise one. Anytime that our government takes upon itself the rather 
extreme position of suing a private business is serious indeed. It 
is important for our government to encourage innovation and 
creativity through incentives, rather than discouraging them through 
convoluted, politically expedient lawsuits. It seems as if this case 
may have had less actual legal merit than it first appeared. In 
these days, we should remain especially vigilant at concentrating on 
far more important issues like national security and budgetary 
problems. It is good for us to settle this case and move on to these 
more important matters. The settlement does an excellent job of 
answering for all the problems that competitors brought against 
Microsoft. By allowing manufacturers their own say in how to 
configure Windows and competitors more access to source code that 
will improve their programs' ability to operate in Windows, 
Microsoft is going well beyond what has been asked of them.
    Thank you for your foresight and wisdom in this matter and thank 
you for taking the time to review my opinion in this matter. It is 
about time for the Justice Department ask the people who will be 
most affected by this decision how it will impact them.
    Sincerely,
    Clark Spencer
    Microsoft Corporation is an equal opportunity employer,



MTC-00029838

STRATFORD
3737 Glenwood Ave.
Sutre 100
Raleigh: NG 27612
Tele: (919) 573-6102
Fax: (919) 573-6026
January 23, 2002
Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D, Street NW, Suite 1200
Washington, DC 20530
    Dear Ms. Hesse,
    I understand that the federal courts are now reviewing the 
proposed settlement in the Microsoft antitrust case. I further 
understand that the government is collecting public comment on that 
issue.
    My comment is simple: Accept the settlement and help get this 
country back to work. A lengthy, expensive lawsuit contributes 
nothing to our nation's economic prosperity. Unwise government 
interference in the marketplace contributes nothing to economic 
growth--in fact) it hurts growth. And the Microsoft lawsuit has 
hurt our nation's economy, make no mistake about it.

[[Page 28759]]

    The marketplace, not the courtroom, is where these issues should 
have been decided. Those who are concerned by Microsoft's dominance 
of its market should remember other industry leaders that no longer 
lead: Apple and Tandy in computer manufacturing; Kodak and 3M in 
copiers, and CompuServe m online services.
    A market leader that fails Is satisfy its customers will remain 
a leader no longer. Microsoft will remain a leader if and only if it 
continues to provide new services and lower costs. That is where its 
competitors should seek to replace Microsoft, not through the 
courtroom.
    The government should not file antitrust lawsuits simply because 
a company is dominant in its market or because competitors cry foul. 
Yes, Microsoft plays hardball. But nothing in this long and costly 
lawsuit has established that the consumer--the most important 
person in this proceeding--has been damaged by anything 
Microsoft has done. In fact, the consumer has been the big winner. 
If this settlement is approved, the consumer will again be the big 
winner--as will the entire American economy.
    Sincerely,
    James A. Ciao
    Introduction ?? in from sources ?? it not ?? by ?? and is 
subjects to change in ??, cor??, ?? and ?? or withdrawal without 
notice



MTC-00029839

January 28, 2002
Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
Fax: 202-616-9937
    Dear Ms. Hesse:
    As the government accounts representative for Comark, a leading 
regional tech firm, I am thrilled that the long awaited settlement 
between Microsoft and thee federal government is finally at hand. 
All we need now is for the Judge to approve the settlement. The 
Judge, in my opinion, has more than ample reason to do just that.
    First of all, let me say how well I believe that government and 
business can work together for mutual prosperity. It can and does 
happen--EVERY DAY! I see it when I call on governmental 
agencies, officials and departments.
    I enjoy using technology to build a bridge between government 
and business. It makes perfect sense. After all, the emerging 
technologies of today make every segment of society more 
productive--it makes no difference if the end user works for 
the public good or a private interest. Let's forge ahead and 
revitalize the American economy. Let's renew our commitment to 
research and development, so that we continue to lead the world in 
productivity and quality. Let's create a new spirit of cooperation 
between the government and private enterprise. Let's show the rest 
of the world that American don't take recessions lying 
down--that we will act to strengthen our country and assist our 
countrymen.
    Now is the time for bold action. I request that Judge Kollar 
Kotelly approves the settlement.
    Sincerely,
    Jason Deans



MTC-00029840

FAX
To: John Ashcroft
Phone
Fax Phone +1(202)307-1454
Date: Monday, January 28, 2002 Pages including cover sheet: 2
From: Eric & Britt Boston
17525 199th Place NE
Woodinville
WA 98072
Phone +1(425)788-2297
Fax Phone +1(425)788-2297
NOTE:
January 26, 2002
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    I'm writing to encourage you to accept the terms of the 
antitrust settlement recently reached between Microsoft and the 
United States Justice Department. Microsoft has agreed to terms that 
will result in a much more competitive software environment and that 
will allow Microsoft to move forward with its business of developing 
innovative software.
    To put this lawsuit behind it, Microsoft has agreed to allow 
computer makers and software developers to set-up Windows within 
their computer systems they will sell on the market so that 
Microsoft products can be disabled and competitive non-Microsoft 
products can be enabled in their place. And to make this easier, 
Microsoft will show competitors the various interfaces that are 
internal to Windows. This will allow smaller, developing software 
companies to get their foot in the door and grow while fostering a 
competitive environment that will drive all parties to create 
better, more innovative software.
    Further, Microsoft will not take any retaliatory action against 
any computer makers of software developers who choose to modify 
Windows, nor will Microsoft retaliate against any computer makers 
who ship operating systems that directly compete with Microsoft 
Windows. Based on these facts, I encourage you to support the terms 
of the settlement so everyone can move forward with the business of 
developing good software for the American people. Thank you for all 
your hard work!
    Sincerely,
    Brittisha Boston



MTC-00029842

FHANC??S H SUITTER
SUITTER AXLAND
A ??ALT PROSESSIONAL LAW ??TION
175 South West ??emple
Seventh Floor
Sal?? Lake City, ??tah 84101-1480
Telephone (801) 512-7300
F Man [email protected]
?? (801) 532 73??
January 28, 2002
Attorney General John Ashcroft
U.S. Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Attorney General Ashcroft:
    I write today concerning the Microsoft Antitrust Class Action 
Lawsuit. I urge you to settle this case as quickly as possible. As a 
user of technology on a daily basis, I am concerned that technology 
consumers are suffering the biggest loss rather than those involved 
in this suit. I am increasingly alarmed at all of the government 
regulatory oversight, which will be placed tm computer companies. I 
have never witnessed a settlement where more government intervention 
and layers of bureaucracy have been the solution. I urge you to move 
forward to settlement.
    Sincerely,
    Francis H. Suitter, Esq.
    FHS/jg ??



MTC-00029843

Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
Fax: 202-616-9937
    Dear Ns. Hesse:
    Given that my husband is a local television news personality, I 
follow the news even more keenly than I ordinarily would. I began 
working at a new job just a few short weeks ago, as the membership 
and marketing director for Heritage Golf Club in Wake Forest, North 
Carolina. Unfortunately, the news and my common sense tells me that 
many other folks won't be fortunate enough to find new jobs because 
of the poor economic conditions our country is in. Were got to 
change that.
    Our government must demonstrate that it is serious about 
stimulating the economy. A great first step in that process would be 
to finish the job of settling its antitrust lawsuit against 
Microsoft. I think I speak for most American when I say, 
"Enough already!" Both sides have agreed to 
settle--it's time to move on to something else,
    I believe that I also speak for executives who work in 
membership and marketing when I say that I'm much more efficient in 
my job because of Microsoft's quality products. Database management, 
communications, and publications are all professionally done with 
just a click of a mouse.
    The American people choose Microsoft products because they make 
life better. Life will also be better for many Americans once this 
suit is settled. I request that Judge Kollar Kotelly approves the 
settlement.



MTC-00029844

To: Microsoft Fax: 001
fin@Mobilization Office.com
1-202-307-1454
From: Joe G. Ike
Date. 1/26/02
Letter to Attorney General
Pages: 2
    To Whom It May Concern:
    Reference is made to your e-mail of Friday January 25, 2002, 
Attachment USAGike--

[[Page 28760]]

Joe--1018--0123 and my reply thereto by return e-mail. As 
noted in my reply, please find attached a signed copy of the letter 
that I dispatched this morning to the Attorney General of the USA. I 
sincerely hope that all will turn out in your favor! Wishes!
3410 76th Avenue, SE
Mercer island, WA 98040-3439
January 25, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft
    I am writing to you today to encourage you to bring the 
litigation against Microsoft to an immediate and decisive closure. I 
must state that I have been unequivocally and strongly against this 
case from its very inception. It appears evident to me that it is 
very unfair to punish a company for excelling in their industry. I 
am a volunteer instructor with a non-profit organization teaching 
senior citizens how to enrich their lives by becoming computer 
literate. This is no easy task but at the close of every session I 
thank God that Microsoft has been so innovative and far sighted as 
to integrate their basic Operating System with applications to 
provide the User with a basis of commonality that makes the learning 
process infinitely easier. This applies not only to senior citizens 
but also to those individuals learning the use of new software to 
increase their knowledge and consequently leading to industrial 
efficiency. Prior to my retirement I vividly remember the days when 
it was a nightmare when attempting to home-brew our own integrated 
system, I have experienced the fact that Microsoft has expended 
every effort to provide us with the features that we sorely needed.
    As I dwell upon the past three years ! conclude that it must 
have been very taxing on the IT industry, the economy, Microsoft and 
its employees. I understand that Microsoft has spent millions of 
dollars in their defense-money that could have been put into the 
development of new products resulting in further advancement of 
technology and industrial efficiency. The employees of Microsoft 
have had to endure an air of uncertainty during this entire 
situation. As a citizen I am extremely concerned with the possible 
flight of talent that is the backbone of Microsoft's awesome 
capability.
    It is difficult for me to understand the problems related to the 
proposed, but rejected, settlement. Judging from what the media has 
reported, Microsoft has agreed to the terms included in the 
settlement as well as to the terms brought forth on issues that were 
not considered to be unlawful, To name two concessions, Microsoft 
has agreed to avoid agreements that would obligate any third party 
to exclusively distribute Windows technology. Additionally, 
Microsoft will not obligate software developers to refrain from 
developing competing software. Frankly, I personally cannot 
understand why Microsoft should have to divulge the code that makes 
up their Operating System. t would certainly include that in the 
realm of being proprietary and intellectual property. To put it more 
strongly, to me it smacks of being a case of sour grapes by certain 
other organizations that have not been as successful. Chairman 
Greenspan commented, with words to the effect, that the Guide-On 
that is going to lead the economy of our nation out of tile doldrums 
is technology. It is our future. There is absolutely no doubt in my 
mind that Microsoft has been a major contributor to technology. As a 
result, and to reiterate, I personally would like to see this matter 
dosed as soon as possible and I am sure that I am among many who 
share this same point of view. Thank you for your time and giving me 
this opportunity to voice my opinion.
    Sincerely,
    Joe 13. Ike
    Engineer( retired ) e-mail 
joeikel @ attbi.com tel: (206) 232-5e43



MTC-00029845

Edward A. Garvey
32 Lawton Street
St. Pail, MN 55102
Phone: 651-296-2243 (wk); 651-221-1922 (hm) 
E-mail: GarveyEd;@;AOL.com
Renata B. Hesse
Antitrust Division
U.S. Department of Justice
601 D Street NW
Suite 1200
Washington DC 20530
    Dear Ms. Hesse:
    As a small Microsoft stockholder (about Ii0 shares in my 
daughter's college fund) and a user of diverse computing and 
software products, I have followed the antitrust proceedings against 
Microsoft with interest. With this introduction, I thought it worth 
sharing with you that I think the settlement between the Department 
of Justice and Microsoft is a reasonable conclusion to a matter 
whose founding facts have been (and are being) addressed in the 
marketplace.
    I support the settlement and am pleased that it was reached. 
Thank you for considering my thoughts.
    Sincerely,
    Edward A. Garvey



MTC-00029846

Renata B. Hesse
Antitrust Division
U.S. Department of Justice
6ol D Street NW
Suite 1200
Washington, DC 2053D-0001
Randolph S. Kahle
6161 N Canon del Pajaro
Tucson, AZ 8S750
28-January-2002
    Dear Ms. Hesse:
    I have worked in the computer industry for over 2S years. During 
that time I have worked as a developer, a marketing / business 
strategist, and as a consultant to large and small companies. I have 
a degree from Rice University in software and hardware design and an 
MBA from the Amos Tuck School of Business Administration at 
Dartmouth College.
    My work experience includes Hewlett-Packard as well as six years 
as a marketing and business strategist at Microsoft working on 
database and developer products.
    I have seen Microsoft from both the inside and now, for the last 
ten years, from the outside. As I am not an attorney, I cannot speak 
to the legal specifics of the Proposed Final settlement, however, I 
am qualified to speak to the practical implications of the terms in 
the computer industry as well as other industries and markets into 
which Microsoft may enter.
COMMENTS IN GENERAL
    As the computer industry moves towards a future, fully-
distributed, computing environment, it is vital to have an 
environment which fosters and rewards innovation. While it may seem 
a mature industry, we are still only at the early stages. To date, 
there have been several waves of general innovation and 
consolidation. Each wave brings cost reductions, creative ideas, 
whole new companies and new technologies. After a wave, there has 
been consolidation around standards and then the next wave appears. 
These waves could be named the "mainframe era", the 
"minicomputer era", and the "personal computer 
era". We are now leaving the "personal computer 
era" and entering a new one centered on distributed computing 
and information, the "distributed computing era". As 
each era transitioned to the next, the companies and products of 
each successive wave accommodated the past, while providing new 
innovations.
    IBM anchored the mainframe era, Digital and Hewlett-Packard 
emerged during the minicomputer era, and Microsoft, Dell, Gateway, 
and others emerged during the personal computer era.
    What is different about the current transition, is that a single 
company, Microsoft, is attempting to leverage their monopolistic 
power created in the personal computer era and their position in the 
industry to define and control the next era. COMMENTS ON CULTURE
    I worked at Microsoft before Windows was a monopoly. What I 
observed was a culture fixated on domination at all costs. While 
Microsoft was growing, these actions and activities were not 
illegal. After becoming a monopoly, they clearly are (and were found 
to be so by the courts). What is important to note is that these 
illegal behaviors stem from the culture of the company. Because of 
this strong culture, I do not believe that any external monitoring 
of internal operations would ever be successful (e.g. the 
"TC" as proposed). Microsoft managers are simply too 
smart, experienced, and aggressive to ever agree to submitting to 
external pressures. This comes from the top, Bill Gates himself. In 
my experience, I have never encountered a discussion in which anyone 
at Microsoft ever thought that they were in the wrong. This would 
never occur to anyone. This is a cultural factor, an arrogance of 
doing no wrong. With this culture, it seems extremely unlikely that 
Microsoft would be able to self-monitor or even work with an 
external auditing agency.
    REMEDIES
    My first choice for a remedy is to break Microsoft up into 
smaller competing entities. The reason for this is to attempt to 
reshuffle the organization so that there could be cultural and 
behavioral change.
    I petition the court to explore this remedy as the best way to 
combat future violations by Microsoft.

[[Page 28761]]

    If the court does not pursue a break-up of Microsoft, then I 
strongly agree with many others, that there must be changes to and 
additional provisions added to the Proposal Final Settlement.
    For example, I fully support, and have sign Dan Kegel's open 
letter (http://www.kegel.com/remedy/letter.html). OPENNESS AND 
TRANSPARENCY
    My second choice for a remedy is to force openness and 
transparency in Microsoft's technology. Distributed computing 
systems are very complex and can be very subtle. To help the court, 
many other petitioners have listed specific technology disclosures 
that will help create openness. I will add that, in a general way, 
if Microsoft's technologies can be viewed by the industry and the 
market as *components* rather than as a *whole*, then a good balance 
may be struck between Microsoft's ability to innovate, and the 
industry's ability to compete and develop both complementary 
technology as well as competing technology.
    The tricky question is this: "Where are the boundaries 
between the components7"
    A simple answer can be found by focusing on and leveraging the 
upcoming pressures that will be felt as the distributed computing 
era arrives. The answer I propose is simple, easily monitored and 
enforced:
    * Force Microsoft to fully disclose all wire-level (binary) 
protocols used between independent computing devices. (This include 
.Net protocols, SMB/NBT protocols for file sharing, and others) 
Force Microsoft to disclose the APIs which they expect other 
components to use as they access the wire-level protocols.
    * Force Microsoft to fully disclose all file formats used to 
store persistent information. The reason these are good remedies 
relies on the following:
    * The future direction of computing is toward small, distributed 
computing devices. The economic and technological pressures will 
force the definition of boundaries between distributed components. 
This will be a constant pressure to *increase* disclosure over time.
    * It is easier to monitor and audit compliance at these 
boundaries compared to other more abstract and more easily re-
defined boundaries. (Microsoft is a master at redefining boundaries 
for their own benefit).
    * These disclosures provide significant value to competitors and 
innovators. However, I must also point out that this is only a first 
step, This describes the technological boundaries and requirements. 
The Settlement must also address the legal issues such as 
Microsoft's attempt to prevent open-source software from running on 
Windows, and other licensing and cross-tie issues. I will leave 
these issues to the legal experts.
    Violation of the Settlement must bring with it a powerful and 
costly punishment. I propose that if Microsoft violates the 
provisions of the Settlement that they be forced to place any 
software or system found to be in violation or associated with a 
violation into the general domain through, an open-source license. 
This, more than any financial penalty, would be a real deterrent.
    Randolph S. Ka??e
    Tucson, AZ



MTC-00029847

FROM : Santo L Gaudio
3011 146th Street
Flushing. NY 11354
January 25, 2002
    Dear Mr. Ashcroft:
    I am writing this letter to express my full support for the 
settlement with Microsoft. Enough is enough. Milllons of dollars are 
being wasted on unnecessary litigation and we must take advantage of 
this opportunity to end needless spending now.
    Microsoft has made many concessions just so that the company may 
move forward with developing new products. For example, Microsoft, 
has agreed to disclose for its competitors various interfaces that 
are internal to Windows' operating system products--a first in 
an antitrust settlement, Also, the Company has agreed in design its 
future products to provide easy access to computer makers and 
consumers to promote non-Microsoft software within Windows. In 
addition, Microsoft has agreed to license its Windows operating 
system products to the 20 largest computer makers on identical 
terms, including price. Clearly, these changes will benefit both 
consumers and the economy.
    Not only is this settlement fair and reasonable, but it will 
prevent any future antic0mpetitive behavior as well. The recession 
has had a huge affect on both government and individual pocketbooks, 
and it. is important that the IT industry be allowed to concentrate 
on business as soon as possible.



MTC-00029849

Avionet (U.S.A.) Ltd.
Avionet Leasing Inc.
888 S. Figueroa St., Suite 800
Los Angeles, CA g0017
Tel: (213) 896-1000 Fax: (213) 824-7796
January 28, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    I am writing to express my support of the recent settlement 
between the Department of Justice and Microsoft. Even though the 
terms of the settlement are certainly not favorable to Microsoft, 
the settlement has the advantage of ending the litigation.
    It is better that Microsoft will now be encouraged to handle its 
pricing policies to its OEMs in a fairer and more equitable fashion, 
but the requirement that Microsoft release more of its source codes 
to developers and competitors can be problematic. I am hopeful that 
that proposed technical committee would be a fair arbiter when 
dealing with all of these issues.
    With so many other more important issues facing our country 
today, I am glad that this lawsuit is finally over. I am hoping that 
no further federal action in this matter will be necessary.



MTC-00029850

347 Chilian Ave.
Palm Beach, FL 33480
January 28, 2002
Ms. Renata B. Hesse
US Dept of Justice
    Dear Ms Hesse:
    I strongly support the Microsoft settlement. I do so as a 
taxpayer and consumer. Thank You.
    Very Truly Yours
    Marvin A. Goldenberg



MTC-00029851

Constance Roberts
3421 South Dye Road
Flint, Michigan 48507-1009
January 23, 2002
Attorney General John Ashcroft
U.S. Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    I am urging you to settle the lengthy antitrust lawsuit pending 
against Microsoft. I think it is ridiculous that the case even made 
it as far as it has. I think it is a shame that the government has 
gone after Microsoft. Bill Gates is simply a guy who made good and 
has been punished for his success. The Justice Department seems to 
have unfairly singled out Microsoft instead of treating all 
companies in similar positions in an evenhanded manner.
    Though I believe that the justice system has wasted significant 
time and money in continuing to pursue legal action against 
Microsoft, I believe that the terms of the current settlement are 
reasonable, and I would like to see Microsoft back on track. I am a 
stockholder in the company, so I am affected by its inability to 
conduct business as usual.
    The government's stated aim is to increase competition. The new 
provisions Microsoft has agreed to will do just that. Users and 
computer makers can more often and more easily install and configure 
Windows in ways that promote and use competing products.
    Please settle the case as quickly as possible.
    Sincerely,
    Constance Roberts



MTC-00029852

05/06/1994 09:07 0609663171
GARY REID HOMES INC
Jan-28-02 11:66A Sharon Cassidy
Gary and Susan Reid
5651 Mission Road
Bellingham, WA 98226-9580
Tel (360) 966-2385/1 ax (360) 966-3171
Form: The Attorney General
From: Oaty Reid
Date: January 28, 2002
Re: Microsoft Anti-Trust Settlement
    From any viewpoint as a consumer, this suit needs to be 
resolved. I believe that this suit with cost in money. First, it has 
increased Microsoft's cost to do business second, it has diverted 
effect from producing a better products and, third, the tax dollars 
spent on this suit exceed possible savings to the public.
    I believe the Microsoft's product is fairly priced when compared 
to the benefits obtained I can be par?? communication revolution 
that has changed the world for less than $200,00.
    Does not Microsoft have a proprietary right to its st??ems? It 
appears that the patent

[[Page 28762]]

holder of be ?? hoop has more rights than the designers of this 
life-changing system The me?? of the internet browser into the basic 
system is important to the consumer. I should not be se??nitted to 
give a competition an advantage. Several of the business p?? that 
were in question have already been changed. If our economic system 
is ?? competitors need to produce better products--not resort 
to politically driven ?? that results in power products for the 
purpose of bringing equality
    ee: Microsoft



MTC-00029853

SGM Bindery Inc.
January 28, 2002
Attorney General John Ashcroft
US DOJ
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I would like to take this time to give you my opinion on die 
Microsoft Anti Trust case. This case has been a fiasco since its 
beginnings and I can't understand how it has been allowed to go on 
for so long.
    I run my own company and use Microsoft products every day. I 
have never been forced to use their software. This is supposed to be 
a free enterprise system and anyone can go out and buy whatever 
products they want. There is a reason Microsoft's products have 
become so widespread and widely used that consumers prefer them to 
their competitors. Consumer preference does not constitute a 
monopoly.
    Even though I feel this settlement goes farther than Microsoft 
may want, it is necessary to get out country on its feet again. 
Microsoft has agreed to give away a lot of thee intellectual 
property and will be changing their business practices to make it 
easier for consumers to access non-Microsoft products on their 
computers.
    For the sake of our technology industry and our entire economy, 
please do your pall m putting a final end to this case.
    Sincerely,
    Stephen G Martinec
    President
    7120 Rutherford Road,
    Baltimore, MD 21244
    410.944.7660
    800.852.4530
    Fax 410.944.5707
    [email protected]
    www.sgmbindery.com



MTC-00029854

Jan 28 02 04:28p
EVERGLADES
Laboratories. Inc.
1602 Clare Avenue
West Palm Beach, FL 33401
ph: 561/833-4200
fx: 561/833-7280
email: evlabs @ beffsouth.net
January 28,2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DO 20530
    Dear Mr. Ashcroft:
    Microsoft is not the evil money grubbing corporation that it has 
been made out to be. Rather, it is in my opinion that the other 
information technology companies are the ones with dollar signs in 
their eyes. The antitrust lawsuit filed against Microsoft was 
nothing more than profit driven facade.
    The settlement that was reached in November is reasonable and in 
the best interest of all parties involved. Microsoft has agreed not 
to seek any sort of retaliatory measures against computer 
manufacturers that promote software other than Windows. The 
settlement further stipulates that
    Microsoft must provide documentation on how to interface 
competitors' software with its own operating system. Microsoft has 
already given a lot of ground with this settlement, and I feel that 
they should be asked to give no more. The settlement as decided upon 
in November should be left as is with no changes. The money driven 
attack on this company needs to stop, so please finalize the current 
settlement and stop litigation now.
    Sincerely,
    Ben Martin, Ph.D.



MTC-00029855

James Woodward
432 Lynshire Lane
Findlay, OH 45840
January, 26, 2002
Attorney General John Ashcroft
U.S. Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft,
    I am writing you today to express my concern in regards to the 
Microsoft settlement issue. I feel this settlement is fair and 
reasonable, and I believe that this three-year-long dispute should 
be resolved permanently. Because of the federal action many states 
have jumped on board. I don't understand their cause. If you drop 
the case and accept the initial agreement, then, I'm sure man), of 
the states will also.
    Microsoft is a company that is successful m its business. I do 
not believe they should be penalized for this. Microsoft has pledged 
to share more information with other companies and create more 
opportunities for them, therefore, the entire technology industry 
will benefit from this settlement.
    Again, it will be more productive to allow Microsoft to continue 
doing what they do best. This will benefit the economy and 
consumers. I sincerely hope that this settlement will be finalized 
because it is in the best interest of the industry and the American 
consumers.
    Sincerely,
    James Woodward



MTC-00029856

January 27, 2002
Renata Hesse
Trial Attorney
Anti-Trust Division
U.S. Department of Justice
6Ol D St., NW
Suite 1200
Washington, DC 20530
    Dear Ms. Hesse:
    I am not a lawyer, an officer of the court, a technology 
professional, or a politician. So granted, there may be nuances that 
I am overlooking in the Microsoft antitrust case. I am having a 
difficult time understanding why some of Microsoft's competitors 
driving the antitrust case, along with half of the states suing the 
company, are unhappy with the settlement that all others involved in 
this case have agreed upon.
    Reviewing the compromise from my vantage point, it would appear 
that Microsoft gave the most and the plaintiffs got the most. 
Computer makers using Windows receive flexibility allowing them to 
replace and remove specific parts of Windows. Even customers receive 
more flexibility with the product and information technology 
providers will have access to technical specifications. Plus, they 
would set up a panel to make sure all parts of the settlement are 
complied with.
    As children, and sadly sometimes as adults, when it comes to 
decision-making there are always a couple of people that won't 
budge. In order to seek a compromise, two sides must at least come 
part way to meet somewhere in the middle. It seems those not signing 
off on the settlement simply refuse to take any steps toward the 
middle. Where I come from, that's bullheaded and stubborn and it 
gets you nowhere fast.
    It is my hope that as the officer of the court making a final 
judgment on this decision, that you will be able to compartmentalize 
the intricate parts of this case. Set aside those who haven't signed 
on to the settlement, set aside those technology companies seeking a 
break up of Microsoft refusing to accept any punishment less, set 
aside those politicians who may be seeking continued spotlight by 
moving on with the case. Focus on the facts. A settlement has been 
reached by most of the parties partaking in the case. It seems to me 
to be a just compromise.
    Sincerely,
    Joe Meyers
    4822 Ashley Park Drive
    W. Des Moines, IA 50265



MTC-00029857

January 28, 2002
Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
    Dear Ms. Hesse:
    During my tenure as Assistant Director of Admissions at North 
Carolina State University, I have witnessed many technological 
innovations and trends. Most Of these have involved the use of a 
computer, and many involved Microsoft products.
    While I cannot say with exact certainty why the federal 
government pursued an antitrust lawsuit against Microsoft, I can 
tell you that it has had a devastating impact on technological 
innovation while it has transpired. Before the lawsuit, tech 
companies were lauded for focusing on research and development at 
the exclusion of politics. In fact, few of the leading tech firms 
employed anyone to conduct government relations programs.
    Microsoft learned quickly that its exclusive focus on making 
life more efficient for everyone had made its competitors struggle

[[Page 28763]]

for market share. The competitors retaliated by getting into the 
political game. The lawsuit followed. Even today, Microsoft's 
competitors are lobbying to contignue the lawsuit endlessly.
    We should support the federal government and Microsoft in their 
decision to settle the case. I urge Judge KollarKotelly to approve 
the proposed settlement of the lawsuit. Let's allow research and 
development to march ahead.
    Sincerely,
    Jill Green



MTC-00029858

January 28, 2002
Renata Hesse
Antitrust Division
Trial Attorney
U S. Department of Justice
601 D St NW, Ste 1200
Washington, DC 20530
    Attorney Hesse:
    In my eyes, the government's treatment of Microsoft has not been 
unlike the actions of Medieval European Lord's who would cut off the 
head of a nemesis and display it on a stake in the village square 
for all to heed the warning. Unfortunately, the real harm goes to 
taxpayers, consumers, and tech investors in this case.
    The government and Microsoft finally came to a settlement after 
going in and out of courtrooms as fast as they would enter and cease 
mediation talks since this case began a few years ago. Although this 
settlement is fair, we are beyond even that factor in this 
proceeding. Whether or not the agreement serves one side more than 
the other--which from the looks of it serves the government 
over the corporation--what is important is that a settlement 
has been reached with most of the contributors to the case have 
signed off on.
    Please end this portion of the case with your approval of the 
settlement so that all of us--Microsoft, consumers, taxpayers, 
government court officials, and investors--can get back to 
business as usual.
    Many Thanks,
    Richard J. McLaren
    President, McLaren Ins. & Associates



MTC-00029859

Linda Diamond
1961 West Hood Avenue 2B
Chicago, Illinois 60660
January 28, 2002
Attorney General John Ashcroft
U.S. Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I would like to see the government stop interfering with the 
business practices of Microsoft, and I am happy to see this case has 
been settled at the federal level. The two sides reached a fair 
compromise in November of last year, and it is time to finalize that 
settlement and end this matter once and for all.
    The government agreed to settle this matter because Microsoft 
agreed to change its operating system to allow independent companies 
a better chance to compete in the marketplace. Windows will be 
designed so that these other companies can promote their own 
products rather than Microsoft's, and Microsoft will not retaliate 
against its competitors in any way for promoting non-Microsoft 
products. Them will be no more risk of anti-competitive behavior by 
Microsoft because a three person technical committee will oversee 
Microsoft's business operations from this point forward, ensuring 
that the company fully complies with all terms of the proposed 
settlement. I see no need to continue this litigation.
    Once this case is settled, the IT industry will really benefit, 
and consumers will have more choices and better choices as a result. 
Competition will be strong, the industry will flourish, and the 
nation's economy will get a jump-start that it desperately needs. 
Thank you for settling this lawsuit, as it is the right thing to do 
for the industry and for the American economy.
    Sincerely,
    Linda Diamond



MTC-00029860

Wayne Hummer
Investments, LLC.
Fax
To: Attorney General John Ashcroft
From: Steven & Linda Diamond
Fax: 1-202-307-1454 or
    1-202-616-9937 3
Phone:
Date: 1/26/02 
Re: Microsoft Litigation cc:
Comments:
JAN-28-2002 15:29
WAYNE HUMMER
312 431 0704
P.02/03
Wh Wayne Hummer
INVESTMENTS
300 South W. Drive,
Chicago, IL 60606-6607
local 312/431.1700 / toll free 800.621.4477
312,431,0704
www.whunmer.com
January 28, 2002
Attorney General John Ashcroft
U.S. Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I would like to see the government stop interfering with the 
business practices of Microsoft, and I am happy to see this case has 
been settled at the federal level. The two sides reached a fair 
compromise in November of last year, and it is time to finalize that 
settlement and end this matter once and for all.
    The government agreed to settle this matter because Microsoft 
agreed to change its operating system to allow independent companies 
a better chance to compete in the marketplace. Windows will be 
designed so that these other companies can promote their own 
products rather than Microsoft's, and Microsoft will not retaliate 
against its competitors in any way for promoting non-Microsoft 
products. There will be no more risk of anti-competitive behavior by 
Microsoft because a three person technical committee will oversee 
Microsoft's business operations from this point forward, ensuring 
that the company fully complies with all terms of the proposed 
settlement. I see no need to continue this litigation.
    Once this case is settled, the IT industry will really benefit, 
and consumers will have more choices and better choices as a result. 
Competition will be strong, the industry will flourish, and the 
nation's economy will get a jump-start that it desperately needs. 
Thank you for settling this lawsuit, as it is the right thing to do 
for the industry and for the American economy.
    Sincerely,
    Steven M. Diamond
    Serving Investors Since 1931



MTC-00029861

January 28, 2002
Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite
1200 Washington, DC 20530
    Dear Ms. Hesse:
    I wanted to correspond with you and convey my opposition to the 
Microsoft lawsuit and support the compromise settlement.
    I don't sec rely harm that has come to the American consumer as 
a result of the legal proceedings. Capitalism continues to work and 
Microsoft has developed useful and practical technology for 
education I am clear that Microsoft has been targeted by its 
competitors and I don't believe that taxpayers" money should 
be silent for this type of lawsuit. Take the government out of this 
dispute and let capitalism do its job.
    In conclusion, I ask that the Court resolve this issue as 
quickly as possible, in the interest of the American people.
    Sincerely,
    Barnes Elementary Principal



MTC-00029862

Wake Forest Town Commission
Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
    Dear Ms, Hesse:
    As a member of the Wake Forest Board of Commissioners, I am 
concerned that the Microsoft antitrust lawsuit has dragged on too 
long and we need to settle it now. I am elected to represent all the 
people in Wake Forest, and I am concerned that everyone's jobs are 
being threatened by the recession. Microsoft products are the 
backbone of business and industry--and they help offices run 
efficiently throughout our community. I am opposed to prolonging the 
lawsuit in any way. The suit needs to be resolved... and resolved 
now! Many of our commuting citizens work in the Research Triangle 
Park. High tech solutions for health care, business and 
communications firms are developed here in the Triangle. However, 
the ability of these companies to be innovative in creating 
solutions, and productive in the creation of jobs, hinges upon 
moving beyond excessive litigation.
    Let's face the fact that both parties want the suit to end, 
Microsoft and the federal

[[Page 28764]]

government are in agreement on all points of the settlement. I want 
to strongly urge Judge Kollar-Kotelly to promptly approve the 
settlement. This lawsuit has cost businesses and local governments 
untold millions in lost revenues, Let's stop the bleeding,
    Let's move beyond this case and move the economy forward.
    Sincerely,
    Kim Marshall
    Mayor Pro Tempore
    401 Owen Avenue--Wake Forest, NC 27587



MTC-00029863

2601 Scofield Rid6e Parkway
#1523
Austin, TX 78727
David Morgan
Fax
To: Attorney General John Ashcroft
From: David Morgan
Fax: 1-202-307-1454 or
1-202-616-9937
Pages: 1
Phone:
Date: 1/28/2002 
Re: Microsoft Anti-Trust
cc:
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft
    I'm happy to see the Federal Government has come to at least 
some decision to end the unjustifiably offensive and expensive anti-
trust case against Microsoft Corporation. Three years of untold 
waste has been directed at Microsoft and we the tax payers incurred 
the entire cost. Quite frankly, had Justice spent the amount of 
money it wasted in this suit in anti-terrorist security several 
thousand people would be alive and working at the World Trade Center 
building. The agreement arrived at after extensive negotiations with 
a court-appointed mediator is very unfair and only serves the self 
interests of the individuals and companies which brought the action 
as well as those political interests of the Justice Department 
attorneys and US politicians. Simply; Microsoft has gone well beyond 
any legitimate or fair agreements to remedies. It's time the 
government accepted the terms levied against the company and moved 
on to other things, Let Microsoft continue doing great things for 
the computer industry which helps us all instead of hindering the 
company and as we all know harming the little guys--the 
employees and the consumers.
    Enough is enough. No more federal legal action should be taken 
against Microsoft.
    Sincerely,
    David Morgan



MTC-00029864

Jeffrey L. Phelps
4705 East U.S. Highway 160
Independence, KS 67301
Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
    Dear Ms. Hesse,
    The proposed settlement of the Microsoft antitrust case is a 
good deal for the taxpayer, investors and the computer industry. I 
strongly encourage the court to accept the settlement. The good news 
for supporters of the free-market system is that Microsoft is not 
going to be busted up by the federal government. Instead tiffs 
settlement specifically provides remedy for portions of the 
complaint that have been made it through lower courts.
    Under this agreement competitors of Microsoft will find it much 
easier to promote their products into the Windows operating system, 
it requires Microsoft to provide intellectual property with other 
companies when necessary, and Microsoft will be banned from cutting 
special deals with specific computer manufacturers.
    Clearly the Department of Justice and the company are interested 
in seeing this case ended. I the American public can count on the 
court to support this agreement.



MTC-00029865

To: Attorney General John Ashcroft
From: Forrest G. Gregory
11134 Villas On The Green DR
Riverview, Fl. 33569
Sub. Microsoft Settlement
Date: January 26, 2002
    Dear Sir.
    I feel the Justice Department should settle with Microsoft. The 
agreement you and the nine states agree to was a victory for neither 
side.
    Now we need a victory for the consumer. Allow us to use the 
windows system without diluting it with more regulations on 
Microsoft.
    The public has been supporting the Justice Department and state 
attorneys with our tax Dollars to continue these lawsuits. Settle 
and allow the private industry to make a profit. If an inventor has 
his property taken away by the government, other inventors will take 
notice. Consider what little incentive Microsoft or other potential 
targets of lawsuits would have to make a better product I would not 
be able to type and send you this letter without windows operating 
system. I'm sure there are others systems but I don't have time to 
search them out. Settle and somehow don't allow the other nine 
states to continue battling the litigation can be endless and no 
benefit to the public.
    Settle and close the book.
    Forrest G. Gregory



MTC-00029866

Anne Gould Anderson
614 West Marconi Ave
Phoenix AZ 85023-7447
January 28, 2002
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    I would like to urge you and the administration to do every 
thing in your power to bring to a close the years old Microsoft 
case. This anti-trust suit is settled but m name and further 
politicking in Washington or posturing in the media are wasteful and 
counter productive exercises. The proposed settlement agreement was 
born of years of litigation, negotiation and mediation, it is a hard 
fought and won compromise between the several parties and varied 
interests. It deserves to be adopted for the sake of Microsoft, a 
great American company, the faltering IT industry, and our national 
wellbeing.
    The settlement will leave Microsoft as it stood at the outset, 
the sole leader of America's most innovative industry. It will 
require the company, however, to change its ways and embrace a more 
Open and pro-competitive business philosophy. Microsoft will have to 
abandon its software exclusivity demands when selling its platforms 
to computer manufacturers. It will have to open itself up to regular 
government review. It must eschew further predatory or anti-
competitive marketing practices. It will have to, not just accept, 
but also promote a more competitive IT world. In doing so it will 
hopefully become a catalyst for the whole industry.
    Please support this settlement.
    Sincerely,
    Anne Gould Anderson



MTC-00029867

HENRY G, & EILEEN C. JAMES
1825B BRIARCLIFFE BOULEVARD .
WHEATON, IL 60187
P 630-665-8904 .
F 630-260-4037
Email: twojames @ earthlink.net
January 28, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    We are writing to express our opinion regarding the antitrust 
suit against Microsoft, which is that it should be concluded at 
once. The settlement reached in November 2001, is a fair and just 
settlement that ought to be accepted by the Justice Department.
    For fire sake of Microsoft's shareholders and customers, this 
antitrust suit needs to be brought to a swift and final conclusion.
    Thank you and we think you are doing a good job in your cabinet 
position.
    Sincerely,
    Henry G. James
    Eileen C. James



MTC-00029868

Fred Dorst
11715 Canyon Vista Lane
Tomball, TX 77375-7677
January 26, 2002
    Dear Mr. Ashcroft:
    I am happy to hear that the Justice Department has decided to 
end its antitrust lawsuit against Microsoft. The Department's three-
year case has gone on for way too long.
    The agreement they came up with came after extensive 
negotiations with a court-appointed mediator. The company agreed to 
terms that extend well beyond the products and procedures that were 
actually at issue in the suit--trust for the sake of wrapping 
up the suit. The company even agreed to document and disclose, for 
use by its

[[Page 28765]]

compertitors, various interfaces that are internal to windows' 
operating system products--a first in an antitrust settlement.
    Microsoft has been distracted long enough. I don't think the 
federal government should ever have to drag the company in to the 
courts ever again, it would be soon by most as nothing more than 
pure harassment.
    Sincerely,
    Fred Dorst



MTC-00029869

TRAVEL WORLD
US DEPARTMENT OF JUSTICE
RE:COMMENT PERIOD MICROSOFT SETTLEMENT
JANUARY 28, 2002
    AS A SMALL BUSINESS OWNER WHO BELIEVES STRONGLY IN THE FREE 
INTERPRISE SYSTEM WE SHOULD BE ABLE TO COUNT ON IN THE UNITED 
STATES, I WISH TO OFFER MY OPION ON THE MICROSOFT ANTITRUST LAWSUIT. 
I BELIEVE IT WAS WRONG FOR OUR GOVERNMENT TO INITIATE THE LAWSUIT 
WHICH IN ESSENCE PENALIZED MICROSOFT FOR IT'S SUCCESS IN THE 
TECHNOLOGY ARENA. I STRONGLY FEEL THAT MICROSOFT HAS NOT HARMED 
CONSUMERS AND THAT CONSUMERS INSTEAD HAVE BENEFITED FROM THE NEW 
CHOICES, AND LOW PRICES PROVIDED BY MICROSOFT AND OTHER COMPANIES 
LIKE THEM. I WAS VERY SORRY TO HEAR THAT NINE ATTORNEYS GENERAL AND 
THE DISTRICT OF COLUMBIA HAVE DECLINED TO ACCEPT THE SETTLEMENT TO 
THIS 3 YEAR MILTIMILLION DOLLAR EFFORT TO TOPPLE MICROSOFT AND ALLOW 
THEIR COMPITORS TO HAVE UNFAIR LEVERAGE OVER THEM. UNFORTUNATELY MY 
STATE OF IOWA IS ONE OF THOSE NINE.
    I WANT TO INCOURAGE THE DOJ TO MOVE FORWARD WITH WHAT IS BEING 
CONCIDERED A SETTLEMENT WITH SOMETHING FOR EVERYONE WHILE NOT 
ENTIRELY SATISFYING TO ANYONE. IN THIS TIME OF ECONOMIC UNCERTAINTY, 
WE NEED BUSINESSES THAT STIMULATE DEMAND FOR PRODUCTS THROUGHOUT 
THEIR INDUSTRY TO RETURN WORK AND NOT! ENCOUNTER NEW OBSTACLES TO 
GROWTH.
    THANK YOU FOR THE OPPORTUNITY TO EXPRESS MY CONCERNS REGARDING 
THE LAWSUIT AND PROPOSED SETTLEMENT.
    KAY KING, OWNER/PRESIDENT
    TRAVEL WORLD. INC
    5922 Ashworth Road
    West Des Moines, Iowa 50266
    Office: 515.223-7474 .
    Fax: 515-223-7722



MTC-00029870

Management Reports Incorporated
23945 Mercantile Koad
Beachwood, OH 44122-5924
January 7, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC, 20530-0001
    Dear Mr. Ashcroft:
    At first glance, many companies in the IT community were elated 
when the Department of Justice filed their suit against Microsoft. 
As time went on, however, it became evident that the punitive nature 
of the suit would probably end up more damaging than helpful to the 
entire IT community.
    Now there is this settlement. I believe this settlement to he 
amply fair. It is my hope that it will prevail through this period 
of public comment, and that no further federal action will be 
contemplated. The settlement's call for interoperability protocol 
disclosure and Windows reconfiguration will ensure that more varied 
and effective computer software is brought to the market.
    The IT business community has already been hit with slowdown and 
its share of business failures, both of which cut into the ability 
to quickly rebound. As the IT business has faltered, so has our 
entire national economy. It is time to put all of this 
unpleasantness behind us and allow the IT community to regain its 
position of strength. It is here that our economic recovery as a 
nation will be greatly enhanced.
    Sincerely,
    Robert Burger
    IS Manager



MTC-00029871

Kevin H. Smith
12435 129th Avenue E
Puyallup, WA 98374
January 26, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I favor an immediate resolution to the Microsoft anti-trust 
case. A settlement proposal exists. It has the support of the major 
parties and the majority of party states. It is fair and it is 
workable and it deserves to be ratified by the government and 
enacted.
    The settlement agreement addresses the concerns and the 
complaints of all parties. It leaves Microsoft whole while requiring 
the company to adopt practices that benefit its competitors. 
Microsoft must abandon predatory market practices. It must open its 
systems and technology to the exploitation of its competitors. It 
must now license its Windows platforms to computer manufacturers 
without exclusivity requirements for its software. These and other 
settlement terms, which Microsoft has accepted, make it clear that 
the company is willing to actively contribute to a new more 
competitive marketplace and justify an end to this case.
    Please support this settlement and use your influence to 
convince the congress that it is, as it is in fact, the best thing 
for everyone.
    Sincerely,
    Kevin H. Smith



MTC-00029872

FACSIMILE COVER PAGE
To: Renata B. Hesse
From: Bill Barmes
Sent: 2/1/2002 at 10:17:56 AM
Pages 1 (including Cover)
Subject: Microsoft Settlement
    I am a VAR (Value Added Reseller) in the state of Idaho. I 
believe it is extremely important for the economy of this country to 
have the DOJ Microsoft agreement resolved as soon as possible. The 
Small Business Owner not only in Idaho but accross the country has 
already been badly affected by this process being dragged out. We 
all need to move forward and get OUR economy going again in the 
right direction.
    Bill Barmes
    CompNet Systems
    208-283-5400
    bbarmes @ velocitus.net
    fax 208-388-0610



MTC-00029873

Bill Hughes
33 Deborah Drive
Roswell, New Mexico 88201-6501
January 27, 2002
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530-0011
    Dear Mr. Ashcroft:
    I am of the opinion that the settlement that was reached between 
the Justice Department and the Microsoft Corporation is fair and 
reasonable, and I am in full support of it. It is nice to see that 
the lawsuit that has leveled the stock market and pushed our economy 
into recession is over, and I hope that the other states still 
involved in litigation will follow the lead of the federal 
government.
    The settlement does not go easy on Microsoft, but will be 
beneficial to the entire information technology industry and the 
economy. Microsoft has agreed to design future versions of Windows, 
which will include a mechanism that will make it easier for computer 
makers and consumers to install and use non-Microsoft software 
within the Windows operating system. It will also make it easier to 
add or remove access features that are built into Windows. This will 
push the competition to develop better software that will rival 
Microsoft's, and gives the consumer more choices. This gives the 
consumer the best of all worlds. Competition in the information 
technology industry will benefit as will consumer choice, This 
settlement is good for everyone involved, and i stand behind it.
    Sincerely,
    Bill Hughes



MTC-00029874

January 28, 2002
Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
    Dear Ms. Hesse,
    I work in the financial services industry (commercial insurance) 
and have closely watched the impact of the Microsoft lawsuit, 
particularly its effect on the economy as a whole. I don't believe 
it is a coincidence that just when the lawsuit was getting underway, 
our economy began a significant downturn which some say we are just 
beginning to come out of in recent weeks. Continuing this lawsuit is 
only detrimental to the companies involved and the American economy 
as a whole. It would be far more advantageous to

[[Page 28766]]

all parties to settle the matter with appropriate safeguards in 
place to prevent a similar suit in the future. In my opinion this 
suit did nothing to protect me or other American consumers. In fact 
it harmed our buying power and the overall strength of the economy.
    As I understand the settlement from media reports, Microsoft has 
agreed to share intellectual property (which I don't think is right 
or fair) and create software that would allow for more flexibility 
for competing products to be used within Microsoft's operating 
system. In addition, a special committee will be formed to ensure 
compliance with all aspects of the settlement. It seems to be a fair 
and just compromise. Continuing to cripple Microsoft to allow others 
to "catch up" is not what our market economy is based 
upon. The fair opportunity taken advantage of by Microsoft 20 some 
years ago was open to all, do not further punish them for exercising 
their opportunity.
    Please accept the settlement before you and put this case to 
rest. Thank you.
    Sincerely,
    Scott M. Scheidel



MTC-00029875

Advanced Network Design, Incorporated
301 N. Harvey
Oklahomg City, OK 73102
(405) 319-9795, Fax: (405) 319-9824
January 28, 2002
Attorney General John Ashcroft
U.S. Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft,
    During the course of the past several years, there has been a 
lot of saber-rattling going on between Microsoft and the department 
of Justice over this lawsuit. I personally do not think that the 
ultimate goal of the government to break up Microsoft would have 
survived a Supreme Court review, but the very threat seems to have 
tamed Microsoft into this settlement.
    In the unlikely event that Microsoft would have ever been broken 
up, it could have been beneficial for my company. However, it must 
be quickly said that the Microsoft product line is deservedly 
superior to anything on the market today. The long-term effects of 
having Microsoft splintered through this lawsuit would have been 
devastating for most consumers as well as many IT companies.
    This settlement is therefore good. Even though its terms 
encompass more than the lawsuit did, it has been accepted by both 
sides and, with its acceptance, the struggle between our government 
and Microsoft is over. i am hoping that this in itself will be 
enough to allow all of us to put this behind us and move forward.
    Sincerely,
    John Woods
    President
    CC: Senator Don Nickles



MTC-00029876

ALLIED WASTE
Charlotte Metro District
January 19, 2002
Renate Hesse
Trial Attorney
Anlitrust Division
Department of Justice
601 D Street NW, Suite I200
Washington, DC 20530
Subject: Support for Microsoft Settlement
    Dear Ms. Hesse:
    I started in business as a very young man, working with my 
father at the garbage company he owned. Since then I have worked 
with a variety of companies in the waste industry. I have seers 
dramatic changes not only in this industry but also in the national 
economy, Technology is a driving force in the waste industry and the 
economy, providing the foundation for increased productivity, 
consumer and business knowledge and millions of new jobs in almost 
every industry.
    Microsoft has been the leader in technology, not only in the 
United States, but internationally through its establishment of 
technology standards and integration of software. The efforts to 
restrict Microsoft's ability to compete could have serious 
implications for our economy. I urge a speedy resolution to the 
antitrust lawsuit. The proposed consent decree offers new 
flexibility and access to the tachnical aspects of Microsoft 
software so that computer makers and software developers can 
integrate non-Microsoft products into computer operating systems. 
Microsoft itself, its competitors, computer manufacturers, 
information technology providers and, most important of all, the 
consumer and end-users will benefit from the protections provided in 
the settlement agreement. It is time to accept this agreement and 
allow Microsoft and other technology companies to return to building 
a competitive technology industry.
    Sincerely,
    Jimmie Jones
P.O. Box 219/ Pineville, NC
28234/ 704.377.0161/ 803.548.2026 FAX
Waste Services of Charlotte
January 17, 2002
Renata Hesse
Tria1 Attorney
Antitrust Division
Department of Justice
601 D Street NW. Suite 1200
Washington, DC 20530
Fax 202-616-9937
Subject: Support for Microsoft Settlement
    Dear Ms. Hesse:
    For more than 20 years, I have worked in different aspects of 
the waste management industry During that time, I have seen dramatic 
changes in my industry as well as the overall economy. Certainly the 
use of technology has dramatically changed the way business is done, 
The waste industry is much more efficient and more capable of 
keeping track of equipment, waste sites and a variety of other 
aspects of our work because of technology.
    I have watched the antitrust litigation against Microsoft with 
interest not only because of the impact on technology but also the 
impact it could have on innovation and product development. While 
not a panacea for the concerns voiced by computer makers and 
software developers, the proposed settlement agreement will give 
them new rights to configure Windows so that non-Microsoft products 
can be used. Microsoft has also agreed to the establishment of a 
technical committee to monitor progress of the settlement and to 
provide a venue for concerns of computer makers, software developers 
and consumers.
    Microsoft will have the freedom to continue efforts to develop 
new and innovative products, Innovation is key in this country's 
ability to thrive in a global marketplace where foreign competitors 
try to replicate our products and sell them st cheaper prices to 
undercut our economic growth, The proposed settlement, agreement 
provide protections to all involved in this industry Microsoft 
itself, its competitors, computer manufacturers, information 
technology providers and, most important of all, the consumer. From 
my own experience, I know how difficult it is to come up with a 
compromise I encourage a quick resolution to the litigation so the 
technology industry can focus on regaining its competitive edge in 
the world economy.
    Sincerely,
    Tony Davies
    5105A Morenead Road
    Concord, NC 28027
    (704) 393-6900, Fax (704) 782-2177
?? Pre??cts, Inc.
?? Break Read, FF-202
Charietie, North Carallas 28205
Phone 704-373-9889
Toll Free 888-332-2888
January 22, 2002
Ronal?? Hesso
Trial Attorney
Antitrust Division
Department of Justice
601 D Streat NW, Suite 1200
Washington, DC 20530
    Dear Ms. Hesso.
    I am writing in support of the proposed settlement a??eement in 
the United States v. Microsoft case The Antitrust laws were meant to 
protect consumers, not to stop market competition. As a small 
business owner, I believe this proposal will not penalizeï¿½ 
other competing operating systems. This proposed settlement 
encourages more competition and groater innovation. All new 
Microsoft operating systems, including Windows XP. would have to 
include a mechanism that readily allows and users to remove or to-
enable Microsoft's middleware products, such as the Internet web 
browser We need to be encouraging the technology sector, which is 
critical to out economic recovery.
    This Agreement is good for the technology industry, the economy 
and consumers
    Sincerely,
    Evan J. Boxer
    President
    EJn/dgb



MTC-00029877

John O'Donnell
13000 NE 28th Place
Bellevue, WA 98005
January 27, 2002
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    I am writing in full support of the recent settlement between 
Microsoft and the US

[[Page 28767]]

Department of Justice. It is time that this foolishness comes to a 
prompt end. More than enough time has been used to cover all of the 
bases and I feel that it is just a political standoff at this point.
    The terms of the settlement make apparent to me the intense 
lobbying efforts of Microsoft's competition as they will be granted 
new rights to configure Windows so that non-Microsoft products can 
be promoted more easily and also be given interfaces that are 
internal to Windows' operating system produces.
    Even though these concessions do not actually protect consumers 
and just help Microsoft's competitors that were unable to be 
innovative on their own, I urge your office to finalize the 
settlement. It is in the best interests of our economy, IT sector, 
and public for the case to end and our country to move on. Thank 
you.
    Sincerely,
    John O'Donnell



MTC-00029878

Beverly Duncan
8310 E MORRIS ST
WICHITA, KS 67207
Renata Hesse
Trial Attorney
Antitrust Division
US Department of Justice
601 D Street NW--Suite 1200
Washington, DC 20530
    Attorney Hesse:
    Please accept the settlement before involving the Department of 
Justice's antitrust suit against Microsoft. Based on what I have 
seen on the news and read in the papers lower courts have ruled that 
Microsoft should not be broken up and have thrown out much of the 
original case. It is my understanding that this occurred because the 
case revolved around proving consumer harm and such harm has never 
been proven.
    While this case has gone on for the last several years, we have 
all felt its negative impact on our wallets. Whether you consider 
the astronomical costs that taxpayers must bear or the millions lost 
in the stock-market, the effects of this case have been negative to 
average Americans. In an effort to resolve this case the Justice 
Department and Microsoft have wisely found a way to reach an 
agreement. It seems to me this agreement more then addresses any 
concerns some may hold about Microsoft's business practices.
    Please support the settlement before the court.
    Sincerely,
    Beverly Duncan



MTC-00029880

Gary G. Hill
44024 Countryside Druive
Lancaster, CA 93536
January 26, 2002
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    Re: Microsoft Settlement Support
    As an elected member of the Antelope Valley Health Care District 
representing 450,000 people, I am writing this letter as in support 
of the settlement in the case against Microsoft. I believe that this 
whole suit was a waste of time and money. Only in America do we 
focus on tearing down success, and destroying a product line the 
works. There are choices out there, but none of them work as well as 
the Microsoft products.
    There are more pressing issues that are of concern to me in this 
country such as the energy crisis here in California. The state has 
lost $22 billion dollars resulting in consumers getting gauged. In 
addition, the price of gas has risen 20 cents per gallon, just in 
the last week. The Department of Justice should have taken a strong 
NO to the rash of oil company mergers this past decade; we can live 
without a home computer, but must have gasoline (real public transit 
has not arrived yet) Microsoft did not get off as easy, as its 
opponents would have people think. They agreed to terms beyond what 
was required in the suit. They also agreed to design future versions 
of Windows, starting with an interim release of XP, to provide a 
mechanism to make k easy for computer companies, consumers and 
software developers to promote non-Microsoft software within 
Windows.
    Microsoft seemed to be generous when settling the case. Let's 
end litigation now so that Microsoft can go back to work. We, the 
American people, need a company like Microsoft to stay strong, so 
they can continue to create innovative products, well paying jobs, 
and help strengthen the tech sector of the economy.
    Sincerely
    Gary G. Hill



MTC-00029882

TAMMY FOX
Renata Hesse
Thai Attorney
Anti-Trust Division
U.S. Department of Justice
601 D St., NW
Suite 1200
Washington, DC 20530
    Dear Ms. Hesse:
    After years of hearing and reading about the Microsoft antitrust 
case, it is a great opportunity for the those of us in the general 
public to voice our opinion as part of the official record. Thank 
you for the opportunity to do so.
    Bill Gates started his company in his garage. Today, it's one of 
the largest software companies in the world. There is no better 
example in our time of fulfilling the American Dream. This man and 
his company are what entrepreneurial spirit is all about. When 
raising our children, never was it instilled in them to work hard, 
work smart, build something, BUT be careful not to get too big 
because if you do, the government might try to take it away. That is 
not how our country became the economic super power it is today. We 
got there with freedom and free enterprise. Clearly, I disagree with 
the premise of this entire case. However, we are past that point. 
Now we are at a place, after three long years of courtrooms and 
lawyers, where you have a decision to make On a proposed settlement. 
The agreement presented delivers what the federal and state 
governments involved felt they needed--oversight of Microsoft's 
business operations. I hope you will see fit to endorse the 
agreement so we can all move on.
    Thanks Again,
    Tammy Fox
    2136 Blake Boulevard SE
    Cedar Rapids, Iowa 52403



MTC-00029883

State Senator Stan Clark
205 US Highway 83
Oakley, KS 67748
January 25.2002
Judge Kolar-Kottely
Attn: Renata Hesse, Antitrust Division, U.S. Department of Justice
601 D Street, NW, Suite 1200
Washington. DC 20530
    Dear Judge Kolar-Kottely,
    This is a difficult time for our nation as we face economic 
hardship we have not seen in a decade. As a state senator, I know 
the difficulties that come with this economic downturn. My own state 
of Kansas is facing budget shortfalls and the threat of increased 
taxes as a result.
    I understand that the economic situation is the result of a 
number of elements that together have culminated in a recession. 
Some of these elements, like the attacks on America on September 
11(th), were beyond our immediate control. Others elements, like the 
monetary" policy of the Federal Reserve are controlled 
directly by the government. The US Department of Justice's antitrust 
suit against Microsoft is another event that contributed to our 
economic downturn at the hands of our own government.
    There is quite a pool of evidence that demonstrates that 
specific events during the government's case against Microsoft had a 
direct correlation to the state of the stock market, Upon Judge 
Jackson's "findings of fact" against Microsoft, the 
NASDAQ fell. Upon his recommendation for splitting up the company, 
there was another NASDAQ freefall.
    The lawsuit against Microsoft may seem to be a small part of the 
whole economic picture, but it is difficult to deny that the case 
has had a negative economic impact--and on one of the driving 
sectors of our economy: the high-tech industry".
    When the high-tech industry is ailing, the rest office economy 
suffers as well. Technology is so integrated into our daily lives 
that we sometimes forget just how dependent up on it we are. Thus 
the ripple effect through the economy. When high-tech hurts, 
everybody hurts.
    From what I understand of the settlement accord the Department 
of Justice, state attorneys general and Microsoft Corp have agreed 
to, the major concerns of the government have been addressed; yet 
Microsoft is kept from breakup and allowed to continue to be an 
innovator in our high-tech industry.
    I hope you take a valuable step forward for our national economy 
by lending your approval to this settlement. It is a timely and 
appropriate way to end this suit and allow our country's economy to 
begin to repair itself.
    Sincerely,
    Sen. Stan Clark

[[Page 28768]]



MTC-00029884

VIRGINIA V. MANN
3004 Normandy Place
Evanston, Illinois 60201
January 25, 2002
Renata B. Hesse
Anti-trust Division
US Department of Justice
601 D Street, NW
Washington, DC 20530
Sent via fax to: 202-307-1454
    Dear Ms. Hesse:
    I was pleased to hear that the Department of Justice had settled 
its ridiculous suit against Microsoft. Clearly, this lawsuit was 
politically driven and using our government and our laws in this 
fashion was unfortunate from the beginning. I am relieved to see 
this dispute resolved, although believe it should never have been 
brought in the first place.
    Although Microsoft has agreed to the restrictions in this 
settlement, I believe it is unfortunate that our government has 
chosen to do anything less than completely dropping the case. 
Microsoft has done more to improve our efficient and effective 
communications than has any other company in history. They should be 
left alone to continue their fine work without further interference 
from our government.
    Sincerely,



MTC-00029885

Mark D. Snipe
420 West 42(nd) Street, Apt, 11F
New York, New York 10036
To: Attorney General's office
Fax: 202-307-1454
From: Mark D. Snipe
Date: 1/28/02 
Re: Microsoft Settlement
Pages: 2 (including fax cover page)
CC:
420 West 42nd Street, Apt. 11F
New York, NY 10036
January 24, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing you today to express my opinion m regards to the 
Microsoft antitrust dispute. I fully support Microsoft in this 
dispute and feel that this company is being punished for being 
successful. Microsoft has contributed such a great deal to our 
society that stifling this company would only have adverse 
consequences for consumers. I support the settlement that was 
reached in November and believe that this settlement will serve in 
the best public interest.
    Microsoft has agreed to all provisions of this agreement. 
Microsoft is willing to grant computer makers broad new rights to 
configure Windows so as to promote non-Microsoft software programs 
that compete with programs included within Windows. Microsoft has 
also agreed to design future versions of Windows to provide a 
mechanism to make it easy for computer makers, consumers, and 
software developers to promote non-Microsoft software within 
Windows.
    This settlement is thorough. Continuing litigation against 
Microsoft will only serve to negatively impact our economy and 
consumers. Please support this settlement so that this company can 
devote their resources and time to innovation, rather than 
litigation. Thank you for your time.
    Sincerely,
    Mark Snipe



MTC-00029886

To:
Fax:
Date:
Subject: 
FAX
Citizens for a Sound Economy
Phone 202 783-3870
Fax 202 783-4687
1250 H Street NW
Suite 700
Washington, DC 20005-3908
    To the U.S. Department of Justice:
    I am writing in support of the recent settlement of the long-
running antitrust lawsuit between the U.S. Department of Justice, 
state attorneys general and Microsoft Corporation. Though I applaud 
the nine state attorneys general that decided to follow the federal 
government's lead and settle the case, I am thoroughly disappointed 
that remaining state attorneys general and the District of Columbia 
have decided to further pursue this baseless case.
    The settlement is fair to all. It will allow Microsoft's 
competitors to use Microsoft's Window's operating system to 
incorporate their software programs and will give consumers more 
services and products to choose from.
    As you are well aware, members of Citizens for a Sound Economy 
have been unrelenting in our opposition to the federal government's 
antitrust case against Microsoft. For nearly 3 years, activists like 
myself have called, emailed, visited, and sent letters to the U.S. 
Department of Justice and to state attorneys' general offices 
explaining that Microsoft's actions did not harm consumers, but 
provided them with great benefits by lowering the cost and 
increasing the availability of software products. We have stressed 
that Microsoft is a pioneer in the high-technology market and that 
their products increased our familiarity with the Internet. Once 
again, I thank you for your decision to settle this unfortunate 
lawsuit against a successful and innovative company.
    Respectfully,
    Name:
    Address:
    Email:
    To the U.S. Department of Justice:
    I am writing in support of the recent settlement of the long-
running antitrust lawsuit between the U.S. Department of Justice, 
state attorneys general and Microsoft Corporation. Though I applaud 
the nine state attorneys general that decided to follow the federal 
government's lead and settle the case, I am thoroughly disappointed 
that remaining state attorneys general and the District of Columbia 
have decided to further pursue this baseless case.
    The settlement is fair to all. It will allow Microsoft's 
competitors to use Microsoft's Window's operating system to 
incorporate their software programs and will give consumers more 
services and products to choose from.
    As you are well aware, members of Citizens for a Sound Economy 
have been unrelenting in our opposition to the federal government's 
antitrust case against Microsoft. For nearly 3 years, activists like 
myself have called, emailed, visited, and sent letters to the U.S. 
Department of Justice and to state attorneys" general offices 
explaining that Microsoft's actions did not harm consumers, but 
provided them with great benefits by lowering the cost and 
increasing the availability of software products. We have stressed 
that Microsoft is a pioneer in the high-technology market and that 
their products increased our familiarity with the Internet. Once 
again, I thank you for your decision to settle this unfortunate 
lawsuit against a successful and innovative company.
    Respectfully,
    Print Name:
    Address:
    Email:
    To the U.S. Department of Justice:
    I am writing in support of the recent settlement of the long-
running antitrust lawsuit between the U.S. Department of Justice, 
state attorneys general and Microsoft Corporation. Though I applaud 
the nine state attorneys general that decided to follow the federal 
government's lead and settle the case, I am thoroughly disappointed 
that remaining state attorneys general and the District of Columbia 
have decided to further pursue this baseless case.
    The settlement is fair to all. It will allow Microsoft's 
competitors to use Microsoft's Window's operating system to 
incorporate their software programs and will give consumers more 
services and products to choose from.
    As you are well aware, members of Citizens for a Sound Economy 
have been unrelenting in our opposition to the federal government's 
antitrust case against Microsoft. For nearly 3 years, activists like 
myself have called, emailed, visited, and sent letters to the U.S. 
Department of Justice and to state attorneys" general offices 
explaining that Microsoft's actions did not harm consumers, but 
provided them with great benefits by lowering the cost and 
increasing the availability of software products. We have stressed 
that Microsoft is a pioneer in the high-technology market and that 
their products increased our familiarity with the Internet. Once 
again, I thank you for your decision to settle this unfortunate 
lawsuit against a successful and innovative company.
    Respectfully,
    Print Name:
    Address:
    Email:
    To the U.S. Department of Justice:
    I am writing in support of the recent settlement of the long-
running antitrust lawsuit between the U.S. Department of Justice, 
state attorneys general and Microsoft Corporation. Though I applaud 
the nine state attorneys general that decided to follow the federal 
government's lead and settle the case, I am thoroughly disappointed 
that remaining state attorneys general and the District of Columbia 
have decided to further pursue this baseless case.

[[Page 28769]]

    The settlement is fair to all. It will allow Microsoft's 
competitors to use Microsoft's Window's operating system to 
incorporate their software programs and will give consumers more 
services and products to choose from.
    As you are well aware, members of Citizens for a Sound Economy 
have been unrelenting in our opposition to the federal government's 
antitrust case against Microsoft. For nearly 3 years, activists like 
myself have called, emailed, visited, and sent letters to the U.S. 
Department of Justice and to state attorneys" general offices 
explaining that Microsoft's actions did not harm consumers, but 
provided them with great benefits by lowering the cost and 
increasing the availability of software products. We have stressed 
that Microsoft is a pioneer in the high-technology market and that 
their products increased our familiarity with the Internet. Once 
again, I thank you for your decision to settle this unfortunate 
lawsuit against a successful and innovative company.
    Respectfully,
    Print Name:
    Address:
    Email:
    To the U.S. Department of Justice:
    I am writing in support of the recent settlement of the long-
running antitrust lawsuit between the U.S. Department of Justice, 
state attorneys general and Microsoft Corporation. Though I applaud 
the nine state attorneys general that decided to follow the federal 
government's lead and settle the case, I am thoroughly disappointed 
that remaining state attorneys general and the District of Columbia 
have decided to further pursue this baseless case.
    The settlement is fair to all. It will allow Microsoft's 
competitors to use Microsoft's Window's operating system to 
incorporate their software programs and will give consumers more 
services and products to choose from.
    As you are well aware, members of Citizens for a Sound Economy 
have been unrelenting in our opposition to the federal government's 
antitrust case against Microsoft. For nearly 3 years, activists like 
myself have called, emailed, visited, and sent letters to the U.S. 
Department of Justice and to state attorneys" general offices 
explaining that Microsoft's actions did not harm consumers, but 
provided them with great benefits by lowering the cost and 
increasing the availability of software products. We have stressed 
that Microsoft is a pioneer in the high-technology market and that 
their products increased our familiarity with the Internet. Once 
again, I thank you for your decision to settle this unfortunate 
lawsuit against a successful and innovative company.
    Respectfully,
    Print Name:
    Address:
    Email:
    To the U.S. Department of Justice:
    I am writing in support of the recent settlement of the long-
running antitrust lawsuit between the U.S. Department of Justice, 
state attorneys general and Microsoft Corporation. Though I applaud 
the nine state attorneys general that decided to follow the federal 
government's lead and settle the case, I am thoroughly disappointed 
that remaining state attorneys general and the District of Columbia 
have decided to further pursue this baseless case.
    The settlement is fair to all. It will allow Microsoft's 
competitors to use Microsoft's Window's operating system to 
incorporate their software programs and will give consumers more 
services and products to choose from.
    As you are well aware, members of Citizens for a Sound Economy 
have been unrelenting in our opposition to the federal government's 
antitrust case against Microsoft. For nearly 3 years, activists like 
myself have called, emailed, visited, and sent letters to the U.S. 
Department of Justice and to state attorneys" general offices 
explaining that Microsoft's actions did not harm consumers, but 
provided them with great benefits by lowering the cost and 
increasing the availability of software products. We have stressed 
that Microsoft is a pioneer in the high-technology market and that 
their products increased our familiarity with the Internet. Once 
again, I thank you for your decision to settle this unfortunate 
lawsuit against a successful and innovative company.
    Respectfully,
    Print Name:
    Address:
    Email:
    To the U.S. Department of Justice:
    I am writing in support of the recent settlement of the long-
running antitrust lawsuit between the U.S. Department of Justice, 
state attorneys general and Microsoft Corporation. Though I applaud 
the nine state attorneys general that decided to follow the federal 
government's lead and settle the case, I am thoroughly disappointed 
that remaining state attorneys general and the District of Columbia 
have decided to further pursue this baseless case.
    The settlement is fair to all. It will allow Microsoft's 
competitors to use Microsoft's Window's operating system to 
incorporate their software programs and will give consumers more 
services and products to choose from.
    As you are well aware, members of Citizens for a Sound Economy 
have been unrelenting in our opposition to the federal government's 
antitrust case against Microsoft. For nearly 3 years, activists like 
myself have called, emailed, visited, and sent letters to the U.S. 
Department of Justice and to state attorneys" general offices 
explaining that Microsoft's actions did not harm consumers, but 
provided them with great benefits by lowering the cost and 
increasing the availability of software products. We have stressed 
that Microsoft is a pioneer in the high-technology market and that 
their products increased our familiarity with the Internet. Once 
again, I thank you for your decision to settle this unfortunate 
lawsuit against a successful and innovative company.



MTC-00029891

January 25, 2002
Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
Fax: 202-616-9937
    Dear Ms. Hesse:
    As the new Commissioner of the Babe Ruth Softball League, I am 
confident in the future of our programs. I only wish that I had 
reason to be as optimistic about the future of the American economy. 
It seems as though everywhere I look I see doubt, confusion and a 
lack of stability in the American economy. We've got to improve this 
situation
    I think that President Bush has the right ideas: strengthening 
our military, improving education and cutting taxes will make our 
nation stronger, smarter and more ready for business. However, 
consumer confidence in the short term must be fixed in order to spur 
growth. The American people want to see their government working to 
help create jobs. In that spirit, I believe that the pending 
settlement in the federal government's antitrust suit against 
Microsoft needs to be finalized. Think about it: the stock market 
took a nosedive when the federal courts announced that they planned 
to dissolve Microsoft. The economy has never recovered. We need to 
reverse this trendl
    When I think of every American out of work, it makes me realize 
how needless and futile that any further pursuit of this lawsuit 
would be. We need our industry leaders, particularly our industry 
giants, like Microsoft, to be as strong as possible. Our government 
should work cooperatively to bolster, not weaken, them.
    I request that Judge Kollar Kotelty approves the settlement.
    Sincerely,
    Famie Horn



MTC-00029892

Adam Marigold
January 27, 2002
Renata Hesse
Trial Attorney
Anti-Trust Division
U.S. Department of Justice
601 D St., NW
Suite 1200
Washington, DC 20530
    Dear Ms, Hesse:
    The antitrust case against Microsoft brought the booming success 
of the high-tech industry to a screeching halt.
    Microsoft has been a leader in the surge in both the high-tech 
sector and our overall economy. The case caused numerous slides on 
Wall Street costing investors everywhere. Future success for not 
only tech companies, but businesses of all types, seems in jeopardy 
of government intervention.
    The marketplace is constantly changing and guarantees success to 
no one, but opportunity for success to all. Government involvement 
in business obstructs the workings of America's free-market system. 
Customers determine what they want, what they like and buy it. 
There's no sure thing. The federal government should not be placed 
in a position of authority over the market--choosing champions 
and runners up. There is a place for a limited government--to 
protect.
    Those who argue this is in fact the role the state and national 
Justice Departments undertook in this case, should be asking

[[Page 28770]]

themselves--Why does this settlement come three years too late? 
Three years after it began we have a wounded economy, a limping 
technology industry, puzzled consumers and furious taxpayers. Please 
accept the settlement before you.
    Sincere
    Adam Marigold
    3906 B Ave NE
    Cedar Rapids, IA 52402
    (319) 363-3527



MTC-00029893

Commercial Underwriters
22720 Michigan Ave., Ste. #210
P 0 Box 1088
Dearborn, MI 4812t
Phone: (3t3) 278-3800
Fax: (3t3) 278-8467
TO: Attorney General John Ashcroft
DATE: 1/28/02
COMPANY:
FROM: US Department of Justice
FAX# 202-307 145/05 616-9937
FROM: Dan Schwartz
PAGES INC- COVER:
MESSAGE:
Please see Following page.
Click on us at:
www. CURMinc.com
January 28, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, N W
Washington, DC 20530
    Dear Mr. Ashcroft:
    I want to express my gratitude liar the work you have done since 
being named Attorney General last year. I am especially pleased with 
your decision to settle the government's anti-trust lawsuit against 
Microsoft, and I fully support this settlement. Private businesses 
should have the right to develop ideas and become successful from 
them without being punished by the federal government.
    This lawsuit has had very negative effects on the technology 
industry, and this has carried over and hurt the U.S. economy. 
Microsoft has agreed to change its business practices so that 
competition can increase, the industry can be revitalized, and the 
economy can be stimulated. The settlement calls for a three person 
technical committee that will watch over Microsoft, and make sure 
that no more anti-competitive behavior exists in the future. 
Consumers will benefit from more choices in the marketplace, and 
this was the desired outcome when the lawsuit began over three years 
ago.
    Settling now is the right thing to do for our country at this 
time, and I thank you for your decision to end the litigation 
against Microsoft. I am hopeful that this is truly the end of this 
case at the federal level, and that there will no further action 
taken against Microsoft.
    Sincerely,
    Dan Schwartz
    P.O. Box 5644
    Dearborn, M--I 48128
    P.O. Box 1088,
    Dearborn, Michigan 48121-1088
    22720 Michigan Avenue,
    Suite 210,
    Dearborn, Michigan 48124
    Phone (313) 278-3800
    Fax (313) 278-8467--Toll Free 
1-800-856-8701
    www.curminc.com



MTC-00029894

JOSEPH TARTAGLIA
88 FARRELL DRIVE
WATERBURY, CT 06706
Renata Hesse, Esq.
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
Via Facsimile 202-616-9937
    Dear Ms Hesse:
    This letter is to articulate my support for the proposed 
settlement in the Microsoft case. The fact that over $30 million in 
taxpayer dollars has been spent in this case during these trying 
economic times is proof enough that this case has gone on far too 
long. Hopefully, the settlement will signal a return to innovation 
without the threat of government intervention.
    The Department of Justice has done a commendable job in putting 
together an agreement that is fair but won't put Microsoft out of 
business. It is a reasonable conclusion to this case and I support 
it wholeheartedly.
    Sincerely,
    Joseph Tartaglia



MTC-00029895

ASSOCIATED BROKERS
OF SUN VALLEY, LLC
Real Estate
January 28.2002
Mike Sampson
P.O. Box 2004
Sum Valley, ID 83353
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing in support of Microsoft and believe this whole 
antitrust case has become political. I don't see how this benefits 
consumers and businesses--especially at the expense of the 
economy. The tech stocks are down. The technology sector is down. 
The employment numbers are down. Let Microsoft get back to work and 
the government get on with worthwhile business. The only people I 
see benefiting from this case are the lawyers.
    I am a small businessman who employs 25 people. I have greatly 
benefited since 1982 from the products Microsoft produces and feel 
they have been more than fair to me. If their competitors can't put 
out a better product with competitive pricing and service that's 
their problem. I don't see why I should suffer as a small 
businessman.
    After years of extensive negotiations and mediation, Microsoft 
has gone out of their way to settle this case. They went well beyond 
what would be required in any antitrust case. They agreed to design 
future versions of Windows, starting with an interim release of XP, 
to provide a mechanism to make it easier for computer companies, 
consumers and software developers to promote their software within 
Windows.
    Let's end this litigation so that we can focus on what's really 
important. Thanks,
    Sincerely,
    Mike Sampson
    cc: Senator Larry Craig



MTC-00029896

Jesse L Clay
1205 Ridgecrest Drive SE
Albuquerque, NM 87108
January 26, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I would like to take some time to express to you my feelings 
about the proposed settlement that was reached between Microsoft and 
the Department of Justice. It is about time that the antitrust suit 
ended, and I feel that the terms in the settlement, although harsh 
on Microsoft, will be for the betterment of the computer industry 
and the economy.
    I am pleased with the prospect of the case being resolved, but I 
think it was initiated for all of the wrong reasons. Microsoft's 
competitors had a major role in initiating the litigation, because 
they could not bring to the market a product that matched 
Microsoft's own. The competition should be happy though. The terms 
of the settlement require Microsoft to turn over to their 
competitors source code and design data that are crucial to the 
internal makeup of Windows. Enough is enough. This settlement needs 
m he approved so the industry can get back on its feet, and with 
competitors working more closely with one another, the industry will 
benefit.
    I feel the proposed settlement will benefit all parties 
involved, including Microsoft's competitors.
    Sincerely,
    Jesse Clay



MTC-00029897

Carol Morse Sibley
92 Overlook Terrace
Bloomfield, NJ 07003-2917
January 24, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    The antitrust lawsuits against Microsoft have gone on for too 
long. They are also not very well justified. Microsoft has not only 
created jobs and wealth for our country, but also has made 
technological breakthroughs that have revolutionized the IT sector. 
I do wish that when they come out with new versions of software they 
would always make it compatible with previous versions, which they 
didn't do, for instance, with PowerPoint.
    Still, it's clear that the settlement seems to only help 
competitors gain an edge they were not able to gain beforehand. It 
forced Microsoft to disclose interfaces that are internal to Windows 
operating system products, and also grant computer makers broad new 
rights to configure Windows so that non-Microsoft software can be 
promoted more easily. It is in the best interests of the

[[Page 28771]]

American public to finalize the settlement. Our nation cannot afford 
further litigation so I urge your office to use its influence to try 
to rein in the nine states that want to drag this case out for even 
longer. Thank you for your time.
    Sincerely,
    Carol Morse Sibley



MTC-00029898

Nancy A. Waxdahl
305 N. Chicago Avenue
Sioux Falls, SD 57103
605-332-5335 Home/Consultant Phone
January 24, 2002
Renata Hesse, Trial Attorney
Antitrust Division
U.S. Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
    Dear Ms. Hesse:
    I am addressing in this letter the settlement agreement in 
U.S.v. Microsoft, and its benefits for our state and America's 
economy.
    Frankly, this case has run its course after four years and the 
tremendous financial investment by federal and state governments, 
and the Microsoft Corporation, I am aware that nine of the 18 states 
in the antitrust case have chosen not to agree to settle, but I 
think it speaks more loudly and convincingly when nine states and 
the U.S. Department of Justice agree that this case has reached a 
satisfactory conclusion.
    As someone who has served on county and city boards which were 
created a better quality of life, I am very pleased that a positive 
result of this case wilt be the distribution of computers, software 
and support for low income schools in the nation. Our state will 
certainly benefit, particularly among the Indian populations where 
some of America's poorest counties are found. I am also pleased that 
this agreement indicates that this court action will finally end, 
and Microsoft will be able to refocus its energies to providing the 
leadership in information technologies. Because Microsoft has blazed 
the path, America's technology industry has been a cornerstone to 
our nation's economic position in the world. Please do what you can 
to allow this agreement to be implemented so that we can all move 
forward. Thank you very much.
    Sincerely,
    Nancy Waxdahl



MTC-00029899

JEFFREY Q. OLSON, D.D.S.
Clock Tower Plaza. Suite 211B
2525 West Main St.
Rapld City, SD 57702 605/342.2445
January 25, 2002
Renata Hesse, Trial Attorney
Antitrust Division
U.S, Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
    Dear Trial Attorney Hesse:
    Thank you for the opportunity to provide my Input on the 
settlement reached recently in U.S.v. Microsoft. I am very pleased 
that this antitrust case has settled after the years and millions 
invested in pursuing every relevant issue involved, I realize that 
it has been a complicated case which has caused the courts to enter 
unfamiliar terrltory in determining the appropriateness of Microsoft 
Corporation's practices as they affect its equally ambitious 
competitors, However, I have been concerned that this case would 
also act to stifle the dynamic ability of Microsoft--or any 
other software firm--to create and successfully market the best 
software which meets the needs of consumers Placing our government 
in charge of micromanaging innovation would certainly limit the 
ability of American software companies to keep our nation ahead in 
technology development, For my dental practice and home use, I have 
relied on Microsoft to provide a competent and versatile system to 
conduct bustness and communicate with friends and family. I hope 
this settlement will allow Microsoft to dived its resources into 
continuing to make Its clients satisfied with its new products.
    Sincerely,
    Dr. Jeff Olson



MTC-00029900

COMMUNITY COLLEGE
224 NORTH PHILLIPS AVENUE
Sioux FALLS. SD 57104
605/336,1711
FAX: 605/336-2606
1-800-888. 1147
E-Mall: Info @ kee.cc.??d.us
January 17, 2002
Renata Hesse, Trial Attorney
Antitrust Division
U.S. Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
    Dear Renata Hesse:
    My letter is for the public commentary portion of the settlement 
phase in U.S. vs. Microsoft. As an educator in a Sioux Falls 
college, one reason I support the settlement is it offers a chance 
to improve education in South Dakota's and the nation's poorest 
school districts by bringing IT equipment, software, and support to 
them. This will create a ladder to those who've been trapped in the 
IT access gap, and give these children the tools they will need to 
continue their education in our state's colleges.
    I also support the proposed settlement largely because it puts 
an end to an antitrust suit which has not shown consumers have been 
harmed by Microsoft, and because it has found answers to the issues 
which were found to be important by the federal court system. 
Additionally, when a case of this size and important has boon 
running for four years with all of the resources brought into it, I 
think you can safely assume that all valid issues have been brought 
to light and all questions have been answered satisfactorily, 
Apparently the U.S. Department of Justice thinks so, as do half of 
the state attorneys general who brought the case.
    Our own state did not join this antitrust action. Our Attorney 
General felt it lacked enough ?? to warrant using our state's 
limited financial resources to pursue it, I think he was right. 
Considering them arc much more important and pressing matters before 
the Department of Justice, I think it's time to call this matter 
resolved and settled.
    Thank you for your attention to my letter.
    Sincerely,
    Kip Scott



MTC-00029901

Randy
2408 W. Rice Street.
Sioux Fails. SD 57104
January 24, 2002
Renata Hesse--Trial Attorney
Antitrust Division
US Department of Justice
601 D Street NW--Suite "1200
Washington, DC 20530
    Dear MS. Hesse:
    With the court's approval, our nation will be best served by the 
settlement agreement reached between the Department of Justice and 
Microsoft Corporation. The settlement resolves the issues which were 
found to be legitimate. It resolves an issue which has absorbed four 
years and many millions in taxes from the Justice Department.
    While our nation has endured a recession, one Of the strong 
points in our recovery has been the Microsoft Corporation which has 
Shown great resiliency, even though its resources and attention have 
been split with the threats posed by the antitrust case. Microsoft 
has ?? In one of the most hostile Industries because the entire 
company's energetic focus is on remaining the leader in software 
development. Their competitors are also very wealthy and they are 
equally as determined to replace Microsoft as the leader. Therefore, 
I am not surprised that half of the states in the original suit are 
still in the hunt to bring down Microsoft.
    I am impressed with one Of the gifts available In this 
settlement, Which will target computers and Information technologies 
resources for our nation's most poverty-stricken school districts. 
My home state will probably be rewarded With these computers since 
some of the nation's poorest counties are located in South Dakota. I 
nave been an activist on social development Issues, Including my 
service as Executive Director of the S.D. Alzheimer's Association. I 
support this settlement not only because It ends an action which has 
served its usefulness, but also because it benefits children who 
need the help. I appreciate your consideration of my letter.



MTC-00029902

PAUL SYMENS
STATE SENATOR
3ENATE CH.AMBERS: RESIDENCE: TELEPHONE:
State Capitol RR Box 89 605/a48-5775 (home)
Pierre, SD 575Ol Amherst, SD 57421 605/448-2624 (work)
phone: 773-525I 605/448-5786 (fax)
January 18, 2002
Reacts Hesse, Trial Attorney
Antitrust Division
U.S. Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
    Dear Trial Attorney Hesse:
    Thank you for the opportunity to provide my comments on the 
settlement of U.S.v. Microsoft and the benefits this settlement will 
have for the nation and our state. South. Dakota has been pro-active 
in making information technologies ubiquitous for

[[Page 28772]]

children and adults throughout our state. Governor Bill Janklow's 
Wiring the Schools Program is making high-speed, wide ban interact 
service available in all schools and public buildings in every town. 
Additionally, with the help of a $670,000 matching grant from the 
Bill and Melinda. Gates Foundation, the state is bringing faculty 
and administrators up to speed on using these systems so that more 
children will benefit. The settlement from the Microsoft antitrust 
case will result in financially disadvantaged school districts 
receiving free software, hardware and technical support. For 
disadvantaged kids, this is a case of what happens when preparedness 
meets opportunity, In South Dakota, where the nation's three poorest 
counties are found, this settlement will have great meaning for 
young people seeking their way in tills world.
    Aside from the educational benefit, I am glad that this ease is 
nearly settled. It has absorbed an incredible amount of taxes and 
four years of productive time to resolve the issues brought to the 
court. Those issues are addressed in this settlement, and I believe 
they should he satisfied. There are those who would like to continue 
this case, I can't imagine that after all of the time and money 
invested to date that anything useful or productive would be the 
result. Please let this case become settled, Microsoft is part of 
the foundation of our nation's economy, and continuing this case 
will work only to weaken a corporation which has been a responsible 
citizen to our nation. Thank you for considering my letter.
    Sincerely,
    Paul N. Symens
    State Senator, District I
    Paid for by Paul Symens for Senate Committe, RR Box 89, Amherst, 
SD 57421



MTC-00029903

South Dakota Network
Against Family Violence and Sexual Assault
P.O. Box 20453.
Sioux Fails, SD 57109.
(605)731.0041.
sdnafvsa @ meleodusa.net
January 17, 2002
Renata Hesse, Trial Attorney
Antitrust Division
U.S, Department of Justice
601 D Street NW, Suite t200"
Washington, DC 20530
    Dear Ms. Hesse:
    My comments here are" in favor of the settlement in U.S. 
vs. Microsoft, because the settlement's provisions will be a benefit 
for children in regions" where poverty has prevented them from 
accessing the intenet. The state government of South "Dakota 
has put an emphasis of wiring our public schools and public" 
buildings for the. internet, but obtaining good software and 
hardware, and the support needed to make the system work smoothly, 
have been lacking. The settlement will be of great benefit to this 
program and to the state's children.
    I also feel the settlement is the. right thing for our nation's 
economy, I have used Windows products for work and pleasure, and I 
am satisfied with the products. They empower people to gain the full 
benefit of the information superhighway, and they enable business 
people and nonprofits to correspond on the same technical level, I 
think it is noteworthy that the antitrust case never established a 
finding that consumers were shortchanged by Microsoft.
    Your attention to my letter .is appreciated.
    Sincerely,
    Deb Aden



MTC-00029904

Mark Proctor
family & children advocacy services
713 N. Madison Avenue
Picrre, SD 57501
January 22, 2002
Renata Hesse
That Attorney
Anti-trust Division
US Department of Justice
601 D Street NW, Suite t200
Washington, DC 20530
    Dear Ms. Hesse:
    On the issue of the settlement agreement in US v. Microsoft, 
please allow this agreement to move forward so that this anti-trust 
case is allowed to come to a fair and final conclusion very soon.
    The time and money which has gone into this case, in both the 
government and private sectors, has been more than sufficient to 
render sensible decisions, it is my understanding that the 
settlement agreement addresses each of the issues which needed to be 
addressed by the courts. It is interesting that none of Microsoft's 
practices and policies were determined to be harmful to consumers. 
AS someone who has worked in family and children advocacy projects 
in Western South Dakota, I am pleased that an important aspect of 
this settlement will help to bridge the IT gap among poorer Children 
in the nation.
    The distribution of computers and supplies by Microsoft is in 
keeping with the reputation of the Bill ?? Melinda Gates Foundation. 
The Foundation made a sizeable gift to our state to enhance the 
development of IT services within South Dakota's public school 
systems. And the Foundation has a tremendous record of philanthropic 
contributions [o eliminate diseases worldwide through vaccination 
programs. Despite the criticism by some, the remedy of forcing 
Microsoft to install and maintain computer systems in public schools 
to help the neediest children is profoundly wise and beneficial to 
society.
    Sincerely,
    Mark Proctor



MTC-00029905

South Dakota Legislature
State Capitol,
500 East Capitol,
Pierre, South Dakota 57501-6070
January 22, 2002
Renata Hesse--Trial Attorney
Antitrust Division
US Department of Justice
601 D Street NW--Suite 1200
Washington, DC 20530
RE: Public commentary In U.S. v. Microsoft settlement
    Dear Ms. Hesse:
    Public service, for me, means investing my time and energy to 
help improve the quality of life for the people in my legislative 
district. That is why I have served as a member of the Rossbud Sioux 
Tribal ??, and as a State Senator for 10 years, and now as a State 
House member for my second year.
    My legislative District 27 is home to the pine Ridge Reservation 
and the Ro??obud Reservation, where you will find two of the poorest 
counties in the entire United States, according to the U.S. Census 
Bureau. My district is filled with kids who want to do well in 
school no that they can make a good life for themselves as adults, 
Everybody is encouraged by our Governor's program Wiring the Schools 
because it brings wide band, high speed Internal capabilities to our 
schools. But it is discouraging when you visit the schools and see 
Kids waiting their turn to use systems which are slow, dilapidated 
and not up to the standards of systems used by kids in other parts 
of the United States.
    That is one important reason why I support the settlement 
agreement, because it will bring updated systems, software and 
support to the schools in my district. Another strong point is the 
fact that this antitrust case has been fully scrutinized and debated 
for four years in the federal court system, and the settlement 
agreement speaks to all of the significant issues which have 
survived the court process. I have enough faith in the U.S. Justice 
Department to know that this settlement is a good one, or it would 
not have aigned off on the agreement.
    Thank you for the opportunity to submit my opinion on this 
important settlement.
    Sincerely,
    State Representative



MTC-00029906

STEVEN D. SANDVEN
LAW OFFICE5
300 HUNDRED BUILDING
300 NORTH DAKOTA AVENUS, SUITE 516
SIOUX FALLS, SD 57104-6026
PHONE: (605) 332-4408
FAX: (605) 332-4496
CELLULAR: (605) 941-1498
January 22, 2002
Renata Hesse
Trial Attorney
Antitrust Division
Dept. of Justice
601 D Street NW / Suite 1200
Washington, DC 20530
RE: Public commentary on U.S.v. Microsoft Settlement
    Dear Ms. Hesse:
    In my service as General Counsel to the Sisseton-Wahpeton Sioux 
Tribe at Lake Traverse Reservation, I am concerned with the 
development of tribal schools and the education of Indian children. 
My work also involves services to other tribes in more remote areas 
of western South Dakota, North Dakota, and Kansas where education 
programs are also viewed as essential to the economic survival of 
Indian people and tribal governments.
    Tribal schools throughout this region are becoming increasingly 
interested in new technologies and making sure Indian children are 
not left behind the curve with non-Indian students. That is why I 
believe the Microsoft settlement is going to have untold benefits 
for generations by supplying

[[Page 28773]]

these schools and schools of other low-income students with 
computers, software and technical support they need to operate 
competent systems.
    As an attorney, I have been watching the antitrust case, and I 
have taken an interest in its outcome. While consumers clearly have 
not been hurt by anything Microsoft has done, I think it is 
debatable whether Microsoft was inappropriate in its practices 
against its competitors. I am glad to see that the U.S. Justice 
Department and nine of the 18 states in the case come to terms with 
Microsoft, because I think this case has had enough time and 
resource paid to it to render a just settlement of issues.
    I appreciate your interest in my thoughts on this settlement, 
and I ask for a quick resolution to approve the settlement.
    Steven D. Sandven



MTC-00029907

City of Winnfield
PHONE (318) 628-3939
FAX (318) 628-6773
P. O--BOX 509
WINNFIFLD, LOUISIANA 71453
winn @ imerica.net
Deano Thornton, Mayor
Council Members
TONY ASOSTA
KENNY CALDWELL
WILLIE HOLDEN
ANDRE" HOWARD
MATT MILAM
Date 1-28-02
From?? Fax No.318-428-4773
To?? Fax NO. 202-414-9937
Re: MESSAGE
Renata Heese
Trial Attorney
Antitrust Division Department of Justice
601 D. Street NW. Suite 1200
Washington. DC 20530
FAX: 202-616-9937
RE: Settlement of U.S. vs. Microsoft
    Dear Ms. Heese:
    I have always been a strong believer in the free enterprise 
system. It is what built this country from the beginning and is 
responsible for making us the economic giant of the world. This case 
has cost taxpayers over thirty million dollars and It is high time 
that it come to an end. Microsoft's competitors need to return to 
competing in the marketplace When they do. the consumer wins and the 
free enterprise system works.
    The last thing the technology sector needs is more 
"lawyers and governmental intervention. Please accept this 
letter as complete support of the settlement and request that this 
case come to an end.
    Thank you.
    Sincerely
    Deano Thomoto
    Mayor
    DT/sp



MTC-00029908

Peripherals Plus Technologies, Inc
317 North Queen Sweet
Lancaster PA 17603
Phone 717.397.9752
Fax 717.397.9905
www.pptnet.com
January 23, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    Since the Courts reached a settlement on the Microsoft antitrust 
case in November, I was hopeful we could move forward. Now with the 
additional states and competitors coming forward to pursue further 
litigation, I am starting to wonder if this benefits the consumer at 
all or just the business of the competitor's.
    Microsoft has been more than cooperative. They agreed to license 
their Windows operating system products to the 20 largest computer 
makers on identical terms and conditions, including price. They also 
agreed to grant computer makers broad new rights to configure 
Windows, in order to promote non-Microsoft software programs that 
compete with programs included within Windows.
    I urge you to put an end of this litigation fiasco. There are 
more pressing issues upon which the government should be focused.
    Sincerely,
    Byron Wright



MTC-00029909

Ellisport Engineering, Inc.
January 28, 2002
To: Ms. Renata B. Hesse
Antitrust Division
U.S. Department of Justice
601 D Street NW
Suite 1200
Washington, DC 20530-0001
Subject: Microsoft Settlement
    Dear Ms, Hesse,
    I believe the terms of the agreement are reasonable and fair to 
all parties involved. This settlement represents the best 
opportunity for Microsoft and the industry to move forward. To 
continue prosecuting Microsoft is to punish one of the few American 
companies who are helping us to compete in the international arena 
of commerce,
    Please settle this now. It is in the best interest of the 
country.
    Stephen T. Kicinski, PE
    Ellisport Engineering, Inc.
    20501 81st Ave. S.W.
    Vashon, WA 98070
    Telephone (206) 463-5311
    FAX (206) 463-2578
    E-Mall: Ellisportl @ aol.com



MTC-00029910

ReportWare
1460 Manzanita Lane
Reno, Nevada 89509-5207
(888) REPWARE
(775) 827-4494/Fax 827-3213
www.ReportWare.com
Sales @ ReportWare.com
January 27, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
Re: Microsoft Settlement
    Dear Mr. Ashcroft:
    I support the settlement between Microsoft and the U.S. 
Department of Justice. Please stop this foolishness.
    I feel that, as an attorney and president of a technology firm, 
I have some reasonable understanding of the issues in this case. It 
is my strong feeling that the Government's actions have been overly 
aggressive and caused problems damaging to the whole software 
industry. I have no sympathy for Microsoft's competitors who have 
sought to promote this case. I believe that they have done so in 
order to gain advantage for their otherwise inferior software. I 
have no economic relationship with Microsoft, beyond being in the 
same industry and using their products--for which I pay retail. 
I support Microsoft and this settlement and I hope you will lend 
your support as well. Thank you.
    Yours truly,
    Randy Hanshaw
    9President. ReportWare, Inc.
    RH:gt
    cc: Senator Harry Reid



MTC-00029911

34 Heritage Court
Randolph, NJ 07869
January 28, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing to express my support of Microsoft and by 
extension, the settlement recently proposed by the DOJ. I support 
this settlement because Microsoft deems the terms fair and will 
comply in the hope of regaining a measure of normalcy in the IT 
industry as soon as possible. I am sure that this has been public's 
desire from the very beginning.
    However, I don't believe in the prosecution of Microsoft, in the 
first place, in my mind, this all started due to an overzealous 
prosecutor and competitor's which used the available court system as 
a venue to retain competitive advantage, damn fairness and free 
trade. Microsoft has brought new innovative products to market and 
because they were superior, they've become widespread. Why on earth 
should they be prosecuted for being successful?
    To me the only good thing that has come out of this lawsuit is 
that the public has been able to see the kind of company that 
Microsoft is, one that provides products that the market wants, low 
cost and effective computing solutions. That they bundled their 
software, made it easier for me and I support them for it. It didn't 
kill Netscape (I still use it) or any other competitor. They just 
failed to be as successful as Microsoft, and now they're 
complaining.
    Microsoft's willingness to comply with the terms of this 
agreement and those not even at issue in the lawsuit is a classic 
example of their high caliber. Microsoft has agreed to allow their 
competitors aspects of Windows that will facilitate competitiveness 
such as Microsoft's internal interfaces, protocols and intellectual 
property. To ensure their compliance, Microsoft has agreed to be 
monitored by a Technical Committee.
    In the interest of seeing a restored IT industry and a more 
stabilized economy, please make the necessary decision to

[[Page 28774]]

formalize the proposed settlement, though I personally think it goes 
to far.
    Sincerely,
    Richard Paeschke



MTC-00029912

The Genate
Slate of Iowa
Seventy-ninth General Assembly
STATEHOUSE
Des Moines, Iowa 50319
STEVEKING
STATE SENATOR
Sixth District
Statehouse: (515) 281-3371
HOME A ADDRESS
3897 Esther Avenue
??, Iowa 51448
Home--(712) 675-4572
Office--(712) 668-2300
FAX--(712) 675-4573
steve king @ legistrate ??
January 28, 2002
COMMITTEES
State Government, Chair
Appropriations
Business & Labor Relations
Commerce
Judiciary Oversight & Communications Appropriations Subcommittee
Vice Chair
Renata Hesse
Department of Justice, Antitrust Department
601 D St NW
Suite 1200
Washington, DC 20530
    Dear Ms. Hesse,
    I am a State Senator from Iowa and I also the owner of 
construction contracting business. In my capacity as a State Senator 
I am chairman of the state government committee and also serve on 
the commerce committee. I chose to serve on these committees because 
as a business owner I am acutely aware of" negative impact: 
over regulation can have on business It is from this unique 
perspective that I am writing you today to encourage you to settle 
the Microsoft anti-trust case
    The suit against Microsoft was brought under anti-trust laws 
that were developed in at a time in our history when our nation was 
growing into the industrial and economic leader it is today. These 
laws were meant to protect American consumers from harm inflicted by 
monopoly companies. These laws have served their purpose in the 
past. However, in this case, I do not think they apply the 
government and Microsoft's critics have yet to prove consumer harm 
as a result of Microsoft actions or practices.
    As a businessman and strong supporter of our free-market system, 
it is apparent to me that Microsoft's only crime is giving the 
American public a superior product, and therefore has been able to 
build a loyal following of committed users. Assumedly, Microsoft 
worked very hard to develop its products and market. They should not 
be punished for this or for having the business savvy to take action 
to protect their market.
    A closer look at this suit and the lobbying efforts that have 
fueled it will expose disturbing realities. Microsoft's competitors 
do not appreciate that technology consumers are overwhelmingly loyal 
to Microsoft products. However, instead of committing to production 
of new products that may allow them to more successfully compete in 
our free-market, they have banded together and found a way to use 
outdated anti-trust laws for their own purposes.
    The settlement before you is truly a compromise for Microsoft. 
Certainly, Microsoft will be held to the severe provision of this 
settlement, not the least of which is the sharing of intellectual 
property. However, negotiating settlement is the best solution for 
the technology industry and our" economy in general. When this 
settlement is approved it will send a signal to the technology 
industry that the threat of government interference has been lifted.
    Sincerely,
    Senator Steve King



MTC-00029913

C. Cowdery
3926 NE Eighty-Ninth Street
Seattle, Washington 98115
January 22, 2002
Attorney General John Ashcroft
U.S. Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft,
    After three long years of court baffles, Microsoft and the 
government have settled an antitrust suit that has profound 
implications for all software publishers, the rest of the 
Information Technology industry, and American consumers. By ending 
this case, the government is actually giving a boost to our sagging 
economy.
    The settlement has teeth. Under the agreement, computer 
manufacturers were granted new rights to configure systems with 
access to various Windows features. Microsoft must also design 
future versions of Windows to make it easier to install non-
Microsoft software and to disclose information about certain 
internal interfaces in Windows.
    The government even went so far as to create an ongoing 
technical oversight committee to review Microsoft software codes and 
books and to test Microsoft compliance to ensure that Microsoft 
abides by the agreement. This will help to promote fairness. In 
conclusion, I don't think it will ever be necessary for the federal 
government to ever bring any more litigation against Microsoft 
beyond this agreement. This agreement is more than fair and 
reasonable and was arrived at after extensive negotiations with a 
court appointed mediator.
    Sincerely,
    C. Cowdery



MTC-00029914

RJA Pollinating Co.
P.O. BOX 58 
450 West Main St.
Westmorland, CA 92281
760-344-3726
760-344-3091
FAX 760-344-0012
TO: MA Renata B. Hesse
Location: U.S. Dept by Justice--Antitrust Division
Telephone:
FAX: 202 616 9937
Date: 1-28-02 
Comments:
Total Number of Pages Sent: 2
Approval:
RJA Pollinating Co.
P.O. Box 58 450
West Main St.
Westmorland, CA 92281
760-344-3726
760-344-3091 FAX 760-344-0012
January 28, 2002
Ms. Renata B, Hesse
Antitrust Division
U.S. Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530-0001
VIA FACSIMILE: 202-816-9937
    Dear Ms. Hesse:
    As a concerned citizen with an eye for government waste, I 
strongly believe that the antitrust case against Microsoft has been 
a squandering of public resources. I also believe this was brought 
on by those who have a liberal bias and are against corporate 
America. Therefore, I support the agreement between Microsoft and 
the nine plaintiff states.
    As you know, our antitrust laws are supposed to protect 
consumers, not competitors, What's going on here is that our 
government is penalizing Microsoft for its success, The consequences 
are far ranging. If the United States government can attack one of 
the most successful companies in America, who's next?
    As a believer in open markets and opponent of government 
intrusion, I support "the Microsoft settlement.
    Thank you for your time.
    Sincerely,
    Richard J. Ashcroft



MTC-00029915

1000 Chesterbrook Boulevard,
Suite 101
Berwyn, Pennsylvania 19312
January 28, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am happy to hear about the settlement that has been worked out 
with Microsoft. It has taken three long years to finally reach an 
agreement like this that is fair for both sides. I hope that the 
Federal government will let this be it and finally put the matter to 
rest.
    The settlement is fair. First of all, Microsoft will adhere to a 
uniform pricing list when licensing Windows out to the larger 
computer vendors in the United States. Also, Microsoft has agreed 
not to retaliate against companies that promote or use non-Microsoft 
products. Most importantly, Microsoft has agreed to share sensitive 
information with its competitors; information that will allow them 
to more easily place their own programs on the Windows operating 
system.
    I know that many people who daily depend on Microsoft products 
will write to you about this matter. I hope that you take their and 
my opinions into account. I support the settlement, and look forward 
to seeing the suit come to an end. As a consumer and a

[[Page 28775]]

user of Microsoft products, I do not feel that I am being 
"clobbered" by Microsoft. Many of their competitors 
would like you to think this is the case. Since many other companies 
can't effectively compete with their own inferior products, they 
want the taxpayers to help them get rid of Microsoft by way of a 
government breakup. Enough is enough, settle the lawsuit and allow 
Microsoft to get on with creating more innovative products!!
    Sincerely,
    Marc T Nettles
    Cc: Senator Rick Santorum



MTC-00029916

Denterlein Worldwide
Honorable Colleen Kollar-Kotelly
U.S. District Court, District of Columbia
C/o Renata B. Hesse
Antitrust Division
U.S. Department of Justice
601 D Street NW
Suite 1200
Washington, DC 20530-0001
RE: U.S. v Microsoft
    Dear Judge Kollar-Kotelly,
    At a time when innovation in the computer technology industry 
should be booming the decision with regard to U.S. v Microsoft 
certainly makes it very difficult for companies to find the 
investment dollars to develop software. Limiting the ability of 
companies competing, the settlement provides loopholes which will 
probably keep this issue in litigation for years. Microsoft's 
monopoly has grown stronger. Its Windows operating system and Office 
Suite have higher than 90% usage. It is clear that operating systems 
which may have posed a threat and others that might have competed 
are no longer a concern.
    If competition is precluded it is very unlikely venture capital 
will be available. Investors historically will avoid the risk 
involved when potential future development is impeded by a monopoly, 
Consumers are affected as well be, cause they will not find 
affordable products in the marketplace, The already sluggish job 
market and economy certainly does not reflect the potential in the 
industry if a monopoly did not exit.
    It is clear that Microsoft hopes to expand to web services, 
financial, cable and the like, perhaps even the interact. Without 
venture capital companies will be unable to creatively address 
emerging markets, At a time when government on all levels faces 
serious challenges involving security and privacy issues they will 
be limited in the software they can use if it is not compatible with 
Windows.
    There is nothing the settlement which will hinder Microsoft. It 
will be business as usual. The settlement requires Microsoft to 
share technological information unless Microsoft determines that 
sharing the information might harm its security or software. In 
addition Microsoft, due to its monopoly and dominant market share, 
dictates the technologies, which will be compatible with Windows.
    Ten Liberty Square
    Boston. MA 02109
    P: 617 482 0042
    ?? 617 357 6911
    gerl @ denterleinworldwide.com
    One of the three person technical committee will be selected by 
Microsoft. The Department of Justice will choose a second member and 
they must agree on the third member. There is no question that 
companies will be less inclined to take on a monopoly when their 
future business, if the challenge fails, may well depend on that 
company. Microsoft will continue to be able to charge whatever it 
wants for its products, prices will skyrocket.
    The technical committee must identify violations of the 
agreement. No findings may be admitted into court in enforcement 
proceedings and compliance is only for five years. This seems a 
short time for such a flagrant violation of antitrust law.
    After all the years examining this important issue it would seem 
a better solution could be found. I appreciate your interest. If 
there is any additional information with which I may be of 
assistance, please contact me,
    Sincerely,
    Geri Denterlein
    President
    CC: Honorable Tom Reilly, Attorney General



MTC-00029917

Lynch Associates, LLC
Honorable Colleen Koltar-Kotelly
U.S. District Court, District of Columbia
c/o Renata B. Hesse Antitrust Division
U.S. Department of Justice
601 D Street NW
Suite 1200
Washington, DC 20530-0001
RE: U.S. v Microsoft
    Dear Judge Kollar,Kotelly,
    I am writing in regards to the proposed settlement between 
Microsoft and the Department of Justice. In the decision on U.S.v. 
Microsoft it appears that the settlement does not fully resolve 
Microsoft's monopoly of the market and will continue to lead to 
predatory, practices.
    Microsoft's "bolting" of applications to their 
software which was not terminated in the settlement has maintained 
an unfair advantage for Microsoft in the distribution of these 
applications. These types of practices don't create an environment 
of fair competition, which creates a problem not only for their 
competitors but also eventually for consumers.
    It is clear that Microsoft hopes to expand its monopoly to web 
services, financial, cable and the like, perhaps even the Internet. 
If we let Microsoft continue this expansion ultimately consumers 
will have to pay inflated prices for these products that we will 
only become more dependant on. Antitrust laws were created to avoid 
business being conducted in such a manner.
    This deal also threatens to curtail innovation in an industry 
that is a vital part of our new economy. At a time when serious 
challenges face government and corporations they will be seriously 
handicapped in choosing the high value systems they need for privacy 
and security because compatibility with Windows does not exist.
    The enforcement mechanisms in the settlement leave Microsoft 
free to do whatever it wants. The three person technical committee 
will only serve as a kangaroo court, which further threatens the 
integrity of enforceability. Analysts from many sectors of the 
technology industry have indicated the lack of impact the settlement 
will have and will result in minuet changes in Microsoft's 
practices.
    10 Liberty Square, 5th Floor
    Boston, Massachusetts 02109
    Telephone: 617.574.3399
    Facsimile: 617.695.0173
    Enforcing federal antitrust laws is vital to maintaining the 
integrity of free markets, It is important that we continue to 
enforce them to protect the welfare of consumers and the 
fundamentals that contribute to what makes our country's industries 
great. I appreciate you taking your time to examine this important 
matter. If there is any additional information I can provide for 
you, please contact me
    Sincerely,
    Anne Lynch
    Lynch Associates
    CC: Honorable Tom Reilly, Attorney General Commonwealth of 
Massachusetts



MTC-00029918

International Brotherhood of Electrical Workers
256 FREEPORT STREET
DORCHESTER, MASSACHUSETTS 02122
TELEPHONE; (617) 436-3710
FAX: (617) 436-3299
TOLL FREE: (800) 218-0015
WEBSITE: www, ibew103, corm
January 25, 2002
The Honorable Coleen Kollar-Kotelly
U.S. District Court, District of Columbia
C/o Renata B. Hesse
Antitrust Division
U.S. Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20540-000:t
RE: U.S. v Microsoft
    Dear Judge Kollar-Kotelly:
    After many years of investigating Microsoft with regard to 
monopoly issues, a settlement has been struck which appears to 
continue that monopoly. Limiting the ability of other companies to 
compete, the settlement provides loopholes, which wilt probably keep 
this issue in litigation for years.
    The longer it takes for competition to be permitted the less 
likely it is for those interested in investing venture capital to 
risk taking a chance on potential future development by companies 
hoping to compete. The result is that not only are consumers 
affected in that they will be unable to buy an affordable product, 
but the already sluggish job market will fail to reflect the 
potential of the industry.
    It is clear that Microsoft hopes to expand its monopoly to web 
services, financial, cable and the like, perhaps even the internet. 
Without venture capital companies will be unable to creatively 
address emerging markets.
    Although the agreement precludes Microsoft from paying a vendor 
to keep it from developing or distributing software that would 
compete, Microsoft is the determining body when an exception is 
identified. Likewise Microsoft: must share technological information 
unless Microsoft determines the

[[Page 28776]]

information may harm its security or software. In addition 
Microsoft, due to its monopoly and dominant market share, dictates 
the technologies, which will be compatible with Windows.
    The Honorable Coleen Kollar-Kotelly
    January 25, 2002
    At a time when serious challenges face government and 
corporations they will be seriously handicapped in choosing the high 
value systems they need for privacy and security because 
compatibility with Windows does not exist.
    Although the technical committee will oversee the process, 
Microsoft will choose one of its three members. The Department of 
Justice will choose a second and they must agree on the third 
member. There is no question that companies will be less inclined to 
take on a monopoly when their future business may well depend on the 
company. Given that Microsoft will continue to be able to charge 
whatever it wants for its products, prices will skyrocket. The 
technical committee of three must identify violations of the 
agreement. No findings may be admitted into court in enforcement 
proceedings and compliance is only for five years. This seems a 
short time for such a flagrant violation of antitrust law.
    After all the years examining this important issue it would seem 
a better solution could be found. I appreciate your interest. If 
there is any additional information with which I may be of 
assistance, please contact me.
    Sincerely,
    Richard P. Gambino
    Business Manager
    cc: Honorable Tom Reilly, Attorney General



MTC-00029919

January 23, 2002
CARROLL LOGISTIC8 INC
P.O. Box 4797
Tisbury, MA 02568
TEL 617-945-1600
FAX 617-945-2416
Honorable Colleen Kollar-Kotelly
U.S. District Court, District of Columbia
C/o Renata B. Hesse
Antitrust Division
U.S. Department. of Justice
601 D Street NW
Suite 1200
Washington, DC 20530-0001
    Dear Judge Kollar-Kotelly,
    I am writing with regard to the settlement between the 
Department of Justice and Microsoft in U.S. v Microsoft. It appears 
to violate antitrust law. Microsoft has a monopoly now and will be 
permitted to expand it with regard to emerging markets.
    The fact that Microsoft Is free to bolt financial services, 
cable services or even the internet to Its Microsoft Windows is a 
great concern. As companies develop software they will be unable to 
address the issue of affordability due to the dependency on Windows 
technology to function.
    Microsoft may not pay a vendor to keep them from developing or 
distributing software that would compete, however Microsoft is the 
determining body when an exception is identified. Likewise Microsoft 
must share technological information unless Microsoft determines the 
Information may harm Microsoft security or software. In addition 
Microsoft, due to its monopoly and dominant market share, dictates 
the technologies, which will be compatible with Windows. Governments 
and corporations will be unable to choose high value systems they 
need for privacy and security if that compatibility does not exist.
    Half of the technical committee will be appointed by Microsoft. 
The Department of Justice and Microsoft each appoint one member 
while they must agree on the third member. There is no question that 
companies will be less inclined to take on a monopoly when their 
future business may well depend on that company. Given that 
Microsoft will continue to be able to charge whatever it wants for 
its products, prices will skyrocket.
    The technical committee of three must identify violations of the 
agreement. No findings may be admitted into court in enforcement 
proceedings and compliance is only for five years. This seems a 
short time for such a flagrant violation of antitrust law. After 
many years of examining this important issue I would think a better 
solution could be found. I appreciate your Interest. If there is any 
additional Information with which I may be of assistance, please 
contact me.
    Sincerely,
    Thomas R Carroll
    PO Box 4797
    264 Sandpiper Lane
    Vineyard Haven, MA 02568
    CC: Honorable Tom Reilly, Attorney/General



MTC-00029920

allan associates
six osmanosen avenue
ball, massachusetts 02045
(781) 925-6388
January 22,2002
Hon. Colleen Kollar-Kotelly
US District Court
District of Columbia
C/o Renata B. Hesse, Antitrust Div.
US Dept. of Justice
601 D St. NW
Washington, DC 20530-0001
RE: US v Microsoft
    Dear Judge Kollar-Kotelly,
    The settlement agreed to by the Department of Justice and 
Microsoft appears to fly in the face of antitrust laws. Although the 
examination of this problem took a number of years, the results seem 
inadequate and the penalties less than one would expect for such 
serious violations of the law. Among the areas which are of concern:
    * Microsoft will determine if any company's technology violates 
Microsoft security or software. This would preclude a vendor from 
distributing or developing software as proscribed by the settlement.
    * Microsoft may bolt financial, cable services or even the 
internet to Windows, creating a dependency on Windows technology for 
all software developers.
    * The technical committee which will oversee implementation will 
be stacked in favor of Microsoft, as there will be one member 
appointed by Microsoft, another appointed by the Department of 
Justice and a third on whom both entities must agree.
    * The process to" file a complaint would be unlikely to 
attract many businesses challenging Microsoft, as the most probable 
result would be the company then still having to deal with 
Microsoft.
    * Consumers will bear the brunt of this decision, as they will 
find the expense of software reflected in the monopoly Microsoft 
will hold in its development.
    * At a time when governments and corporations are looking to 
develop software to insure privacy and security it will be 
impossible if compatibility with Microsoft Windows does not exist.
    I am pleased that Attorney General Tom Reilly has agreed to 
reject the settlement and is pursuing all avenues to assist 
individuals and businesses in the Commonwealth of Massachusetts. I 
appreciate your attention. Please contact me if I may be of 
assistance.
    Sincerely,
    Virginia M. Allan
    CC: Attorney General Tom Reilly



MTC-00029921

Law Offices of
Mark T. Collins
329D Boston Post Road Millbrook Park
Sudbury, Massachusetts 01776
Telephone (978) 443-7677
January 24, 2002
Honorable Colleen Kollar-Kotelly
U.S. District Court
District of Columbia
C/O Ms. Renata B. Hesse
United States Department of Justice
Antitrust Division
601 D Street NW, Suite 1200
Washington, DC 20530-0001
    Dear Judge Kollar-Kotelly,
    With regard to the settlement of the Department of Justice and 
Microsoft in U--S--v Microsoft I would like to raise a few 
issues. It appears Microsoft will continue to have a monopoly in the 
marketplace. Expansion will only increase the corporation's ability 
to intimidate smaller companies as they make an effort to produce 
software at more affordable prices.
    At a time when development of financial services, updated cable 
services and the internet are offering challenges to many small and 
midsized companies to be creative in new uses, the inability of a 
company to progress without compatibility with Microsoft is a major 
stumbling block. Microsoft in theory may not keep a vendor from 
developing or distributing software, even if it might be 
competition, but Microsoft itself will determine if a company's 
information technology might adversely affect Microsoft's security 
or its software.
    Compatibility with Microsoft Windows is essential and Microsoft 
makes the determination as to which technologies will be compatible 
thus limiting the ability for companies whose technologies are not 
included to procede.
    The oversight of the settlement offers additional problems in 
that Microsoft will be responsible for the appointment of one 
individual on the technical committee. In addition the Department of 
Justice appoints one other and the two must agree on the third. The 
committee must identify violations of the settlement. In addition it 
must hear

[[Page 28777]]

complaints from the companies whose products are not compatible. It 
is highly unlikely that a challenge will be made against a company 
which essentially controls the monopoly which at some point may well 
control the smaller companies ability to develop future software,
    Although Microsoft will comply with these lenient restrictions 
it will only be required for five years. This seems a short time for 
a penalty for violating antitrust law, Please contact me if you have 
any questions.
    Sincerely,
    Mark T. Collins
    CC: Honorable Tom Reilly
    Attorney General
    Commonwealth of Massachusetts



MTC-00029922

THE LIBERTY SOUARE GROUP
Honorable Colleen Kollar-Kotelly
U.S. District Court, District of Columbia
C/O Renata Hesse
Antitrust Division
United States Department of Justice
601 D Street NW
Suite l200
Washington, DC 20530-0001
RE: US v Microsoft
    Dear Judge Kollar-Kotelly,
    I realize there has been discussion over many years concerning 
this issue. It does seem a more equitable solution could have been 
reached in light of antitrust laws. As it stands now, Microsoft can 
still bolt financial services, cable or even the internet to Windows 
hindering competition. The fact that Microsoft will determine what 
technologies will be compatible with Windows makes it very difficult 
for companies to develop software or for that matter find capital 
investors to even be interested in their companies.
    As it stands now both Microsoft Windows and Office Suites enjoy 
a 90% user status. Expansion into other markets will expand that 
usage even more. At a time when computer technology should be 
expanding to address security and privacy issues in government and 
corporations, the inability to compete is certainly not making it 
the environment good for growth. The settlement provides many 
loopholes which will probably keep the issue in litigation for 
years.
    Without competition it is very likely venture capital will be 
unavailable. The affect on consumers will be reflected in the high 
cost of software. The already sluggish job market and economy 
certainly does not reflect the potential in the computer software 
market. It is clear that Microsoft plans to expand to financial, 
cable and the internet, expanding its monopoly. There is nothing in 
the settlement which will hinder Microsoft.
    One of the three people on the technical committee will be 
selected by Microsoft. The Department of Justice will choose a 
second member and they must agree on the third member. It is 
apparent that companies will be reluctant to take on a monopoly when 
their future business may well depend on that company. Microsoft 
will continue to be able to charge whatever it wants for its 
products, prices will skyrocket.
    This issue has been discussed for many years. It seems a more 
equitable solution could be determined, if I may be of any 
assistance, please contact me,
    Sincerely,
    Scott M. Ferson
    President
    Liberty Square Group
    CC: Attorney General Tom Reilly



MTC-00029923

JENNIFER E. LAWRENCE, ESQ.
Honorable Colleen Kollar-Kotelly
U.S. District Court, District of Columbia
c/o Renata B. Hesse Antitrust Division
U.S. Department of Justice
601 D Street NW
Suite 1200
Washington, DC 20530-0001
RE: U.S. v Microsoft
    Dear Judge Kollar-Kotelly,
    I am writing in regards to the anticipated settlement with the 
Microsoft Corporation, This proposed settlement allows Microsoft to 
preserve and reinforce its monopoly, while also freeing Microsoft to 
use anticompetitive tactics to spread its dominance into other 
markets. After more than 11 years of litigation and investigation 
against Microsoft, it seems a more equitable solution can be 
reached.
    The deal fails to meet the appellate court's remedy standards, 
which are clearly laid out by the appellate court. The following are 
some examples of how the deal fails to meet the standards:
    1. The settlement does not address key Microsoft practices found 
to be illegal by the appellate court, such as the finding that 
Microsoft's practice of bolting applications to Windows through the 
practice of "commingling code" was a violation of 
antitrust law. This was considered by many to be among the most 
significant violations of the law, but the settlement does not 
mention it.
    2. The proposed settlement permits Microsoft to define many key 
terms, which is unprecedented in any law enforcement proceeding.
    3. The flawed settlement empowers Microsoft to retaliate against 
would-be competitors and to take the intellectual property of 
competitors doing business with Microsoft.
    4. The deal fails to terminate the Microsoft monopoly, and 
instead guarantees Microsoft's monopoly will survive and be allowed 
to expand into new markets. The settlement is also fiddled with 
loopholes making the enforceability of the settlement questionable.
    The agreement requires Microsoft to share technical information 
with competitors so that non-Microsoft software will work on Windows 
operating systems. However, Microsoft is not required to do so if it 
may harm the security or software licensing. The determiner of this 
harm? Microsoft. The settlement also says that Microsoft 
"shall not enter into any agreement" to pay a software 
vendor not to develop software that would compete with its products. 
However, another provision permits those payments and deals when 
they are "reasonably necessary." Again who determines 
this "reasonably necessary?" Microsoft.
    The enforcement provisions in the settlement are weak and leave 
Microsoft virtually unaccountable.
    Microsoft is only subject to comply with the terms of the 
agreement for a mere five years. Hardly an adequate amount of time 
for a corporation found guilty of violating antitrust laws. The 
three-person committee that is being assembled to identify 
violations of the agreement will have nearly no effect since the 
work of the committee cannot be admitted into court in any 
enforcement proceeding.
    The proposed settlement between the Department of Justice and 
Microsoft in U.S.v. Microsoft falls short of what would be prudent 
and necessary in rectifying Microsoft's monopoly and changing their 
current practices.
    Thank you for your time.
    Regards,
    Jennifer E. Lawrence, Esq.



MTC-00029924

4712 Ferncreek Drive
Rolling Hills Estates, CA 90274
January 27, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Attorney General Ashcroft:
    I would tike to express some of my opinions regarding the 
settlement agreement between your Department and Microsoft. I feel 
that it is fair, reasonable, and extensive. I do not see the need 
for further federal action, especially when nine states have 
approved the agreement. Microsoft is currently negotiating with the 
opposing states to reach a conclusion. Not only does this agreement 
address the issues that brought about the lawsuits, but it provides 
direction in dealing with future problems as weft.
    Although the settlement calls for concessions that make 
antitrust precedent, Microsoft has agreed in an effort to end this 
case sooner rather than later. The company will stop retaliating 
against those that design or p ore non-Microsoft programs, end will 
allow computer makers to configure Windows so as to promote those 
programs. Most importantly, a technical oversight committee will 
ensure Microsoft's compliance with these concessions, and 
competitors will be allowed to sue Microsoft directly if they feel 
they've been treated unfairly.
    I appreciate you taking time to consider my views on this issue. 
We must bring certainty and stability back to the IT sector. This 
agreement will allow the market, the industry, and the economy to 
move forward.
    Sincerely,
    Erwin Oetken



MTC-00029925

Henry Kath P.O. Box 1920
Cottonwood, CA 96022-0351
January 18, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:

[[Page 28778]]

    As a citizen of California I am very disappointed that the 
settlement reached between Microsoft and the Department of Justice 
has not been accepted by my state. I believe that this suit has gone 
much farther than was ever appropriate. It is my opinion that the 
alleged crimes committed by this company are much less severe than a 
number of people have made them out to be. Microsoft does not 
deserve the callous treatment that they have been given, and the 
continuation of this already protracted suit will not benefit either 
the United States as a whole or the state of California.
    The proposed settlement is well thought out and is a fair 
conclusion to this unfortunate litigation. Microsoft will not commit 
any further anti-trust infringements, the company will be monitored 
by a three-man oversight committee which will ensure that all 
business tactics engaged by the company in future are fair and do 
not lean towards monopolistic practices. The settlement ensures that 
Microsoft will not strike back against any company that develops 
products that compete against its own. And finally, Microsoft will 
develop all future versions of Windows to work more completely with 
the products of competing companies. This settlement will remedy any 
problems that any of Microsoft's competitors may have experienced 
when dealing with this company. All of the states should jump at the 
chance to accept the terms and finalize this costly litigation.
    I understand the need to protect businesses and to ensure that 
there is a fair playing field for everyone. However, free enterprise 
must be protected. Without it, we lose the very fabric upon which we 
have built this nation. I believe that we need to move forward as a 
nation and to do so we need this settlement. Thank you for the work 
that you have done to bring this agreement about and for ensuring 
that we do not ring in another year with this costly litigation 
hanging around our necks.
    Sincerely,
    Henry Kath



MTC-00029926

Elliott.
US Department of Justice
Attorney General John Ashcroft
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
Elliott Davis Technology Solutions, LLC
1200 Woodruff Rd. Suite C40
P.O. Box 5088
Greenville, SC 29606-6088
Phone 864,281 7440
Fax 864.987.0180
1866281,74.10
January 22, 2002
    Dear Mr. Ashcroft,
    I personally believe that this lawsuit against Microsoft is 
better settled. Even though many of the points enumerated in the 
suit were valid, the litigation was quickly getting out of control 
and could have resulted in a lot of unnecessary complications for 
both Microsoft and for the IT businesses in general.
    The points of the suit have been adequately addressed in the 
settlement. The settlement, for example, requires more responsible 
and flexible attitudes by Microsoft towards its OEM licensees as 
well as to third party software developers, who will now be able to 
take advantage of disclosure of Microsoft software code. Microsoft's 
competition should be elated at this.
    I am therefore writing in support of the settlement and hope 
that this kind of lawsuit be prevented in the future.
    Sincerely,
    Charles Johnson
    Partner



MTC-00029927

LS Consulting
Date: January 21, 2002
Renate Hesse
Triel Attorney
Antirust Division
Department of Justice
?? D Street NW. ?? 1200
Washington, DC 20550
    Dear Ms. Hesse.
    The Microsoft ?? case reminds me of the novel ?? Shrugged, 
written by Ayn Rand In the novel, industral competitors turn to the 
govenment and empower it to choose ?? and losers in the marketplace.
    Without question, Microsoft's primary competitors have joined 
into an unholy zilance with the judicial ?? of government, in an 
effort to target the success of Microsoft are its popular software 
You might also want to reference ?? Bastiat's The Law, to gain his 
insights on how government attempts to choose winners and losers in 
the marketplace.
    I have been intimately involved with personal computers and the 
software that drives them since the very ??. As a computer 
consultant and a database software developer for nearly twenty 
years, I would be amused by government lawyers with limited computer 
skills--and an even more limited grasp of the actual inner 
working of software--trying to dictate policy to a marketplace 
that literally changes every day. If the slakes weren't: so high.
    As an active an informed citizen, I have a thorough 
understanding of the roles the branches of government are to play in 
our society, and the businese, of choosing winners and losers in the 
marketplace is not a function of government, in belongs to the 
American consumer. Sign off on the proposed settlement before you in 
this case and lot us do our work Sincerely,
    Loras Schulte
    In His ??



MTC-00029928

NASH FINCH COMPANY
Cedar Rapids Distribution Center
Rob Reinert
Regional Pricing Manager
319-743-4245
Ms. Ronata Hesse
U.S. Department of Justice, Ami-trust
601 "D" Street NW, Suite 1200
Washington, DC 20530
    Ms. Hesse:
    I have been informed that under the Tunney Act you are accepting 
public comment on the United State's agreement with the Microsoft 
Corporation. I am writing to offer my views on this matter. I work 
for a company called Nash-Finch that is based in Minneapolis and 
operates a large chain of grocery stores in the upper Midwest and 
wholesale operations in more than thirty states. As Regional Pricing 
Manager I have seen first hand the benefits of computer innovations. 
It seems that we are constantly being presented with new tools that 
allow us to maintain better control of our inventory and maintain/
improve gross margins:
    The future holds many exciting things for consumers and 
lousiness when it comes to technology. The last few years have 
taught us theft almost anything is possible when technicians are 
allowed to freely ?? and create. Future innovations will allow 
businesses to operate more efficiently and help our economy as we 
work out of our current recession.
    This case has cruised questions throughout the entire industry 
as it watches to see if the government will successfully gain new 
power to regulate this industry. It is clear in the reports that I 
have read that the settlement currently on the table is fair. It 
appears that any allegations against Microsoft that have been shown 
to have merit in court are fairly remedied in the settlement.
    This settlement provides a good resolution and it allows the 
technology industry as a whole to get on the move again.
    Your consideration is appreciated.
    RO. Box 549
    Cedar Rapids, IA. 52406
    1201 Blairs Ferry Rand N.E.
    Cedar Rapids, IA 52402.
    Ph. 319-393-1880
Fx. 319-393-2223
    Sincerely.
    Rob Reinert
    Customer Satisfaction is ACWAYS First



MTC-00029929

January 22, 2002
Ms. Renata Hesse
Department of Justice, Antitrust Division
601 D Street NW, Suite 1200
Washington, DC 20530
    Dear Ms. Hesse.
    Like so many Americans, I am an investor in the stock market and 
have been financially hurt by the downturn this past year. As an 
individual investor, I have made every effort to do my part to 
prevent an even greater drop in the markets by maintaining my 
holdings without over-reacting. While we enjoyed a relatively minor 
upswing recently, the markets once again dropped following the 
national media attention of the Enron bankruptcy. In the face of so 
much negative news, it is getting more and more difficult for 
investors to optinistically believe the markets have hit the bottom 
and are in a recovery.
    From an economic standpoint, you have the ability to send a 
message which can only be construed as good by the media and the 
American public. I am referring to the Microsoft lawsuit. A proposed 
settlement in this case is before you. Most of the parties involved 
in this case are in agreement to settle this case based on the 
proposal presented. Please take this opportunity to do your part and 
sign on to the proposed settlement. By putting and and to this 
lawsuit, you allow the tech industry the chance to move forward. You 
will also create

[[Page 28779]]

much needed oprimism for a ?? point in our times of economic 
struggles.
    Thank you.
    Sincerely,
    Keith ??
    4815 Grand Avenue
    Des Moines, Iowa 50312
    515 255-8328



MTC-00029930

ERIG J. KFOURY. EGQ.
January 24, 2002
Honorable Colleen Kollar-Kotelly
U.S, District Court, District of Columbia
C/o Renata B. Hesse
Antitrust Division
U.S. Department of Justice
Suite 1200
Washington, DC 20530-0001
    Dear Judge Kollar-Kotelly:
    Please accept this letter of concern with regard to the terms of 
the settlement being proposed by the United States Department of 
Justice and Microsoft Corporation. Acceptance of this settlement 
will not dissuade Microsoft from continuing to pursue its 
established objective of market dominance, and, more importantly, 
will encourage other businesses to follow the lead in new and 
different markets without fear of any reprisals or Interference from 
the government, in all, it is a seemingly toothless me measure of 
exactitude that undermines the historical good achieved by the 
antitrust regulations of which Microsoft was duly found to be in 
violation.
    The settlement purports to force Microsoft to share key 
information with competitors as a way of braking the stranglehold 
the company enjoys with its Windows product. Howover, it need only 
do so if Microsoft, itself, determines such divulgence would not 
hurt its security or product licensing. Further, the continued 
market dependency c Windows created by the fact Microsoft can bolt 
it to financial and cable services, as wall as, the internet will 
adversely affect the affordability of new software being developed 
by other companies. As such, any potential competition will be 
priced out of the market and Microsoft will stand alone--the 
essence of a true monopoly.
    Though there are other areas of the settlement that are 
problematic, the final concern sterns from the notion that there can 
be a limit to the amount of time (e.g., five years) an antitrust 
violator should be subject to enforcement. If the government agrees 
to terms with a corporation to correct conditions set by 
monopolistic practices, there should be no expiration data with 
regard to the commitment to those terms.
    An antitrust violation has been established. Irrespective of 
penalizing the violator, an equitable resolution must be found that 
opens up the market and ensures it remains a place where other 
businesses and entrepreneurs have a chance to succeed. This proposed 
settlement does not amount to such a resolution.
    Very truly yours,
    Eric J. Kfoury, Esq.
    Co: Honorable Thomas Reilly, Attorney General Commonwealth of 
Massachusetts



MTC-00029931

JAN-25-02 14:31
FROM:
ID: PAGE 2
SALOMON SMITH BARNEY
A member of Columbia
Ho??orable Colleen Kollar-Kotelly
U.S. District Court, District of Columbia
C/o Renata B. Hesse
A?? Division
U.S. Department of Justice
601 D Street NW Suite 1200
Washington, DC 20530-0001
    Dear Judge Kollar-Kotelly,
    I am writing with regard to the settlement between the 
Department of Justice and Microsoft in U.S. v Microsoft. It appears 
to violate antitrust law. Microsoft has a monopoly now and will be 
permitted to expand it with regard to emerging markets.
    The fact that Microsoft is free to bolt financial services, 
cable services or even the internet to its Microsoft Windows is 
appalling. As companies develop software they will be unable to 
address the issue of affordability in working to help consumers find 
a lower priced product due to the dependency on Windows technology 
to function.
    Microsoft may not pay a vendor to keep them from developing or 
distributing software, which would compete, however Microsoft is the 
determining body when an exception is identified, Likewise, 
Microsoft must stare technological information unless Microsoft 
determines the information may harm Microsoft security or software, 
In addition, Microsoft, due to its monopoly and dominant market 
share, dictates the technologies, which will be compatible with 
Windows. Governments and corporations will be unable to choose high 
value systems they need for privacy and security if that 
compatibility does not ??.
    The three person technical committee, which will be appointed is 
inordinately weighted in favor of Microsoft as the department of 
Justice and Microsoft each appoint one member while they must agree 
on the third member. There is no question that companies will be 
less inclined to take on a monopoly when their future business may 
well depend on that company. Given that Microsoft will continue to 
be able to charge whatever it wants for its products, prices will 
skyrocket.
    The technical committee of three must identify violation, of the 
agreement. No lindings may be admitted into court in enforcement 
proceedings and compliance is only for five years. This seems a 
short time for such a flagrant violation of antitrust law.
    After many years of examining this important issue, I would 
think a better solution could be found, I appreciate your interest. 
If there is any additional information with which I may be of 
assistance, please contact me.
    Sincerely,
    Karen I, Macdonald
    Financial Consultant
    SALOMON SMI?? BARNEY A member of citigroup
    28 State Street
    Beaten, MA 02109
    617-570-9430 / 800-235-1205 / 
617-570-945R fax
    e-mail Karen ??mac??onald @ rssmb.com



MTC-00029932

HOUSE OF REPRESENTATIVES
STATE HOUSE, BOSTON O2133??1054
RONALD MARIANO
STATE REPRESENTATIVE
SRD NORFOLK DISTRICT
DISTRICT: (??17) 328-5166
E-Mail: Rep.RonaldM??riano @ hou.state.??.us
Chairman
Committee on Insurance
STATE HOUSE, ROOM 254
TEL. (617) 722-2220
FAX (617) 722-2821
January 25, 2002
The Honorable Colleen Kollar-Kotelly
U.S. District Court, District of Columbia
C/o Renata B. Hesse
Antitrust Division
U.S. Department of Justice 601 D Street NW
Suite 1200
Washington, DC 20530-000t
    Dear Judge Kollar-Ketelly,
    I am writing with regard to the settlement between the 
Department of Justice and Microsoft in U.S. v Microsoft. It appears 
that this settlement will enable Microsoft to continue to expand its 
monopoly with regard to emerging markets and may violate antitrust 
laws.
    Microsoft's ability to bolt financial services, cable services 
and the Internet to its Microsoft Windows program is of great 
concern. As companies develop software, they will be unable to 
address the issue of affordability due to the dependency on Windows 
technology. Microsoft is required to share technological information 
unless they determine the information may harm their security or 
software. Additionally, Microsoft dictates the technologies, which 
will be compatible with Windows. As such entities will be unable to 
choose high value systems they need for privacy and security if that 
compatibility doesn't exist.
    As I feel that this agreement raises significant questions 
affecting the equity and fairness of the settlement, I ask for your 
consideration of a more appropriate solution to this matter. Thank 
you for your time mad attention to this matter.
    Sincerely,
    RONALD MARIANO
State Representative
Cc: The Honorable Thomas Reilly, Massachusetts Attorney General



MTC-00029933

FROM:
FAX NO.:Jul. 26 2001 06:26PM P1
Wake Forest Town Commission
Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
    Dear Ms. Hesse:
    As a member of the Wake Forest Board of Commissioners, I am 
concerned that the Microsoft antitrust lawsuit has dragged on too 
long and we need to settle it now. I am elected to represent all the 
people in Wake Forest, and I am concerned that everyone's jobs are 
being threatened by the recession. Microsoft products are the 
backbone of business and industry--and they help offices run 
efficiently throughout our community.

[[Page 28780]]

    I am opposed to prolonging the lawsuit in any way. The suit 
needs to be resolved... and resolved now] Many of our commuting 
citizens work in the Research Triangle Park. High tech solutions for 
health care, business and communications firms are developed here in 
the Triangle. However, the ability of these companies to be 
innovative in creating solutions, and productive in the creation of 
jobs, hinges upon moving beyond excessive litigation.
    Let's face the fact that both parties want the suit to end. 
Microsoft and the federal government are in agreement on all points 
of the settlement. I want to strongly urge Judge Kollar Kotelly to 
promptly approve the settlement. This lawsuit has cost businesses 
and local governments untold millions in lost revenues. Let's stop 
the bleeding.
    Let's move beyond this case and move the economy forward.
    Sincerely,
    Kim Marshall
    Mayor Pro Tempore
    401 Owen Avenue- Wake Forest, NC 27587



MTC-00029934

Jan 28 02 02:38p p. 1
U.S. Department of Justice, Antitrust Division
Attention: Renata Hesse
601 D Street, NW, Suite 1200
Washington, DC 20530
    Dear Judge,
    It is time for the Anti-trust lawsuit" against Microsoft 
to end.
    Our antitrust laws were designed and enacted in order to protect 
the citizens and consumers of the United States.
    The Microsoft Antitrust lawsuit was originally pushed by its 
competitors and their claims they were working in the interest of 
consumers. I do not believe that the consumers were clamoring for 
this lawsuit. I wonder how prolonging these proceedings will benefit 
consumers?
    The Federal Government has spent millions of dollars on this 
antitrust case. Microsoft has probably spent several times as much 
defending itself against this claim filed by the government.
    These costs will no doubt be passed on to the consumer, the same 
consumer the antitrust laws are supposed to benefit.
    I believe this case has cost enough and should be settled once 
and for all.
    Thanks for your consideration and your acceptance of my comments 
as part of the public comment period for the case.
    Sincerely,
    Ruth Mellen
    21000 West 180th Street-
    Olathe, KS 66062



MTC-00029935

15 Riverpoint Road
Hannibal, MO 63401
January 25, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I understand that Microsoft and the Justice Department have 
reached a proposed settlement of their antitrust case, and I want 
you to know that I support the settlement.
    I wish my letter were sent for the purpose of thanking you for 
dismissing the case. Microsoft has incurred substantial expenditures 
of time and money for no reason other than to defend the fact that 
they are big and they are successful. It is a shame that Microsoft's 
ability to defend itself in Court was thwarted by a judge with an 
axe to grind. The case should have been thrown out before evidence 
was ever presented.
    The settlement proposed clearly addresses the allegations of 
anticompetitive behavior by promoting greater consumer choice and 
opening areas to greater degrees of competition from non-Microsoft 
software programs. After implementation of the settlement agreement, 
Microsoft Windows operating systems will be subject to competition 
in areas such as messaging and the Internet from non-Microsoft 
programs.
    In addition to responding to the allegations of antitrust 
violations, Microsoft has placed a settlement on the table that 
makes concessions regarding products and practices that were never 
even at issue in the suit. I fail to see the need to punish 
Microsoft by continuing the Case.
    Thank you for the opportunity to speak on this matter.
    Sincerely,



MTC-00029936

January 28, 2002
Attorney General John Ashcroft, DOJ
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear AG Ashcroft,
    While I agree that this settlement appears better than a 
perpetuation of this ill-advised lawsuit, I believe that the 
settlement goes too far. In spite of the fact that Microsoft has 
agreed to its terms, I do not see the necessity of forcing them to 
release any more of their source code to developers than they had 
previous to the suit. This code is proprietary and Microsoft is 
entitled to keep it so. This consideration aside, I am at least 
pleased that the lawsuit and all that it entailed will soon be over. 
On the whole, however, I am hopeful that our government will not be 
as quick to interject itself into the private marketplace in the 
future as it has here. If Microsoft supports this suit, than I will.
    I am appreciative of the opportunity afforded me to voice my 
opinion of this settlement, and I must stress here that this opinion 
is my own. However, the issue of forcing a company to relinquish 
even a small piece of its proprietary intellectual property, simply 
because its competitors cannot develop better products on their own, 
is of some concern.
    Sincerely,
    Charlie Butler
    St. Exchange Engineer
    Agilera, Inc.
    Cc: Senator Strom Thurmond
    1400 Browning Road
    Suite 150
    Columbia, South Carolina 29210
    PHONEu 803.770.1800
    www.8gilera.com



MTC-00029937

804 Stirling Road
Silver Spring, MD 20901
January 28, 2002
Attorney General John. Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    The Microsoft Corporation and the Department of Justice agreed 
to terms on a proposed settlement that will bring an end to the 
three-year antitrust lawsuit filed against Microsoft. I support this 
settlement because it ends the litigation against Microsoft, and 
allows them to focus even more on producing innovative products.
    The settlement goes further than k should have, in particular as 
regards intellectual property, which Microsoft will have to disclose 
to its competitors. In order to end this messy litigation process, 
Microsoft has actually agreed to give to its competitors source code 
and other design information that is critical to the internal 
structure of Windows. While that does not fit the mold of a free 
market economy, it enables Microsoft's competitors to do more, and 
to produce software that is compatible with Microsoft's. This will 
foster competition in the IT industry, and the economy will benefit 
as a result.
    I support this settlement. Now the economy can regain its former 
level of success, and we can put this costly litigation behind us.
    Sincerely,
    Sunil Chatterjee



MTC-00029938

1-28-02
Tried to email--mo luck used address
microsfot.atr @ usdoj.gov.
fax.
RE: Microsoft Settlement
    To the Dept of Justice
    We believe the settlement between Microsoft and the movement is 
fair for both sides. At this time to put this to behind us and move 
forward for the good and all, especially economy
    Sincerely.



MTC-00029939

Ken Graham
7531 Aberdon Road
Dallas, TX 75252
January 24, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am highly opposed to excessive government intervention in the 
business world. It is no surprise, then, that I am opposed to the 
antitrust lawsuit that was brought against Microsoft three years 
ago. Now that a settlement has been reached in this case, I hope you 
will support it, as well, and allow Microsoft to put this episode 
behind them.
    Microsoft has offered many compromises as part of this 
settlement. The company has agreed not to have any contractual 
restrictions with companies it deals with regarding the sale of non-
Microsoft products. Microsoft has also agreed to build all future 
operating systems in such a manner that non-

[[Page 28781]]

Microsoft products can easily be promoted on them.
    Despite the fairness of the settlement and the compromises made 
by Microsoft, some opponents want this case brought back to court. I 
believe it is your duty to make sure they do not succeed.
    Sincerely,
    Ken Graham



MTC-00029940

DBM Associates
Computer Systems & Services
One Salem Square,
Whitehouse Station, NJ 08889
January 28, 2002
Attorney General John Ashcroft,
Justice Dept.
950 Penna. Avenue
Washington, DC
    Dear Mr. Ashcroft:
    I am glad that the litigation in this matter with Microsoft has 
ended with a settlement. Settling in this case is better for all. 
There has been a noticeable uncertainty in the IT industry over the 
threat to break Microsoft up, and this settlement at least will end 
this talk and help us all get back to business.
    Progress in the IT industry, and the strength of this country's 
IT infrastructure, depend upon both innovation and some semblance of 
standardization. The prevalence of Microsoft software has greatly 
aided the exchange of information both within and between 
organizations. This prolonged legal action is hurting this country 
by slowing progress to a crawl.
    I can appreciate that Microsoft's competitors are unhappy with 
this prevalence, but that's the way it has worked out. To them I 
say, there are plenty of other problems to be solved and they should 
put their resources into solving them instead of counter-productive 
efforts directed against Microsoft.
    For their part, the evidence indicates that Microsoft has 
engaged in unfair business practices and abused their monopoly 
position. I see that penalties and restrictions on their future 
behavior are part of the settlement. I hope that the settlement 
terms were negotiated in good faith by both parties to effectively 
address the issues.
    I am writing in support of the settlement of the Microsoft case, 
and the sooner the better. I am hopeful that with it, some 
uncertainty in the IT industry will be resolved, and we can all put 
this behind us.
    Sincerely,
    David Weston
    Vice President



MTC-00029941

FAX COVER LETTER
To: attorney ??
Fax No. 1-202-616-9937
From: ??
Fax No. 1-740-482-2126
Date: Jan. 28, 2002
Re: ??
Number of Pages 2
??
Comments:
See attached letter
Rodger and Carol Carpenter
140 T.H. 70
Bucyrus, OH 44820
January 28, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    This is to give our support to the antitrust settlement between 
Microsoft and the Department of Justice. This antitrust suit has 
gone on for far too long, crippling our economy and holding our 
country back from further innovation in the technology industry. 
Furthermore, I do not believe the government should have been 
brought into what is competition between technology companies. 
Microsoft became the dominant force in computer software, creating 
the first compatible software programs. Before Bill Gates nothing 
worked, nothing was compatible. Through hard work and creativity, 
Bill Gates met the needs of consumers. The company became successful 
because of tiffs, and unfortunately, created a lot of jealousy with 
other rims, who were unable to compete. This was the real cause 
behind the antitrust suit against Microsoft.
    The case has been settled. Even the federal judge wanted to see 
an end to it, ordering round-the-clock dialogue. Microsoft has 
agreed to a uniform price list, and to design future versions of 
Windows with a way to make it easier for computer makers to promote 
non-Microsoft software such as different startup screens; Microsoft 
has also agreed to help companies reach a greater degree of 
reliability with regard to then competing networking software. The 
company has gone the extra mile to end this case and satisfy the 
demands of the Department of Justice. We think we should honor that 
decision.
    We urge you to give your support to this agreement and not give 
in to the pettiness of those whose only concern seems to be the 
destruction of Microsoft.
    Sincerely,
    Rodger Carpenter and Carol Carpenter



MTC-00029942

Scott B. Glynn
3205 Poppleton Ave. # 2
Omaha, NE 68105
402-932-6535
Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
    Dear Ms. Hesse:
    I am writing with regards to the pending settlement between the 
Department of Justice and the Microsoft Corporation.
    In my opinion, the finding of fact in the case of the federal 
government versus Microsoft, overlooked the most important point: 
whether or not there has been harm to consumers. We hear conflicting 
reports--(a) that the company's dominance in the market has 
resulted in higher prices and (b) that their dominance has produced 
a trend of prices dropping lower than cost for consumers.
    How do consumers feel? In even the most recent public opinion 
polls, most consumers express their approval of Microsoft and the 
company's products. The reality of it is that the high-tech industry 
develops and changes so rapidly that since the trial began the face 
of the industry has changed, Linux has made great strides in the 
market with their operating system and several software companies 
have closed the gap between themselves and Microsoft.
    I am sure that most consumers would be in favor of ending the 
lawsuit against Microsoft. The proposed settlement would end the 
suit and that is exactly what consumers are looking for. I urge the 
Judge to approve the settlement.
    Sincerely,
    Scott B. Glynn



MTC-00029943

Planning Enterprises
David A. Kulle
P.O Box 8019
Jupiter, FL 33468-8019
(800) 447-3660
(561) 335-3077
Fax (561) 335-0009
Robert C. Kulle
P.O. Box 601481
?? 75360-1481
(714) 361-5707
?? (214) ??-3110
fax (214) 378-??
January 26, 2002
    Attorney General
    John Ashcroft
    US Department of Justice
    Washington, DC 20530
    Dear Mr. Ashcroft,
    I have been a firm supporter of Microsoft for many years and my 
philosophy as far as this settlement goes is that I will support 
anything that is in Microsoft's best interest. As far as the 
settlement reached in the antitrust case, I am willing to express 
support for it in the interest of closure. I feel this entire 
lawsuit was unwarranted and a complete contradiction to the spirit 
of free enterprise. Bringing closure to this as soon as possible 
will be in the best interest of consumers, the economy, and the IT 
industry on a whole.
    It is very hard for me to imagine why there are still States 
that wish to pursue this matter when one considers the severity of 
our economic situation. What exactly is the issue? Microsoft has 
made several concessions in this settlement that will doubtless have 
adverse effects on their own competitiveness. For example, Microsoft 
has agreed not to obligate third parties to distribute or promote 
Windows technology exclusively or at a fixed percentage. Also, 
Microsoft will make no attempt to obligate software developer to 
only create Windows-compatible software. I am very pleased with the 
Microsoft's obvious compliance and hope that you will aggressively 
pursue means that will pacify the concerns of the dissatisfied 
states and bring this matter to close immediately.
    Sincerely,
    Cynthia Kulle



MTC-00029944

TIM GOLBA
13G24 S. S?? STREET

[[Page 28782]]

??. KS 66062
January 23, 2002
MS. Renata Hesse
Trial Attorney
Anti-trust Division
U.S. Department of Justice
601 "D" Street NW,
Suite 1200
Washington, DC 20530
    Dear Ms. Hesse,
    Our country is experiencing a recession like we have not seen in 
decades. Many factors have contributed to our shaken economy, but 
the onset of the Microsoft antitrust case really bit into the 
NASDAO, shaking confidence of investors and consumers. It is 
important to remember that for the first time in history, more than 
half of American citizens are invested in the stock markets. I am 
pleased to see the significant steps President George W. Bush has 
taken to offset the panic of the American consumer in the form of 
tax rebates and tax cuts. We are fortunate to have such a proactive 
in office.
    Information regarding the lawsuit is readily available through 
every imaginable media source, and I couldn't help but notice 
that tech stocks parked up a little with news of the ?? settlement. 
I appeal to your sense of good ?? and ask you to endorse the 
settlement. I fear that further litigation and regulation will 
further damage our economy and morale. Rest assured that an end to 
this lawsuit would result in a collective sigh of relief from the 
entire nation.
    Sincerely,
    Tim Golba



MTC-00029945

January 28, 2002
Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D Street N W, Suite 1200
Washington, DC 20530
    Dear Ms. Hesse,
    I live and work in a Midwestern state that is constantly 
battling to keep our citizens here to work and raise their families. 
One of the most important incentives we have to offer is a growing 
technology industry, which we affectionately refer to as 
"Silicorn Valley."
    I've watched with much interest the progress of the Justice 
Department's suit against Microsoft. I understand the issues 
involved, but more importantly, I've felt the impact of the lawsuit 
on my own pocketbook. As a young investor, I have a portion of my 
retirement savings invested in the technology sector and have 
watched my returns deflate along with the sinking economy and can't 
help but assume that this lawsuit has some bearing on my poor 
returns.
    Common sense tells me tells me that the quicker we can ?? this 
issue ?? the better off all Americans will be, particularly those 
Americans whose livelihood is directly dependent on the technology 
industry and those whose retirement savings could use a shot in the 
arm.
    Please give your utmost consideration to the settlement before 
you. An approval of the settlement will go far in jump-starting the 
economy and actting America back on the road to prosperity.
    Thank you for your consideration.
    Sincerely,
    Susan Severino
    Office of the Speaker
    ?? House of ??
    State Capital
    Des Moines, IA 50319



MTC-00029946

34-20 l2th Street
Long Island City, NY 11106
January 22. 2002
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    I am writing you to express my opinion in regards to the 
Microsoft settlement. The settlement that was reached in November is 
fair and reasonable, and I am extremely anxious to see this 
settlement finalized. This three-year-long litigation against 
Microsoft has been expensive and a waste of resources.
    Microsoft has agreed to all terms and conditions of this 
agreement. Microsoft has agreed to document and disclose for use by 
its competitors various interfaces that are internal to 
Windows" operating system products. Microsoft has also agreed 
not to enter into any agreements obligating any third party to 
distribute or promote any Windows technology exclusively or in a 
fixed percentage, subject to certain narrow exceptions where no 
competitive concern is present. This settlement will create more 
opportunities for other companies and make "it easier for 
these companies to compete against Microsoft. Please support this 
settlement so this company can remain together and continue 
benefiting our society, with inventive software that makes our lives 
easier. Thank you for your support.
    Sincerely,
    Stefanos Evangelinos



MTC-00029947

January 28,2002
Attorney General John Ashcroft
Department of Justice
950 Pennsylvania Avenue
Washington, DC 20530
    Dear Mr. Ashcroft,
    The pending settlement between Microsoft and the federal 
government presents an opportunity to bring this case to a close. 
This suit has distracted Microsoft and the nation from more pressing 
priorities for too long, and this settlement will allow us to get 
back to business.
    The settlement will, in effect, force Microsoft to treat its 
competitors in a more sympathetic way. For example, Microsoft has 
agreed to avoid retaliation against any computer makers who ship 
software that competes with anything in Windows. This alone will 
increase competition among software developers. Additionally, 
Microsoft has agreed to share its code for the Windows operating 
system that will enable its competitors to configure software that 
is fully compatible with Windows. Most vexing, however, is the 
provision that places Microsoft under the oversight of a government 
mandated technical review committee. As the president of a business, 
I can say that I would not relish the idea of my company being 
watched by the government at all times.
    This lawsuit has drained resources on both sides for more than 
three years. The settlement can stop the resource drain, and at the 
same time make the IT sector more competitive. I support it 
wholeheartedly, and believe that it is in the best interest of the 
nation. Thank you for your time and efforts in Washington.
    Sincerely,
    Carol Conway
    President



MTC-00029948

Renata Hesse
Department of Justice, Antitrust Department
601 D St NW
Suite 1200
Washington, DC 20530
    Dear Ms. Hesse,
    I am writing as a Kansas State Representative and Vice Chairman 
of the House Business, Commerce, and Labor Committee. As settlement 
in the Microsoft suit hangs in the balance, I write with genuine 
concern for the future of our industry.
    The Microsoft Antitrust suit was brought to fruition due to 
antiquated rules and regulations written during the development of 
the railroads, Microsoft's harm to the consumer has yet to be 
proven; point in fact, there is a discrepancy in claims that 
Microsoft: has undercut the competition by under pricing, yet there 
are contradicting claims that Microsoft has overcharged the 
consumer.
    Microsoft is primarily guilty of supplying a terrific product 
for a huge niche market. A market they actually helped to grow due 
to high demand for the technology they pioneered. The prosecution of 
Microsoft for giving the consumer what they ask for is absurd. Like 
an>, business, Microsoft has tried to protect the details of 
their products from competitors and tried to maintain their market 
share.
    The real meat of this lawsuit lies in the antitrust laws 
themselves. Microsoft's competitors have merged and aligned in a 
full attack in hopes of gaining Microsoft's market share through 
court orders rather than through the free market system. It's as if 
these laws are allowing the competition to monopolize Microsoft with 
protection of the courts.
    In the time since the lawsuit was introduced, the software and 
tech industries have ?? into a living, breathing organism, changing 
daily with each new advance. Paid far by leggy long for State 
Representative, Rayburn, Treasure. PO Box 546--Madison, KS 
66860-0546 (620) 
437-283--peglong @ ink.org
    There are no linear changes here. Each new advance seems to 
drive the consumer toward a different direction. This reality holds 
no marker share security for Microsoft. In your consideration of the 
settlement of this suit, please be thoughtful as to the root of the 
problem, outdated antitrust law. Prompt settlement will appease the 
competition, but more importantly let industry move on without such 
slowing scrutiny.

[[Page 28783]]

    Cordially,
    Representative Peggy Long



MTC-00029949 LARRY McKIBBEN

9STATE SENATOR
Thirty-second District
Statehouse (515) 281-3171
e mail Larry mekibben @ legis.state.la.us
HOME: ADDRIESS
P.O. Box 618
Marshulltown, lowa 501.58
The Senate
State of lowa
Seventy-ninth General Assembly
STATEHOUSE
Des Moines, Iowa 50319
Appropriations
Business & labor Relations
local Government
Ways and means, Chair
Transportation, ?? &
Capitals Appropriations ??
January 28,2002
Judge Kollar Kotelly
c/o Ms. Renata Hesse LI.S, Department of Justice, Antitrust Division
601 D Street NW, Suite 1200
Washington, DC 20530
    Your Honor,
    The new economy has been the source of an economic and 
technological renaissance in America and Microsoft has been a part 
of that from the beginning. At the dawn of the Information Age, 
there is no denying the importance of the technology industry to 
America's prosperity in the 21st century.
    As an elected official, I need to ensure an environment that 
allows the technology industry's entrepreneurial freedom to innovate 
and reinvigorate our economy. We need a return of the self-
regulating competition that has built this industry into the most 
vibrant and successful in the world. The U.S. economy stands to grow 
by leaps and bounds in coming years, all due to the innovation, 
competition, and customer-focused attitude of our high tech 
community.
    This case opened a Pandora's box of litigation and regulation 
that is already stifling competition, cramping innovation, and 
haring consumers and investors. Microsoft's presence in the market 
increased competition and innovation driving down costs for 
consumers, Microsoft helped set a high standard in the market and 
raised the bar for competitors many of whom have stepped up to the 
plate and become viable competitors to Microsoft.
    Considering a snapshot of the high-tech industry when this case 
started compared to one from today, it is a much different picture 
Aside from the fact that the industry has outgrown this case, the 
proposed Final Judgment would decidedly help our economy and 
hopefully close the lid on the Pandora's box it opened. I urge you 
to approve the settlement.
    Sincerely,
    Larry Mekibben



MTC-00029950

Bonnie Wood
116 Timber Springs Lane
Exton, PA 19341
January 28, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
Fax 1-202-307-1454
Page 1 of 1
    Dear Mr. Ashcroft:
    This letter is to give my support to the Microsoft and 
Department of Justice settlement. Microsoft is one of our greatest 
companies and I resent the government interference in what is 
basically competition between technology companies. I doubt whether 
Microsoft has done anything that the other firms have not. More 
likely, the other firms could not compete and have gone crying to 
the government. They just want a bigger piece of the pie.
    You don't have to look any further than AT&T to see the 
havoc that can result from breaking up certain so-called monopolies. 
AT&T was deemed a monopoly while we had the best service in the 
world. Now, no one can understand the half-dozen phone bills 
received each month from strange sounding phone companies. Phone 
companies come and go with alarming frequency, and those that stay 
in business seem to be merging all back together. I often wonder if 
I would have been better off if AT&T had been left alone.
    The same may be true for Microsoft. In any event, Microsoft and 
the Justice Department have reached an agreement. Microsoft has 
agreed to open the company up to third party, innovation; has agreed 
to disclose internal source codes for Windows; and agreed to an 
oversight committee. This is more than fair.
    I urge you to give your approval to this agreement.
    Thank you for your consideration of my views.
    Sincerely,
    Bonnie Wood
    cc: Senator Rick Santorum
    202-228-0604



MTC-00029951

THE HENRY HAZLITT FOUNDATION
Free-Market.Net: The Freedom Network
40t N. Franklin St., Sulte 3E
Chicago, IL 60610
(312) 494-9440
fax (312) 494-9441
e-mall: info @ hazlltt.org
http://www.free.market, net
BOARD OF DIRECTORS
Dan Curran
Robert Davis
Marsha ??
Louis James
Robert Knautz
Art Margulis, Jr.
David Padden
Frank Resnlk
Alvan Rosenberg
Mark Schultz
Chris Wh??tten
BOARD OF ADVISORS
Scott Banister
Godspeed Networks
David Boaz
Cato Institute
Lloyd Buchanan
Axe-Houghton Associates, Inc.
Sky Dayton
EarthLink Networks. Inc.
Paul R. Farago
Constructive Management Foundation
Bill Frezza
Internet Week
John H, Fund
The Wall Street Journal
BettIn?? Blen Greaves
Foundation for Economic Education Dr, David Kelley
The Objectivist Center
Dr. Henri L??page
Idees Action
Virginia Postral
Reason magazine
Andrea Millen Rich
Laissez Faire Books
Dr. Jeremy Shearmur
Australian National UniverSity
Dr. Thomas Szasz
SUNY Health Science Center
Dr. Walter E. Williams
George Mason University
January 25, 2002
Renata Hesse
Department of Justice
Antitrust Division
601 D St NW, Ste 1200
Washington, DC 20530
    Dear Ms. Hesse,
    The settlement before the court in the Microsoft antitrust case 
is not ideal. The premise for this case was unwarranted to begin 
with. The antitrust laws being applied are subjective and left to 
regulators to interpret--in this case not even for the benefit 
of consumers. All things considered, I still write you today to 
encourage Judge Kolar Kottely to support the proposal.
    The settlement gives the government most of what they wanted, 
stopping short of breaking up the company. Among other measures, the 
company is required to disclose significant proprietary information 
to its competitors. This is a significant and meaningful punishment. 
To enforce the terms of the settlement, Microsoft engineers will 
have to put up with a team of three on-site, full-time monitors. The 
monitors will have access to all of the company's records and 
personnel, and Microsoft will even have to pick up the tab for their 
offices and up-keep. Again, this is a significant and meaningful 
punishment that provides ample ground for the state to make the case 
to the public that justice has been served.
    The end of the conflict between Microsoft and the federal 
government will restore a much-needed measure of "certainty in 
the marketplace," as the Justice Department itself has 
claimed. Consumers and business partners will no longer have to fear 
the dismemberment of a major player in the software industry. I, as 
a Microsoft customer, won't have to worry about dealing with more 
vendors to get the same goods and services. People will be able to 
make plans for the future with a somewhat reinforced sense of 
confidence.
    But real certainty in today's marketplace requires a knowledge 
of what's legal and what's illegal. While the Microsoft settlement 
seems to put a high-profile conflict to rest, it doesn't deal with 
the larger problems that sparked that battle. As long as legislation 
that means whatever bureaucrats say remains on the books, conflict 
will continue between frustrated businesses and arbitrary 
regulators.

[[Page 28784]]

    So, I urge you to take this needed step toward bringing this 
chapter to an end. And I encourage the Department of Justice to work 
with the legislative branch to carefully re-examine and restructure, 
or, preferably, repeal the Sherman Antitrust Law.
    Thank You,
    Louis James
    President



MTC-00029952

January 28, 2002
Attorney, General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am the controller of a diamond wholesale company writing to 
give my support to the recent Department of Justice and Microsoft 
antitrust case. This settlement was reached after three months of 
intense, round-the-clock negotiations endorsed by a federal judge. 
Ongoing persecution of one of the strongest companies m our country 
is unfair, and stands in stark relief to how much positive 
difference Bill Gates has made in the computer industry.
    When I first started using computers, interoperability was 
virtually nonexistent, and computers were not user-friendly at all. 
Now, with Windows, I can install everything myself. I am not a 
computer expert by any means, but bemuse of Microsoft's simple 
programs, I have been able to customize my computer to my 
specifications.
    The envious competitors who foisted this lawsuit on America now 
claim that the settlement is not strict enough. Any objective view 
of the settlement, however, shows that Microsoft is more than fairly 
reprimanded. Microsoft has agreed to change Windows so that it will 
be even easier to install programs, and Microsoft has agreed to 
share any interfaces that Windows uses to communicate with other 
programs. This alone is more than enough, and should placate even 
the shrillest of the competition.
    I urge you to continue your support to this agreement.
    Sincerely,
    Irene Chin
    Controller
FULLCUT
M?? Inc.
MAK?? BIRN??ACH)
CHAIRHAN
?? FIFTH AVENUE
NEW YORK. N.Y. 10017
(212) 681-00??0
January 28, 21302
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft;
    I am writing on this last day of the comment period to express 
my full support of the recent settlement in the antitrust case 
between Microsoft and the US Department of Justice. The lawsuit 
dragged on too long and now it is definitely in the best interests 
of the American public to end litigation against Microsoft.
    I am a Microsoft supporter. I do not think my rights as a 
consumer have been infringed upon. In fact, 1 think that Microsoft 
has standardized the industry and made it mush easier for users. The 
terms of the settlement are fair. Microsoft has agreed to increase 
its relations with computer makers and software developers, design 
future Windows" versions so that competitors can more easily 
promote their own products and form a three person team to monitor 
compliance with the settlement.
    I hope your office implements the settlement as soon as 
possible. Our nation needs Microsoft as the cornerstone of the tech 
sector. Please suppress the opposition from the nine states and make 
this thing a reality.
    Sincerely
    Max Birnbach
    President



MTC-00029953

Mrs. Victoria Jenson
32710 WEST ??IST TERRACE
DESOTO, KS 66018
January 19, 2002
Ms, Renata Hesse
U.S. Department of Justice, Anti-trust
601 "D" Street NW, Suite 200
Washington, DC 20530
    Ms. Hesse:
    I appreciate the chance to comment under the Tunney Act on the 
settlement that has been proposed to end the Department of Justice's 
anti-trust suit against Microsoft.
    I am in favor of settlement of the suit. I believe the suit 
should be brought to an end. as soon as possible. In my opinion, the 
case should not have been brought in die fiat place. The fact that 
nine states and the Department of Justice trove found common ground 
with Microsoft to settle the case is a very positive development for 
the entire nation,
    It seems to me that the laws governing anti-trust suits are not 
designed to -keep up with a constantly changing industry like high 
technology. That said, the proposed settlement does reach a solid 
middle ground that cakes measures to ensure competition without 
over-reaching the role of government regulators.
    The settlement is a fair and reasonable way to end this suit. I 
urge the judge to approve it.
    Sincerely,
    Victoria Jenson



MTC-00029954

165 E 32nd Street
Apt. 2B
New York, NY 1 0016-6054
January 17, 2002
Atty. Gen. John Ashcroft
950 Penn. Ave., NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    I am writing in regards to the antitrust settlement reached 
between Microsoft and the Department of Justice. I am in favor of 
bringing the litigation process to an end immediately, and I support 
the current settlement. The antitrust suit with Microsoft has been 
going for three years now, and with a settlement proposed is the 
time to put this issue to bed once and for all.
    Under the terms set forth in the current settlement, Microsoft 
has agreed to make several major changes in the way it operates and 
interacts with other companies, consumers, and in particular with 
its competitors. Microsoft has agreed to license its Windows 
products out to the 20 largest computer manufacturers on identical 
terms and conditions, Additionally Microsoft will no longer enter 
into any agreements with third parties to exclusively distribute or 
promote Windows family products, unless there are no competitive 
concerns present in the particular situation.
    While I feel that many of the aspects of the settlement are too 
restrictive on Microsoft I am still in favor of the settlement as a 
whole. Now more then ever we need companies such as Microsoft, 
leaders in the industry, who are financially able to weather our 
current economic storm. At a time when the economy is dwindling and 
layoffs are prominent we should not be penalizing successful 
companies. For these reasons I urge you to support the antitrust 
settlement and take no further action against Microsoft.
    Sincerely,
    Jorge Godoy



MTC-00029955

AMERICA
GENERAL
FINANCIAL GROUP
MOORE FINANCIAL GROUP
    Please deliver the following documents to the person or 
department listed below as quickly as possible. Thank Your
NAME: Renata Hesse
COMPANY: 1/28/01
DATE:(202) 616-9937
PHONE NO.:
FAX NO.:
COMMENTS:
PERSON SENDING THIS FAX: Bill
    Should there be any difficulty reading this document or if all 
pages have not been received,
please call (337) 261-1006 for assistance.
William E. "Bill" Moore
Registered Representative
P.O. Box 92802
Lafayette, LA 70509
(337) 261-1006
Fax: (337) 236-5566
January 23, 2002
Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington DC 20530
FAX: 202-616-9937
RE: Settlement of U.S.v. Microsoft
    I share the government's concern about consumer harm in the fast 
growing technology industry. However, I am aware that the settlement 
agreement provides resources, access, and authority to respond to 
complaints about Microsoft's compliance.
    I am aware that the negotiators have worked out a settlement 
that may not satisfy, anyone, but includes something for everyone. 
Usually that is the sign of a fair settlement.
    Therefore I believe that it is time to settle this case. As our 
economy begins to try to rebound, finality in this case would be a 
great boost. I appreciate your consideration of this important 
matter.

[[Page 28785]]

    Sincerely,



MTC-00029956

Anne G. Pullin, President
AAA, FRICS, GG
2887 Wright Avenue
Winter Park, FL 32789
Personal Property Appraisals & Consultations Fine & 
Decorative
Arts--Antiques
January 28,2000
Attorney General John Ash??? Sales--Art Market Research
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC20530
Phone: (407) 644-2156 
jimannep @ worldnet.att.net
    Dear Mr. Ashcroft:
    I am concerned about the states and now AOL currently seeking 
litigation and more litigation against Microsoft They all seem to be 
operating only on a basis of greed and without a firm foundation for 
claims. Or else, they are suffering from sour grapes because they 
have not been able to bring to the market a product that was as good 
or as easily usable by people like me. I have used Microsoft 
products since Word Version One came out. In fact I bought my first 
computer because research indicated that it would be the best and 
easiest product to use. Time tins proved me correct.
    Microsoft has helped me in so many ways to improve my business: 
I can exchange information without telephone calls and long retyping 
of material. Everything is less expensive to operate and 
buy--from computers to all the software.
    I tried Netscape -what a pain it was to use. And AOL is the only 
E-mail service that I have not been able to exchange images with 
Microsoft walked away with the business because they had better 
products and were good about customer service. They have always been 
able to get me operating--and I am a complete novice to the 
technical end of this business. I cannot say this for many other 
software products.
    As an example of their products: I took my old DOS with the 
Multiplan spreadsheet to Europe. Used the old DOS computer because 
the battery had 6 hours, and I was working in an ancient library. 
Recorded my data. Brought the data home into Excel and then into 
Access. It all worked like a charm.
    Sincerely,
    Anne Pullin
    CC: Representative Ric Keller



MTC-00029957

True Blue--Freedom
January 26, 2002
Board of Adojsors
Hon.john A. ??
R??? 8ty ???istrict Ohio
Hon John Kastoh, For??? Chai???
Congressional ???dget ???
???hn S. Dowlin, Co???ssion???
Han??? Couny
Wayne ??? Prestent
Data Rank Cerp
Gregg Schole Ventech
Ranata B, Hesse
Fax 202-616-9937
    Dear Renata:
    While I am pleased that the Tunney Act allows me to make an 
input on behalf of True Blue'8 membership across America In regard 
to the proposed Microsoft settlement, I want to be candid. The 
federal government's pursuit of Microsoft damaged consumers and the 
economy, as follows:
    . Consumers paid more than $30 million in taxes to sue a company 
that has consistently created and marketed better products at a 
lower cost.
    . Investors lost millions more as the tech sector of the stock 
market sagged under the Impact of the threat to break up Microsoft, 
adding Impetus to a recession.
    . Taxpayers, whose Interests are the key priority of lawmakers, 
paid lawmakers and attorneys" salaries to work on behalf of 
the competitors of Microsoft. (Personally, I'm not sure I'll ever 
want to buy products from companies that whine to the Papa Fools to 
secure taxpayer funding of their marketplace fights.)
    Asking Microsoft to hire a staff and provide offices for a 
bureaucracy to enforce the settlement is simply using a socialist 
mechanism to control an Industry. At best, such an office should 
exist no longer than 12-18 months, and then be completely 
terminated, If Congress determines a need for such an agency, we can 
place the idea before Congress, debate the law, and vote. The Court 
must not become a bureaucracy-creating and bureaucracy-enforcing 
entity.
    Every State Attorney General who continues in this suit clearly 
morphs his/her office into collection arm grabbing for taxpayer 
dollars. It is disturbing that the Attorneys General, who are funded 
by taxpayers at the state level, are grasping for families" 
earnings at the federal level, too We urge you to end this matter 
and allow Microsoft to return to what it does best: Innovating to 
serve consumers. Consumers will see that Microsoft offers 
flexibility and demonstrates its resolve to become an ever better 
industry leader.
    Yours truly,
    Patricla R. Cooksey, President



MTC-00029958

Attention: Renata Hesse
U.S. Department of Justice, Antitrust Division
601 D Street. NW, Suite I200
Washington, DC 20530
    Dear Ms. Hesse.
    I often encourage my students to speak up when they have, an 
opinion on a current event. I decided recently to heed my own advice 
and speak up on the proposed proposed Microsoft settlement during 
this open comment period.
    As a teacher in a small rural school. I am encouraged by the 
possibility that Microsoft has offered to donate millions of dollars 
of computer equipment to schools like the one where I teach. Many 
times, rural schools have a hard timer keeping up with technological 
advances and opportunities available at larger, more urban schools. 
I believe the settlement proposed by the Bush administration would 
go a long wary toward leveling the playing field for students who 
attend rural schools by allowing them access to cutting edge 
computer technology. Thank you for your work on this important case. 
I urge you to approve the settlement
    Sincerely
    Connie Morris



MTC-00029959

Jim Waldo
1202 April Lane
Green Bay, WI 54304-4106
(920) 494-4628 (Voice & Automatic Fax, if our fax does not 
recognize yours, dial # 11 during ringing
Cell Phone: (920) 362-3623
EMAIL: JIMWALDO2 @ CS.COM
January 27, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing to say that I fully support the Microsoft 
settlement. I feel that if Microsoft is going to comply with all the 
terms and conditions of the settlement agreement, then the Justice 
department should conclude their investigations in this matter. The 
country needs to go on with it business of production and 
development in regards to the tech industry.
    One way in which Microsoft has agreed to comply in regards to 
the settlement, is the three expert technical committee, which was 
formed to make sure that Microsoft will not step out of the bounds 
of the agreement. If another group finds Microsoft acting 
inappropriately, that group can take up a formal grievance with a 
number of individuals appointed by the government and who are 
associated with this case.
    I know that you will make the right decision for all Americans. 
End this case now, and let the country keep moving.
    Sincerely,
    Jim Waldo
    cc: Representative Mark Green



MTC-00029960

TO: John Ashcroft
Department of Justice
202616-9937
FROM: Calvin A. Jordan
3800 Meredith Drive
Greensboro. NC 27408
January 28, 2002
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue. NW
Washington. DC 20530-0001
    Dear Mr. Ashcroft:
    For a long time I have followed the antitrust, suit being 
brought on Microsoft by the Justice Department. After more than 
three years of litigation, a settlement has finally been reached. 
The purpose of this letter is to show my support for this 
settlement. This case has simply gone on far too long.
    Unfortunately, some powerful opponents of Microsoft would like 
to see this settlement, revoked, and are pressuring the Justice 
Department to withdraw this offer. They believe that the settlement 
does not go far enough. This is where I distinctly disagree. Under 
the terms of the settlement, Microsoft will allow easy access to its 
operating systems for competing software firms. Also under the terms 
of the settlement. Microsoft will be monitored full-time by the 
government, and can still face lawsuits from competing companies.

[[Page 28786]]

    The government at the State and Federal levels must fully 
support, the settlement for it t come to fruition. After three years 
and millions of dollars, isolated opponents should not be allowed to 
spoil the work of the DOJ to settle this case. I stand behind the 
settlement 100%, and appreciate this outlet to have my opinion 
count.
    Sincerely
    Calvin A. Jordan
    cc: Representative Howard Coble



MTC-00029962

Post-it Fax Note 7671 Date ??? 2
To ZEN???A HESSE From ZOB??? HAUS
Co./Dept. Dos Go.
Phone # Phonb #
Fax #202 616 9937 Fax #
Robert J. Haus
5501 Harwood Drive
Des Moines, IA 50312
(515) 277-3098 (horne)
(515) 490-0538 (office)
January 28, 2002
Renata Hesse
U.S. Department of Justice, Antitrust Division
601 D Street NW, Suite 1200
Washington, DC 20530
    Dear Ms, Hesse,
    I am writing to take advantage of the opportunity to weigh in on 
the Microsoft antitrust settlement decision by the U.S. District 
Court. Thank you for this opportunity. Microsoft has been a leader 
in the technology industry with its software, operating system, and 
Internet browser. They are accused of being a monopoly, yet the 
companies fueling the case are identified as Microsoft's 
"competitors"--seems like a contradiction.
    Linux operating system (OS) is growing at an astounding pace 
taking a larger share of the market every day. It's able to capture 
more of the market because consumers are choosing the Linux OS over 
Windows. The customer is deciding which product best suits their 
needs--not the government.
    Bill Gates took Microsoft to unforeseen levels with unmatched 
speed. His vision and business savvy made the company "king of 
the hill"... for now. However, the high-tech industry grows at 
such rapid rates that no company will be "king of the 
hill"... for long.
    In the meantime, Microsoft's position in the market has not 
caused harm to the consumer. On a professional and personal level I 
appreciate the ease with which Windows works and my children would 
agree...it is simply the most user friendly software on the market 
today. Whether or not Microsoft is the best system for me is, and 
should remain, my own decision.
    The settlement that the parties in this suit have come to is 
reasonable and delivers the government much of what it sought 
including a way to enforce the requirements set forth in the 
agreement. I respectfully request that you support the settlement in 
this ease.
    Thank You,
    Robert Haus



MTC-00029963

Kellene Walker
Route 4
??. KS 66736
January 22, 2002
Renata Hesse
Trial Attorney, Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington, DO 20530
    Attorney Hesse,
    I find it interesting that Apple is objecting to Microsoft's 
settlement offer, perhaps due to Microsoft's offer of cash, 
software, and computer equipment to schools in need, I think Apple 
pioneered the idea of discounting computers to schools and teachers 
in the 1980's, possibly in a smart strategy of gaining youth loyalty 
and influencing future sales, No matter, fair is fair. When Bill 
Gates and company were working out era garage, they had no more 
opportunity than any other person or company. Microsoft was 
literally built from nothing to an empire due to hard work, 
innovation, and by recognizing an untapped market.
    Microsoft's biggest edge is that they pioneered the industry, 
and to date, they do it better than anyone else. Their business 
model is studied internationally. Of course Microsoft is a fierce 
competitor, there are no laws against that.
    The bottom line is that freedom to innovate is there for 
everyone. This lawsuit borders on hindering that freedom. I strongly 
encourage you to approve the current settlement offer in a move to 
protect free commerce.
    Sincerely,
    Kellene Walker, RN



MTC-00029964

FORRESTST H. MUIRE, JR.
908 PRINCETON
MIDLAND, TEXAS 79701-4159
915-682-5097
email, ??uire. @ swbell.net FAX 685-4091
January 23, 2002
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    Please accept the proposed settlement of the Microsoft anti-
trust case. As a long-time user of Microsoft products, I see this 
agreement as the most practical solution for competitors to thrive, 
short of a break up that would risk consumers losing a quality, 
stable presence in the software industry.
    Seemingly inspired by a lack of monetary support from the last 
administration, this government intervention into the business world 
has been off base from the start. With this deal, Microsoft's market 
position is clearly weakened, so any further litigation would be an 
even more misguided attempt to manipulate the marketplace on behalf 
of the "consumer." Microsoft will allow computer 
manufacturers broad freedoms to configure Windows with the software 
of their choice without preference in future licensing deals and 
will provide competitors with extensive access to its internal code, 
among other agreed measures to expand competition. Considering the 
constant verification by a committee of experts to monitor the deal, 
I ask for you to support for this overly fair settlement. The IT 
industry and the economy will greatly benefit from the return of 
stability to the software marketplace. Thank you very much for your 
support.
    Sincerely,
    Forrest Muire



MTC-00029965

SEAN GALVIN
Renata Hesse, Esq.
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
Via Facsimile 202-616-9957
    Dear Ms. Hesse:
    I am writing to express my support for Microsoft case's 
settlement with the federal government. Considering the poor state 
of the economy, the last thing consumers need prolonged litigation 
resulting in additional oppression of the high tech industry.
    Consumers, on the whole, were harmed by the case far more than 
they were ever harmed by the conduct described by it. It's been a 
long time since the high tech industry was truly free to compete and 
innovate without fear of repercussions from the government, but now 
that that time has come again. I believe we will see great results 
in short order that could turn this economy around.
    Sincerely,
    Sean Galvin



MTC-00029966

Eric Movassaghi
1765 Coliseum St. #314
New Orleans, LA 70130
January 22, 2002
Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington DC 20530
FAX: 202-616-9937
RE: Settlement of U.S.v. Microsoft
    As the owner of a private business I know how fierce competition 
can be out in the open market. And I do appreciate the government's 
role in protecting consumers against monopolistic activities. 
However, this case has gone on long enough and I am hopeful that the 
proposed settlement will be approved.
    It is important to my business that our economy begin to turn 
around and I think the technology sector is important to the 
rebound. A final settlement in this case will provide that boost and 
protect consumers at the same time. I am hopeful that the settlement 
is approved soon.
    Thank you for your consideration of my views.
    Sincerely,



MTC-00029967

Inwoodola
Jan 28, 2002
Attn U.S. Department of Justice.
Regarding the lawsuit Against Microsoft
    I think it is time to settle this and get it behind us so we can 
proceed with more important things such as economy and terrorists. I 
feel this Company is being punished for being successful and that 
most libly have not done anything more out of their time than those 
that are bringing

[[Page 28787]]

charges against them. Lets get on with it and say it is done!
    Sincerely,
    Mark Hanson



MTC-00029968

FACSIMILE TRANSMISSION COVER SHEET
Transmission Date: 2/28/02 
Total Pages: 2(Including cover page
FROM: Attorney James R. Graves
TO FAX NO: (202) 307-1454
TO THE ATTENTION OF: Renata B. Hesse
 Antitrust Division
RE: Letter to Attorney General John Ashcroft
January 28, 2002
Attorney General John Ashcroft
United States Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft,
    As a Microsoft supporter, I would like to point out some reasons 
why the antitrust case should be closed at the federal level. The 
settlement is fair and reasonable, and has been extensive enough for 
nine states to approve. I fear that the states pursuing further 
litigation will never be satisified. Under the terms of the 
agreement, Microsoft will make significant changes in the way it 
develops and licenses its software. The corporation has agreed to 
more or less open its inventions to the competition, allowing them 
to use the success of Windows to launch their own competing 
products. For instance, Microsoft has granted broad new rights to 
software engineers and computer makers to configure Windows so that 
competing programs can be promoted on Windows itself.
    Although these concessions make antitrust precedent, Microsoft 
has been willing to change in an effort to bring this case to a 
close. As long as the industry leader is giving away market share, 
there will always be those that want more. I hope you will pay 
attention to the merits of this case.
    If so, you will see fit to end this matter.
    Very truly yours,
    James R. Graves Attorney-at-Law



MTC-00029969

2 High Stepper Court, Apt, 406
Pikesville, MD 21208
January 17, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing to ask that you give your support to the settlement 
reached between Microsoft and the Department of Justice I am a 
retired electrical engineer. I know computers, and I know Microsoft. 
I believe Microsoft was all right; in no way did it monopolize the 
market. Bill Gates" main strength was that he was simply 
quicker and smarter than the other fellows. Bill Gates recognized 
the need for standardized software programs and filled it. Then he 
marketed it brilliantly. There are any number of firms out there in 
other industries whose product is not necessarily better, it's just 
that they are smarter in promoting it and changing to fulfill public 
need. MBAs are taught this very lesson Bill Gates was hauled into 
court out of jealousy, not any unfair business practices.
    I also understand from the settlement, Microsoft will be opening 
up its source codes for the Windows operating system. This is a lot 
more than other firms would do Microsoft has also agreed to a 
technical committee that will oversee Microsoft's compliance. 
Microsoft has more than paid for any sins it may have committed. I 
urge you, for the good of the county, for business, for the general 
public, to give your support to this settlement. Thank you.
    Sincerely,
    Bernard Gerber



MTC-00029970

WILCO VETERINARY CLINIC
RR 4. BOX 188. FREDONIA. KS 66736
January 14, 2002
Judge Renata Hesse
U.S. Department of Justice Anti-Trust Division
601 "D" Street Northwest, #1200
Washington, DC 20880
    Dear Ms. Hesse:
    The purpose of this letter is to add my comments to the record 
regarding the anti-trust lawsuit filed against Microsoft.
    As a veterinarian and businessman, I believe in as little 
interference as possible in the operations of a private company. 
Though I see the value of having anti-trust statutes in place to 
protect the public from, anti-competitive practices. I also believe 
that in this case, those statutes have not been properly applied.
    While it is true that Microsoft is a large company and has 
earned a great share of the computer and software marker, I believe 
that has happened because Microsoft offers great products at 
reasonable prices. I do not believe it has been demonstrated that 
Microsoft has been engaging in anti-competitive practices that would 
warrant an anti-trust lawsuit of this type. I further believe that 
to continue pursuing this lawsuit will only sap state and federal 
resources that are already in short supply and cause unnecessary 
damage to a company that has contributed a great deal to the 
American economy and way of life.
    I urge you to affirm the settlement proposed by the Bush 
Administration and agreed to by many state Attorneys General.
    Sincerely,
    Dr. Charles Fox



MTC-00029971

2800 Blue Spruce Lane
Silver Spring, Maryland 20906
January 13, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania A venue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    After a long, difficult three years, the Department of Justice 
has settled its antitrust suit against Microsoft. Microsoft did not 
get off easy. The firm went far beyond what was originally mentioned 
in the antitrust case. Microsoft has substantially opened up the 
company to competitors of Microsoft. Something I do not think any 
other firm would have done. But it is time to move on. It should be 
over. We cannot keep dragging the case on. Congress is arguing about 
a stimulus package, but keeps one of our major companies tied down 
with litigation. I support the settlement, and look forward to the 
boost ending this case will give our economy. Thank you for your 
time and consideration,
    Sincerely.
    Eldridge Parks



MTC-00029972

East 1751 Riverview Drive
Postfalls, Idaho 83854
January 17,2002
Attorney General John Ashcroft
US Department of Justice
950 Pert??is Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    The antitrust law was designed to Protect consumers from abuse 
by a company. Not to monitor competition between businesses, which 
is what happened with the antitrust case brought against Microsoft 
by the Department of Justice. A settlement has been reached and I am 
writing to ask that you give your rapport to this agreement. The 
original antitrust suit against Microsoft was badly misinterpreted. 
Microsoft has not harmed consumers; on the contrary, Bill Gates has 
helped consumers enormously in understanding the technological 
revolution that has descended upon us. He has made software easier 
to understand, easier to imegrate, and much more affordable. What he 
has not done is pay court to the powers that be in Washington, or 
appeased his competitors by not being too successful. Hence, we have 
our antitrust lawsuit against Microsoft. However, the case is over, 
and it is time to move on.
    Microsoft has met the demands by the Department of Justice by 
agreeing to configure its Windows program to allow competing 
software to be inserted; Microsoft his agreed to help companies 
achieve a greater degree of reliability with their networking 
software, and Microsoft has agreed to terms that extend well beyond 
the products and procedures ?? in the original lawsuit. Whatever 
"sins" Microsoft may have committed, they have more than 
paid for. I urge you to give your support to this agreement. It is 
time to get back on track. We have been through some rough times and 
now need to concentrate on getting our ??my going again.
    Microsoft can help us to this, if we allow it. Thank you.
    Sincerely,
    James Rocca
    cc: Senator Larry Craig



MTC-00029973

Attorney General
Department of Justice
Washington, DC
FAX 1-202-307-1454 or 
1-202-616-9937
    Please settle the Microsoft case with the current findings.
    We feel the prosecution of Microsoft has been and is detrimental 
to the entire economy. The public has been penalized by actions of 
the federal government in this unreasonable prosecution by the 
government,

[[Page 28788]]

Microsoft competitors, various states where the competitors reside 
and a prejudice judge. We feel Microsoft has a better product and 
should not be prosecuted for making the best successful economy in 
history and its prosecution led to the recession. It appears the 
other giants, i.e. Exxon and Mobile, merging banks, merging lumber 
companies, etc., manage to merge and be monopolistic to the 
detriment of the regular citizen causing increased prices and the 
federal government does not interfere.
    While Microsoft gets punished for going it alone (without 
political aid) and the other giants lobby Congress, we (everyday 
citizens) have to pay the higher prices. Please settle this matter 
with the current decisions and do not carry it out any longer. 
Forcing Microsoft to help their competitors is unAmerican.
    Sincerely,
    Joe Brennan
    Betty Brennan
    FAX 206-878-1681
    January 28, 2001



MTC-00029974

January 26, 2002
Attorney General John Ashcroft
US Dement of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530-000
    Dear Mr. Ashcroft:
    I have taken this opportunity to write and express my opinion of 
the settlement that has been reached in the Microsoft antitrust 
case. I believe that we need to concentrate on issues of greater 
importance. I am pleased that a settlement has finally been reached 
in this case and that Microsoft will be able to continue doing 
business as a whole entity.
    It is apparent to me that the people pursuing this litigation on 
are not looking for a good judgment in this case but rather the 
perpetuation of their own personal agendas. When government becomes 
involved in business, socialism becomes the rule of the day. I feel 
that this case has been fueled by jealousy and that until we reach a 
conclusion to this litigation free enterprise is stymied. The terms 
of the settlement are fair: Microsoft has agreed to design all 
future versions of Windows to be compatible with the products of its 
competitors, and they will also cease any behavior that may be 
considered retaliatory.
    Please support this settlement. I trust that you will do all 
that is within your power to protect American businesses.
    Sincerely,
    Vanessa I. Castagliola, Leonard D. Castagliola Jr.



MTC-00029975

January 24, 2002
Attorney General John Ashcroft
US Justice Department
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am tired of the Justice Department using my tax dollars to 
fund litigation against Microsoft. No other company has provided the 
amazing tools that have helped businesses around the globe to 
produce their work faster and better.
    The litigation was shaped and formed in the Clinton 
administration under the guidance of Microsoft's competitors. Had 
they put as much passion and energy into developing products that 
were worth using, they would not be in this fight.
    Please, let's put the American machine to work protecting our 
people from terrorists inside and outside of America. Let the free 
market economy decide who has the better product. At the end of the 
day, it really doesn't matter what is loaded onto a computer. I can 
strip it down and build it back with whatever programs I so desire. 
To date, the competitive products have not been worth the effort.
    I am a business owner who has a product that is so great; my 
clients won't go elsewhere ever again. Does that make me a monopoly 
too? By the way, I intend to make a profit this year. Is it cause 
for litigation by the Justice Department?
    Sincerely Yours,
    Laurie J. Mitchell, Director
    EventForce, Inc.
    1323 102nd Avenue NE
    Bellevue, WA 98004
    (425) 635-7696



MTC-00029976

J C BOATRZGIIT
1395 N Falkenburg Road
Tampa. FL 33619
January 24, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing to you today in support of the settlement that was 
reached in the Microsoft antitrust dispute. I believe that this case 
needs to come to a close, and indeed, never should have been brought 
in the first place.
    The settlement is reasonable, under its terms Microsoft will 
disclose information about the internal interface of its Windows 
operating system, this will enable its competitors to create new 
products that will work within the system. Microsoft will also 
design all future versions of Windows to be compatible with the 
products of other companies. Finally Microsoft will not engage in 
predatory business tactics, or exact revenge against any of its 
competitors. The company will be monitored the by a government 
appointed technical committee which will ensure that Microsoft 
complies with the terms of this settlement.
    Microsoft is one of this nations greatest corporate assets. 
Attacking this company will not benefit the U.S. economy, the IT 
industry, or the American consumer. Thank you for doing all that is 
within your power to see this settlement pass. Thank you for your 
consideration of my position.
    Sincerely,
    J.C. Boatright



MTC-00029977

January 18, 2002
Ms. Renata B. Hesse
Antitrust Division
U.S. Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530-0001
    Dear Ms. Hesse,
    The settlement of the Microsoft antitrust case can help our 
nation's struggling economy begin to improve.
    Employers are challenged by the downswing in the economy. Many 
workers are seeking employment after being laid off. NASDAQ and 
technology stocks have been directly affected by the Microsoft 
lawsuit since the spring of 2000. It is imperative to draw closure 
to this litigation. I see that this is important to improve our 
economy and to encourage consumers. I urge you to agree with the 
settlement of the proposed Final Judgment antitrust case against 
Microsoft Corporation.
    Sincerely,
    Jack & Mary Woelfel
    4346 $E Maryland
    Topeka, KS 66609



MTC-00029978

EQUITRRC
THE TRACKING COMPANY
January 21, 2002
Attorney General John Ashcroft
U.S, Department of Justice
950 Pennsylvania Avenue
Washington, DC 20530-0001
    Dear Mr. Ashcroft,
    Your decision to settle the Justice Department's lawsuit against 
Microsoft offers every party involved in the matter the best of both 
worlds; Microsoft will cease its alleged unfair business practices 
to the immense benefit of its competitors while at the same be 
allowed to stay in tact as a company.
    Microsoft certainly was penalized with more than a rap on the 
corporate knuckles. The settlement was arrived at after extensive 
negotiations with a court-appointed mediator. Important to note is 
Microsoft's agreeing to terms that extend well beyond the products 
and procedures that were actually part of the suit; it demonstrates 
how much Microsoft is committed to settle this lawsuit. Even though 
they may not realize k right now, Microsoft's biggest adversaries 
will benefit from the terms of the settlement. First of all, 
Microsoft has agreed to share its patented code for its Windows 
operating system with competitors. Second, Microsoft has agreed not 
to retaliate against computer makers who ship software that competes 
with anything in its Windows operating system. These two measures 
will significantly increase competition.
    I hope the settlement process is quickly concluded and that the 
settlement is implemented as soon as possible.
    Sincerely,
    Gid Yousefi
    836 Ponce de Leon Boulevard, Coral Gables, Florida 33134, (305)
    442-2060, Fax (305) 442-0687



MTC-00029979

1449 Chelmsford Street NW
North Canton, OH 44720
January 27, 2002
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC
20530-0001
    Dear Mr. Ashcroft:

[[Page 28789]]

    Three years ago, Microsoft was brought to trial in the federal 
courts. Up until six months ago, absolutely no progress was made it 
was just a waste of time and money. Now, a settlement has been 
proposed and is currently awaiting approval. Microsoft's opponents 
believe that the settlement lets Microsoft off too lightly and that 
Microsoft holds a dangerous monopoly over the consumer. They are 
wrong. Microsoft did not get off lightly in the settlement, they do 
not hold a dangerous monopoly, and the only thing that is harming 
the consumer is the litigation itself. The economy has been crippled 
over the past several years, arid this is due in large part to the 
antitrust case, the amount of money that has been spent in 
litigation, and the panic of stockholders pulling out of their 
Microsoft shares. I do not believe it is in the best interest of the 
consumer to continue litigation against Microsoft. It can only do 
more damage to the economy and the technology industry.
    The settlement needs no further deliberation or modification. 
Microsoft has been more than generous to its competitors, agreeing 
to terms that cover aspects of Microsoft technology and procedures 
that were not found to be in violation of antitrust laws. The 
settlement requires Microsoft to refrain from retaliation should 
software be introduced into the market that directly competes with 
Microsoft technology. Microsoft has also agreed to license the 
Windows operating system to twenty of the largest computer makers on 
identical terms and conditions, including price.
    I can find no reason for litigation to be continued against 
Microsoft. As I see it, only more harm can come to the public if 
this drags on for much longer. I ask you to support the settlement 
as it now stands.
    Sincerely,
    Richard Miller



MTC-00029980

Senator W.Tom Sawyer, Jr.
3 State House Statum
Augasta, ME 04333-0003
(207) 287-1505
S?? Valley Ave.
Ranger, ME 04401
TEL (207) 942-1771
FAX (107) 943-3073
January 17, 2002
Renata Hesse, Trial Attorney
Antitrust Division--department of Justice
801 D Street NWW, Suite 1200
Washington, DC 20530
Fax 202-616-9937
    Dear Ms. Hesse,
    I am writing in regards to the proposed settlement negationed 
with Microsoft. As the former owner and CEO of a Maine Company that 
employed over 250 people and relied on negotiations with state and 
local governments for much of my business, I can appreciate first 
hard the complexity of dealing with issues that effect the public 
good. In fact that was a significant factor in why I chose to run 
for both local and state offices in my home town. I also have been 
involved in litigation and know the enormous drain it is on a 
business, and even its employees, many of whom are also 
stockholders, both financially and emotionally. That is why I feel 
it is in the best internet of the public and the government to 
accept the proposed settlement negotiated with Microsoft and move 
on. Having need a considerable amount surrounding the proposal, I 
feel it to be a beneficial arrangement for the general public in 
several ways.
    It provides for the introduction of technology resources into 
the education system that will be functional and integrated. It 
offers the potential for widespread benefit because it includes 
money for teacher training and support as well as sorely needed 
hardware and software. These have proven to be more critical to the 
successful integration of technology than the latest version of 
computers and associated programs.
    I also like the matching greats aspect of the proposed 
foundation. I have always felt in dealing with various nonprofit 
groups and charities with which I have been involved, that some 
contribution on the part of the recipient provided for appreciation 
of the items or services received. It just makes sense to me.
    Fax (201) 287-1527 * TTY (207) 287-1858 * Message 
Service 1-800-423-6900 * Web Site: http://
www.state.me.sul/legis/s??sts E-MAIL: 
S?? @ aol.com



MTC-00029981

Ms. Renata Hesse, Esq.
January 17, 2002
Page Two
    To return for a moment to the matter of litigation, I am of the 
opinion that a civil case of prominence benefits our society in that 
it causes both parties to become more sensitive and responsive to 
issues that resulted in the suit to begin with. However, there comes 
a time where the need to resolve the case becomes crucial as it 
starts to drain productive resources from both parties. Our 
government's case has reached such a stage. Timing is always of the 
essence for all parties.
    The legal actions to date have forced Microsoft, and many other 
large corporations, to rethink and modify their business practices 
if they have half a brain, which can only benefit the general 
public. Microsoft's willingness to reach a settlement of this 
magnitude demonstrates a responsive attitude and finally it brings 
to a productive conclusion a very expensive and burdensome lawsuit 
which has had adverse effects on the company's value and 
productivity during the period of the lawsuit and this too has an 
adverse effect on many citizens as well. As we have seen in the 
Enron debacle, stockholders are real people too.
    At a time when the economy and our nation are in recovery, I 
feel settlement of this case to be in the general public's best 
Interest and urge the Attorney General to convey this message to all 
parties involved.
    Thank you for consideration of my comments.
    Enthusiastically,



MTC-00029982

HEADQUARTERS
6033 W. Century Blvd.
Suite 950
Los Angeles, CA 90045
(310) 410-9981
Fax: (310) 410-9982
POLICY CENTER
126 C Street, NW
Washington, DC 20001
(202) 479-2873
Fax: (202) 479-2876
www.urbancure.org
January 24, 2002
Ms. Renata B. Hesse
Antitrust Division
U.S. Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530-0001
SUBJECT: Microsoft Settlement
    Dear Ms. Hesse:
    I am writing to urge acceptance of the proposed Final Judgment 
offered by the U.S. Department of Justice and endorsed by nine state 
attorneys general to resolve the antitrust case against Microsoft 
Corporation.
    I am president of the Coalition on Urban Renewal & Education 
(CURE), a 5-year-old independent nonprofit organization based in Los 
Angeles. CURE produces research and commentary on a wide range of 
public policy issues impacting America's inner cities and the poor. 
CURE promotes faith-based and free-market solutions on issues of 
race and poverty. CURE works with policy leaders, inner city 
pastors, entrepreneurs, college students and ex-welfare recipients 
to create an environment for self-government and free-enterprise.
    This lengthy litigation has cost my fellow taxpayers and me more 
than $35 million, and after reviewing the terms of this Judgment, 
final approval is clearly in the public interest. Perhaps of 
greatest benefit to the American people, the Department of Justice 
(DO]) and the settling states will avoid additional costs and now be 
able to focus their time and resources on matters of far greater 
national significance--the war against terrorism, including 
homeland security. As noted by District Court Judge Colleen Kollar-
Kotelly, who pushed for a settlement after the attacks of September 
11, it is vital for the country to move on from this lawsuit. The 
parties worked extremely hard to reach this agreement, which has the 
benefit of taking effect immediately rather than months or years 
from now when all appeals from continuing the litigation would 
finally be exhausted.
    The terms of the settlement offer a fair resolution for all 
sides of this case the DOJ, the states, Microsoft, competitors, 
consumers and taxpayers. Microsoft will not be broken up and will be 
able to continue to innovate and provide new software and products. 
Software developers and Internet service providers (ISPs), including 
competitors, will have unprecedented access to Microsoft's 
programming language and thus will be able to make Microsoft 
programs compatible with their own. Competitors also benefit from 
the provision that frees up computer manufacturers to disable or 
uninstall any Microsoft application or element of an operating 
system and install other programs. In addition, Microsoft cannot 
retaliate against computer manufactures, ISPs, or other software 
developers for using products developed by Microsoft competitors. 
Plus, in an unprecedented enforcement clause, a

[[Page 28790]]

Technical Committee will work out of Microsoft's headquarters for 
the next five years, at the company's expense, and monitor 
Microsoft's behavior and compliance with the settlement.
    Most importantly, this settlement is fair to the computer users 
and consumers of America, on whose behalf the lawsuit was allegedly 
filed. Consumers will be able to select a variety of pre-installed 
software on their computers. It will also be easier to substitute 
competitors" products after purchase as well. The Judgment 
even covers issues and software that were not part of the original 
lawsuit, such as Windows XP, which will have to be modified to 
comply with the settlement.
    This case was supposedly brought on behalf of American 
consumers. We have paid the price of litigation through our taxes. 
Our investment portfolios have taken a hard hit during this battle, 
and now more than ever, the country needs the economic stability, 
this settlement can provide. This settlement is in the public 
interest, and I urge the DOJ to submit the revised proposed Final 
Judgment to the U.S. District Court without change.
    Sincerely,
    Star Parker
    President



MTC-00029983

FACSIMILE TRANSMITTAL SHEET
TO: Ms. Renata Hesse
FROM: Rep. Jeff Plale
COMPANY: Department of Justice
DATE: 01/28/2002
FAX NUMBER: (202)616-9937
TOTAL NO. OF PAGES INCLUDING GOVER:2
PHONE NUMBER:
SENDER'S REFERENCE NUMBER
RE: U.S. v. Microsoft
YOUR REFERENCE NUMBER:
NOTES/COMMENTS:
    Please call with any questians.
    Thanks,
    Rep. Jeff Plale (608) 266-0610
    Jeff Plale
    State Representative
    21st Assembly District
    OFFICE
    State Capitol
    P.O. Box 8953
    Madlson, WI 53708-8953
    (608) 266-0610
    1-888-534-0021
    Fax:
    (608) 282-3621
    E-Mall:
    Rep.Plale @ legis.state.wl.us
    HOME
    1404 Eighteenth Avenue
    South?? 435
    (414) 764-5292
    Fax:
    5404 18?? Avenue
    (414) 571-0035
    Printed on recycled paper
    January 28, 2002
    Ms. Renata Hesse
    Trial Attorney
    Department of Justice--Antitrust Division
    601 D Street NW, Suite 11200
    Washington DC 20530
    Dear Ms. Hesse:
    I am writing to encourage your swift approval of the settlement 
of the U.S. v. Microsoft case. As you are aware, Microsoft has been 
a worldwide leader in groundbreaking technology. This has been a 
tremendous benefit to consumers. Prompt settlement of this case is 
in the best interest of the state of Wisconsin, and my constituents 
in the 21st Assembly District. Microsoft's leading technology is of 
great advantage to our school children and the future of America. By 
file Department of Justice settling this case, Microsoft could again 
assist less fortunate school districts with much needed help in 
technology. To date, over $30 million dollars in taxpayer dollars 
has been needlessly spent on this case. It is time for the 
Department of Justice to move forward and approve the settlement of 
the U.S. v. Microsoft case.
    Sincerely,
    Jeff Plale
    State Representative
    21st Assembly District



MTC-00029984

JOSEPH TARTAGLIA
88 FARRELL DRIVE
WATERBURY, CT 06706
Renata Hesse, Esq.
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
Via Facsimile 202-616-9937
    Dear Ms Hesse:
    This letter is to articulate my support for the proposed 
settlement in the Microsoft case. The fact that over $30 million in 
taxpayer dollars has been spent in this case during these trying 
economic times is proof enough that this case has gone on far too 
long. Hopefully, the settlement will signal a return to innovation 
without the threat of government intervention. The Department of 
Justice has done a commendable job in putting together an agreement 
that is fair but won't put Microsoft out of business. It is a 
reasonable conclusion to this case and I support it wholeheartedly.
    Sincerely,
    Joseph Tartaglia



MTC-00029985

ASSOCIATED BROKERS
OF SUN VALLEY, LLC
Real Estate
January 28, 2002
Mike Sampson
P.O. Box 2004
Sun Valley, ID 83353
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing in support of Microsoft and believe this whole 
antitrust case has become political. I don't see how this benefits 
consumers and businesses--especially at the expense of the 
economy. The tech stocks are down. The technology sector is down. 
The employment numbers are down. Let Microsoft get back to work and 
the government get on with worthwhile business. The only people I 
see benefiting from this case are the lawyers.
    I am a small businessman who employs 25 people. I have greatly 
benefited since 1982 from the products Microsoft produces and feel 
they have been more than fair to me. If their competitors can't put 
out a better product with competitive pricing and service that's 
their problem. I don't see why I should suffer as a small 
businessman. After years of extensive negotiations and mediation, 
Microsoft has gone out of their way to settle this case. They went 
well beyond what would be required in any antitrust case. They 
agreed to design future versions of Windows, starting with an 
interim release of XP, to provide a mechanism to make it easier for 
computer companies, consumers and software developers to promote 
their software within Windows.
    Let's end this litigation so that we can focus on what's really 
important. Thanks,
    Sincerely,
    Mike Sampson
    cc: Senator Larry Craig
    P.O. Box 186, Sun Valley, Idaho 83353
    Sun Valley Road & Main Street,
    Ketchum, Idaho
    208-226-5300 . Fax 208-726-4311



MTC-00029986

2724 Gladstone Avenue
Ann Arbor, MI 48104-6431
January 15, 2002
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, N-W
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    As a citizen of a state party to the pending Microsoft 
settlement, I would like to offer my support to the Justice 
Department approving the current deal and ending further legal 
action in this case. The seemingly envious reaction of the 
government to Microsoft's growing power and dominance in the 
technology industry, led to a lawsuit, then a misguided judgment, 
that far over-reached the right of government to manipulate the 
marketplace. This agreement seems like a reasonable compromise and 
should be approved, or risk alienating the public and hurting the 
economy. Based on the terms of the settlement, it would seem that 
Microsoft has made great strides to offer competitors more 
opportunities to succeed. They have agreed to not retaliate against 
computer makers who ship competitive software, offering broader 
fights to promote non-Microsoft programs within Windows and 
providing the top 20 manufacturers a uniform price structure to back 
up that promise. Starting with Microsoft XP, they will begin to 
provide a mechanism to make it easy to add access to competitive 
software, such as those from AOL or Real Networks, or even remove 
features within Windows. These steps seem like a major opportunity 
for competitors to show they can thrive in the Windows environment.
    I ask for your approval of this very fair settlement, as both 
sides have proven able to compromise through negotiation with a 
court-appointed mediator and that work should be upheld. I 
appreciate your time and look forward to an intelligent decision.

[[Page 28791]]

    Sincerely,
    Vernon Kempfert



MTC-00029987

THE REGION'S CHAMBER
PRINCE WILLIAM REGIONAL CHAMBER OF COMMERCE
4320 Ridgewood Center Drive,
Prince William, Virginia 22192 ??
Tel. 703-590-5000 ??
703-590-9815
email: pwrcc @ RegionalChamber.org ?? Internet: 
www.RegionalChamber.org
FAX COVER SHEET
To
DATE
BUSINESS FAX #
FROM
PAGES (??)
MESSAGE
PRINCE WILLIAM REGIONAL CHAMBER OF COMMERCE
VISION
To be the leading organization for businesses in the Prince William 
Region.
MISSION
    To promote and improve the business climate through initiatives 
that stimulate economic growth, effect legislative change and 
enhance the region's quality of life.
CHAMBER PARTNERS 2002
GOLD
POTOMAC NEWS ** POTOMAC HOSPITAL
WASHINGTON GAS
SILVER
DOMINION VIRGINIA POWER
BRONZE
MDA TECHNOLOGIES ** NOVEC
COMPTON & DULING, LC
THE WATERS GROUP, INC.
FORT BELVOIR FEDERAL CREDIT UNION
Jan 3rd, 8:00 am Legislative Kick-off Breakfast, Manassas
Jan 10th, 5:30 pm BAH at the Hampton Inn Woodbridge
Jan 16th, 11:30 am Membership Meeting Luncheon at Montclair Country 
Club
 Topic: State of the County
Sponsor: Washington Gas
Jan 18th, 12 pm Lunch Bunch at Burger King, River Oaks
Jan 22nd, 9:00 am New Member Orientation at River Run Senior 
Apartments
Jan 24th, 8:00 am Business Before Hours at the Chinn Center
Jan 26th, 6:30 pm Chairman's Dinner & the Silver Salute at 
Montclair Country Club
    Happy New Year !
JOIN THE REGION'S CHAMBER NOW--DON'T MISS ANOTHER OPPORTUNITY!
Call (703) 590-5000 for Reservations/Directions/Information
January 28, 2002
Ms. Renata B. Hesse
Antitrust Division
U.S. Department of Justice
601 D Street, Suite 1200
Washington, DC 20630
RE: Comments on the Microsoft Proposed Settlement Agreement
    Dear Ms. Hesse:
    The Prince William Regional Chamber of Commerce is writing this 
letter to express its support for the settlement reached by the U.S. 
Department of Justice, nine state attorneys general and Microsoft in 
the long-running antitrust lawsuit initiated by the federal 
government. The Region's Chamber is critically aware of how 
important it is to our national economy that all businesses be able 
to "get back to business." There were many knowledgeable 
people guided by an internationally recognized mediator to reach the 
Microsoft settlement. We believe that additional litigation, 
following on the heels of many years of costly legal proceedings and 
on the subsequent work of those in mediation would serve only to 
prolong the negative impact on our economy of the Microsoft 
litigation.
    Therefore, the Prince William Regional Chamber of Commerce, an 
organization of more than 800 businesses in the Prince William area, 
respectfully encourages the U.S. Department of Justice to urge the 
Courts to adopt the agreement with all due speed so that business 
and our national--and even international--economy can move 
forward again with certainty.
    Sincerely,
    Carol A. Kalbfleisch Laurie C. Wieder
    Chairman of the Board President



MTC-00029988

MARLANE R. TAYLOR
4600 Laurel Ave.,
Grants Pass, OR 97527
541.471.4126
uscchirp @ terragon.com
January 25, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Ave., NW
Washington, DC 205301-0001
Re: Comments on Microsoft Antitrust Settlement
    Dear Mr. Ashcroft:
    It has been well over three years that I have watched the 
litigation debacle among the Department of Justice, states and other 
lawsuits against Microsoft. I have been dismayed that Judge Thomas 
Penfield Jackson's decision was allowed to stand in the first place, 
when it was obvious that he was biased before the trial ended and 
his ruling ought to have been tossed out in its entirety. That the 
litigation continues to date without settlement is egregious.
    I am indignant that millions of our tax dollars have been wasted 
in pursuit of Microsoft, a tax-paying corporation that employs over 
40,000 workers worldwide. In the past twenty-five years, it has been 
known for its software advances and innovation. It has established 
industry standards where there were none, advanced computer science, 
and single handedly has been the catalyst of the technological boom. 
They are only guilty of "being very successful" in what 
they do.
    The DOJ's lawsuit has and continues to financially injure 
retirees, mutual funds, PERS state retirement funds, individual 
investors, and anyone who has invested in Microsoft. "How in 
good conscious can the department justify this?" So far, the 
DOJ has done more to disrupt business, injure the public, damage the 
economy and technology sector, and financial markets combined than 
what you claim Microsoft has done to the consumer.
    Finally, it appeared there would be a settlement with Microsoft 
offering to undergo close scrutiny and willing to spend a billion 
dollars on computer science, hardware and software, teacher training 
and on-going assistance in the most needy schools. It is an 
innovative idea and adequate settlement offer, all of which is 
geared to help our youth become computer literate, as the business 
world will demand and expect of them for entry-level positions.
    However, Judge Motz denied the offer, since he believes it gives 
Microsoft an unfair advantage and allows them to expand their market 
share into the school system. The judge fails to recognize that he 
alone is denying impoverished school districts, and the children 
therein, access to a computer education they will need in order to 
compete for jobs in the real world. He would rather have children 
computer-illiterate, because Microsoft might just benefit in some 
way. What's wrong with this picture?
    His ruling is notably without justification, denying Microsoft's 
good faith offer to settle. Even in a perfect world, the judge's 
decision would still be wrong, very wrong. This litigation is a 
perfect example of an imperfect legal system. The ease has gone on 
far beyond anyone's imagination, and has become a virtual nightmare. 
The DOJ has seemingly painted itself into a corner, looking very 
inept. From my viewpoint, it seems the entire justice system needs a 
complete overhaul, because of its anti-business bias, and 
predilection against what constitutes normal and free competition in 
the business world. Judges need to be knowledgeable in the law, of 
course, but they also need to understand business, economics, 
capitalism, and who succeeds in business and why. Innovation is not 
a dirty word. Until now, our country has led the world in creativity 
and innovation thanks to Microsoft. Take a good look at all the 
companies that have stood on the shoulders of Microsoft and have 
ably competed in the marketplace for the last twenty-five years. The 
list is huge.
    That Microsoft is willing to follow the provisions set forth, it 
should satisfy every one. It is past time to end this debacle. The 
states that are holding out simply want to pan for gold in 
Microsoft's deep pockets. There isn't one rational reason not to 
grant Microsoft's substantial offer of settlement, because, it IS in 
the public's interest.
    The litigation has already cost millions of tax dollars for 
nothing. Moreover, the DOJ is directly responsible for the untold 
millions that it has cost Microsoft for its legal defense and 
representation--not to mention the financial fallout affecting 
millions of investors.
    Enough of this: Settle the case.
    Sincerely,
    Marlane R. Taylor



MTC-00029989

1001 NW 63rd Street Suite 280
Oklahoma City, OK 73116
January 25, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing to support the implementation of the recent 
settlement between the U.S.

[[Page 28792]]

Department of Justice and Microsoft. There is no sense in continuing 
litigation against a company that is the only bright in our sorry 
economy. I do not think the lawsuit should have begun in the first 
place. Microsoft has made a good offer and the nine states opposing 
the settlement should accept it. Microsoft is giving away 
technological secrets, granting broad new rights to computer makers 
to configure Windows so as to make it easier for non-Microsoft 
products to be promoted, and a three-person team will monitor 
compliance with settlement.
    I urge your office to finalize the settlement and to make sure 
that further unnecessary lawsuits against Microsoft do not occur. 
Thank you. My losses in the stock market during the past year have 
been in excess or $2,000.000 and Microsoft is the only bright spot I 
have left in my technology portfolio. I urge you to get this lawsuit 
settled and allow Microsoft to work on behalf of the stockholders 
and America.
    Sincerely,
    George Platt
    CC: Senator Don Nickles



MTC-00029990

From the Desk of Rick Bagley
Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
    Dear Ms. Hesse,
    I wanted to write to Judge Kollar-Kotelly to encourage her to 
approve of the settlement that has been reached between Microsoft, 
nine of the attorneys general and the Department of Justice in 
Washington. If you have a consensus like this with so many 
interested parties, it is hard to see what is standing in the way of 
approval of this settlement.
    As a member of the school board in Forsyth County and a former 
employee of one of the largest law firms in the Southeastern United 
States, I am more than aware of what happens when the government 
gets involved in lawsuits. The effects of a lawsuit on any company, 
school or just an individual is chilling enough. But in this case, 
the effect of forward movement in the Microsoft lawsuit was 
devastating to millions of investors throughout America who were 
heavily invested into Microsoft stock. During this period and while 
many high-tech firms were losing ground, Microsoft continued to be 
strong and show good earnings. Yet, by facing a court trial and 
possible break up, Microsoft stock suffered a great deal as did 
investors as, at that time, Microsoft was the No. 1 held stock in 
pension and mutual funds. The reason that I would like to see a 
quick settlement in this case is to get the matter out of the courts 
so that Microsoft and the other parties can get back to business.
    Thanks for your consideration of my views
    Sincerely,
    Rick Bagley
    1195 Whispering Pines Dr.,
    Kernersville, NC 27284



MTC-00029992

11234 NE 87th St.
Kirkland, WA 98033
January 28, 2002
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    I am writing today to encourage the Department of Justice to 
accept the Microsoft antitrust settlement. The entire case was 
uncalled for from the beginning. Now that there is a settlement that 
is fair I would like to see the government accept it and move on.
    Many people think that Microsoft is getting off easy, this is 
simply not true. Microsoft has given up much to reach the 
settlement. Microsoft has agreed to allow computer makers the 
flexibility to install and promote any software that they see fit. 
Microsoft has also agreed to not enter into any agreement with any 
computer maker that would require them to use Microsoft software in 
any set percentage. Microsoft has also agreed to license Microsoft 
software at a set price no matter what kind of software the computer 
maker installs or promotes.
    Microsoft has agreed to much in order to put the issue behind 
them. The government needs to accept the settlement and allow 
Microsoft to move forward. The only way to move forward is to put 
the issue in the past. Please accept the Microsoft antitrust 
settlement.
    Sincerely,
    Kenneth Jerome



MTC-00029993

CENTRAL CALIFORNIA
HISPANIC
CHAMBER of COMMERCE
Serving the Central Valley Business Community from Stockton to 
Bakersfield Since 1984
Fax
To: RENATA HESSE
From: ANTONIO GASTELUM
ANTITRUST DIVISION
EXECUTIVE DIRECTOR
DEPARTMENT OF JUSTICE
CENTRAL CALIFORNIA HISPANIC
CHAMBER OF COMMERCE
Fax: 202-616-9937
Pages: 2
Phone:
Date:   JANUARY 28, 2002
Re: DOJ v. Microsoft Settlement
CC: BECKY DARLING
ï¿½ COVER PAGE PLUS 1
ADDITIONAL PAGES FOLLOWING
Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
801 D Street NW, Suite 1200
Washington DC 20530
January 26, 2002
    Dear Me. Hesse,
    Pursuant to the Tunney Act in anti-trust cases, we are writing 
to strongly urge you to support the settlement reached by the 
Department of Justice and Microsoft. It is time to put this issue to 
rest, Nearly four years and 35 million dollars is enough!
    Microsoft is a true American business success story and doesn't 
deserve to be penalized for it. Fair business guidelines are 
sometimes necessary, and have been already incorporated into the 
settlement agreement. Let Microsoft get back to the business of 
creating new and useful computer software. Every part of the economy 
feels the affects of this issue. As we are in the middle of a hard-
hitting recession, it is time to do what is necessary to get the 
nation back on its financial feet.
    Again we strongly urge you to support the settlement reached by 
the Department of Justice and Microsoft.
    Sincerely,
    Antonio Gastelum
    Executive Director
    Central California Hispanic Chamber of Commerce



MTC-00029994

FAX COVER PAGE
FROM THE OFFICE OF
ASSEMBLYMAN JOSEPH D. MORELLE
132ND ASSEMBLY DISTRICT
716 Legislative Office Building
ALBANY, NEW YORK 12248
(518) 455-5373 FAX (518) 455-5647
TO:
FAX #:
FROM:
DATE:
RE:
PAGES: INCLUDING COVER PAGE
REPRESENTING BRIGHTON AND IRONDEQUOIT AND THE EAST SIDE OF 
ROCHESTER.
JOSEPH D. MORELLE
Assemblyman 132nd District
Monroe County
THE ASSEMBLY
STATE OF NEW YORK
ALBANY
CHAIRMAN
Committee on Tourism,
Arts and Sports Development
CHAIRMAN
Subcommittee on Manufacturing
COMMITTEES
Economic Development, Job Creation,
Commerce & Industry
Higher Education
Local Governments
Libraries & Education
Technology
January 28, 2002
Renata B. Hesse
Antitrust Division
U.S. Department of Justice
601 D Street NW
Suite 1200
Washington, DC 20530-0001
Re: Comments on the Microsoft Proposed Settlement Agreement
    Dear Ms. Hesse:
    The United State government negotiated a meaningful settlement 
with Microsoft that is in our nation's best interest. The settlement 
places sanctions on Microsoft without destroying the company. These 
sanctions will foster greater competition in the software industry 
and give consumers greater choice when they purchase and enhance 
their computers. This settlement will also help define the direction 
of government's role in the high-tech industry. This is a just, not 
punitive, resolution that will help the economy and promote new 
investment in

[[Page 28793]]

technology. I am encouraged by the actions of the Department of 
Justice and support you in your efforts to settle this case.
    Sincerely,
    Joseph D. Morelle
    MEMBER OF ASSEMBLY



MTC-00029995

Tom A. Schatz, President
Citizens Against Government Waste
13Ol Connecticut Avenue, NW, Suite 400
Washington, DC 20036
I am in gavor oh this mio TM. Herrick
Ms. T. M. Herrick
1500 Terrace Ave, Apt. 112
Liberal, KS 67901-5702
    Dear Ms. Herrick,
    Your response to this letter today will not only put a stop to 
$35 million in government waste, it may also be the single best way 
you can help stimulate America's economy and protect this nation's 
and your own financial future. I need to ask you today to send an 
urgent message to the U.S. Department of Justice (DOJ) that you 
support the proposed settlement of the Microsoft lawsuit,
    Under a federal antitrust law called the Tunney Act, there is a 
60-day period for public comment before the U.S. District Court 
decides whether to accept the settlement. This period will expire on 
January 28th.
    By sending your message to DOJ, you can help put an end to the 
government's long-running legal assault on Microsoft, which has cost 
taxpayers more than $35 million and undermined one of the primary 
engines of America's economic growth. Let me tell you what's going 
on and why it's urgent that you send DOJ a message right away that 
you support the Microsoft settlement.
    On Noyember 6, 2001, Microsoft reached, a proposed settlement 
with DOJ and nine states in the antitrust lawsuit against the 
company. The terms of the settlement, briefly, are as follows: 
Computer manufacturers would be free to include non-Microsoft 
software in their products. Microsoft would alter its products, 
including the new Windows XP, to make it easier for consumers to 
substitute non-Microsoft programs in the Windows operating system. 
Microsoft would be required to share its programming code with 
competitors so their software for video streaming, digital 
photography and other features would be compatible with Windows. In 
addition, a three-member Technical Committee would be established, 
at Microsoft's expense, to monitor the company's behavior and 
enforce the settlement for the next five years. Should the company 
be found in violation of the terms of the settlement, it can be 
extended for another two years.
    The proposed settlement is a win-win for all concerned. It's 
fair to:
    ï¿½ Microsoft, which will continue to be able to 
provide new software that integrates new products;
    ï¿½ competitors, who will have more access to the 
Windows platform to incorporate their products or make them 
compatible;
    ï¿½ software manufacturers, who will get back to the 
business of creating innovative products;
    ï¿½ Consumers, who will have more choices among 
software products; and,
    ï¿½ investors, who will have stability in the 
marketplace.
    Opponents of the settlement--primarily Microsoft's well-
heeled competitors who lobbied DOJ and the states to bring this 
lawsuit on the backs of taxpayers in the first place--have 
launched a massive campaign to prevent the court from accepting the 
agreement. They want nothing less than the dismantling of Microsoft, 
and they want taxpayers to continue to pay to secure a competitive 
advantage they couldn't win in the marketplace. That's why I 
urgently need you to send a strong message to DO! today that you 
support the Microsoft settlement.
    By visiting CAGW's website at www.cagw.org, you can e-mail a 
letter to DOJ, telling the government that you support the 
settlement. DOJ has specifically stated that they would prefer to 
receive comments electronically, so that's why I'm talcing the 
extraordinary step of asking you to visit our website today and send 
an e-mail to DOJ. All you need to do is go to CAGW's homepage at 
www.cagw.org, click onto the "Approve the Microsoft 
Settlement" link on the top fight-hand side of the page, and 
follow the instructions to e-mail your letter. It will just take a 
few minutes of your time.
    If, however, you prefer to fax your comments in support of the 
settlement to DOJ, you may fax them to the attention of Ms, Renata 
B. Hesse at (202) 307-1454 or (202) 616-9937. The most 
important point is that you tell DOJ you support the Microsoft 
settlement and that you do it right away before the comment filing 
period ends on January 28th. To date, the Microsoft lawsuit has cost 
taxpayers more than $35 million. As the District Court Judge 
presiding over the case has said, "In light of the recent 
tragic events affecting our nafion...the benefit which will 
be" derived from a quick resolution of these cases [is] 
increasingly significant." Please tell DOJ to approve the 
settlement today. Thank you.
    Sincerely,
    Thomas A. Schatz
    President, CAGW
    P.S. Help put an end to $35 million in government waste. Tell 
DOJ that as a taxpayer and consumer you support the Microsoft 
settlement, and please get your message off to them today.
    Time is nmning out.



MTC-00029996

Jesse L Clay
1205 Ridgecrest Drive SE
Albuquerque, NM 87108
January 26, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I would like to take some time to express to you my feelings 
about the proposed settlement that was reached between Microsoft and 
the Department of Justice. It is about time that the antitrust suit 
ended, and I feel that the terms in the settlement, although harsh 
on Microsoft, will be for the betterment of the computer industry 
and the economy.
    I am pleased with the prospect of the case being resolved, but I 
think it was initiated for all of the wrong reasons. Microsoft's 
competitors had a major role in initiating the litigation, because 
they could not bring to the market a product that matched 
Microsoft's own. The competition should be happy though. The terms 
of the settlement require Microsoft to turn over to their 
competitors source code and design data that are crucial to the 
internal makeup of Windows. Enough is enough. This settlement needs 
m he approved so the industry can get back on its feet, and with 
competitors working more closely with one another, the industry will 
benefit. I feel the proposed settlement will benefit all parties 
involved, including Microsoft's competitors.
    Sincerely,
    Jesse Clay



MTC-00029997

Carol Morse Sibley
92 Overlook Terrace
Bloomfield, NJ 07003-29t7
January 24, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    The antitrust lawsuits against Microsoft have gone on for too 
long. They are also not very well justified. Microsoft has not only 
created jobs and wealth for our country, but also has made 
technological breakthroughs that have revolutionized the IT sector. 
I do wish that when they come out with new versions of software they 
would always make it compatible with previous versions, which they 
didn't do, for instance, with PowerPoint.
    Still, it's clear that the settlement seems to only help 
competitors gain an edge they were not able to gain beforehand. It 
forced Microsoft to disclose interfaces that are internal to Windows 
operating system products, and also grant computer makers broad new 
rights to configure Windows so that non-Microsoft software can be 
promoted more easily.
    It is in the best interests of the American public to finalize 
the settlement. Our nation cannot afford further litigation so I 
urge your office to use its influence to try to rein in the nine 
states that want to drag this case out for even longer. Thank you 
for your time.
    Sincerely,
    Carol Morse Sibley



MTC-00029998

1-23-02
Mi. Renata B. ??
?? (202) 307-1454 02 (202) 616-9937 (FAX)
Ms. ??
    This Letter is intended to Conform that I am in favor of the ?? 
settlement between Microsoft and The U.S. Dept. of Justice.
    This is the ?? settlement of november 6,2001.
    Sincerely ??



MTC-00029999

4911 Bainbridge Court Southwest
Lilburn. GA 30047
January 24,2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530

[[Page 28794]]

    Dear Mr. Ashcroft:
    The lawsuit that has reached a tentative agreement between 
Microsoft and the US Department of Justice was flawed from the 
start. The initial aim of settlement was to break up a perceived 
monopoly and stop Microsoft from infringing in consumer rights. 
First off, Microsoft does not fall under the terms of he definition 
for monopoly because it does not sell poor quality goods at inflated 
rates. Microsoft in fact has consistently delivered user-friendly 
products that far outdo their competitors. They have also not 
infringed on our rights, because all consumers made a conscious 
decision to purchase Microsoft. The terms of the settlement violate 
Microsoft's intellectual property rights as they force them to 
disclose for use by competitors interfaces that are internal to 
Windows" operating system products. I urge your office to take 
a firm stance against the nine states that want to continue 
litigation. Put an end to this dispute so that the cornerstone of 
the IT sector can continue to innovate as it has in the past. It is 
in the public's best interests to settle.
    Sincerely,
    Ralph Knight



MTC-00030000

FRANK W. BROWN
REALTON
POST OFFICE B0X 215.
ORANGE PARK, FLORIDA 32067-0215
--TELEPHONE
904-264-0504
January 28, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear General Ashcroft:
    If the public spends time listening to Microsoft's opponents, we 
all would be under the impression that this industry icon was the 
bad guy in this entire case. These same opponents would like us to 
think that Microsoft got off easy in this settlement. The truth, 
however, is the very opposite. Since the company's inception, 
Microsoft has set the standard for innovation and quality. Their 
products are accessible, easy to use, arid affordable. They have 
been seen as the "bad guy" because they are being blamed 
for their competitor's inability to innovate and keep up with 
Microsoft's rapid changes. How fair is that?
    As far as Microsoft getting off easy in the case, this is simply 
not true, Microsoft has basically opened their operation doors to 
their competitors by allowing them access to Windows interfaces, 
protocols, and intellectual property. They have even agreed to 
create future versions of Windows within which non-Microsoft 
products may function. In addition to all these damaging 
concessions, Microsoft has also agreed to terms that were not even 
found unlawful. I hope that you will make every possible attempt to 
bring this matter to an early close.
    Sincerely,
    Frank W. Brown, Jr.



MTC-00030001

320 Tanglewood Trail
Wadsworth, OH 44281-2355
(330) 334-1097
January 14, 2002
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Attorney General Ashcroft:
    I would like to express my support for settling the antitrust 
suit against Microsoft. I do not feel that the case should ever have 
been taken as far as it was. It is time to move on to more pressing 
concerns.
    While I recognize Microsoft's market dominance, I also feel that 
they are operating legally, and as such no further action should be 
taken. With the economic downturn of the past year, ending the case 
and letting Microsoft generate further technologies is important. 
Competitors of Microsoft will gain a lot from the settlement, 
including disclosure by Microsoft of the internal interfaces of the 
Windows operating system Microsoft development with its own 
personnel and capital.
    The longer the government keeps Microsoft's hands tied, the more 
the economy will suffer. Please finalize the settlement agreement as 
soon as possible. Thank you.
    Sincerely,
    Jenny Wallace



MTC-00030002

Janurn7 28, 2002
Attorney General John Ashcroft
U.S. Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    The Microsoft antitrust settlement agreement should be 
finalized. I am opposed to this lawsuit.
    We operate h a free enterprise system where competition is 
the driving force behind a prosperous economy. Lawsuits of this 
nature punish a company for being competitive. Despite my opposition 
to the lawsuit, I believe the terms of the settlement are 
reasonable. Microsoft has agreed to begin designing Windows with 
mechanisms to make it easier for consumers to add or remove features 
of Windows, and instead replace them with non-Microsoft software. 
They also agreed to not to enter into contracts that would obligate 
third parties to exclusively promote or distribute Windows products. 
With these types of concessions, consumers will have greater 
choices, and any so-called anticompetitive behavior wilt be 
curtailed.
    I am hopeful the Department of Justice will continue in its 
efforts to settle this case. Thank you.
    Sincerely,



MTC-00030003

CarrierChoice
January 28, 2002
Attorney General John Ashcroft
US Department of Jusnce,
950 Pennsylvania, Avenue, NW
Washington. DC 20530
    Dear Mr. Ashcroft:
    I am writing you this brief note to encourage you to help end 
the Microsoft antitrust case. This nearly four-year-old case has 
dramed Microsoft and the government of millions of dollars. It has 
been the subject of controversy and litigation to no one's 
discernable benefit. It has had a debilitating affect on Microsoft, 
the entire ?? industry and the national economy at a nine when we 
can least afford it. It is tune to resolve this matter.
    At present, the major parties and the majority of compl??ant 
states have reached a tentative settlement agreement. The agreement 
allows Microsoft to retain its present corporate structure in return 
for committing itself to a radical change in its marker philosophy 
and practices. Microsoft will now actively encourage 
"competition" by reconfiguring its Windows platforms to 
readily accept and even promote non Microsoft software. The company 
will now no longer requite exclusive Windows software be in 
agreements of computer manufacturers to whom they license their 
basic platforms. These and other concessions prove the sincerity of 
Microsoft's commitment to ameliorating its in intimidating marker 
dominance.
    Microsoft is a great, inventive and productive player in our 
economy and its own industry. We need Microsoft up and running full 
time. Please support this settlement
    Sincerely,
    Chick ??earberstone
    Director of Carner Relations
    CarrierChoice
    cc Senator Rick Santorum



MTC-00030004

THE CENTER FOR THE
MORAL DEFENSE
OF CAPITALISM
VIA FAX
January 28,2002
From: Nicholas Provenzo
Chairman
Center for the Moral Defense of Capitalism
To: Antitrust Division
U.S. Department of Justice
601 D Street NW
Suite 1200
Washington, DC 20530-0001
    Re: Microsoft Settlement
    Pursuant to the Antitrust Procedures and Penalties Act, 15 
U.S.C.  16, the Center for the Moral Defense of 
Capitalism respectfully submits its evaluation of the proposed Final 
Judgment resolving U.S. v. Microsoft Corporation (Civil Action No. 
98-1232) and State of New York ex. ref Attorney General Eliot 
Spitzer, et al., v. Microsoft Corporation (Civil Action No. 
98-1233). The mission of the Center for the Moral Defense of 
Capitalism is to promote the social welfare of the nation by 
presenting to the public a moral foundation for individualism and 
economic freedom based on a philosophical analysis of humanity and 
human nature. Specifically, we seek to apply Ayn Rand's philosophy 
of Objectivism to the understanding of human action and human 
relationships.
    As the cornerstone of a free, capitalist system, we argue that 
human life requires thought and effort and that the free market 
springs from the trade of one's thoughts and efforts with others. We 
make the argument that human minds and bodies must be left free of 
coercion, that all human interaction must be voluntary and that the 
initiation of

[[Page 28795]]

physical force must be banished from human relationships. We see a 
proper government as the agent of its citizens, charged with one 
mission: the use of retaliatory physical force in defense against 
the initiation of physical force. Our organization has followed the 
Microsoft antitrust case from its initial filing--we have 
opposed the case from the outset, seeing it as an abridgement of the 
freedom of production and trade and an interference with the right 
to acquire and possess property. We disagree with the essential 
factual component of this case-that Microsoft's integration of its 
Internet Explorer Web browser with its Windows operating system was 
a coercive act against Microsoft's competitors and customers. 
Instead, we see a company that accordin9 it its evaluation of the 
marketplace saw the commercial value of product integration and 
acted accordingly. In exercise of Microsoft's right to control its 
property, the firm set terms for the sate of that property that it 
believed was in its own self-interest. Microsoft's subsequent 
commercial success after this integration affirms the wisdom of 
Microsoft's actions--Microsoft's customers themselves chose to 
reward the firm with increased sales and increased market share. 
Rather than serve an impediment to the free market, Microsoft's 
actions personified them.
    Yet, obviously, Microsoft's success has made it into the target 
of the government's wrath via the current antitrust case. Our 
organization closely followed the District Court case, writing 
several published evaluations of the case and its subsequent rulings 
(see Appendix t & 2). Our organization also participated in the 
US Court of Appeals for the District of Columbia Circuit appeals 
proceedings as an amicus curie. Our amicus brief relied on two major 
arguments in opposing the government's case: 1.) that the antitrust 
laws are unconstitutional laws that fail to provide with clear and 
concise guidance necessary to avoid sanctions under the law; and 2.) 
that the antitrust laws are unconstitutional laws because they 
require the government to initiate force against innocent citizens.
    Today, our view of the Microsoft antitrust case and its proposed 
settlement is as follows: While we respect the desire of the parties 
to seek a resolution to this case, particularly that of Microsoft, 
which has had to endure a 3\1/2\ year crusade against its property 
rights and its right to conduct its business in a profitable manner, 
we are wary of any settlement that legitimizes any aspect of this 
unjust assault against a successful, innovative business
    We consider the case against Microsoft to have been defective at 
every level, from the fundamental claim that the entrepreneurial 
actions of a successful business are a threat against others, to the 
claim that a monopoly can exist where there is no legal barrier to 
entering a market, to the claim that the citizens of the United 
States are too ignorant or incompetent to exercise their individual 
power of choice when in the marketplace and therefore require the 
government to make their personal choices for them. We consider it a 
failure that the court saw no distinction between the earned success 
of a business in the free market and the coercive power of a 
government favorite and we consider it a failure that the court did 
not ultimately throw out the case against Microsoft.
    Considering that this case was initial brought not at the 
insistence of individual consumers or with Microsoft's business 
partners, but at the insistence of Microsoft's unsuccessful 
competitors, this entire case reeks of business failures asking the 
government to step in and give them the commercial success they 
could not achieve in the marketplace. Failed businesses must not be 
allowed to set the rules for the markets in which they failed.
    In evaluating the proposed settlement, we find that it 
specifically threatens the right to private property. A key 
component of the proposed remedy is a requirement that Microsoft 
make its source codes available to a government-sanctioned oversight 
committee, which in turn is supposed to ensure these same source 
codes are made available to non-Microsoft "middleware" 
producers, so that these companies can create products to compete 
with Microsoft. Since under the proposed judgment, the United States 
would retain the right to determine and enforce the scope to which 
these source codes are to be made available, the final judgment 
constitutes a de facto seizure of private property--the source 
codes--and its subsequent conversion to a public good. Such a 
taking is wholly incompatible with the Constitution of the United 
States.
    Accordingly, we reject the notion that this settlement serves 
the public interest, or that any punishment of Microsoft for its 
business practices will be of benefit to any consumer. Eroding 
Microsoft's property rights serves no one. We hold that no antitrust 
case, including the Microsoft case can withstand rational scrutiny, 
and we ask that no sanction be placed on Microsoft as a result of 
its antitrust conviction.
    Appendix 1:
    Judge Jackson's Findings of Fiction
    By Dr. Edwin A. Locke, Ph.D.
    Senior Policy Analyst
    The Center for the Moral Defense of Capitalism Judge Thomas 
Penfield Jackson has released his "findings of fact" in 
the Microsoft antitrust case. While his report did contain some 
correct information--such as the truism that a successful 
company tries to defeat its rivals--the central claims of his 
report are blatant falsehoods Let us examine five of these fictions
    Fiction #1: Microsoft is a "monopoly. "There is 
no such thing as a private monopoly. Only the government can 
forcibly prevent competitors from entering a market. Microsoft has 
attained dominance in the software industry, but dominance is not 
monopoly. Market dominance has to be earned through a long struggle, 
by providing better products and better prices than anyone else 
Dominant companies who falter (as did Xerox, IBM, General Motors and 
Kodak) will find their market share eroded, sometimes very quickly. 
There is no threat from these dominant players so long as their 
competitors are legally permitted to enter the field, invent new 
products, and combine with each other to gain the needed market 
power.
    In a free market, a dominant position can only be sustained by 
continually providing new products and services that are better than 
other firms" products. Paradoxically, Judge Jackson recognizes 
this fact but condemns it. Microsoft's innovation, its continual 
product upgrades, its millions spent on research and development, 
are cited by Jackson, not as evidence that Microsoft has earned its 
position, but only as evidence of a conspiracy to 
"stifle" its competitors.
    Fiction #2: Microsoft's "monopoly power" allows 
it to "coerce" its customers. A private company has no 
power to force consumers to do anything. Did Judge Jackson find that 
Microsoft threatened to beat people up or throw their bodies into 
the East River if they bought the wrong Web browser? Of course not. 
The only "leverage" Microsoft has is the leverage it has 
earned by producing a product that people want to buy.
    This economic power, the power of voluntary trade, is 
fundamentally different from political power, the power of the gun. 
Yet Judge Jackson is eager to erase this distinction. Thus, such 
actions as upgrading a product to match the features offered by a 
competitor, distributing a product for free, or negotiating 
favorable terms with business partners--all of them normal and 
beneficial business practices--are presented by Judge Jackson 
as if they are a nefarious, mafia-like conspiracy to oppress the 
public.
    Fiction #3. Microsoft harmed consumers. This is certainly 
news to the millions of people worldwide who value Microsoft 
products enough to make the company and its founders rich. Most 
bizarre is Judge Jackson's claim that Microsoft harmed consumers by 
giving away its Web browser, making it unprofitable for other firms 
to sell their browsers Any sane consumer would be delighted to get a 
product for free rather than paying money for it. To speak of 
receiving free software as a "harm" is Orwellian 
doublespeak.
    Fiction #4: Microsoft is a threat to consumers because it 
"could" raise its prices. Under this criterion, anyone 
could be prosecuted for anything. Do you own a kitchen knife? Then 
you might stab somebody--so should the government put you in 
jail?
    Microsoft has the right to sell its product for any price it 
chooses--but anyone familiar with the history of business and 
with Economics 101 knows that market leaders have a selfish interest 
in keeping their prices low. Why? Because they make a lot more money 
by creating a mass market than by creating a product only the rich 
can buy. Henry Ford understood this. So did Bill Gates.
    Clearly, Judge Jackson does not. The only basis for his 
conclusion is the caricature of the successful corporation as a 
vicious "Robber Baron" which, even if it is not 
"exploiting" consumer now, is merely waiting for the 
opportunity to do so
    Fiction #5: Blocking Microsoft's ability to compete will 
foster greater industry innovation. A private company, with no power 
over consumers but the power conferred by offering a useful product, 
is branded by Judge Jackson as dangerous. But far-reaching 
government intervention in the software industry, including the 
massive use of force to shatter Microsoft and control its

[[Page 28796]]

business practices, is presented as an attempt to spur innovation. 
Only those who believe Al Gore invented the Internet could take this 
argument seriously.
    What Judge Jackson really objects to is the fact that Microsoft 
defeated its competitors, i.e., that it was successful. The real 
meaning of his "findings of fact" is that the best 
brains must be crippled, so that lesser brains will not have such a 
hard time succeeding. He and the government prosecutors whose 
arguments he is echoing do not want to foster innovation; they want 
to sacrifice the best and the brightest in the name of 
egalitarianism. They want the playing field leveled by coercion so 
that no one can rise to the top.
    What consumers need is an antidote to the fictions peddled by 
Judge Jackson: the recognition that businessmen have a right to 
succeed by trading their products in a free market Dr. Edwin A. 
Locke is Dean's Professor of Motivation and Leadership at the Robert 
H. Smith School of Business at the University of Maryland and is 
affiliated with UMD's Department of Psychology. An internationally 
renowned behavioral scientist, Locke's work is included in leading 
textbooks and acknowledged in books on the history of management.
    Appendix 2:
    Altruism in Action: An Analysis of Judge Jackson's Finding of 
Fact and the Antitrust Assault on Microsoft by Adam Mossoff
    Policy Analyst
    The Center for the Moral Defense of Capitalism United States 
District Court Judge Thomas P Jackson is crystal clear in his recent 
"findings of fact": Microsoft is marked for destruction. 
But why does Judge Jackson want to punish one of the most successful 
corporations in American history? Because Bill Gates proclaimed that 
he wanted "to prove that a successful company can renew itself 
and stay in the forefront"i and he proceeded to do 
just that.
---------------------------------------------------------------------------

    \i\ Bill Gates, The Road Ahead 64 (1995).
---------------------------------------------------------------------------

    By the early 90s, Microsoft had gained a dominant position in 
the software industry by creating Windows, the first commercially 
viable graphical operating system that could be used on PCs. But in 
the mid-90s, Gates realized that the Internet represented the next 
step in the ongoing computer revolution; thus, he created a business 
plan to "stay in the forefront" of this revolution. In 
so doing, he set into motion the same technological and commercial 
innovation that had led to Microsoft's leading market position in 
the first place.
    Microsoft began by investing a staggering $100 million each year 
in Internet research and development, and in four years the company 
expanded its Internet division from only six people to more than one 
thousand. These investments, in the words of Judge Jackson, paid 
"technological dividends.ii (Paragraph 135) 
Microsoft developed a Web browser called Internet Explorer, and 
"after the arrival of Internet Explorer 4.0 in late 1997, the 
number of reviewers who regarded it as the superior product was 
roughly equal to those who preferred [Netscape's] Navigator." 
(Paragraph 135)
---------------------------------------------------------------------------

    \ii\ US v Microsoft, No. 98-1233 (TPJ) D.D.C. Nov 5, 
1999) (findings of fact). All references to the findings of fact 
hereafter will refer only to the paragraph number.
---------------------------------------------------------------------------

    But Gates took Microsoft even farther. He integrated Internet 
Explorer into Microsoft's Windows operating system so that it would 
be easier to incorporate the fast-growing Internet into all aspects 
of personal computing. In fact, Judge Jackson partly acknowledges 
the groundbreaking work performed by Microsoft in this regard:
    The inclusion of Internet Explorer with Windows at no separate 
charge increased general familiarity with the Internet and reduced 
the cost to the public of gaining access to it, at least in part 
because it compelled Netscape to stop charging for Navigator. These 
actions thus contributed to improving the quality of Web browsing 
software, lowering its cost, and increasing its availability, 
thereby benefiting consumers. (Paragraph 408)
    Concurrent with its technological innovation, Microsoft put into 
practice novel business services and licensing arrangements. Just 
one of many examples addressed by Judge Jackson is the Internet 
Explorer Access Kit (IEAK), a service that permits an Internet 
access provider (IAP), such as America Online or Earthlink, to 
accept a license agreement on the Web and then download and 
customize Microsoft's Internet software. When Microsoft began 
offering this service in September, 1996, it was the first time an 
Internet access provider could create a distinctive identity for its 
service in as little as a few hours by customizing the title bar, 
icon, start and search pages, and "favorites" in 
Internet Explorer. The IEAK also made the installation process easy 
for IAPs. With the IEAK, IAPs could avoid piecemeal installation of 
various programs and instead create an automated, comprehensive 
installation package in which all settings and options were pre-
configured (Paragraph 249)
    More than 2,500 access providers--representing more than 
95% of the Internet subscriber market in the US--used 
Microsoft's IEAK service. (Paragraph 251) Notably, Netscape did not 
create a similar service until nine months after Microsoft 
introduced IEAK, and Netscape charged almost $2,000 for something 
Microsoft offered for free. (Paragraph 250)
    Microsoft blended technological innovation with business acumen 
and thus offered its business partners an integrated package of new 
technology and new business opportunities. In exploiting these 
opportunities: Microsoft often offered "valuable 
consideration"--such as special discounts-to companies 
like Compaq, IBM, and Intel as an incentive to adopt its Internet 
Explorer and other Microsoft technology In fact, Judge Jackson uses 
the term "valuable consideration" eight times to 
describe Microsoft's business agreements with other 
companies--leaving the honest reader to conclude that 
Microsoft's dealings were not some form of coercion but rather 
value-for-value trades.
    For instance, Microsoft beat Netscape in developing a special 
type of browser that America Online (AOL) required for its Internet 
service As a result, the two companies entered into several 
agreements in 1996. In exchange for AOL's commitment to use 
Microsoft's Internet software, Microsoft promised to provide AOL 
with unprecedented access to Internet Explorer source code, 
extensive technical assistance, "free world-wide distribution 
rights to Internet Explorer," an assurance "that future 
versions of its Web browsing software would possess the latest 
available Internet-related technology features, capabilities, and 
standards," and the placement of an AOL icon in a special 
folder on the Windows desktop. (Paragraph 288)
    This relationship has been advantageous to both parties. Overall 
usage of Internet Explorer has risen dramatically, and as a result 
of this agreement AOL registered almost one million new users in a 
single year--11% of its total membership--through its icon 
on the Windows desktop. This fact alone prompted AOL to state in 
1998 that its business arrangement with Microsoft was an 
"important, valued source of new customers for us." 
(Paragraph 302)
    Microsoft's achievements should be held up as a model of how to 
create and maintain a highly productive, innovative company. Yet 
Judge Jackson is unable to view any of these facts in a positive 
light. While Judge Jackson recognizes many of the concrete facts 
that demonstrate Microsoft's productive achievement, he is incapable 
of praising the innovation and business acumen that led to 
Microsoft's success.
    Instead, his descriptions are clouded by slanted, inflammatory 
terms that attribute vicious motives to Gates and his company. When 
Microsoft created new technology to compete with its rivals, Judge 
Jackson describes the company's motivation as "fear" and 
"alarm." When Microsoft offered incentives to its 
business partners, Judge Jackson decries this as the 
"quashing" and "stifling" of rivals. When 
Microsoft licensed its products only under conditions favorable to 
its long-term success, Judge Jackson describes these actions as 
"threats" and "force." (Judge Jackson uses 
variations of "threat" no fewer than twenty times and of 
"force" no fewer than sixteen times to describe 
Microsoft's actions.) When Microsoft refused to support its 
competition, Judge Jackson calls this "punishment." When 
Microsoft ingeniously melded technological and business strategies 
to convince consumers that its products were the best, Judge Jackson 
sees the company as "seizing control" and trying to 
"capture" the market.
    Even worse than his slanted terminology are his substantive 
arguments, in which he sets up impossible standards according to 
which no successful business could escape prosecution For example, 
Judge Jackson writes early in his ruling that:
    It is not possible with the available data to determine with any 
level of confidence whether the price that a profit-maximizing firm 
with monopoly power would charge for Windows 98 comports with the 
price that Microsoft actually charges. Even if it could be 
determined that Microsoft charges less than the profit-maximizing 
monopoly price, though that would not be probative of a lack of 
monopoly power, for Microsoft could be charging what seems like a 
low short-term

[[Page 28797]]

price in order to maximize its profits in the future for reasons 
unrelated to underselling any incipient competitors (Paragraph 65) 
(Emphasis added.)
    Judge Jackson admits that it is not possible to tell whether 
Microsoft is in fact charging a monopoly price. Yet he dismisses 
this lack of evidence as irrelevant because Microsoft could simply 
be using low prices today in order to "capture" the 
market and charge exorbitant prices at some future date. In other 
words: Microsoft is a monopolist if it charges prices that are 
deemed "too high"--but it is also a monopolist if 
it charges prices that are too low. By virtue of its dominant 
position in the industry--that is, by virtue of its 
success--Microsoft is damned if it does and damned if it 
doesn't.
    Judge Jackson's visceral antagonism to business is also revealed 
by his condemnation of Microsoft for winning the browser battle 
against Netscape when "superior quality was not responsible 
for the dramatic rise [in] Internet Explorer's usage share" 
(Paragraph 375) Note the implicit premise in this condemnation: If 
Microsoft hasn't produced a product that is technologically 
superior, then only commerce can explain its success. Jackson is 
repulsed by the notion that successful computer companies require 
both technological savvy and business skills; in his ideal world, 
Silicon Valley would be populated solely by computer scientists with 
nary an "alarming" venture capitalist or 
"threatening" businessman in sight.
    Judge Jackson's praise for innovation, however, might seem to 
contradict his overall attack on successful businesses. 
Technological innovation is a source of business success, is it not? 
Although Judge Jackson recognizes that technological innovation 
causes businesses to succeed, he believes that this innovation has 
another, more legitimate, function. He writes: In many cases, one of 
the early entrants into a new software category quickly captures a 
lion's share of the sales What eventually displaces the leader is 
often not competition from another product within the same software 
category, but rather a technological advance that renders the 
boundaries defining the category obsolete. These events, in which 
categories are redefined and leaders are superseded in the process, 
are spoken of as "inflection points." (Paragraph 59) 
(Emphasis added.)
    Innovation appeals to Judge Jackson not because it leads to the 
creation of wealth, but rather because it tends to tear down the 
market leader. He argues that the emergence of the Internet in the 
mid-90s was one such "inflection point." (Paragraph 60) 
Thus. the nature of his support for innovation explains his disgust 
with Microsoft's defeat of Netscape: By introducing its browser 
product sooner, Netscape should have replaced Microsoft--if 
only Microsoft had not engaged in the "vicious" 
commercial competition that ensured its continued leadership in the 
computer industry.
    These beliefs ultimately lead Judge Jackson to conclude that 
Microsoft's "monopoly power" has "harmed consumers 
in ways that are immediate and easily discernible?" (Paragraph 
409) What are these alleged harms? Judge Jackson claims (wrongly) 
that the integration of Windows 98 and Internet Explorer does not 
allow employers to block employees from surfing the Web He asserts 
that vast "confusion" reigns among consumers--but 
beyond one or two offhand references throughout the rulin9, he never 
explains this vague allegation Moreover, he claims, the integration 
of Windows and Internet Explorer has created slower computers with 
more bugs--as if computers are slower and less dependable than 
they were two years ago! One might regard such mythical 
"harms" as the laughable allegations of a 
Luddite--if they did not come from a judge who wields the 
coercive power of the federal government
    Regardless of how trivial these alleged harms may be, Judge 
Jackson seems sincerely to believe that Microsoft is acting as a 
vicious monopolist Why? He answers this question in the last few 
sentences of his ruling: "Microsoft's past success in hurting 
such companies and stifling innovation ... occur for the sole reason 
that [other companies and their innovations] do not coincide with 
Microsoft's self-interest." (Paragraph 412) (Emphasis added.) 
It takes Judge Jackson more than 200 pages, but in the end he names 
the essence of his disgust for Microsoft--and the essence of 
the antitrust laws In so doing, Judge Jackson exposes the 
fundamental moral premise dictating his factual distortions, his 
fallacy-ridden arguments, and his illogical conclusions: a hatred 
for any form of self-interest The morality of altruism or self-
sacrifice is often presented as a form of benevolence, as if it 
simply means being nice to other people. But the actual meaning of 
this philosophy is a hatred of success. Under this morality, anyone 
who achieves some extraordinary wealth or distinction owes it to his 
fellow men to sacrifice what he has earned--including giving 
away his whole fortune, as and when it is demanded by others. (This 
is essentially what has been demanded of Bill Gates) But what about 
those who have not achieved anything? They are entitled to welfare 
programs, private charities, protective legislation, and a host of 
other unearned benefits to be paid for by those who have succeeded. 
In this system, anyone who earns success through his own effort is 
to be punished, while anyone who hasn't exerted any effort and 
hasn't attained any success is to be rewarded.
    Far from standing for benevolence or good will, such a moral 
outlook stands for destruction. This code of sacrifice demands an 
assault on a Microsoft or a Bill Gates. By amassing so much money 
and achieving so much success, they must be shirking their duty to 
sacrifice to others. But it does not demand the destruction of the 
Netscapes of the world because, by virtue of having faltered, they 
are the "have-nots" who are entitled to benefit from the 
sacrifice of their more-successful competitors.
    Note that the ultimate standard of this moral outlook is not the 
well-being of the poor, the weak, the downtrodden; has the welfare 
state ever achieved these aims? Instead, the goal is the sacrifice 
of the rich, the strong, and the powerful--not to achieve any 
positive aim, but simply to punish them because they are rich, 
strong, and powerful.
    The altruist connection to antitrust is evident in the mere fact 
that Judge Jackson could have applied the antitrust laws against 
Microsoft without finding any harm at all. Although the ostensible 
purpose of antitrust is to "protect consumers" from 
alleged "monopolists," court decisions consistently 
belie this fiction. In one of the first cases defining the doctrine 
of antitrust, a large railroad trust defended itself against 
prosecution by arguing that its price-fixing plan resulted in lower 
prices for consumers. Since the stated purpose of the 1890 Sherman 
Antitrust Act was to protect consumers, and since consumers actually 
benefited in this case, the defendant logically concluded that the 
antitrust laws should not apply to its practices. The Supreme Court 
rejected this argument and ruled that the railroad trust was guilty. 
In an illuminating statement, Justice Peckham declared: "in 
this light it is not material that the price of an article may be 
lowered. It is in the power of the [monopolist] to raise 
it." \iii\
---------------------------------------------------------------------------

    \iii\ United States v. Trans-Missouri Freight Association, 
166 US 290, 324 (1897), emphasis added.
---------------------------------------------------------------------------

    (Interestingly, Justice Peckham was an ardent conservative who 
was one of the principal advocates of "freedom of 
contract" in the 19th century--just as Judge Jackson was 
a Reagan appointee. This proves once again that conservatives are 
not reliable friends of freedom.) Continuing to apply the underlying 
anti-success principle of antitrust, the Supreme Court ruled in 1968 
that a newspaper company violated the Sherman Antitrust Act when it 
fired a distributor for charging rates above an allowable maximum 
price. The Court found that the newspaper "would not tolerate 
over-charging" of its customers, and that it even agreed to 
rehire the distributor if he "discontinued his pricing 
practice"--that is, if he charged lower prices. 
Nonetheless, the Court held that the benefit to consumers was 
irrelevant in finding that the newspaper company acted in 
"conspiracy" with its other distributors to set 
prices--thus its actions were "an illegal restraint of 
trade under Section 1 of the Sherman Act." \iv\
---------------------------------------------------------------------------

    \iv\ Albrecht v. Herald Co., 390 US 145, 153 (1968).
---------------------------------------------------------------------------

    Harm to consumers has nothing to do with the purpose of 
antitrust. The antitrust laws are intended only to punish 
"power"--but since economic power is earned on the 
free market, this means that the purpose of antitrust is to punish 
successful business practices. Antitrust case law is replete with 
examples of companies being punished, not for any alleged harm, but 
simply for having the acumen to remain successful in their 
industries. A ski resort in Aspen, Colorado, was not only found 
guilty in 1985 of violating the antitrust laws because it 
successfully competed against its only rival; it was also held to a 
"duty under antitrust law to help a 
competitor." \v\ In the famous case against ALCOA in 
1945, Judge Hand declared that "the successful competitor,

[[Page 28798]]

having been urged to compete, must not be turned upon when he 
wins."
---------------------------------------------------------------------------

    \v\ "Olympia Equipment Leasing Go. v. Western Untion 
Telegraph Co.. 797 F.2d 370, 377 (7th Cir. 1986), citing Aspen 
Skiing Co. v. Aspen Highlands Skiing Corp., 472 US 585 (1985) 
(holding that monopolist has a duty to help a competitor).
---------------------------------------------------------------------------

    But he contradicted himself in the very next paragraph, 
concluding that ALCOA insists that it never excluded competitors: 
but we can think of no more effective exclusion than progressively 
to embrace each new opportunity as it opened, and to face every 
newcomer with new capacity already geared into a great organization, 
having the advantage of experience, trade connections, and the elite 
of personnel.\vi\ ALCOA's ability and success, by Hand's reasoning, 
was the deciding factor for finding it guilty of violating the 
antitrust laws.
---------------------------------------------------------------------------

    \vi\ US v. Aluminum Co. of America, 148 F.2d 416, 431 (2d 
Cir. 1945).
---------------------------------------------------------------------------

    Given this legal context, Microsoft was doomed before it even 
set foot in the courtroom. The media, in an anti-Microsoft feeding 
frenzy, often highlighted mistakes made by Microsoft's counsel 
during the lengthy (and ongoing) trial. Yet Microsoft's attorneys 
could have performed flawlessly, and Judge Jackson would still have 
produced the same ruling. The reason is that Microsoft is an 
extremely successful company; Gates is a unique combination of 
technological genius and businessman, reminiscent of earlier 
American giants like Thomas Edison Thus, it was irrelevant how hard 
Microsoft's attorneys worked or how much intellectual vigor they 
brought to their legal briefs and courtroom arguments. These things 
were irrelevant because no army of lawyers could hide a single, 
essential fact--the only fact necessary for applying the 
antitrust laws: Microsoft succeeds at what it does.
    The punishment doled out for success is paralysis. Judge Jackson 
makes it clear that Microsoft must not be permitted to capitalize 
upon its well-earned success. Because it has created values, it must 
now relinquish them. Does it matter that Microsoft has earned its 
success by producing a better product, by offering better incentives 
to its business partners, and by providing better service to 
software developers and Internet access providers? No.
    Such facts do not matter to a man who believes that a successful 
company has a moral duty to sacrifice to its lesser 
rivals--especially when that man has the legal power to coerce 
the company to obey its alleged duty. With every slanted term and 
with every absurd conclusion, Judge Jackson practically screams his 
unstated moral premise: Since Microsoft is a leader in the computer 
industry, it must sacrifice the values it has created because it has 
created them In his ruling, Judge Jackson claims to set out the 
objective facts underlying his impending application of the 
antitrust laws to Microsoft. But the only thing he manages to 
establish is his own animosity towards commercial success. What 
drives this animosity is the underlying moral justification for 
antitrust: altruism's hatred of success.
    The basis for Judge Jackson's ruling is not any 
"monopoly" allegedly controlled by Microsoft; it is the 
monopoly commanded by the morality of altruism over our culture. 
That monopoly can be seen, unfortunately, in Bill Gates's sanction 
of his own destruction in a comment immediately after the ruling, in 
which he declares that "because of our success, we understand 
that Microsoft is held to a higher standard, and we accept that 
responsibility." \vii\ vii As long as this moral 
monopoly remains unchallenged, legal doctrines such as antitrust 
will continue to punish successful businesses.
---------------------------------------------------------------------------

    \vii\ "Statement by Bill Gates on the Findings of 
Fact," www.microsoft.com/presspass/ofnote/11
---------------------------------------------------------------------------



MTC-00030005

Henry R. Ochel, Jr.
1155 East 2100 South
Salt Lake City, Utah 84106
January 28, 2002
Attorney General John Ashcroft
U.S. Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    As a yahoo Internet user I would like to voice my opinion 
concerning the Microsoft lawsuit. I urge you to support the 
settlement and encourage the various companies to get back to the 
business of technology research. It is my belief that millions of 
dollars are being spent to stifle competition when these companies 
should be focused on new markets and technology. Please do what is 
in the best interest of consumers through out the United States and 
settle this costly suit.
    Sincerely,
    Henry R. Ochel, Jr.



MTC-00030006

2035 Harbert Avenue
Memphis, TN 38104-5329
January 22, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    The intention of this letter is so that I may go on record, per 
the Tunney Act, as supporting the settlement that was reached 
between the Department of Justice and the Microsoft Corporation. The 
court battles between these two entities went on for over three 
years, and cost millions of dollars. This is time and money that 
could have been put to much better use.
    Microsoft did not get off easy by any stretch of the 
imagination, and has had severe restrictions placed upon it. For 
example, Microsoft will now have to turn over data and source code 
that makes up internal interfaces in Windows' products. This is a 
first in an antitrust settlement, and is not fair in that it makes 
them forfeit their intellectual property. I think this goes too far. 
Plus they will have to deal with a technical oversight committee 
watching over Microsoft's every move and testing their compliance 
with the terms of the settlement.
    Enough is enough, this has gone on too long, cost too much 
money, and is too harsh on Microsoft. End this now. I support any 
settlement, even though it is not 100.*,'o fair, which ends the 
litigation against Microsoft.
    Sincerely,
    Vincil C. Bishop, Jr



MTC-00030007

568 Scenic Hills Drive
North Salt Lake, UT 84054
January 21, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I have been following the Microsoft antitrust case for quite 
some time now, and quite honestly this is getting a little out of 
hand. I am pleased that a settlement has been reached in the matter, 
and I believe it is in the best interest of the public to have the 
settlement finalized rather than dragged out any longer. The economy 
has suffered as a result of this seemingly endless suit, as has; the 
technology industry. Naturally, consumers have begun to suffer as 
well. Time is getting to be of the essence in this case, and I see 
no reason to reject this settlement.
    After extensive negotiations, Microsoft and the Department of 
Justice reached an agreement on various terms that would prevent 
antitrust violations on Microsoft's part in the future and allow 
Microsoft's competitors more of an edge in the market. Microsoft 
has, for instance, agreed to reformat future versions of Windows so 
that non-Microsoft software will be able to be introduced and 
supported within the Windows operating system. Microsoft has also 
agreed to refrain from retaliation should sofa, are be introduced 
into the market that directly competes with Microsoft programs. I 
believe that these terms are fair; in fact, Microsoft has agreed to 
conditions that extend to products or policies that the Court of 
Appeals did not, in fact, find to be unlawful.
    This settlement is, I believe in the best public interest. No 
further action needs to be taken at the federal level. I urge you to 
support the settlement and allow the Justice Department to move on.
    Sincerely,
    Hao Chen



MTC-00030008

Name: James W. Putt
Company: PFE Management
Voice Number: 445-2590
Fax Number: 445-2590
77 Mary Ann Lane
Wyckoff, NJ 07481
Date: Monday, January 28, 2002
Total Pages: 2
Subject: Microsoft Settlement
Name: Attorney General
Company: US Government
Voice Number:
Fax Number: (202) 3071454
Note: Please include my attached letter in you decision making 
process.
Jim Putt
James W. Putt
77 Mary Ann Lane
Wyckoff, NJ 07481
January 28, 2002
Attorile3, General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I would like to see the antitrust lawsuit against Microsoft 
settled. I feel that the case has been active long enough, and that 
ending it according to the settlement reached in

[[Page 28799]]

November is fair. An important reason I would like to see the case 
settled is because of the concessions Microsoft is agreeing to. I 
have not felt positively about the company bundling Windows-related 
programs onto computers, and the new removal features will give 
users and computer manufacturers a wider range of choices. 
Microsoft's competitors will now be able to more easily place their 
own programs on the Windows platform. Because of that and the other 
provisions in the settlement, I believe settling the suit is in the 
best interests of the public.
    Microsoft is approaching the settlement reasonably, and I urge 
you to do the same. Please end the case without additional delay.
    Sincerely,
    James Putt



MTC-00030009

5235 W Pershing Avenue
Glendale, Arizona, 85304
January 28, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 205301
    Dear Mr. Ashcroft:
    I have long been a Microsoft supporter and was angry to see a 
case being brought against them in the first place. Microsoft is a 
company that is being punished for simply being too successful and 
the government simply needs to keep their hands off of business. The 
settlement, that has taken three long years to work out, I think 
adequately covers many off the issues that people had with 
Microsoft. Because of the terms of the settlement, Windows will have 
greater compatibility with a wider array of products and relations 
with other software developers won't be tarnished because of this 
case. I feel that this case will improve things overall in the 
software industry, if that is it is ever over and done with.
    I know that there will he many letters coming in concerning this 
issue, but I also know that a good deal of them will support 
Microsoft. Please pay attention to how much the average person care 
about Microsoft and end any further Federal litigation.
    Sincerely,
    Beverly Goyen



MTC-00030010

LTC Bernard R Buchta (US Army, Ret)
5100 Cameron Drive
Troy, Michigan 48098
.. E-mail: MrBuchta @ home.com
January 28, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    As a six-year teacher of PCs and the Windows operating system, I 
would like to voice my strong support for settling the pending 
Microsoft case.
    My experience as a PC instructor and my 26-year's as a military 
logistics officer has taught me the great value of standardization. 
Standardization buys everyone a lot. And, after standardization is 
achieved, "the payback is forever." Witness: When we go 
to war, we want our bullets to fit into our allies' guns and rifles, 
and want theirs to fit into ours. We want to be able to share, 
substitute and interchange their artillery rounds, fuel, and 
rations, etc., with ours. It's called being 
"Interoperable." It's a great force-multiplier and keeps 
costs down.
    Standardization, by definition, creates efficiency. It also 
makes for convenience and ease of use. Now, today, we need 
standardization and efficiency more than ever. Therefore, the 
proposed solution seems like a fair compromise that will provide the 
most effective long-term results for consumers.
    As seen with the International Standards Organization, the 
uniformity of Windows* and its supporting products is an asset to 
all computer users. This includes business and industry, schools, 
home users, . .. just everyone!
    Technology is complicated enough for the average person, so the 
advantages Microsoft provides with the scope of their software 
presence is immeasurable in the form of America's almost seamless 
transition into the information age with young and old alike. Though 
I did not respect the government's case, the restrictions imposed 
with this deal are far more favorable than the possibility, of a 
corporate break up and chaos within the computer world. Based on the 
new, more even-handed approach of Microsoft toward competitors, and 
those who do business with competitors, plus the implementation of 
an objective technical committee of experts to ensure compliance, it 
seem to me it would be in the best interest of all parties involved 
to proceed with this agreement. This will save the consumer a great 
deal of heartache. It will also permit continued interoperability in 
future systems and software programs.
    Thank you very much for your consideration.
    Sincerely,
    LTC, OrdC
    US Army (Ret)
    P.S.
    You're doing a great job in the War on Terror.
    Don't let them grind you down!



MTC-00030011

651 North Washington Street.
Wilkes Barre, Pennsylvania 18705
January 9, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing to express my opinion in the recent settlement 
between Microsoft and the US Department of Justice. While I am glad 
to see Microsoft is not being broken up, I do believe some of the 
concessions Microsoft are making axe not in the best interest of the 
public. Microsoft must integrate their software with different 
software makers' products to allow for more effective development of 
windows interfaces and technology. But other concessions such as 
contractual restrictions and windows design obligations seem to go 
against intellectual property fights and patent laws.
    I think that the IT sector is hurt badly enough without any 
further litigation brought against Microsoft by the nine states who 
oppose the settlement. I look forward m seeing Microsoft focusing on 
business and watching one of the premier companies in the world keep 
on thriving.
    Sincerely,
    Hudson Zhu
    cc: Senator Rick Santorum



MTC-00030012

1651 Nocatee Drive
Miami, FL 33133-2540
January 28, 2002
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    We are writing to urge you to accept the pending deal in the 
Microsoft case. This agreement offers the competition plenty to work 
with to gain ground in the software market and should mean an end to 
this costly government action.
    Microsoft is one of the great success stories in the history of 
U.S. business and should not be disbanded because their competitors 
can't gain consumer support and market share. With the pending 
settlement, the company has made extensive moves to give their 
rivals more opportunities to succeed, from licensing its 
technologies to disclosing its internal code for the Windows 
operating system. The added verification of a three-person group of 
experts to monitor the deal should provide added assurance of the 
plan's long-term effectiveness.
    Please make sure to confirm this court-mediated compromise at 
the soonest time possible, as these steps provide plenty of options 
for computer makers and give software developers more than enough 
chance to compete. Any further action is unnecessary. Please make 
the right decision.
    Sincerely,
    Daniel Riemer
    Rebecca Weymouth



MTC-00030013

Brian Showalter
14713 W. 149th Court
Olathe, KS 66062-4623
bshowalter @ sbcglobal.net
January 28, 2002
U.S. Department of Justice
Antitrust Division
6O1 D Street, NW
Suite 1200
Washington, D* 20530-0001
Attn: Renata B. Hesse
Re: Comments regarding the Proposed Final Judgement
United States v. Microsoft
Civil Action No. 98-1232
    As a United States citizen and experienced computer professional 
who has at times been compelled to work with Microsoft products, I 
would like to express my opposition to the settlement that has been 
proposed for the USDOJ's antitrust lawsuit against Microsoft. I feel 
that the terms of the settlement as currently specified are weighted 
far too heavily in favor of Microsoft, and that they will do nothing 
to prevent Microsoft from continuing to abuse its monopoly position 
to stifle competition and lock customers into its

[[Page 28800]]

products. The terms also significantly underestimate the lengths to 
which Microsoft has shown it is willing to go to root out loopholes 
in any agreements it enters into and exploit them in such a way that 
any intended restrictions on its behavior are effectively 
neutralized, T also feel that the terms will do literally nothing to 
ease the market barrier to entry for new products, particularly 
open-source products such as the Linux operating system, which may 
happen to directly compete with Microsoft's offerings.
    There are a number of problems with the settlement which others 
have outlined and on which I will not 9o into further details. 
However, I am dismayed by the extent to which the proposed 
settlement focuses almost completely on attempting to restrict 
Microsoft's behavior on the Windows desktop and middleware 
platforms, to the virtual exclusion of server platforms and other 
operating system products that are offered or soon to be offered by 
Microsoft. In particular, the name "Windows" is 
mentioned 56 times in the document, yet no mention is made of the 
embedded operating system market or of Microsoft's explicitly stated 
intention to replace the Windows desktop and server platform with 
the .NET initiative. Furthermore, the definitions of 
"operating system," "personal computer," 
"Microsoft Platform Software," and "Windows 
Operating System Product" in the document refer entirely to 
desktop operating systems intended for use by a single user at a 
time. This loophole would have the effect of rendering Section III.A 
moot in its entirety should Microsoft attempt to retaliate against 
an OEM that is attempting to market a competing SERVER platform on 
its products. Additionally, the proposed settlement does nothing to 
preclude Microsoft from dropping the Windows brand name altogether 
and continuing their customer lock-in, competition-stifling and 
monopoly-extending behavior on a similar but differently named 
platform.
    Dan Kegel has done an excellent analysis which may be found 
online at (http://www.kegel.com/remedy/remedy2.html). Mr. Kegel's 
site also contains links to several other very compelling analyses. 
Due to the flaws which I and others have pointed out, the settlement 
as it is currently written does not serve the public interest and 
should not be accepted without considerable revisions to ensure that 
the market is not tilted unfairly in Microsoft's favor. Thank you 
for your time and for considering my point of view.
    Sincerely,
    Brian Showalter
    Programmer/Analyst



MTC-00030014

Joyce Newell, M.S.W.
Licensed Clinical Social Worker
facsimile transmittal
Joyee Newell L.C.S.W
2729 Blair Stone Lane
Tallahassee. Fl. 32301
Phone (850) 871t-0279
Fax (850) 878-0459
January 28, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    It has been three long years of litigation between Microsoft and 
the Department of justice and quite frankly it is tirr a to put this 
issue to rest. I am an avid supporter of Microsoft and am very 
pleased that the settlement is acceptable at the federal level hut 
am puzzled as to the persistence of the nine remaining states, Is it 
not obvious to them the negative effects that this continued 
litigation has on the economy and on the Technology industry? I 
trust that; my views and those of others will contribute to the 
expeditious settlement of this matter.
    Microsoft's innovations have done much to enhance productivity 
both on and off the job and is doubtless an Industry icon. This 
company has made significant contributions to the economy and the 
overall growth of our country and the sooner this matter is settled 
the sooner Microsoft is able to rededicate their full attention to 
doing what it does best--innovate Looking closely at the 
details of the settlement, we will see that Microsoft has already 
done very much to honor the terms. They have agreed to make their 
protocols and intellectual property license available to competitors 
and have made it easier for competitors to promote non-Micro, soft 
software within windows. The list of measures taken by Microsoft 
goes on and on and is a direct indication of their willingness to 
comply.
    Sincerely,
    Paul Newell
    1362 Grovaland Hills Drive
    Tallahassee, FL 32311



MTC-00030015

Mail Boxes Ete.
330 Old Steese Hwy
Fairbanks. AK 99701
(907) 452-2221 Phone
(907) 45%8329 Fax
Facsimile Transmission
481 Valley View Drive
Fairbanks, AK 99712-1327
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
January 24,2002
    Dear Mr. Ashcroft:
    Winter greetings from Fairbanks!
    I am sending you this e-mail to register my support on behalf of 
the settlement in the Microsoft antitrust case. This is the best 
resolution available to America now due to a bad situation. The 
settlement required Microsoft, the attorney generals from the states 
involved, and the Department of Justice, to state their differences, 
make concessions, and reach compromises in front of the Federal 
judge appointed in an effort to avoid countless days of court 
battles and appeals. In the settlement, Microsoft basically kept 
itself intact in exchange for giving up its legal rights. Microsoft 
will release from copyright the software codes of the various 
internal interfaces and protocols allowing servers to interoperate 
for its Windows operating system programs. Microsoft must license 
its other software copyrights and patents to any company that wants 
to use them on reasonable terms. The ability of a business to enter 
into exclusive marketing agreements is often very important to its 
success. Microsoft will no longer be able to contract with computer 
builders to use its Windows operating system exclusively. Monitoring 
of the settlement terms by software engineering experts will make 
sure that the agreement is followed.
    The settlement is in the best interest of America. Please use 
your best efforts to see that the Federal judge approves it. Thank 
you for your consideration and support.
    Sincerely,
    Bill Moberly



MTC-00030016

PO Box 1419
Missoula, MT 59806
Ph: 406-541-4545
Fax: 406-54.1-4543
To: Attorney General John Ashcroft
From: Larry D. Williams
Fax: 1-202-307-1454
Date: 1/28/2002 
Re: Microsoft Settlement
CO:
PO Box 14-]9
Missoula, MT 59806
Certified Technologies Incorporated
Phone: 406-541-4545
Fax: 406-541-4543
Toll Free: 866-541.-4545
620 W Addison
Missoula, MT 59801
January 16,2002
Attorney General 3ohn Ashcroft
Justice Department
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    Microsoft revolutionized the computer age with the advent of its 
Windows operating system. The standardization and user-friendly 
operability offered by Windows has a wide appeal and is what pushed 
Microsoft to the front of the pack. Microsoft's success is due to 
great innovation and clever products, not surreptitious antitrust 
activity.
    I am content with the pending settlement reached by Microsoft 
and the government because it is fair. The settlement provisions, 
such as Microsoft agreeing to share its Windows source code with 
competitors, represent a very positive development. It is important 
because they are also interconnected and comprehensive. Microsoft 
not only will avoid retaliating against software developers who 
promote software that competes with Windows, but also the computer 
makers who ship the aforementioned software are also covered. 
Together, these measures will lead to an increase in competition and 
therefore remedy the government's primary "beef" with 
Microsoft.
    Everyone wins! Thanks.
    Sincerely,
    Larry Williams
    Controller
    Certified Technologies, Inc.



MTC-00030017

HIMALAYA ENTERTAINMENT
Renata H??
The Attorney, Antitrust Division

[[Page 28801]]

Department of Justice
801 D Street, NW, Ste, 1200
Washington, DC 20530
    Dear Ms. Hesse:
    I am writing in support of proposed consent decree between the 
D??trment of Justice and I believe It represents a fait ??ment for 
both sides.
    The lawsuits here been dragging along for nearly four years now 
and have cost taxpayers $36 million--enough is enough. Let's 
move forward with this agreement good of the country. Please feel 
free to contact me for more information, but my position is 
clear--let Microsoft get back to work and stop w??ting any more 
tax do?? in pu?? of these lawsuits.



MTC-00030018

Renata Hesse
Trial Attorney, Antitrust Division
Department of Justice
601 D Street, NW, Ste. 1200
Washington, DC 20530
    Dear Ms. Hesse,
    This letter is to express my strong support for the proposed 
settlement between the Department of Justice and Microsoft, It is a 
fair settlement to the antitrust lawsuit. Fair means that it is a 
compromise which all sides can live with.
    This issue has been going on for more than three years. It has 
gown into multiple lawsuits and the millions of dollars. The 
proposed settlement gives the opportunity to close part of the 
issue. If both the DOJ and Microsoft have reached an agreement, 
let's move forward for the good of the economy and in the bigger 
picture, the good of the country.
    Sincerely,
    Katteena Salgado



MTC-00030019

January 28, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    During these times of economic strain, it is important for us to 
watch our spending, and to focus on production. After hearing that 
the recent Microsoft settlement may be even further delayed, I felt 
the need to write you. After years of well thought out negotiations, 
it is time to let the terms of the settlement speak for themselves. 
I support the settlement as it stands
    The terms of this settlement have teeth. Not only does Microsoft 
make various concessions to help promote non-Microsoft software, but 
they have also agreed to be monitored throughout the entire process. 
The settlement will require Microsoft to share information detailing 
the internal interfaces in Windows with its competitors, allowing 
them to more easily install their own software on machines that use 
Windows It is obvious Microsoft is willing to work with the many 
companies in the IT sector so that everyone can get back to 
business.
    I urge you to help get the economy back on track. The delay of 
this settlement can only slow down our growth in the technology 
industry. The finalization of this settlement would be a step in the 
right direction.
    Sincerely,
    Paul W. Budd



MTC-00030020

January 22, 2002
Attorney General John Ashcroft
U.S. Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I would like to go on record as supporting the settlement that 
has been reached between the Department of Just?? a and Microsoft. 
The settlement finally brings an end to the three-year-old antitrust 
law suit that has been partly responsible for the sharp decline in 
America's economy. I can remember three years ago when the antitrust 
skill against Microsoft was first announced.
    The stock market and economy immediately started to go down, and 
now we are in the middle of a recession I have no idea how 
economists working for the government did not notice the correlation 
between these two events. In any case, the settlement is fair. The 
increased information shoring and non-retaliation provisions should 
be enough to satisfy even Microsoft's harshest crities.
    The settlement is the best thing that has come out of the 
??titrust su?? between fi?? Department of Justice and Microsoft, and 
I fully su?? pert it.
    Sincerely,
    W??mda Bel??



MTC-00030021

January 22, 2002
Attorney General John Ashcroft
U.S. Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Attorney General Ashcroft:
    As an active computer user, I would urge you to settle the case 
against Microsoft. I have heard repeatedly of the unfair advantages 
that Microsoft has over its competitors and believe this to be a 
ploy on the part of Microsoft's competitors in the industry.
    I have owned a Palm Pilot for over five years while using 
Microsoft Outlook on my desktop computer. I have never had any 
synchronization problems with the two software programs. The charge 
that Microsoft is trying to squash its competition by making 
software that does not work with other programs is unwarranted. 
Please work to settle this case as quickly as possible so that all 
companies involved can focus their time and efforts on software not 
law suits.
    Sincerely,
    Barney Chapman



MTC-00030022

Holme Roberts & Owen LLP
Paul F. Moxley most VP @ hro.com
Attorneys at Law
111 Last Broadway Suite !100
Salt Lake City; Utah 841I? "5233
Tel (??1)521-5800 Fax (??01)521-9639 www.??ro.com
Salt Lake City
Den??r
Bou??er
Colorado Spring,
London
January 28, 2002
SENT VIA:
E-MAIL TO: Microsoft.atr @ usdoj.gov
VIA FACSIMILE COPY TO: (202) 307-1454 or (202) 616-9937
1ST CLASS MAIL TO:
The Honorable Colleen Kollar-Kotally
U.S. District Court, District of Columbia
c/o Renata B. Hesse Antitrust Division
U.S. Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530-0001
Re: Microsoft Settlement
    Dear Judge Kollar-Kotally:
    My comments are made with regard to the proposed settlement in 
the Microsoft v. DOJ case. I believe it would be improper to allow 
Microsoft to enter a settlement agreement that does not guarantee 
that future antitrust violations will be prevented. Microsoft has 
been adjudged to have violated antitrust laws. Its conduct was so 
pervasive that the original trial court judge determined that break-
up was the only remedy. That decision, but not the decision that 
Microsoft violated antitrust laws, was reversed on appeal to the 
Court of Appeals. The case is now back before a new trial court 
judge following the U.S. Supreme Court's decision not to review the 
case. The purpose of the remand is to determine the proper sanctions 
to penalize Microsoft for past conduct and to prevent future 
violations.
    This determination should be made by the court and not by the 
parties. I am informed that the proposed agreement contains critical 
provisions that do not go far enough or that place too much 
discretion into Microsoft's hands. Failure to impose proper and 
adequate sanctions will set an unfortunate precedent for future 
antitrust cases and will do little to resolve the issues in the 
Microsoft litigation.
    The court should resist the urge to adopt a settlement and hold 
hearings to make a proper determination.
    Respectfully,
    Paul T. Moxley
    cc: The Honorable Mark Shurtleff, Utah Attorney General



MTC-00030023

Casey ]ones
January 28, 2002
Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
    Dear Ms. Hesse,
    The Justice Department and State Attorney General offices' case 
against Microsoft was arguably unwarranted from its commencement.
    As a concerned and active voting citizen, I am focused on how to 
keep taxes at a minimum in our state as well as serving as somewhat 
of a watchdog for the use of taxpayer money at the state level.
    There has been no proof of consumer harm from the monopoly 
behavior of which this technology company is being accused. Yet, 
this suit continued seemingly gaining steam with every new wave of 
national media attention that came with it. At present,

[[Page 28802]]

consumers are no better or worse off than when it all started. 
Unless you consider their position as taxpayers, in which case they 
are much worse for the wear.
    More than $I million has been spent by Iowa's state attorney 
office alone. Millions of tax dollars have also been spent 
cumulatively by the other states involved in the case and tens of 
millions more by the federal Justice Department.
    Now after cycling through mediators and various bumps in the 
road toward bringing this case to an end, there is now a settlement 
proposed. The proposal is one that gives enough to satisfy both 
sides and addresses the consumer concerns. I urge you to accept it 
for the sake of the American taxpayer.
    Sincerely,
    Casey Jones
    Attorney at Law
    7216 Wilton Drive NE
    Cedar Rapids, IA 52402



MTC-00030024

Angie Weible-Jones
January 27,2002
Renata Hesse
Trial Attorney
Anti-Trust Division
US Department of Justice
601 D Street, NW
Washington, DC 20530
    Dear Ms. Hesse:
    As an individual who owns her own business, I am very interested 
in seeing the Microsoft case brought to Its end. I congratulate the 
US Department of Justice for working hard to find a sound way to 
close this chapter In American legal history. One of the most 
amazing things about the technology industry Is that we are only 
just beginning. The innovations and great strides yet to come should 
be exciting to all of us. However, the costs and risks of Innovation 
are extremely high. Investors and creators must have the confidence 
and the will to move forward,
    When the move was made against Microsoft, It was felt throughout 
the entire industry, This action coincided with falling technology 
stocks and loss of investment capital for start-up companies. The 
entire Industry felt the blow and its suffering is detrimental to 
our nation, When our economy was booming there was much talk about 
the New Economy and the leading role technology stocks had this 
economy. But this all ended about the time the government threatened 
Microsoft. This action raised a cloud of uncertainty around the 
technology industry and many Investors decided it was best to wait 
it out. It is interesting that when technology stocks began to 
slide, it hurt the entire market, If tech stocks rebound it can only 
be a positive sign for our economy, Investors may regain their 
confidence if the government ends Its case against Microsoft,
    Additionally, when the technology industry slows down if no 
longer has the free??? case brought to an end. It is In all of our 
best Interests.
    Sincerely,
    Angie Weible-Jones
    7216 Wilton Drive NE
    Cedar Rapids, Iowa 52402



MTC-00030025

Ronald Skaggs
22801 N Briarwood Drive
Edmond, OK 73003.9425
January 25, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    I think the three-year lawsuit against Microsoft is flawed and 
unjustified. Microsoft has not done anything that can be called 
monopolistic. Instead, Microsoft has done wonderful things for our 
nation, including creating jobs and wealth, as well as making 
technological breakthroughs. I think it is ridiculous that Microsoft 
is being forced to disclose interfaces that are internal to Windows 
operating system products. Microsoft has spent vast amounts of time 
and money to develop and innovate. They should not be penalized for 
being the most successful company in the IT industry.
    I urge your office to finalize the settlement, although it is 
flawed, because the alternative of further litigation would be 
detrimental to our nation's IT sector and economy. I believe it is 
time to discard the liberal Democrat notion that every competition 
has to end up in a tie. Thank you.
    Sincerely,
    Ronald Skaggs
    cc: Senator Don Nickles



MTC-00030026

BOB L JOHNSON
4276 EAST SOUTH SHORE DRIVE
ERIE, PENNSYLVANIA 16511
8995380
January 8, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr, Ashcroft:
    I would like to tell you how I feel about the Microsoft 
antitrust case. I am in favor of the settlement and do not agree 
with the federal government's role in this whole issue. Under the 
settlement, Microsoft will have to share information with its 
competitors regarding the internal workings of Windows, allowing 
them to install their own programs on the operating systems. I am 
retired and use computers to communicate via email. Microsoft has 
done a fine job of" bringing technology into the homes of 
everyday people, not to mention the thousands of jobs that the 
company has created. This lawsuit is a waste of tax dollars and I 
urge you to put an end to any federal action against Microsoft.
    Thank you for hearing my opinion on this matter, and again, I 
support the settlement and hope to see it implemented as soon as 
possible.
    Sincerely,
    Bobby Johnson
    cc: Senator Rick Santorum



MTC-00030027

STA America
225 Lennon Lane. Suite 110
Wa??nut Creek, CA 84588
FAX 925.955-9993
January 23, 2002
Renata Hesse Trial Attorney, Antitrust Division
Department of Justice
601 D Street, NW, Ste. 1200
Washington, DC 20530
    Dear Ms. Hesse:
    I write in support of the proposed comet decree between 
Microsoft and the Department of Justice, After four years and $35 
million spent pursuing the lawsuit, it is tune that the country move 
On to more pressing business.
    Microsoft is being adequately reprimanded by the proposed 
agreement, as the settlement would address many of the major charges 
against Microsoft. The company would be required to provide 
technical details to help rivals make products compatible with the 
Windows operating system. It also bans exclusive* contracts with 
computer makers that put rival software vendors at s disadvantage.
    Prolonging the settlement would deliver a severe blow to 
California's already shaky financial situation, as our state is 
expected to pay the lion's share of the remaining trial costs. This 
is a fair deal--but more importantly, it is time to put tiffs 
lawsuit behind us for the good of taxpayers. I urge you to move 
forward with the agreement.
    Sincerely,
    Robert Branzuela



MTC-00030028

CENTRAL CALIFORNIA
HISPANIC
CHAMBER of COMMERCE
Serving the Central Valley Business Community from Stockton to 
Bakersfield Since 1984
Renata Hesse
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
    Dear Ms. Hesse,
    Our chamber finds the ongoing pursuit of Microsoft through 
litigation a very bad precedent to set for business in America 
Microsoft has succeeded on a global scale and revolutionized the way 
America, and the world does business.
    The business community has always supported the government in 
actions that best serve the interests of the nation. With that in 
mind we ask you to take the settlement now on the table between 
Microsoft and the Federal Government. Ultimately, this long and 
expensive law suit is proving detrimental to Microsoft, tax payers 
and for the business community at large. You have the opportunity to 
bring it to a close. Again we strongly urge you to accept the 
settlement.
    Thank you for your time on this issue.
    Sincerely,
    Antonio Gastelum
    Executive Director
    Central California Hispanic Chamber of Commerce
    1900 Mariposa Mall, Suite 105. Fresno, California, 93721
    (559) 485-6840 office . (559) 485-3738 facsimile . 
(559) 977-7030 mobile/m??g
    cchispanicchamber @ sbcglobal.net

[[Page 28803]]



MTC-00030029

Fernandez Translation Services
January 23, 2002
Renata Hesse
Trial Attorney, Antitrust Division
Department of Justice
601 D Street, NW, Ste. 1200
Washington, DC 20530
    Dear Ms. Hesse:
    I am a translator and a bilingual aide in the Alhambra School 
District, and have been working in education for more than 15 years. 
I know the problems of our school system first hand, and know that 
increased funding can go a long way towards improving the quality of 
education our children receive.
    That's why I can't believe our federal government has spent $35 
million of taxpayer dollars on the antitrust lawsuit against 
Microsoft. That money is sorely needed in our schools, and could 
have gone to solve real problems facing our children. The only 
positive note is the proposed consent decree between the company and 
the Department of Justice. If the government and Microsoft have come 
to an agreement, I say let's ratify it and get on with Solving real 
problems facing real people. I support the proposed consent decree 
not only because it addresses the major charges against the company; 
it allows our leaders to get back to work on the greater issues 
affecting ordinary citizens.
    Sincerely,
    Sylvia Fernandez
    304 N. Hidalgo Ave., Alhambra, CA 91801 (626) 300-0810



MTC-00030030

Gino's Primo Pizza
"Serving, Southern California for Nearly 20 Years"
January 23, 2002
Renata Hesse
Trial Attorney, Antitrust Division
Department of Justice
601 D Street, NW, Ste. 1200
Washington, DC 20530
    Dear Ms Hesse:
    As a small business owner, I don't want the government telling 
me how to run my business--but I understand the validity of the 
antitrust lawsuit against Microsoft. I also understand that the 
lawsuit has stretched out to four years--and has cost taxpayers 
$35 million.
    I don't want my tax money going to waste--I want to see it 
go to help our schools and our healthcare system. I would also like 
to see it help end the energy crisis--something that directly 
impacts my business. So that's why I'm writing to support the 
proposed consent decree between Microsoft and the Department of 
Justice.
    From my understanding, it has a little something for 
everyone--the major issues against the company are addresses 
without preventing Microsoft from innovatin8 new technology or 
responding to the needs of its customers.
    Let's put this lawsuit behind us and get on with the nation's 
business. Feel free to call me if you have any questions.
    Sincerely,
    Joseph Harvey
    Owner
    717 W. Las Tunas Dr., San Gabriel, CA 91775 626.576.5945



MTC-00030031

Thea Perrino, MPH
206 Chumalia St., Ste. 3F
San Leandro, CA 94577
510.483.6143
January 23,2002
Renata Hesse
Trial Attorney, Antitrust Division
Department of Justice
601 D Street, NW, Ste. 1200
Washington, DC 20530
    Dear Ms. Hesse:
    As an alcohol prevention specialist working with at-risk youth, 
I am deeply concerned that taxpayer dollars have been used to draw 
out the antitrust lawsuit against Microsoft for almost four years. 
The $35 million spent pursuing the suit could have gone a long way 
towards funding youth programs throughout the country.
    I understand that a proposed consent decree has been reached 
between the Department of Justice and Microsoft. I support this 
agreement--it's time that we let everybody get back to work 
solving the real problems facing our nation.
    Please feet free to call me if you have any questions.
    Sincerely,
    Thea Perrino



MTC-00030032

Jennifer Zago, RN
360 S. Euclid Ave., #332
Pasadena, CA 91101
626.584.6769
January 23, 2002
Renata Hesse
Trial Attorney, Antitrust Division
Department of Justice
601 D Street, NW, Ste. 1200
Washington, DC 20530
    Dear Ms. Hesse:
    As a registered nurse, I have firsthand knowledge of our 
nation's woeful healthcare system. Many of my colleagues are 
confronted with shortages and inadequate supplies on a dally basis, 
That Is why I am deeply troubled by the federal government's 
continued pursuit of the Microsoft lawsuit. These lawsuits have been 
drawn out for four years, costing taxpayers upwards of $35 million. 
That money is sorely needed in our healthcare system, and could have 
been put to good use by doctors and nurses throughout our country.
    I understand that there is now a proposed consent decree on the 
table between Microsoft and the Department of Justice that would 
address many of the major charges against the company. I support 
this agreement. It's time that we let everybody get back to work 
solving the real problems facing our nation, like fixing our 
healthcare system and getting more funding to hospitals,
    Please call me if you have any questions.
    Sincerely,
    Jennifer Zago



MTC-00030033

Edward D. Failor, Jr.
2610 Park Avenue
P.O. Box 747
Muscatine, Iowa 52761
Renatta Hesse
Antitrust Division
Department of Justice
601 D Street, NW--Suite 1200
Washington, DC 20530
    Dear Ms. Hesse,
    I am writing to express my support for the settlement Judge 
Kollar Kottely is considering to end the US Department of Justice's 
antitrust suit against Microsoft.
    As Vice President of Iowans for Tax Relief, I have monitored the 
suit against Microsoft from its inception. I stand in stark 
opposition to my Attorney General Tom Miller's dogged pursuit of it. 
I believe this case has been a waste of taxpayer dollars at the 
state and federal level. It has also been an albatross around the 
neck of the technology industry, making it unattractive to investors 
and uncertain for companies making long-term decisions.
    It is important to the high tech industry, taxpayers and 
investors to end this case as soon as possible. The settlement that 
the DOJ, nine states and Microsoft have agreed to is a very good 
deal for the government and achieves what is most important: ending 
the lawsuit.
    Taxpayers have been bearing the negative impacts of this case 
from the beginning. They have been funding the suit at the state and 
federal level--without their consent. They have seen their 
retirement funds suffer through the downturn the stock market has 
taken since the ruling for a breakup of Microsoft was made back in 
the Spring of 2000.
    I urge Judge Kollar Kottely to approve the proposed settlement 
in this lawsuit in order to stop the needless damage done to 
American taxpayers throughout this process. Thank you for accepting 
my comments as part of the court record.
    Sincerely,
    Edward D. Failor, Jr.
    Vice President
    Iowans for Tax Relief



MTC-00030034

Jamie Hopkins
2610 Park Avenue
P.O. Box 747
Muscatine, IA 52761
Renatta Hesse
Antitrust Division
Department of Justice
601 D Street, NW--Suite 1200
Washington, DC 20530
    Dear Ms. Hesse:
    I support approval of the proposed settlement Judge Kollar 
Kottely is reviewing that would bring closure to the federal 
government's antitrust case against Microsoft Corporation.
    As a grassroots taxpayer advocate, I know firsthand that ending 
this suit is a priority for taxpayers across Iowa. It is an issue 
that comes up at many meetings and in telephone conversations with 
activists on a regular basis.
    Taxpayers want to see the suit ended, not just to end the waste 
of their money, but also to send the message that the marketplace is 
where decisions about the success and failure of businesses should 
be made and not courtrooms.

[[Page 28804]]

    I am hopeful that the judge will approve the settlement and 
bring an end to waste of federal taxpayer dollars that have been 
spent on this suit. I appreciate the opportunity to register my 
opinions on this important issue.
    Sincerely,
    Jamie Hopkins
    Development Director
    Iowans for Tax Relief



MTC-00030035

Jeffrey R. Boeyink
EXECUTIVE VICE PRESIDENT
IOWANS FOR TAX RELIEF & TAX EDUCATION FOUNDATION
2610 PARK AVENUE
MUSCATINE, IA
52761 319-284-8080
January 28, 2002
Renata Hesse
Trial. Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
    Dear Ms. Hesse:
    I am writing to submit my position on the Microsoft antitrust 
case. There was no outcry from taxpayers for action in this, case. 
Rather, competitors implored the * federal government to make 
sweeping regulatory decisions picking winners over losers in the 
market.
    Iowa attorney general alone spent more than 3,000 hours working 
on this landmark antitrust case filing a federal court document 
asking for $1.1 million to reimburse "the. state* for the 
time. Altogether, 19 states tendered a $13 million tab from lawsuit 
expenses and it has been estimated that the federal government 
spent, some $30 million.
    Nine of the states, the Department of Justice, and Microsoft saw 
fit to settle. There are many more important issues facing. America 
and taxpayers deserve to have their funds utilized in a responsible 
manner, which best serves them With a fiercely competitive 
technology industry Microsoft, like* any business or individual, 
should be afforded economic freedom.
    I urge you to deliver closure for taxpayers in this case and 
support the proposed settlement.
    Cordially,
    Jeff. Boeyink
    Executive Vice President
    Iowans for Tax Relief



MTC-00030036

Richard R. Phillips
Attorney-at-Law
300 E. Second
Muscatine, IA 52761
January 28, 2002
Attention: Renata Hesse
Judge Kollar Kottely
U.S. Department of Justice, Antitrust Division
601 D Street, NW, Suite 1200
Washington, DC 20530
    Dear Judge Kollar Kottely:
    I am baffled by the fact that the Microsoft antitrust suit has 
gone this far. Unfortunately, the lawsuit has had serious 
repercussions not only on Microsoft, but also on the economy and the 
tech sector in particular. It is time to bring closure to this case 
so the economy can begin to rebuild.
    Even through the economic turmoil this case has created, the 
public has seen a variety of new products introduced by many 
different companies. There is real competition in the software 
industry. So many of us are now plugged into the web, a service that 
actually bombards us with free software and offers from hundreds of 
software companies. Many of us have unexpectedly become dependent 
upon high tech in our work and personal lives and are using products 
from a wide variety of companies.
    Just think how much more innovation and creativity there will be 
in software and hardware when this lawsuit is ended and the threat 
of government intervention in the tech marketplace is shelved. I 
hope you will see to it to approve the settlement in this case. I 
believe it to be in the best public interest.
    Sincerely,
    Richard R. Phillips



MTC-00030037

January 28, 2002
Ms. Renata Hesse
Trial Attorney Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
    Dear Ms. Hesse:
    Free enterprise is what made our country a leader in so many 
sectors of the global marketplace. Today, the nation's has economy 
weakened and we are facing serious economic concerns. During this 
difficult time, many of us are tightening our belts and curtailing 
our own personal family budgets. I hope you will agree that now is 
the time, to do the same within our government.
    In the antitrust case against Microsoft the total to the federal 
government as of July 2000 was an estimated $30 million dollars in 
taxpayer funds. The suing states spent millions of state tax dollars 
on top of that.
    The majority of participants reached a long awaited resolution 
in this case. We applaud those state attorneys general who signed on 
to this proposed settlement--unfortunately our state attorney 
general is notably absent .from that list. Nevertheless, settling 
this case now is the right thing to do for American taxpayers.
    Those who came together on this settlement have found a 
conclusion that will have positive effects for the industry and 
consumers--those for whom the case was originally brought 
about. I urge you to approve, the settlement before you.
    Thank you for your time and careful consideration.
    Cordially,
    Edward D. Failor
    President
    Iowans for Tax Relief



MTC-00030038

DARTMOUTH HITCHCOCK MEDICAL CENTER
1 MEDICAL CENTER DRIVE
LEBANON, NEW HAMPSHIRE
03766
FACSIMILE TRANSMISSION
DATE:1/28/02
FAX #:1-202 307 1454
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Mark Countermarsh
39 Evarts Read
PO BOX 37
North Hartland, VT 05052
January 27, 2002
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Attorney General Ashcroft:
    This letter is to ask you to give your support to the proposed 
agreement between the Department of Justice and Microsoft. I 
understand there is a 60-day period in which public comment is 
allowed, and I feel it is my duty to encourage your support of this 
agreement. There is no need for any further Federal action.
    Microsoft has provided so much to this country through creating 
jobs and opening the way for technological innovation in the 
software industry. I don't feel it should be punished for its 
success at the expense of weak competition. The agreed terms provide 
a major opening for other players to build market share and should 
be quite satisfactory to Microsoft's opponents. Software developers 
will benefit from access to Windows internal interfaces and server 
protocols and will even be able to license Microsoft technology 
while marketing themselves without obstacles due to computer maker's 
business limitations,
    Please move forward with this plan and allow the competition to 
prove their worth in the software market without the industry 
disruption of a corporate break up. Our economy will respond, and so 
will the general public, to this very fair decision being 
implemented without further delay, I appreciate your support.
    Sincerely,
    Mark Coutermarsh



MTC-00030040

Microsoft"
January 26, 2002
Attorney General Ashcroft, USDOJ
950 Penna. Avenue, NW
Washington, DC 20530-0001
    Dear AG Ashcroft,
    I believe that your decision to settle this Microsoft suit was a 
wise one. Anytime that our government takes upon itself the rather 
extreme position of suing a private business is serious indeed. It 
is important for our government to encourage innovation and 
creativity through incentives, rather than discouraging them through 
convoluted, politically expedient lawsuits. It seems as if this case 
may have had less actual legal merit than it first appeared. In 
these days, we should remain especially vigilant at concentrating on 
far more important issues like national security and budgetary 
problems. It is good for us to settle this case and move on to these 
more important matters. The settlement does an excellent job of 
answering for all the problems that competitors brought against 
Microsoft. By

[[Page 28805]]

allowing manufacturers their own say in how to configure Windows and 
competitors more access to source code that will improve their 
programs" ability to operate in Windows, Microsoft is going 
well beyond what has been asked of them.
    Thank you for your foresight and wisdom in this matter and thank 
you for taking the time to review my opinion in this matter. It is 
about time for the Justice Department ask the people who will be 
most affected by this decision how it will impact them,
    Sincerely,
    Clark Spencer



MTC-00030041

Craig Schannaman
P.O. Box 2001--??
January 22, 2002
R?? Hesse, Trial Attorney
A?? Division
U.S. Department of Justice
601 D Street NW, Suite 1.200
Washington, DC 20530
    Dear Ms. Hesse:
    My interest in the antitrust case, U.S. v. Microsoft, comes from 
my concerns as a former state legislative leader and as a satisfied 
customer of Microsoft products. It is no secret that Microsoft is in 
an incredibly competitive and combative business climate. Microsoft 
has maintained its position as the number 1 creator and distributor 
of office systems software by making sure its customers get the most 
innovative systems at the best prices. Perhaps this is the reason 
why this four-year-old case did not show that consumers wars getting 
the poorly served by Microsoft's business decisions.
    I am very concerned about the precedents which could be set if 
this settlement agreement is not approved, and the ball is again 
tossed in the air to see where it may land next. Would Microsoft be 
forced to give away its intellectual property, thus removing its 
technological edge over its competitors? Is the government going to 
begin micromanaging the affairs of information technology research 
and development, thus making it virtually impossible for any IT firm 
in the United States from maintaining a world leadership status? 
After four years in the courts, this case should have examined every 
possible aspect of Microsoft's business pr??tices. I trust that the 
U.S. Department of Justice and nine of the 18 states in this case 
used good judgment in reaching their settlement.
    I hope that it is allowed to end this case and allow the 
benefits of the settlement to help kids in disadvantaged schools. 
Thank you for considering any letter in this public commentary on 
the settlement.
    Sincerely,
    Craig Schaunaman



MTC-00030042

JOHN L. WILDS
LAWYER
3RD FLOOR THREE HUNDRED BUILDING
300 NORTH ??AKOTA AVENUE
SIOUX FALLS, SOUTH DAKOTA 37104-6026
TELEPHONE (603) 332.1822
TELECOPIER (605) 332-0304
January 25, 2002
Renata Hesse, Trial A??orney
Antitrust Division
U.S. Department of Justice
601 D Street NW, Su?? 1200
Washington, DC 20530
    Dear Trial Attorney Hesse:
    I am submitting my comments to support the settlement in U.S. 
vs. Microsoft Corporation, because the settlement has answered all 
of the significant issues which have survived the court process so 
far. While there are those who oppose this settlement, it would be 
senseless to turn it away. I understand it has taken the Justice 
Department four years and about $40 million to reach this point. It 
is time for this case to be allowed to come to a conclusion.
    No doubt, Microsoft's competitors will continue seeking any 
means to gain an advantage over Microsoft inside the marketplace and 
outside the marketplace. Bringing issues to court is an appropriate 
action when there are significant issues to be answered.
    I think this case has answered these issues, and now it is time 
for the case to be ended. A decision to not accept the settlement, I 
believe, would be perceived as an invitation to a fishing expedition 
which will not serve justice for Microsoft or any other company 
which is involved in the creation and marketing of new software 
technologies.
    I appreciate your attention to my remarks.
    Very truly yours,
    John L. Wilds



MTC-00030043

01/28/2002
Renata Hesse
Trial Attorney
Antitrust Division
U.8. Department of Justice
6Ol D Street NW--Suite 1200
Washington, DC 20530
    Dear Ms. Hesse:
    The best interests of the future of Information technologies are 
found in the settlement agreement between the Microsoft Corporation 
and the U.S. Department of Justice. The antitrust case, to a large 
extent, plowed new ground in the development of regulating a company 
like Microsoft, which has moved very quickly in the development of 
its software systems. I have been told the settlement answers the 
issues that prevailed in the court process.
    As a state legislator, I am particularly interested In the 
benefit to schools with high percentages of low-income children and 
families. South Dakota has a number of school districts that would 
be eligible for the supply of hardware, software and support in this 
offering. I think it is a fair method of resolving a case like this, 
and it will matter quite a lot to the future of the children 
included in these school districts.
    I appreciate your attention to my statements.
    Sincerely
    Jim Hundstad
    State Representative
    Logislative District 2



MTC-00030044

South Dakota Legislature
State Capitol,
500 East Capitol,
Pierre, South Dakota 57501-5070
Senate Chamber
Renata Hesse, Trial
Attorney Antitrust Division
U.S. Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
January 28, 2002
    Dear Ms. Hesse:
    The settlement agreement in U.S. v. Microsoft can result in a 
major benefit to education in South Dakota because of the children 
who would be identified to receive computer systems. I understand 
the settlement terms seek to send the systems to school districts 
whore there are disproportionate numbers of children who qualify for 
the fedela1 school lunch aid program. In South Dakota, there are 
quite a few school districts which would qualify under that 
criteria.
    State government in South Dakota has focused on making internet 
use ubiquitous via the Wiring the Schools Program. Our state seeks 
to use long distance learning technologies to make sure our rural 
school districts are on even ground with, the wealthier urban school 
districts. The availability of computer systems via the settlement 
will make this technique a reality for more and more children,
    My letter is sent to support the settlement for the benefits it 
would bring children, arid to express my hopes that this four-year-
old lawsuit can be allowed to be put to rest. The settlement fairly 
and adequately addresses the pertinent issues in the lawsuit, and 
the settlement will allow good things to happen to children who need 
the help, Thank you.
    Sincerely,
    John McIntyre
    State Senator
    Legislative District 12



MTC-00030045

South Dakota Legislature
State Capitol,
500 East Capitol,
Pierre, South Dakota 57501-5070
House of Representatives
January 28, 2002
Renata Hesse
Trial Attorney
Antitrust Division
US Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
    Dear Ms. Hesse:
    My legislative district is home to or borders on the Yankton 
Sioux Tribe, the Crow Creek Reservation and the Lower Brule 
Reservation, as well as non-Indian school districts where you will 
find tow-income families and stressed financial resources for 
schools. The people in my district are quite diverse, not only in 
race, but also in terms of ethnic heritage, faith and occupation.
    One cause we all agree on is the fact that a quality education 
will do more to equalize opportunity for children than anything 
else. For this reason, I am looking forward to the settlement in 
U.S. v. Microsoft. The installation of up-to-date computers and 
systems in low income school districts will allow disadvantaged 
children equal access to

[[Page 28806]]

the wonderful learning tools found in the interest.
    I also support the settlement became the antitrust case has 
fully lived its usefulness to addressing the legal questions 
involved. It is doubtful that extending this case beyond it's 4-
year-old lifespan is going to be productive, I hope this settlement 
wig. be enacted so that everyone concerned may benefit. Thank you 
for your attention to my letter
    Sincerely,
    Sam Nachtigal
    State Representative
    Legislative District 25



MTC-00030046

Joanne Lockner
Country Visions
301 3rd Street MW/
St. Lawrence 57373
Studio/Ho??e
605-853-2756
Renata Hesse
Trial Attorney
Anti-trust Division
US Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
January 25, 2002
    Dear Ms. Hesse:
    My comments are offered here to show my support for the 
Settlement recently obtained between the Justice Department and the 
Microsoft Corporation, support this settlement because it will bring 
an end to a case which has remained in the courts long enough to 
resolve the relevant Issues Involved.
    Beyond the Issues, however, I strongly encourage this settlement 
because it will surely bring a better quality education to children 
who need the most help in South Dakota and elsewhere. I have served 
as a State Representative in central South Dakota where them are 
school districts in farming and ranching communities which are 
considered remote and low income. Pr??sentiy, the state is expanding 
its efforts to Improve the quality and availability of tong distance 
learning. I know there are plenty of rural school districts wh??ch 
need competent computer systems to take advantage of the Internet 
and the state's educational efforts. As an ?? who supports the 
Ar??sts in Schools P?? am excited by the possibilities of helping 
more ch??dren enhance their lifestyles through the arts via the 
Internet.
    Thank you so much for allowing my comments to be considered. I 
think the settlement is a healthy step forward for children and for 
justice.
    Yours very truly,
    Joanne Lockner



MTC-00030047

DR. NONA LEIGH WILSON
415 Medary Avenue
Brookings, South Dakota 57006
605-688-4365 SDSU Office--
605-692-3915 Residence
January 17, 2002
Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Sate 1200
Washington, DC 20530
    Dear Ms. Hesse: My letter is intended to articulate my support 
for the settlement reached in U.S. v. Microsoft and to help complete 
a four-year-old antitrust case which has addressed the issues which 
have been deemed valid through the court process. It is plainly 
clear that this case has had sufficient time and enough resources to 
fully and fairly consider all of the pertinent issues and develop a 
remedy that is appropriate to the findings involved.
    Any further time and financial resources expended to search for 
additional issues would, in all likelihood, be a wasteful effort, 
and not worthy of the resources of the United States government. As 
an educator, I am very interested in realizing the befits to 
education and disadvantaged children that would result from the 
settlement. This penalty seems to be a wise and useful result of 
this lawsuit. Thank you very much for considering my input on this 
settlement.
    Sincerely,
    Nona L. Wilson



MTC-00030048

H??C Galloways
Electrical Consultants
P.O. BOX 375
Black Hawk, SD 57715-0375
(605) 787-4169
Fax (605) 787-5839
January 17, 2002
Renata Hesse, Trial Attorney
Antitrust Division
U.S. Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
    Dear Trial Attorney Hesse: On the issue of the settlement in 
U.S. vs. Microsoft, let my comments show that I support it because 
the settlement will have great value to Indian children throughout 
western South Dakota. The settlement calls for Microsoft to supply 
computers, equipment, software and the technical support they 
require to the nation's neediest school districts, as defined by the 
criteria for federal school lunch aid to students. The U.S. Census 
Bureau has shown South Dakota has three of the nation's poorest 
counties, all of which are located on reservations. South Dakota 
also has plenty of low income counties and school districts in rural 
counties where farm incomes have floundered.
    The settlement should be the last word in the Microsoft 
controversy. This case has had more than enough time and money to 
find remedies to the issues brought before the U.S. Department of 
Justice Antitrust Division. I think it says a tot that nine of the 
eighteen states in the case (South Dakota decided to stay out of the 
case) and the Justice Department have declared they have a 
settlement with the Microsoft Corporation. It's not my intention to 
retry the issues in this tatter because I have faith that everything 
which could be done to reasonably remedy the controversy has been 
done. Thank you for your attention to my comments.
    Sincerely,
    Henry Maicki



MTC-00030049

Fax
To: Renata B. Hesse
From:
Fax: (202) 307-1454 / (202) 616-9937
Pagas: 2 (includes cover)
Phone:
Date: 01/28/02 
Re: CC:
. Comments:
CREW & CREW
Attorneys at Law 141 North Main, Suite 706
P.O. Box 923
Sioux Falls, SD 57101-0923
Michael B. Crew
Karen L. Crew
Anje L. Olseth, Legal Assistant
(605) 335-5561
FAX (605)335-762l
January 28, 2002
Renata Hesse, Trial Attorney
Antitrust Division
U.S. Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
RE: Settlement agreement in U.S. v. Microsoft
    Dear Ms Hesse:
    Please include my sentiments in the public commentary as a 
supporter of the settlement agreement. The sooner this case ends, 
the sooner all parties involved can move on to other matters.
    From what I have been able to learn, the settlement ought to be 
in the final chapter in this case; it has taken four years to reach 
this point. I understand that the issues which ,,,ere deemed 
important by the court have been satisfied in this settlement. I 
believe, the Department of Justice made a wise decision to close the 
book on this issue after an exhausting effort to examine all 
pertinent issues.
    Thank you including my remarks on this commentary.
    Sincerely,
    KAREN L. CREW



MTC-00030050

PUBLIC
POLICY
SYSTEMS
INC.
130 Bowdoin Street, Suite 1108 ??
Boston, MA 08108
Honorable Colleen Kollar-Kotelly
U.S. District Court, District of Columbia
c/o Renata B. Hesse
Antitrust Division
U.S. Department of Justice
601 D Street NW
Suite 1200
Washington, DC 20530-0001
RE: U.S. v Microsoft
    Dear Judge Kollar-Kotelly,
    I would like to express my dissatisfaction with the settlement 
between Microsoft and the Department of Justice.
    The settlement made virtually no impact on protecting consumes 
from companies like Microsoft who have monopolies in the 
marketplace, It has many loopholes and its level of enforcement is 
questionable, In addition the settlement leaves Microsoft in a 
position to continually raise prices for their products. This does 
not provide consumers the level of protection they need for greater 
consumer choice. It is my understanding that many consumer groups 
have opposed the settlement.

[[Page 28807]]

    The agreement states that Microsoft "shall not enter into 
any agreement" to pay a software vendor not to develop or 
distribute software that would compete with their products, but it 
is Microsoft that will he the final decision maker on that 
provision, The agreement also ??tates that Microsoft must share 
certain technical information, but only if it would not the their 
security or software licensing. Again, Microsoft will be the final 
decision maker regarding this matter. The settlement does nothing to 
deal with the effects on consumers and businesses of technologies 
such as Microsoft's Passport.
    I find rhea, inadequacies to be too broad to accept this 
settlement. I hope that Microsoft will not be able to continue to 
preserve its monopoly while consumers and competitors are subject to 
the practices that are supposed to be protected by antitrust laws.
    Thank you for your time,
    Regards,
    William A Carito, President
    CC: Attorney General, Tom Reily



MTC-00030051

January 27, 2002
Renata Hesse
Trial Attorney
Anti-Trust Division
U.S. Department of Justice
601 D St., NW
Suite 1200
Washington, DC 20530
    Dear Ms. Hesse:
    Thank you for your service as U.S. District Court Justice.
    The agreed upon remedies in the Microsoft case allow computer 
operating equipment manufacturers limited access to Microsoft 
Windows to manipulate it in a way that fits their specific needs and 
product. Permits some adjustments to the Windows operating system to 
be made by the average user. It affords other technology 
providers--including Microsoft's direct competitors--the 
benefit of access to technical specifications. It sets in motion a 
machine to enforce these remedies.
    It does the equivalent of disclosing the recipe for the 
McDonald's Big Mac special sauce to all competing fast food 
restaurants. The fact that this only applies to Microsoft and none 
of the other software or operating system manufacturers provides all 
its competitors with an unfair advantage.
    Yet, Microsoft agreed to settle with these remedies in an effort 
to end this relentless infinitely long litigation. Hopefully you 
will add your consent to this agreement.
    Thank You,
    Jill Stutts
    5520 Antler Drive
    Cedar Rapids, Iowa 52411



MTC-00030052

January 28, 2002
Jason Deans
7412 N. Thorncliff Place
Raleigh, NC 27616
Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
Fax: 202-616-9937
    Dear Ms. Hesse:
    As the government accounts representative for Comark, a leading 
regional tech firm, I am thrilled that the long awaited settlement 
between Microsoft and thee federal government is finally at hand. 
All we need now is for the Judge to approve the settlement. The 
Judge, in my opinion, has more than ample reason to do just that.
    First of all, let me say how well I believe that government and 
business can work together for mutual prosperity. It can and does 
happen--EVERY DAY! I see it when I call on governmental 
agencies, officials and departments.
    I enjoy using technology to build a bridge between government 
and business. It makes perfect sense. After all, the emerging 
technologies of today make every segment of society more 
productive--it makes no difference if the end user works for 
the public good or a private interest. Let's forge ahead and 
revitalize the American economy. Let's renew our commitment to 
research and development, so that we continue to lend the world in 
productivity and quality. Let's create a new spirit of cooperation 
between the government and private enterprise. Let's show the rest 
of the world that American don't take recessions lying 
down--that we will act to strengthen our country and assist our 
countrymen.
    Now is the time for bold action. I request that Judge Kollar 
Kotelly approves the settlement.
    Sincerely,
    Jason Deans



MTC-00030053

January 28, 2002
Jill Green
4660-302 Tournament Drive
Raleigh, NC 27612
Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601D Street NW, Suite 1200
Washington, DC 20530
    Dear Ms. Hesse:
    During my tenure as Assistant Director of Admissions at North 
Carolina State University, I have witnessed many technological 
innovations and trends. Most of these have involved the use of a 
computer, and many involved Microsoft products.
    While I cannot say with exact certainty why the federal 
government pursued an antitrust lawsuit against Microsoft, I can 
tell you that it has had a devastating impact on technological 
innovation while it has transpired. Before the lawsuit, tech 
companies were lauded for focusing on research and development at 
the exclusion of politics. In fact, few of the leading tech firms 
employed anyone to conduct government relations programs.
    Microsoft learned quickly that its exclusive focus on making 
life more efficient for everyone had made its competitors struggle 
for market share. The competitors retaliated by getting into the 
political game. The lawsuit followed. Even today, Microsoft's 
competitors are lobbying to conti9nue the lawsuit endlessly.
    We should support the federal government and Microsoft in their 
decision to settle the case. I urge Judge Kollar-Kotelly to approve 
the proposed settlement of the lawsuit. Let's allow research and 
development to march ahead.
    Sincerely,
    Jill Green



MTC-00030054

January 28, 2002
Tresa Jalot
829 Joyner Court
Wake Forest, NC 27587
Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
Fax: 202-616-9937
    Dear Ms. Hesse: Given that my husband is a local television news 
personality, I follow the news even more keenly than I ordinarily 
would. I began working at a new job just a few short weeks ago, as 
the membership and marketing director for Heritage Golf Club in Wake 
Forest, North Carolina. Unfortunately, the news and my common sense 
tells me that many other folks won't be fortunate enough to find new 
jobs because of the poor economic conditions our country is in. 
We've got to change that.
    Our government must demonstrate that it is serious about 
stimulating the economy. A great first step in that process would be 
to finish the job of settling its antitrust lawsuit against 
Microsoft. I think I speak for most American when I say, 
"Enough already!" Both sides have agreed to 
settle--it's time to move on to something else.
    I believe that I also speak for executives who work in 
membership and marketing when I say that I'm much more efficient in 
my job because of Microsoft's quality products. Database management, 
communications, and publications are all professionally done with 
just a click of a mouse.
    The American people choose Microsoft products because they make 
life better. Life will also be better for many Americans once this 
suit is settled. I request that 3udge Kollar Kotelly approves the 
settlement.
    Sincerely,
    Tresa Jalot



MTC-00030055

January 28, 2002
Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
Jennifer Sidbury
1425 Suncourt Villa Drive
Wilmington, NC 28409
    Dear Ms. Hesse:
    As a past Executive Director of the North Carolina Federation of 
College Republicans, it has been my pleasure to work with many 
delightful people in all walks of life. Attorneys, business 
executives and university faculty were heavily involved in the 
statewide organization that I ran. Most

[[Page 28808]]

were people of common sense, good judgement and fine moral 
character. Most wanted the common good to prevail in all political 
proceedings. I have always sought to emulate these people--the 
ones who act in the best interest of ALL of society.
    It is in that spirit that I call on Judge Kollar Kotelly to 
approve the proposed settlement in the antitrust suit between 
Microsoft and the federal government. It's the right thing to do. 
People are hurting. We're in a recession. Let's move the economy... 
and the country forward by ending this whole affair.
    Sincerely,
    Jennifer Sidbury



MTC-00030056

January 28, 2002
Dan Mansell
Demco Construction
317 W. Second Street Clayton, NC 27520
Renata Hesse
Trial Attorney
Antitrust Division Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
Fax: 202-616-9937
    Dear Ms. Hesse:
    I have always believed that a limited government is the best 
government. Our federal government should give businesses and 
families a hand up when they need it. Our federal government should 
never stand in the way of American progress.
    I believe that the Microsoft antitrust suit has gone far enough. 
Microsoft is an industry leader. They deserve to be supported. I use 
Microsoft's technology to run my construction business. Start to 
finish, I use the many tools they offer to estimate, bid, and 
execute a job.
    In short, their products help me meet a payroll. I want the feds 
to support Microsoft the way Microsoft supports me.
    I request that Judge Kollar Kotelly approves the proposed 
settlement.
    Sincerely,
    Dan Mansell
    CEO



MTC-00030057

January 25, 2002
To: Renata B. Hesse
Antiturst Division
U.S Department of Justice
601 D Street NW
Suite 1200
Washington, DO 20530-001
Subject: Microsoft Settlement
    The following are my comments regarding the proposed settlement 
of the United States vs. Microsoft antitrust case.
    Personal Background
    I am Information Technology specialist who works primarily in 
Systems architecture, design, and development, Over the past ten 
years I have specialized in Information Security. I have been a user 
of Microsoft products (for both consumers and developers) since the 
early 1980s. United States w Microsoft Background The District Court 
and the Court of Appeals concluded that Microsoft had 
"unlawfully maintained its monopoly power by suppressing 
emerging technologies that threatened to undermine its monopoly 
control of the personal computer operating system market."
    The Court of Appeals held "a remedies decree in an 
antitrust case must seek to 'unfetter a market from 
anticompetitive conduct," 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."'
    Comments
    Scope of Protection Is Too Limited Microsoft's competition in 
the Operating system area varies greatly in type and size. This 
competion includes:
    . direct competitors, organizations creating different Operating 
systems (e.g. Linux)
    . organizations that build applications and middleware that run 
"on top" of an operating system (e.g. Java and Netscape 
Communicator)
    . organizations that customize operating systems for their 
clients (hardware OEMs)
    . organizations that provide software equivalence of the 
services of one operating system on a different system or 
environment.
    The proposed restrictions on Microsoft business conduct will 
provide protection to a subset of these Microsoft competitors. The 
majority of the Proposed Settlement focuses on providing relief for 
1) organizations that provide middleware that run exclusively on 
Microsoft Windows products, and 2) hardware OEM vendors. There are 
only minimal changes in the Microsoft conduct to protect vendors of 
competing operating systems.
    Only Large Competitors Are Protected
    The size of organizations that develop software varies greatly. 
Even Microsoft started as a small number of people. Unlike many 
other businesses, there is not a requirement for a large capital 
investment to start developing software.
    The restrictions on Microsoft conduct apply only to large 
organizations (both OEM and software developers). Not only does this 
not work to terminate the monopoly it creates new exclusionary and 
discriminatory practices which did not previously exist,
    Scope of Interfaces to be Disclosed Is too Narrow
    The Proposed Settlement requires that Microsoft disclose the 
APIs for its middleware. However, in the Proposed Settlement the 
definition of Middleware is so limited that it excludes many of the 
interfaces required by competitors, The Interfaces to be disclosed 
need to include not just Application Programming Interfaces (APIs) 
but all other data structures and protocols externalized by 
Microsoft software components. The Department of Justice chose not 
to pursue issues related to the comigling of software and yet the 
Proposed Settlement assumes to have sufficient knowledge of the 
separate pieces (middleware vs. operating system) to provide a 
working definition in the Proposed Settlement. As long as the 
definition of the Windows Operating Systems is outside the scope of 
the Proposed Settlement Microsoft will maintain the control over 
which interfaces must be disclosed. It would be more appropriate to 
require Microsoft to disclose ALL interfaces between all components 
of their products.
    Not All Middleware Components are Identified.
    Given that some of the Microsoft Middleware components that are 
subject to this settlement are mentioned in the Proposed Settlement, 
the ".net" interfaces, as the Microsoft followon to Java 
should be included, Given the complexity of the definition of 
Middleware provided in the Proposed Settlement, it would be 
desireable to include the complete list of all Microsoft Middleware. 
This list should be publicly available for the time period that the 
Settlement is enforced.
    Not All Current Versions of Windows are Covered In the 
Settlement
    All current versions of Windows that are based on Win-32 should 
be covered by the Settlement. This should at least include Windows 
CE and Windows XP Tablet Edition.
    Too Many Restrictions on Disclosure of Security Interfaces
    The Proposed Settlement places restrictions on the disclosure of 
Microsoft security interfaces in the name of National Security. I 
would suggest that the reverse is true. In the current environment 
it is important to nurture the development of security 
functionality. All Microsoft security programmable interfaces, 
protocols, and date structures should be fully disclosed. The only 
restriction should be that the content of some specific data 
elements may not be disclosed (private keys, etc.)
    Limits on Which Organizations can Seek Disclosure of Interfaces
    The proposed Settlement places restrictions on which competitors 
Microsoft must disclose their APIs. The competitors must be of 
sufficient size and have a valid business case. This allows 
Microsoft to chose which organizations they wish to compete. Even 
Microsoft in its earliest years would have failed these 
requirements. Given that in the current environment one of 
Microsoft's strongest competitors is primarily a volunteer 
organization (Lunix) it seems likely that Microsoft would not 
disclose any APIs to "Free" Software development 
organizations.
    Poor Enforcement Mechanisms
    A good settlement should include enforcement that is easily 
understood, quantifiable, and verifiable. There should be metrics 
that can be used over a period of time to evaluate the success of 
the Settlement. A good enforcement needs to provide quick resolution 
of issues related the Settlement for the business needs of both any 
plaintiff as well as Microsoft. Finally, them needs to be a 
sufficient motivation to insure Microsoft will not violate the 
Settlement.
    The Proposed Settlement provides almost none of the above There 
is technical review by a three person team but all of their work 
will be confidential and not subject to review. There is no public 
or judicial review of the progress of the Settlement. The only 
option for handling misconduct, outside of the technical team, is to 
go back to court--one of the slowest ways to resolve any 
violations. Finally, given that them is no financial incentive 
required in this Settlement and that Microsoft earns billions of 
dollars using their current business conduct it is hard to see why 
Microsoft will be motivated to make any changes in their conduct.

[[Page 28809]]

    Conclusion
    The Proposed Settlement does not provide adequate changes in 
business conduct of Microsoft to provide a remedy that meet the 
requirements of the Court of Appeals mandate. In some cases the 
Proposed Settlement adds new herders to the competition to Microsoft 
Operating Systems and Middleware. Thus, the Proposed Settlement does 
not serve in the public interest. I recommend that the Proposed 
Settlement be rejected.
    Sincerely,
    Jerry L. Hadsell
    2800 Woodley Road NW
    Washington DC, 20008



MTC-00030058

Fax Cover Sheet
Date: 28 Jan 2002
To: Renate Hesse Antitrust Division
Company: Department of Justice
Fax: (202) 616-9937
From Harold R. ANDRLS Sr
Company:
Tel: (301) 935-0057
Number of pages including this one: 2
kinko's
4417 Hartwick Rd.
College Park, MD 20740
Tel: (301) 277-7543
Fax: (301) 779-6417
Comments:
Renata Hesse, Trial Attorney
28 January 2002
Antitrust Division
Department of Justice
601 D Street NW Suite 1200
Washington, DC 20530
Fax (202) 616-9937
e-mail microsof.atr @ usdoj.gov.
    On Shabbas, 26 January 2002AD, an unsolicited virtual message 
was deposited on my telephone requesting my immediate comments 
concerning the "Microsoft" litigation. Please for the 
sake of immediacy do not make the mistake of recasting the story of 
Genesis 25:29-34. The action taken must avoid the ??okology of 
yet another mons?? marching through-out the Lands of this World. The 
objective of governance should be to protect the rights and freedoms 
of People (be they individuals or organizations) against predicatory 
statements by any entity conspiring to sup press and gain absolute 
control or power.
    In presenting and resolving this and similar issues, perhaps 
rite views of Dr. Herbert I. Schiller should be, considered. I 
understand that his observations are available in such works as 
"Culture, inc."/"Living in the number one 
country"/"Mass communication ,and American 
empire".
    In resolving the arguments, Please do NOT make the mistake of 
ESAU by selling ?? need of the moment to satisfy greed.
    "Happy Iris" & Trails!
    Harold R. Andrus,??
    3509 DePauw Pla??
    College Park, MD 207404009



MTC-00030059

447 Larchwood Avenue
Trevose, PA 19053-4407
January 11, 2002
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    I am writing to express my opinion about the recent antitrust 
settlement between Microsoft and the US Department of Justice. In 
light of the recent terrorist attack and the ongoing war on 
terrorism, I think it is absurd that nine states continue to bring 
lawsuits against Microsoft in a case that seemed unjust from the 
start.
    The settlement is too harsh to begin with since entering into 
third party exclusive distribution agreements have never been a 
problem in the past. Also, disclosing internal interfaces that 
Microsoft spent a lot of time and money to develop is a violation of 
their intellectual property rights.
    I urge your office to free up Microsoft to allow them to focus 
on business. This will serve the public's best interests because 
only our strong industry leaders can rejuvenate economy.
    Sincerely,
    John Stern



MTC-00030060

Kory Nanke Letterhead--realtor / business owner
DATE
Judge Kolar Kottely
Renata Hesse, Antitrust Division Public Comment
U.S. Department of Justice
601 D Street, NW, Suite 1200
Washington, DC 20530
    Dear Judge Kottely.
    After years of litigation, the Department of Justice, nine state 
attorneys general, and Microsoft Corporation--the majority of 
the parties involved in the case--have agreed upon a 
settlement. It is now before you to make your judgment.
    As history has revealed, there is often a six-month to one-year 
delay before the real estate market feels the effects of a 
significant economic change in either direction. An economic 
downturn had begun prior to the horrific events of September 11th. 
However, it was accelerated after that day. Those of us in the real 
estate industry are just beginning to feet the market soften.
    In addition to the much appreciated efforts of President Bush 
and Congress to put forth an economic stimulus package to help 
generate a spark in the economy, settling this case is another 
small, but important step in that direction.
    I urge you to accept the settlement that the majority of the 
parties involved in this case have agreed upon.
    Sincerely,
    Kory Nanke



MTC-00030061

Jim Grabowski
487 Covewood Boulevard
Webster, NY 14580-1107
January 25, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    Now that Microsoft and the Government have reached an agreement, 
it appears that the states are doing to Microsoft what they did in 
the tobacco suit. They wish to pursue further litigation in order to 
fund their state governments, and I think it's ridiculous.
    Microsoft did not get off easy. Not only did they agree to 
disclose various Windows internal interfaces to the competition, 
they also agreed to not enter into any agreements obligating any 
third party to distribute or promote any Windows technology 
exclusively.
    Let's move on. Our government should focus on more pressing 
issues, and leave decisions about software company size and success 
up to consumers.
    Sincerely,
    Jim Grabowski



MTC-00030062

Fax
To: Renata Hesse
From: Kenneth Brown
Fax: 202-616-9937
Pages: 7
Phone: 202-307-1454
Date: 1/28/2002 
Re: Tunney Act Comments
CO:
Please call 703-608-4222 if you have any problems with 
this submission. Ken Brown
January 28, 2002
Renata Hesse
Trial Attorney
Antitrust Division
U.S. Department of Justice
601 D Street, NW Suite 1200
Washington, DC 20530
e-mail: microsoft.atr @ usdoj.gov
Re: AdTI Tunney Act Comments
    The Alexis de Tocqueville Institution submits these comments 
under the Tunney Act. The Alexis de Tocqueville Institution is an 
independent non-profit education and research organization described 
in detail at www.adti.net. The mission of AdTI is to provide helpful 
policy analysis to advance the ideas of democracy and freedom around 
the world.
    Sincerely,
    Kenneth Brown
    President
    Telephone Number(s)- office 202-548-0006, cell 
703-608-4222
Why the Microsoft Case Should Be Settled
Alexis de Tocqueville Institution
Washington, DC
January 22, 2002
    The Hard Truth About Invention in the U.S. Marketplace Two 
courts have reaffirmed that Netscape nor its browser were shut out 
of the marketplace. The browser wars produced a winner and a loser; 
and Netscape was the loser. However, within thousands of briefs and 
legal arguments criticizing the U.S. vs. Microsoft settlement is the 
repeated concern about the future of new Netscape's in the 
technology sector. Almost every other issue is tangential, and we 
must differentiate the arguments properly.
    We see an interchanging of terms being used, specifically, 
"....the settlement should make the marketplace safe for firms 
to compete with Microsoft..." vs. "...the settlement 
should be safe for firms to introduce new products...ie. like 
Netscape

[[Page 28810]]

Navigator..." The Department of Justice has proposed a 
settlement that properly speaks to its duty--to introduce a 
remedy which allows firms to safely introduce new products. 
Microsoft has agreed to the rules; which include a mandate that 
Microsoft disclose any information necessary for rival firms to 
produce fully interoperable products with Windows for competing 
software and servers.
    The reason why critics want a settlement which goes further is 
because they want Microsoft completely out of the way. The case is 
merely obfuscation. With billions of dollars in resources, 
Microsoft's competitors want every advantage because 1) the 
marketplace for new technology is overwhelming and having a chief 
competitor eliminated makes things a little easier and 2) the 
competitors lobbying for a far-reaching settlement are among the 
most aggressive and fierce technologists in the world.
    The reality is that the marketplace, particularly the 
marketplace for new technology has never been safe from a 
competitor. What Microsoft's competitors want is an oxymoron because 
no technology product is ever "competition-free" or 
guaranteed success in the marketplace. This benefits consumers, the 
country and ironically inventors themselves, which makes it relevant 
to observe the reality of the marketplace (beyond the courtroom) for 
a moment. Great Inventors Must Be Fierce Strategists
    Every inventor and innovator small and large must face the 
formidable odds to succeed in the marketplace for new technology. 
Since the day the first idea was registered in the U.S. patent 
office, countless inventions and innovations have become cinders in 
the furnace of competition. Relentless markets in America only 
sustain the fiercest competitors, without exception. Technologists 
rewarded with fabulous wealth and fame did so at the expense of 
employing hard-hitting, merciless strategies. Regardless of 
ingenuity, technologists without the ability to navigate in the 
marketplace were failures; and lucky to even receive credit as 
creators of their own inventions.
    The marketplace for food, furniture and other goods each have 
their challenges. But, the technology marketplace is unique because 
it demands both inventive genius and keen business savvy. The 
combination of the two is rare in individuals and corporations, and 
particularly scarce among pure inventors such as physicists, 
mathematicians or engineers. From the light bulb to the PC operating 
system, every innovator that history has been kind to, had the 
indomitable capability to merge intellectual power with commercial 
insight. In the end, technologists with these qualities became far 
more successful than their counterparts with better inventions or 
greater talent.
    Competitive Inventors Preserve U.S. Leadership
    However, America's owes its technological leadership in the 
world to its competitive battleground. Although education, vigorous 
intellectual property rights and democracy are also credit to 
American invention, its ability to surface inventors with commercial 
savvy, make it a source of the most competitive innovations in the 
world. In the end, the U.S. is a loader in world-changing 
innovations, at the expense of sustaining a "bare-
knuckled" marketplace.
    After an excruciating and lengthy examination by the court 
system, the federal government and 9 states (actually 41 when you 
consider the states that never filed suit) agree on the U.S. vs. 
Microsoft settlement. Regardless of the differences among the 
parties, we can't expect any ruling to settle the differences 
between Microsoft and its competitors. However, this dissatisfaction 
is in the best interest of our country and will only spawn better 
ideas and products that will propel the U.S. to new heights. U.S. 
technological leadership depends on the undying will of its 
innovators to be no. 1.
    The "Electric" War Between Edison and Tesla
    The debate over Windows is similar to many stories about wars 
between rival innovators throughout history, particularly aspects of 
the Thomas Edison story. Although the Edison-Tesla rivalry did not 
involve anti-trust law, the contest details the reality of the 
"invention business" in the most competitive capitalist 
society in the world.
    Contrary to popular belief, the idea of electric lighting was 
not Edison's. A number of individuals had developed forms of 
electric lighting, but none had developed a system that was 
practical for home use. Using lower current, a small carbonized 
filament, and an improved vacuum inside the bulb, Edison was able to 
produce a reliable, long-lasting source of light. Thomas Edison 
didn't "invent" the light bulb, but became a legend for 
making a 50year-old idea a fantastic commercial success.
    Edison's fiercest rival, was an ex-employee named Nikola Tesla 
from Smijlan, Croatia. Tesla was a genius who invented the 
fluorescent bulb in his lab forty years before industry 
"invented" them. At World's Fairs and similar 
exhibitions, he demonstrated the world's first neon signs. Perhaps 
Tesla's greatest invention was the AC (alternating current) system 
we use in our homes today. DC (direct current), an inferior system, 
ironically, was designed by Thomas Edison. After years of fierce 
wars and debate between the Tesla and Edison teams, AC became the 
accepted system of transporting electricity. In fact, Edison later 
admitted that AC was the better system. While both men were geniuses 
ahead of their time, the biggest difference between Edison and Tesla 
was their perspective and approach to invention. Edison had a keen 
understanding of capital markets and the strategies necessary to 
finance, promote and commercialize his inventions. Tesla was a great 
theoretician who worked perpetually to finance experiments.
    Edison held a world record 1,093 patents and died a wealthy, 
famous man. Tesla received over 800 patents, died penniless and was 
literally erased from the history books. In fact, Tesla was poor the 
last thirty years of his life and arguably would have eclipsed 
Edison's patent record if he had the capital. Remembered for many 
things, Edison was known for saying, "I have more respect for 
the fellow with a single idea who gets there than for the fellow 
with a thousand ideas who does nothing." Edison's vision 
reflects the view of anti-trust law, that the greater value is in a 
stable marketplace, not the resurrection of competing ideas.
    The Other Truth about Netscape
    The Appeals Court ruling reflects another hard 
truth--Netscape fell, because it did. The DC Circuit rejected 
the course-of-conduct theory, under which Microsoft's specific 
practices could be viewed as part of a "broad monopolistic 
scheme." This obviously has made anyone that viewed Microsoft 
as an evil-doer exponentially dissatisfied with DOJ's settlement. 
But again, is the responsibility of the DOJ to make the world safe 
from Microsoft? Netscape maintained its Internet dominance until 
1997, when Internet Explorer's fourth version was able to lap 
Netscape. Netscape Navigator never regained its prominence. In 
addition, by that time, the Netscape product was slow, outdated, and 
unstable, falling to a swifter surging Internet Explorer.
    But perhaps the most unmentioned reality regarding Netscape's 
fall was their announcement to all (Microsoft included) that their 
strategy was to be the middleware that would be the 
"new" Windows, removing Microsoft's flagship product 
from dominance. Hindsight is 20/20 but when you consider how far 
ahead Netscape was in front of Microsoft, there are infinite what 
if's" to consider if it had been mum about its strategy to 
take on Redmond. Microsoft had all but ignored the Internet and it 
is very questionable if they would have been able to play catch-up 
to a well-funded and branded Netscape team. The outcome of this 
possibility almost completely counters any damage claims in their 
civil suit recently announced. After all, Netscape's grand plan was 
never realized, thus the future is incalculable especially when 
taking into consideration the hubris of Netscape.
    Innovators are the Lifeblood of U.S.
    Today, new technology firms use every means available to compete 
including spending billions of dollars on research and development. 
Sun Microsystems, IBM and AOL and Microsoft combine to spend over 
$100 billion annually just on research and development. Firms spend 
exorbitant amounts of money to create and protect to new products. 
But again, this competition is to the benefit of inventors and the 
U.S. marketplace.\1\ Recently, the United States Patent Office 
released its annual list of the top ten private sector patent 
recipients, it reported that for the ninth consecutive year, IBM 
received more patents than any other organization in the world. 
"I am proud that American corporations are leaders among U.S. 
patent holders," said James E. Rogan, Undersecretary of 
Commerce for Intellectual Property. "Patents promote 
technological progress and are a potent source for competitive free 
enterprise."
---------------------------------------------------------------------------

    \1\ U.S. Patent and Trademark Offfice. January 10. 2002.
---------------------------------------------------------------------------

    USPTO's comments echo the importance of preserving the status 
quo of the U.S. marketplace. In the end, it is in the interest of 
innovation that we close the chapter on

[[Page 28811]]

U.S. vs. Microsoft. The judicial process has sorted through the 
facts and come to judgment. Those dissatisfied with the settlement 
should be reminded by W. M. Deming's famous quip, "Learning is 
not essential, survival is not mandatory." Deming's point 
speaks not only to the Microsoft case; but the hard truth about 
invention and success in the technology business. The court system 
has done its job, and enough precious time has been dedicated to 
legal jurisprudence, It is now the time for Microsoft and its 
opponents to tuck in their chin, learn from their mistakes and 
return to the marketplace.

                    U.S. Patent and Trademark Office (USPTO) List of Top 10 Patent Recipients
----------------------------------------------------------------------------------------------------------------
                                    Preliminary
                                     # of                                     Final rank  in   Final Number
    Preliminary rank in 2001        Patents  in            Organization                2000       of Patents  in
                                       2001                                                            2000
----------------------------------------------------------------------------------------------------------------
1...............................           3,411  International Business.                      1           2,886
                                                   Machines (IBM).
2...............................           1,953  NEC Corporation...............               2           2,021
3...............................           1,877  Canon Kabushiki Kaisha........               3           1,890
4...............................          1,6543  Micron Technology.............               7           1,304
5...............................           1,450  Samsung Electronics Co., Ltd..               4           1,441
6...............................           1,440  Matsushita Electrical                       11           1,137
                                                   Industrial Co., Ltd..
7...............................           1,363  Sony Corporation..............               6           1,385
8...............................           1,271  Hitachi, Ltd..................              13           1.036
9...............................           1,184  Mitsbushi, Denki Kabushiki                  14           1,010
                                                   Kaisha.
10..............................           1,166  Fujitsu Limited...............              10          1,147
----------------------------------------------------------------------------------------------------------------
* Source: USPTO, January 10, 2002. The listed patent counts are preliminary counts, which are subject to
  correction. The final listing of patent counts for the top patent organizations in 2001 should be available by
  early April 2002. Patent information reflects patent ownership at patent grant and does not include any
  changes that occur after the



MTC-00030063

E. BLAINE RAWSON
596 East 1050 North
Bountiful, Utah 84010
January 28, 2002
SENT VIA:
E-MAIL TO: Microsoft.atr @ usdoj.gov
VIA FACSIMILE COPY TO: (202) 307-1454 or (202) 616-9937
1ST CLASS MAIL TO:
The Honorable Colleen Kollar-Kotally
U.S. District Court, District of Columbia
c/o Renata B. Hesse Antitrust Division
U.S. Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530-0001
Re: Microsoft Settlement
    Dear Judge Kollar-Kotally:
    I write to inform you of my support for the position taken by 
Utah's Attorney General concerning the proposed Microsoft 
settlement.
    It would have been easy for Utah's Attorney General, as a 
Republican, to join with certain other states in accepting the 
proposed Microsoft/Justice Department settlement. He has been 
criticized by some for being anti-free market. However, this case 
can not be reduced to such simplistic sound bytes. His support for a 
free market is not at issue. Microsoft was found in violation of law 
by a court of law. The real question is what action should be taken 
to prevent similar violations from occurring in the future and what 
penalty should be imposed upon Microsoft: for past violations. The 
proposed settlement does not appear to reflect the extent of the 
findings of violation made by the trial court and sustained by the 
appellate court.
    I applaud Attorney General Shurtleff for holding fast to the 
rule of law, notwithstanding the pressure brought to bear through 
campaign contributions and by certain public officials who would 
have him take a position that may not be in the best interest of the 
citizens of the State of Utah.
    If the settlement does not properly terminate present antitrust 
violations, penalize for past violations, and prevent future 
antitrust violations, then it should not be adopted. I would prefer 
this court hold evidentiary and legal hearings and impose a remedy 
warranted by the facts and law. In addition, the government should 
zealously enforce the remedy to avoid future abuses.
    Respectfully,
    E. Blaine Rawson
    cc: The Honorable Mark Shurtleff, Utah Attorney General



MTC-00030064

77 Blackbird
Drive Bailey, Colorado 80421
January 26, 2002
Attorney General John Ashcroft
950 Pennsylvania Avenue, NW
U.S. Department of Justice
Washington, DC 20530
    Dear Mr. Ashcroft:
    The Microsoft case was ridiculous. In my view, it showed how the 
U.S. Government can step in and attack a company because it has a 
huge market share. The competitors complained and said Microsoft was 
unethical even though the stone attackers" business practices 
are largely the stone. The settlement on Microsoft's behalf shows 
how cooperative the company can be in a reluctant situation. It 
includes compromises that far exceed the original scope of the 
lawsuit, and gives their competitors several unfair advantages.
    Please approve the settlement and let Microsoft put the lawsuit 
behind them once and for all.
    Sincerely,
    Jerol Love



MTC-00030065

The Web Practice
Internet alchemy
FACSIMILE TRANSMITTAL SHEET
TO: John Ashcroft
FROM: Curt Fluegel
COMPANY
DATE: 1/28/2002
US Department of Justice
FAX NUMBER: 1-202-307-1454
TOTAL NO OF PAGES INCLUDING COVER: 2
PHONE NUMBER: 651.842.0475
SENDER'S REF??RENCE NUMBER
RE: YOUR REFERENCE NUMBER:
Microsoft Settlement
NOTES/COMMENTS:
THE WEB PRACTICE, LLC
175 5TH STREET EAST, STE. 700 . ST PAUL, MN 55101 .
[650 776-993]
FAX: [651] 726-7326 .
January 9, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    I am writing this letter to inform you that I am fully in 
support of the settlement reached between Microsoft and the 
Department of Justice. The legal battle that preceded this 
settlement drained tax funds, and challenged state budgets. This 
suit was initially brought about to help give the consumer more 
choices in the IT market; instead, it has succeeded in draining 
money from our pockets.
    This settlement is fair and pragmatic. Microsoft has gone far 
and above what it should have needed to do to get this issue 
resolved. The settlement addresses concerns that were not even part 
of the original suit, and Microsoft even compromised some of its 
intellectual property to make the settlement adequately thorough.
    Please prevent any further abuse of our tax resources. The right 
thing to do would be to finalize the settlement and resolve this 
issue promptly. We muse give Microsoft way, so it can return to 
innovation--
    Sincerely,
    Curt Fluegel
    General Partner



MTC-00030066

43 Beaumont Circle Apt. 1
Yonkers, NY 10710
January 25, 2002

[[Page 28812]]

Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    Since the Department of Justice is accepting and publishing 
public comments for the first time since the antitrust suit was 
brought against Microsoft over three years ago, here are my 
comments.
    Microsoft agreed to the right of third party's to exercise any 
of the options provided by the settlement that would infringe on any 
Microsoft intellectual property right. Microsoft will provide the 
third party with a license to the necessary intellectual property on 
reasonable and non-discriminatory terms.
    Microsoft also agreed to the establishment of a technical 
committee that will monitor Microsoft's compliance with the 
settlement and assist with dispute resolution. The technical 
committee will consist of three experts in software engineering. Any 
third party who believes that Microsoft is not complying with any 
provision of the settlement will be free to lodge a complaint with 
an internal Compliance Officer at Microsoft, as established by the 
settlement, the Department of Justice, or any of the State 
plaintiffs that are party to the settlement. Now that Microsoft has 
agreed to those terms, shouldn't Government agree to end litigation?
    Sincerely,
    Syed Kamal



MTC-00030068

SUZANNE F. THORUP
3148 Creek Road
Salt Lake City, UT 84121
January 25, 2002
SENT VIA:
E-MAIL TO: Microsoft.atr @ usdoj.gov
VIA FACSIMILE COPY TO: (202) 307-1454 or (202) 616-9937
The Honorable Colleen Kollar-Kotally
U.S. District Court, District of Columbia
c/o Renata B. Hesse
Antitrust Division, U.S. Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530-0001
Re: Microsoft Settlement
    Dear Judge Kollar-Kotally:
    This letter will inform you of my opposition to the proposed 
Microsoft settlement. I understand that Microsoft was found to be in 
violation of the antitrust laws of the United States by virtue of 
uncompetitive conduct, particularly in its marketing practices. It 
is important that the market have viable competitors, including 
those who would make compatible products. Microsoft's practices have 
destroyed any semblance of an open market place. The proposed 
settlement appears to be little more than business as usual. 
Microsoft has once again won, and the consumer has lost. The 
proposed settlement does not resolve the problems identified by the 
trial judge, it has merely postponed their resolution because the 
agreement fails to prevent future violations and does little to 
correct past behavior.
    I am not advocating that Microsoft should be broken up. I am a 
shareholder and believe that Microsoft is still a strong company 
that holds value for investors. However, I believe that Microsoft 
will succeed in a competitive market place. Breaking up Microsoft 
would not be in the best interests of investors. By the same token, 
adoption of the proposed settlement agreement would not be in the 
best interests of the consumers.
    Since the parties have not achieved a reasonable settlement, it 
is time for the courts to do so. Please reject the proposed 
settlement and conduct such hearings as may be necessary to 
determine what appropriate remedies should be employed.
    Respectfully,
    Suzanne F. Thorup
    cc: The Honorable Mark Shurtleff, Utah Attorney General



MTC-00030069

268 Neptune Boulevard
Long Beach, NY 11561-3732
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
January 24, 2002
    Dear Mr. Ashcroft:
    In a few days, the Justice Department will make its final 
decision on the Microsoft settlement. It is my fervent hope that the 
government accept this settlement from Microsoft. I feel that 
Microsoft is giving away too much to the competition, but I 
completely support Microsoft's efforts to end this three-year legal 
war over antitrust behavior.
    The federal government's actions toward Microsoft have been 
abominable. I am completely against government involvement in 
private business affairs. The freedom to innovate must be preserved 
if our country is to continue to be a world leader This country's 
strength has been built from our free enterprise system. Further 
government involvement will continue to hurt our already weak 
economy.
    As a real estate agent, I have exclusively used Microsoft 
Windows and Microsoft Office for years and it has indeed contributed 
to the success of my small business. I also use Internet Explorer, 
my web browser of choice. Nothing on the market compares to 
Microsoft's software products. The competition can put their 
software on Windows and remove Microsoft's, but I will always use 
Microsoft's products.
    I have confidence that Microsoft is doing what is in their best 
interest, to get out from under the hand of government involvement. 
I see nothing but positives for the economy and for the computer 
industry, once Microsoft is allowed to work entirely free from 
further government entanglements. Please do what I feel is best for 
the economy and the people of this great nation, confirm the 
Microsoft settlement.
    Sincerely,
    Maria Ferrer



MTC-00030070

SIDLEY AUSTIN BROWN & WOOD LLP
CHICAGO DALLAS
LOS ANGELES
NEW YORK
SAN FRANCISCO
SEATTLE
1501 K STREET, NW
WASHINGTON, DC 20005
TELEPHONE 202 736 8000
FACSIMILE 202 736 8711
www.sidley.com
FOUNDED 1866
BEIJING
HONG KONG
LONDON
SHANGHAI
SINGAPORE
TOKYO
WRITER'S DIRECT NUMBER (202) 736-8067
WRITER'S E-MAIL ADDRESS tbartucz @ sidley.com
FACSIMILE/TELECOPIER TRANSMISSION
From: Name: Tanya Bartucz
Voice Phone: Joanna Harkin 202/736-8268
To: Name: U.S. Department of Justice
Company:
Facsimile #: 202-307-1454
Voice Phone:
Subject:
Message:
Date:   01/28/02
Time: 05:24 PM
No. Pages (Including Cover): 5
    Note: If you do not receive all the pages, please call: Joanna 
Harkin 202/736-8268
SIDLEY AUSTIN BROWN & WOOD LLP
CHICAGO DALLAS
LOS ANGELES
NEW YORK
SAN FRANCISCO
SEATTLE
1501 K STREET, NW
WASHINGTON, DC 20005
TELEPHONE 202 736 8000
FACSIMILE 202 736 8711
www.sidley.com
FOUNDED 1866
BEIJING
HONG KONG
LONDON
SHANGHAI
SINGAPORE
TOKYO
WRITER'S DIRECT NUMBER (202) 736-8067 WRITER'S E-MAIL ADDRESS 
tbartucz @ sidley.com
FACSIMILE TRANSMISSION FORM
Date: January 28, 2002 No. of pages including cover sheet:
To: Company: U.S. Department of Justice
Telephone #: Fax #: (202) 307-1454
SPECIAL INSTRUCTIONS: IF NOT USA PLEASE INDICATE COUNTRY & CITY 
CODE NUMBER
From: Tanya Y. Bartucz Ext. 8067 Floor:
    COMMENTS: Attached please find the Tunney Act comments on the 
Microsoft settlement of Griffin B. Bell, Edwin Meese III, and C 
Boyden Gray. An electronic copy will also be submitted Problems with 
this transmission should be reported to: (202) 736-8067
January 28, 2002
Renata B. Hesse
Antitrust Division
U.S. Department of Justice
601 D Street NW
Suite 1200
Washington, DC 20530-0001
Re: Microsoft Settlement
    Dear Ms. Hesse:

[[Page 28813]]

    We believe the Revised Proposed Final Judgment 
("RPFJ") that the federal government and some of the 
plaintiff states have reached with Microsoft should be adopted, and 
that the proposals of the nine states that continue to pursue this 
litigation (the "Litigating States") should be rejected. 
That is so, in our view, for four main reasons. First, the RPFJ will 
serve the central goal of antitrust law--benefiting 
consumers--far better than any of the states" proposed 
remedies. Most importantly, it allows Microsoft to continue selling 
a single, uniform operating system under the Windows name. This will 
directly benefit all the consumers who have relied on Windows' 
continued availability when deciding which computer and software to 
purchase.
    At the same time, the RPFJ will increase the range of choices 
available to consumers by requiring Microsoft to enable both 
computer manufacturers and end-users to turn off Microsoft's 
middleware products such as its Internet browser, instant messaging 
tools, media player, and email utilities. Consumers will therefore 
be free to sample and choose among a variety of middleware utilities 
from various companies. The RPFJ thus strikes a sensible balance 
between the goal of giving rival middleware producers access to 
Microsoft's customers, and the equally important goal of avoiding 
anything that would destabilize the Windows platform on which 
consumers--and indeed most of the software 
industry--depend.
    The Litigating States' proposals strike no such balance. For 
example, the Litigating States would require Microsoft to sell 
stripped-down versions of Windows at court-mandated prices, without 
regard for the technical advantages of integrating middleware and 
operating system functions, or for the importance of a stable, 
uniform operating system. Computer manufacturers would then be able 
to patch competitors' middleware into the Windows system and sell 
the hybrid product to consumers without giving them any guidance as 
to how to restore their computers to the original Windows settings. 
This would effectively destroy the Windows standard. That will not 
benefit consumers; it will harm them. And it is anti-competitive, 
not pro-competitive.
    Second, the RPFJ is narrowly tailored to the findings of 
illegality affirmed by the Court of Appeals. The RPFJ thus enjoins 
the types of conduct held illegal by that court--primarily 
certain exclusive dealing arrangements and threats of 
retaliation--in language broad enough to preclude similar 
behavior, without losing sight of the limited Court of Appeals 
holding.
    In contrast, many of the Litigating States' proposals have 
nothing to do with any of the issues in this case, much less the 
Court of Appeals' decision. For example, the Litigating States would 
require Microsoft to inform them sixty days in advance of any 
acquisition of technology or other intellectual property. Yet this 
"remedy" cannot be tied to any element of this case, let 
alone to any finding of liability that was affirmed on appeal. Other 
proposals are simply overbroad or unworkable, such as the proposal 
that Microsoft notify any software developer sixty days in advance 
of any action it intends to take that might have an impact on the 
interaction between the developer's middleware and Windows,
    Third, the remedy in this case must be one that the federal 
courts can administer, not one that will turn the District Court 
into a regulatory agency. Again, the RPFJ strikes the needed 
balance. The Technical Committee and the Compliance Officer that it 
would install are unquestionably intrusive, but at least the 
Committee would properly make its reports to the plaintiffs, who 
then would decide what course to pursue,
    By contrast, installing a Special Master with his own staff and 
the power both to investigate and to judge, as the Litigating States 
propose, would drag the federal courts into a prosecutorial and 
regulatory role that they are ill-suited to perform. The Litigating 
States' substantive proposals take a similar, regulatory approach. 
They would mandate product design and pricing, force Microsoft to 
distribute its competitors" products, and give Microsoft's 
rivals a mechanism to try to block any decision by Microsoft that 
they dislike.
    Finally, we believe that entry of the RPFJ will respect and 
promote the primacy of the U.S. Department of Justice in enforcing 
federal antitrust law. To be sure, the States may have some role to 
play in this area. But it would be bad policy to allow a small group 
of state attorneys general to trump, in effect, the Department's 
decision to settle on reasonable terms an antitrust case that has 
such enormous implications for the national economy.
    For all these reasons, we urge the District Court to enter the 
RPFJ as its final judgment in this case. We believe it would benefit 
consumers, effectively address the Court of Appeals' findings, and 
provide a workable resolution to this long-running litigation.
    Sincerely.
    Griffin B. Bill
    Edwin Meese III
    C. Boyden Gray



MTC-00030071

South Dakota Legislature
State Capitol,
500 East Capitol,
Pierre, South Dakota 57501-5070
House of Representatives
January 28, 2002
Renata Hesse
Trial Attorney
Antitrust Division
U.S. Department of Justice
601 D Street NW--Suite 1200
Washington, DC 20530
    Dear Ms. Hesse:
    My pursuit in public service has been to make sure that 
taxpayers and justice are well served in all matters. In the 
settlement proposal affecting U.S. v. Microsoft, I am concerned that 
enough resources in time, money, attention and personnel have been 
used to pursue the issues raised in this anti-trust case.
    At no time in the proceedings has it been established that 
consumers have been wronged by Microsoft's actions. In fact, I think 
consumers who've used Microsoft have been well pleased with the 
quality and cost of the company's products and services. The issue 
seems to focus on Microsoft and its ambitious competitors, and I 
think this case has expended enough resources to determine what is 
fair. I strongly support putting the settlement into effect.
    I appreciate your attention to my statements.
    Sincerely
    Representative Bill Napoli
    Legislative District 35
    Assistant Majority Leader



MTC-00030072

South Dakota Legislature
State Capitol,
500 East Capitol,
Pierre, South Dakota 57501-5070
Senate Chamber
January 28, 2002
Renata Hesse, Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
    Dear Ms. Hesse:
    This letter is to be entered in the public input phase of the 
settlement in U.S. v. Microsoft. I support the settlement for the 
following reasons:
    . The settlement answers the issues which were found to be valid 
at the end of this 4-year-old case.
    . The settlement will conclude a case which has used sufficient 
time, personnel and money to seek out every possible issue and fully 
explore each one.
    . At no time during the past four years has it been established 
that consumers have been wronged by Microsoft's actions.
    . A significant benefit from this case to school districts which 
hold a disproportionate share of economically stressed children is 
the dedication of hardware, software and tech support to bridge the 
IT gap for these children.
    Frankly, the continuation of this case will not benefit justice 
or the information technologies industry. After more than four 
years, an antitrust case of this magnitude should have yielded all 
of the benefits that are reasonable.
    I appreciate the opportunity to submit this letter.
    Sincerely,
    Brock L. Greenfield
    State Senator
    Legislative District 6



MTC-00030073

January 28, 2002
Renata Hesse, Trial Attorney
Antitrust Division
United States Department of Justice
601 D Street NW--Suite 1200
Washington, DC 20530
    Dear Renata Hesse:
    I am a strong supporter of the use of information technologies 
as a major resource of developing the economy of South Dakota. 
Efforts achieved in the state's Wiring the Schools Program and long 
distance learning systems will reap huge dividends as the so-called 
digital divide is erased between urban America and rural states. The 
allocation of computers and backup support which is expected from 
the settlement proposal in the

[[Page 28814]]

antitrust case, U.S. v. Microsoft, offers another leap forward 
because those systems are targeted for use by low income school 
districts. South Dakota has many of those districts which should 
qualify for the computer systems. That is one reason I support the 
settlement.
    The other speaks to how the justice system is used to pursue 
justice. This antitrust case was established to explore Microsoft 
Corporation's practices as they relate to its competition. It has 
not established any harm to consumers, which should be a strong 
consideration in the value of this settlement. From what I have been 
able to read and understand, the settlement adequately addresses the 
issues which have remained viable throughout the court process. I 
think this case has reached the point when it is time to say enough 
is enough; it's no longer necessary to keep this court action going.
    I think justice has been pursued, and the pursuit has not 
wandered outside the lines of what is a proper action by the courts. 
My hope is that this process is not allowed to wander outside the 
lines by rejecting the settlement. Thank you.
    With best regards,
    Phil Hanson



MTC-00030074

January 28, 2002
Renata Hesse, Trial Attorney
Antitrust Division
U.S. Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
    Dear Renata Hesse:
    My letter is being sent for the settlement phase in U.S. vs. 
Microsoft. I have followed the case in the news and I have wondered 
why so much money and attention has been consumed to pursue 
Microsoft on issues which could have been decided in much less time. 
Frankly, the case has the public appearance of Microsoft being 
punished for leading the competition with software which is more 
competent and less expensive for average users than Microsoft's 
competitors.
    Skepticism aside, I hope the settlement is enacted because this 
issue has had its day in court and because the issues which were 
believed to be important have been answered. I am very pleased that 
the U.S. Department of Justice reached an accord with Microsoft. The 
fact that such an accord was reached by the federal government and 
nine of the states involved in the action should weigh heavily in 
favor of allowing thin settlement to move toward enactment.
    Thank you for your attention to my letter.
    Sincerely,
    Ron Sauby



MTC-00030075

To: US Department of Justice--Antitrust Division
Title:
Company:
Fax 202-616-9937
Business
From:
Fax number:
Business phone:
Date & Time: 1/28/2002 5:46:28 PM
Pages sent: 12
Re: Microsoft Settlement
Please see attached document
The Center for the Moral Defense of Capitalism
4901 Seminary Rd #1320
Alexandria, VA 22311-1830, USA
(703) 625-3296 (VOX)
(815) 327-8852
(FAX)
Internet: http://www.rnoraldefense.com E-mail: 
info @ moraldefense.com
10708 N Essex Court
Mequon, WI 53092
January 26, 2002
Attorney General John Ashcroft
Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I was relieved last November when a settlement was finally 
proposed in the Microsoft antitrust case. I do not think Microsoft 
has done anything worthy of such harsh litigation, and I think that 
a settlement would, at this point, be the best thing that could 
happen in the case. To my dismay, however, Microsoft's competitors, 
who have been relentlessly pursuing the destruction of Microsoft 
from the beginning, are currently engaged in undermining the 
settlement and seeking further litigation against Microsoft. Ever 
since this case was brought to the federal courts, the economy has 
declined and the technology industry has suffered. The measures 
Microsoft's opponents want to pursue will ultimately de more harm 
than good, and I do not believe that the public should have to 
suffer simply because Microsoft's competitors want to make some 
money.
    Microsoft has been very generous in this suit. I think Bill 
Gates and his lawyers have shown a great deal of pragmatism in 
making so many unnecessary concessions. They have gone beyond what 
was required of them in the lawsuit, and have agreed to terms that 
restrict parts of their company that have not violated antitrust 
law,, The settlement appears to be very fair, and I can honestly see 
no good reason for additional litigation. Microsoft has agreed not 
to cater into any contract that would require a third party to sell 
Microsoft software at any fixed percentage. Microsoft has also 
agreed to change its Windows operating system so that it will 
support non-Microsoft software, and Microsoft's competitors will be 
able to introduce their own software directly into Windows.
    I believe it is time to let Microsoft gel back to business, and 
the only way to do that is to settle the case. The proposed 
settlement is sufficient to prevent future antitrust violations, and 
there is no need to continue federal action. I urge you to accept 
the settlement.
    Sincerely,
    Ronald Chikalla
    cc: Representative F. James Sensenbrenner, Jr.



MTC-00030076

WP Investments
January 24, 2002
Renata Heese
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington DC 20530
FAX: 202-616-9937
RE: Settlement of U.S. v. Microsoft
    Dear Ms. Heese:
    I am writing in support of this proposed settlement. I deeply 
appreciate the efforts of our government in pursuing antitrust 
activities and believe that this settlement is a positive 
development in this pursuit. As the former director of a state 
agency I know that the government and Microsoft lawyers have fought 
diligently in this important case. I would like to see the case 
resolved so that private industry can return to competing in the 
marketplace. The technology sector of our economy is looking for a 
signal to get moving again. The settlement of this case can provide 
the right signal that competition is alive and well through 
innovation and hard work and not continued litigation.
    Please know that t appreciate your consideration of my views on 
this important matter.
    Sincerely,
    Chris Pilley
    Partner
    729 S. Acadian Thruway
    Baton Rouge, LA 70806
    225-389-9429
    225-387-0309 (fax)



MTC-00030077

FAX
Date:   Monday, January 28, 2002
Pages including cover sheet: 2
To:
Phone
Fax Phone (202)6169937
From: James J. Ferraro
A&J Marketing Southeast In.
PO Box 150533
Altamonte Springs FL 32715
Phone +1(407)331-4960
Fax Phone +1(407)331-7137
NOTE: Microsoft Settlement.
??
P.O. Box 150533
Altamonte Springs, FL 32715-0533
January 22, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    Microsoft has been dealing with a hostile government for over 
three years now; it is time to put on end to the lawsuit. I am 
writing today to encourage the Department of Justice to accept the 
Microsoft antitrust settlement. The critics are wrong when they 
claim that Microsoft is getting away with lenient terms. The 
settlement was arrived at after extensive negotiations under a 
court-appointed mediator. Microsoft has agreed to terms that extend 
well beyond the products and procedures that were actually at issue 
in the suit, simply for the chance to put the issue behind it. 
Microsoft has given up the right to charge different computer makers 
different prices, thus losing leverage useful in getting its 
software promoted. It has also agreed to allow computer makers and 
users to remove access to Windows technologies,

[[Page 28815]]

features, and bundled applications, in favor of competing software. 
Microsoft has even committed competing software ?? works better with 
Windows.
    It is time that the government stops harassing Microsoft and 
allows free enterprise to re-emerge. The terms of the settlement are 
fair and the government needs to accept it. Please exercise your 
influence and authority to help make that happen.
    Sincerely,
    James Ferraro



MTC-00030079

HOUSE OF REPRESENTATIVES
STATE OF UTAH
REPRESENTATIVE JUDY ANN BUFFMIRE
35TH DISTRICT
(SALT LAKE COUNTY)
785 EAST 4255 SOUTH
SALT LAKE CITY, UTAH 84107
HOME (801) 268-1862
STANDING COMMITTEES: EDUCATION; REVENUE AND TAXATION; RULES 
APPROPRIATIONS: PUBLIC EDUCATION
January 25, 2002
SENT VIA:
E-MAIL TO: Microsoft.atr @ usdoj.gov
VIA FACSIMILE COPY TO: (202) 307-1454 or (202) 616-9937
The Honorable Colleen Kollar-Kotally
U.S. District Court, District of Columbia
c/o Renata B. Hesse
Antitrust Division, U.S. Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530-0001
Re: Microsoft Settlement
    Dear Judge Kollar-Kotally:
    This letter will inform you of my opposition to the proposed 
settlement of the Microsoft lawsuit. Although we are from different 
political parties, I agree with the Utah Attorney General's reasons 
for opposing file proposed settlement--the State of Utah must 
defend laws that protect our consumers, protect free enterprise, and 
promote competition. It was determined by the trial court that 
Microsoft violated the antitrust laws of the United States. That 
decision has been reviewed and affirmed by the Court of Appeals, and 
the United States Supreme Court has determined not to hear a further 
appeal by Microsoft. Microsoft has had ample opportunity to defend 
itself against charges that its actions thwarted competition in the 
market. These actions have had an adverse impact on Utah consumers, 
including some who are my constituents.
    Any settlement approved, or any remedy imposed, by the court 
must assure that Utah's consumers, including its businesses, are 
protected from Microsoft's anti-competitive behavior. I am informed 
that the proposed settlement allows Microsoft too much discretion in 
determining whether or not certain of the settlement provisions 
apply. Such provisions do not protect free enterprise or promote 
competition.
    Rather than adopting settlement provisions that might lead to 
future litigation, I recommend that hearings be conducted by the 
court to determine an appropriate remedy that will ensure fair 
competition into the future.
    Sincerely,
    Representative Judy Ann Buffmire
    Utah House District 35
    cc: The Honorable Mark Shurtleff, Utah Attorney General



MTC-00030080

111 NW First Street
Suite 910
Miami, FL 33128
(305) 375-4507
January 28, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    To protect the idea of free enterprise in this country, please 
make sure to confirm the proposed agreement with Microsoft 
Corporation. Microsoft has developed a great product, which tile 
public is satisfied with, so any further attempt to infringe on that 
could only damage our many years of progress in the PC industry.
    Under the review of a committee of software experts, these terms 
enable computer makers to re-configure Windows with their own 
preferred software offerings, and the ability to manipulate their 
supporting features, without reprisal from Microsoft. The top 20 
manufacturers will be able to operate without preference on terms 
and conditions to license the Windows operating system and any 
requirements to distribute or promote Microsoft technologies. Not 
only is the offer generous, but also some of the proposed measures 
even exceed the Justice Department demands in order to encourage 
swift approval of the deal.
    It's time to put the legal activities aside and complete this 
agreement at the earliest opportunity. There is no reason for 
further action against Microsoft, as the company should continue 
freely to develop the high-quality software that consumers want and 
businesses need. I look forward to your approval.
    Sincerely,
    Miguel Cordero



MTC-00030081

January 28, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am in favor of the decision to settle the Microsoft antitrust 
lawsuit. Little will be gained by continued litigation, especially 
in light of the vast concessions Microsoft has made. Contrary to 
assertions made by their competitors, Microsoft will not be getting 
off easy. The settlement agreement will impose numerous restrictions 
on the way Microsoft conducts its business. For instance, Microsoft 
will not enter into agreements obligating third parties to 
exclusively distribute Windows products. They have also agreed not 
enforce many of their intellectual property rights. Instead of 
calling for more litigation, Microsoft's competitors should be 
overjoyed by the changes that will be taking place in Microsoft's 
business practices. I tort hopeful the court will approve the 
settlement. The time has come for fine parties to move on, and to 
focus on other matters.
    Sincerely
    Michael Baldasare



MTC-00030083

January 26, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Attorney General:
    With as many people and small businesses that depend on 
Microsoft and their products on a daily basis, and considering how 
large an impact the company has on the U.S. economy and balance of 
trade, I cannot see how the Justice department thought it a good 
idea to attack Microsoft. It is like shooting ourselves in the foot 
to attack one of, if not the, top businesses in the world. That is 
why I was so pleased to hear that you had reached a settlement, This 
settlement will mean an end to this issue once and for all. It is 
harsh enough to satisfy Microsoft's competitors and yet will leave 
the company in one piece to continue innovating. I only hope that 
they will respect how much Microsoft is giving up by allowing full 
access to key components of its software. This will allow anyone to 
use it to enhance their products to better compete with Microsoft's, 
without retaliation from Microsoft.
    That, without all the other pans of the settlement, should be 
enough to satisfy Microsoft's critics. Microsoft has simply gone 
beyond what was expected of them in order to end this case. Let's 
let them move on and get back to business as usual. In my opinion, 
this will make a major part of ending our recession.
    Sincerely,
    Lee & June Johns
    645 Village Lane South
    Mandeville, LA 70471



MTC-00030084

PAUL C. THORUP
3148 Creek Road
Salt Lake City, Utah 84121
January 28, 2002
SENT VIA:
E-MAIL TO: Microsoft.atr @ usdoj.gov
IA FACSIMILE COPY TO: (202) 307-1454 or (202) 616-9937
The Honorable Colleen Kollar-Kotally
U.S. District Court, District of Columbia
c/o Renata B. Hesse Antitrust Division,
U.S. Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530-0001
Re: Microsoft Settlement
    Dear Judge Kollar-Kotally:
    I write this letter to express my concerns about the proposed 
Microsoft settlement. I am a 17-year old high school student working 
on a merit badge for my scouting activities. My parents own some 
stock in Microsoft, and I have discussed the issue with them to help 
me better understand the issues before making up my mind concerning 
what type of letter to mite. I am told that the Microsoft proposal 
is the result of court action in which Microsoft was found to be in 
violation of antitrust laws. I commend Microsoft for its ingenuity 
and creativity in bringing products to market, however, I believe 
Microsoft may have abused its market power to the

[[Page 28816]]

detriment of its market competitors and consumers.
    The courts have determined that Microsoft has violated antitrust 
laws. The only thing to determine is what should be done. My parents 
suggested to me that breaking-up Microsoft may not be in the best 
interest of its shareholders, however, from I have learned, the 
proposed settlement has many problems and may not prevent future 
violations. This would not be in the best interest of the 
shareholders either.
    Please hold hearings to decide what remedies should be imposed, 
and do not adopt the proposed settlement agreement.
    Thank you for your consideration.
    Sincerely,
    Paul C. Thorup
    cc: The Honorable Mark Shurtleff, Utah Attorney General



MTC-00030086

MICHAEL SONNTAG
P.O. Box 675
Draper, UT 84020
January 25, 2002
SENT VIA:
E-MAIL TO: Microsoft.atr @ usdoj.gov
VIA FACSIMILE COPY TO: (202) 307-1454 or (202) 616-9937
The Honorable Colleen Kollar-Kotally
U.S. District Court, District of Columbia
c/o Renata B. Hesse
Antitrust Division,
U.S. Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530-0001
Re: Microsoft Settlement
    Dear Judge Kollar-Kotally:
    I am a concerned consumer who believes that the federal 
government is not looking out for my best interests in supporting 
the proposed settlement of the government commenced lawsuit against 
Microsoft.
    I have been concerned for a long time that Microsoft's actions 
were not in the best interest of consumers and that its practices 
were uncompetitive, designed more to monopolize than provide 
reliable products to the market. My concerns were realized when the 
Department of Justice was able to prove its antitrust case against 
Microsoft. Although the Court of Appeals determined that breaking 
Microsoft up would be too punitive, the Court did uphold the 
district court's findings that Microsoft violated antitrust laws.
    If breaking up Microsoft is too harsh of a remedy, then the 
proposed settlement is too lenient of a remedy. Some of the proposed 
settlement provisions do not go far enough and others are either not 
easily enforceable or are subject to conditions that would allow 
Microsoft to determine whether and how to comply. For instance, one 
of the driving issues of the lawsuit dealt with Microsoft's failure 
to share information with others to allow for the reasonable 
development of compatible software. The proposed settlement 
agreement would allow Microsoft to determine whether disclosure 
should be allowed, based upon Microsoft's determination that 
disclosure would harm Microsoft's security of software licensing.
    Settlement should be allowed only if past violations are cured 
and future violations are prevented. The current proposal, in my 
estimation, does neither and should be rejected.
    Your truely,
    Michael Sonntag
    cc: The Honorable Mark Shurtleff, Utah Attorney General



MTC-00030087

MIKE BROWNING
88 East Mutton Hollow Road
Kaysville, UT 84037
January 25, 2002
SENT VIA:
E-MAIL TO: Microsoft.atr @ usdoj.gov
VIA FACSIMILE COPY TO: (202) 307-1454 or (202) 616-9937
The Honorable Colleen Kollar-Kotally
U.S. District Court, District of Columbia
c/o Renata B. Hesse
Antitrust Division,
U.S. Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530-0001
Re: Microsoft Settlement
    Dear Judge Kollar-Kotally:
    I am a supporter of the free enterprise system and believe that 
government should generally allow businesses to operate and compete 
without government intervention. Nonetheless, I am informed that a 
settlement has been proposed in the Microsoft case that may not be 
in the best interest of average consumers like me.
    I understand that the original trial court held that Microsoft 
violated U.S. antitrust laws and that the Court of Appeals did not 
overturn that portion of the trial court's decision. If Microsoft 
has violated antitrust laws, they have hurt rather than promoted 
competition which is one of the most important aspects of a free 
enterprise system. This call not be good for the average consumer. 
If the proposed settlement does not resolve the antitrust 
violations, then Microsoft's conduct could continue into the future, 
therefore, I ask that you not accept the proposed settlement and 
take whatever action may be appropriate to properly protect the 
interests of consumers.
    Sincerely,
    Mike Browning
    cc: The Honorable Mark Shurtleff, Utah Attorney General



MTC-00030088

POH
42 Quail Run Warren, NJ 07059
Telephone: 732-302-9608
Number of Pages (Including cover) 2
To: Attorney General Mr. John Ashcroft
From: Ann Poh
Company: US Department of Justice
Date: 1/28/02 
Fax Number: 1-202-307-1454 Phone Number:
Reply Requested: Yes [ ] No [ ]
Notes/Comments:
Letter attached. Thank you.
POH 42 Quayle Run
Warren, NJ 07059
January 24, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing to express my opinion of the recent settlement 
between Microsoft and the US Department of Justice. The lawsuits 
have been too long to date and need to be ended. I feel that 
Microsoft has been a victim of personal vendettas and greed and has 
gotten a raw deal even in temps of the recent settlement.
    The settlement is harsh and requires Microsoft to give up 
interfaces that are internal to their Windows products and design 
future Windows version so that computer makers, software developers, 
and consumers can more easily promote their own products. These 
concessions should be enough to appease all parties that are part of 
dispute so it amazes me that 9 states want to continue litigation. 
Please ignore this opposition for the sake of our IT sector and 
economy. Our nation needs your office to take a strong stance and 
uphold principles of free enterprise.
    Sincerely,
    Ann Poh



MTC-00030090

423 NW 21st Street
Oklahoma City, OK 73103
January 19, 2002
Attorney General John Ashcroft
U.S. Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft,
    This is to address the recent settlement between the Department 
of Justice and Microsoft. I want to give my support to this 
agreement. It has gone on far too long. I opposed the initial 
lawsuit. It was not warranted. Microsoft, through Bill Gates, has 
done nothing but benefit the consumer with his technology. I use 
Microsoft software programs, operating systems, everything, because 
they work better than the other programs on the market. If another 
firm were to put out a better product, I would use that one. The 
antitrust suit was nothing more than a bunch of crybabies getting 
together and trying to cripple the one firm they could not compete 
with, and the Department of Justice fell right into line. I know 
there is a great desire to break up Microsoft, but I cannot think of 
any thing worse for the industry or the country. AT&T was broken 
up; our phone system has gotten worse ever since. I get ten 
different bills, none of which I understand, and my phone service 
keeps increasing in price. When you need to call service, you are 
always switched somewhere else; no one takes responsibility. This is 
what would happen with Microsoft. Further, those who are rivals of 
Microsoft, and those who see any big business as evil, would sit 
gleefully on the side, cheering.
    Microsoft has agreed to terms that extend well beyond the 
products and procedures that were actually at issue in the suit. 
Microsoft has agreed to allow computer makers to ship non-Microsoft 
product to a customer; Microsoft has agreed to design future 
versions of Windows with a mechanism to make it easier to promote 
non-Microsoft software; Microsoft has agreed to document for use by 
its competitors various interfaces that are internal to 
Windows"

[[Page 28817]]

operating system products--a first in an antitrust settlement.
    Whatever "sins" Microsoft has committed, they have 
more than paid for. Give your support and approval to the agreement. 
Thank you.
    Sincerely,
    E. Claudine Long
    CC: Senator Don Nickles



MTC-00030091

ERIC MECHAM
3274 East 7800
South Salt Lake City, UT 84121
January 27, 2002
SENT VIA:
E-MAIL TO: Microsoft.atr @ usdoj.gov
VIA FACSIMILE COPY TO: (202) 307-1454 or (202) 616-9937
The Honorable Colleen Kollar-Kotally
U.S. District Court, District of Columbia
c/o Renata B, Hesse Antitrust Division,
U.S. Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530-0001
Re: Microsoft Settlement
    Dear Judge Kollar-Kotally:
    I understand you are receiving comments concerning the proposed 
Microsoft settlement, and I wish to be heard on the subject.
    I believe it was appropriate for the Department of Justice to 
bring the antitrust case against Microsoft concerning its anti-
competitive actions. It was long overdue. However, I am concerned 
that the case is being settled without imposing appropriate remedies 
against Microsoft. This is not the first case brought against 
Microsoft. Each time, the parties thought they had resolved their 
problems only to find that Microsoft had found a way around 
compliance with the settlement agreement. Therefore, settlement of 
those prior cases has not well-served the public interest in having 
Microsoft stop its anti-competitive behavior.
    Microsoft has proven that it can not be trusted to self-police, 
and the language of the proposed settlement agreement is not tight 
enough to prevent future violations of antitrust laws. Some of the 
agreement's provisions grant too much discretion to Microsoft to 
determine if and when they will comply with some of its provisions. 
If left to enforce the agreement itself, Microsoft find a way to 
interpret the agreement in its favor. This is only natural, however, 
it does not solve the problems that concerned the Department of 
Justice in the beginning.
    Microsoft has already been found to have violated federal 
antitrust laws. Break-up may be the only way to finally rein 
Microsoft in, however, whatever remedy is finally imposed, it must 
take into account past and the potential for future violations of 
the same laws. The proposed settlement does not do this. The 
proposed agreement does not prevent future anti-competitive actions 
against vendors, suppliers, retailers and competitors.
    I request that any settlement or court order be tightly worded 
to avoid any question as to Microsoft's obligation to comply.
    Sincerely,
    Eric Mecham
    cc: The Honorable Mark Shurtleff, Utah Attorney General



MTC-00030092

PATRICIA CHRISTELLO
Honorable Colleen Kollar-Kotelly
U.S. District Court, District of Columbia
c/o Renata B Hesse
Antitrust Division
U.S. Department of Justice
601 D Street NW
Suite 1.200
Washington, DC 20530-0001
RE: U.S. v Microsoft
    Dear Judge Kollar-Kotelly,
    I am writing with regard to the settlement between the 
Department of Justice and Microsoft in U.S. v Microsoft. This 
proposed settlement allows Microsoft to safeguard and bolster its 
monopoly, while also allowing Microsoft to use anticompetitive 
strategies to spread its dominance into other markets.
    The deal does not promote innovation in this vital sector of our 
economy. The enforcement provisions are vague and it seems there are 
many loopholes loft in the settlement. At a time when security is of 
vital importance to both our government and corporations it would 
seem eminently important that we do not curb the production of new 
products in an attempt to protect an illegal monopoly,
    Microsoft has been found liable before the District Court, they 
subsequently lost an appeal in a 7.0 decision to the U.S. Court of 
Appeals for the District of Columbia, have had their rehearing in 
the appellate court denied, and its appeal to the Supreme Court 
denied. It is time we rectify those inadequacies and promote the 
true nature of free markets to keep from hindering innovation in the 
marketplace.
    The court must find a solution that meets the appellate court's 
standards and avoid any future anticompetitive strategies.
    I appreciate you taking the time to consider this matter 
further.
    Sincerely,
    Patricia Christello
    Business Manager



MTC-00030093

GREGORY M. D'AGOSTINO
Honorable Colleen Kollar-Kotelly
US District Court, District of Columbia
C/O Renata Hesse
Antitrust Division
United States Department of Justice
601 D Street NW
Suite 1200
Washington, DC 20530-0001
RE: US v Microsoft
    Dear Judge Kollar-Kotelly,
    I am writing with regard to the settlement between the 
Department of Justice and Microsoft in US v Microsoft. I realize 
there has been much discussion over many years concerning this 
matter. In light of that, it seems a more equitable solution could 
have been reached. The specifics of this settlement appear to 
violate antitrust laws.
    As it stands now, Microsoft has the capacity to bolt financial 
services, cable or even the Internet to Windows hindering 
competition. In addition Microsoft makes the decision as to what 
technologies will be compatible with its Windows. This makes it very 
difficult for companies to develop software or for that matter find 
investors to provide venture capital for their companies. It is 
interesting to note that currently Microsoft Windows and Office 
Suites enjoy over a 90% user status. Expansion into other markets 
will expand that usage even more. At a time when computer technology 
companies should be challenged to address security and privacy 
issues in government and corporations, the inability to compete is. 
certainly not making it an environment good for growth. The 
settlement provides many loopholes, which could well keep the issue 
in litigation for years.
    The computer software market should be buttressing the economy 
rather than adding to its sluggishness. Without competition, venture 
capital and an expectation of success it is very likely this 
industry will continue its downward slope. It is interesting to look 
at the monopoly of Microsoft and note the growth in the company as 
compared to other companies who do not have the ability to control 
most aspects of the market. The affect on consumers will be 
reflected in the high cost of software.
    Given that nothing in the settlement hinders Microsoft, there 
should be little change in its business operation. It appears 
Microsoft plans to expand to financial, cable and the Internet, 
which will only serve to expand its control.
    Although Microsoft will be required to share technology if it is 
reasonably necessary it also will determine which companies' 
technologies will be compatible with Windows. Microsoft will appoint 
one member of the three-person technology committee, the Department 
of Justice appoints another and they must both agree on the third.
    It is likely companies will be reluctant to take on a Microsoft 
with a challenge, as their future business may well depend on their 
relationship with Microsoft. Given that Microsoft will be able to 
charge whatever it wants for its products, prices will skyrocket.
    It seems a more equitable solution could be determined, If I may 
be of any assistance, please contact me.
    Sincerely,
    Gregory M. D'Agostino
    Consultant
    CC: Attorney General Tom Reilly



MTC-00030094

    Holme Roberts & Owen LLP
    Dee L. Heugly
    heuglyd @ hro.com
    Attorneys at Law
    111 East Broadway
    Suite 1100
    Salt Lake City, Utah
    84111-5233
    Tel (801)521 5800
    Fax (801) 521-9639
    www.hro.com
    Salt Lake City
    Denver
    Boulder
    Colorado Springs
    London
January 28, 2002
SENT VIA:
E-MAIL TO: Microsoft.atr @ usdoj.gov
VIA FACSIMILE COPY TO: (202) 307-1454 or (202) 616-9937

[[Page 28818]]

1ST CLASS MAIL TO:
The Honorable Colleen Kollar-Kotally
U.S. District Court, District of Columbia
c/o Renata B. Hesse
Antitrust Division
U.S. Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530-0001
Re: Microsoft Settlement
    Dear Judge Kollar-Kotally:
    Please add my name to the list of those who believe that the 
court should not adopt the proposed settlement in the Microsoft v. 
DOJ case.
    I firmly believe that markets should be open and free to 
competition. When adequate competition exists, consumers generally 
benefit. When competition does not exist, consumers are generally 
harmed to the benefit of one player controlling the market. The 
federal courts have already determined that Microsoft has so 
controlled the market that it is in violation of U.S. antitrust 
laws. Notwithstanding Microsoft's attempt to strike a better deal 
with the DOJ than it might receive from the court, the proposal 
falls short of the goal of remedying past conduct and preventing 
future anti-competitive acts in the future.
    Microsoft has proven to be a super-charged competitor in the 
market place and requires the special attention of the court to 
deter it from once again becoming too dominant in the market. Please 
reject the proposed settlement and conduct whatever hearings may be 
necessary to determine a proper remedy. Respectfully,
    Dee L. Heugly
    cc: The Honorable Mark Shurtleff, Utah Attorney General



MTC-00030095

Holme Roberts & Owen LLP
Abigail L. Jones
(801)323 3265
slolebr @ bro.com
Attorneys at Law
111 East Broadway
Suite 1100
Salt Lake City, Utah
84111-5233
Tel (801) 521-5800
Fax (801) 521-9639
www.hro.com
Salt Lake City
Denver
Boulder
Colorado Springs
London
January 28, 2002
SENT VIA:
E-MAIL TO: Microsoft.atr @ usdoj.gov
VIA FACSIMILE COPY TO: (202) 307-1454 or (202) 616-9937
1ST CLASS MAIL TO:
The Honorable Colleen Kollar-Kotally
U.S. District Court, District of Columbia
c/o Renata B. Hesse
Antitrust Division
U.S. Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530-0001
Re: Microsoft Settlement
    Dear Judge Kollar-Kotally:
    I write to express some concerns with the proposed settlement in 
the Microsoft v. DOJ case. I am informed that the Microsoft case 
will be returning to the federal district court for the purpose of 
imposing a proper remedy. Appropriate sanctions and penalties in an 
antitrust suit generally require that the violator discontinue past 
anti-competitive conduct, provide a component to compensate for the 
damage caused by the past violations, and include conditions under 
which the violator can operate to prevent future violations. 
Although this can occur through settlement, it is appropriate for a 
court to have sufficient supervision over the settlement and 
approval of its provisions to ensure that future violations will not 
likely re-occur.
    I am informed that the proposed settlement does not go far 
enough to ensure that there will be an open and fair market place in 
the future. Microsoft can not be allowed to have too much discretion 
concerning release of its access codes, otherwise, competitors will 
not be able to develop compatible products and vendors will once 
again be required to market software packages according to 
Microsoft's direction, without competition.
    It is time to bring this litigation to an end and correct 
improper market conduct. It appears this will only occur if the 
court takes a strong hand to craft and be willing to enforce 
sanctions designed prevent past conduct from re-occurring. Please 
reject the proposed settlement and fashion your own remedy based 
upon the facts and law applicable to this case.
    Respectfully,
    Abby L. Jones
    cc: The Honorable Mark Shurtleff, Utah Attorney General



MTC-00030096

Holme Roberts & Owen LLP
Jennifer N. Byde bydej @ hro.com
Attorneys at Law
111 East Broadway
Suite 1100
Salt Lake City, Utah
84111-5233
Tel (801) 521-58oo
Fax (801) 521-9639
www.hro.com
Salt Lake City
Denver
Boulder
Colorado Springs
London
January 28, 2002
SENT VIA:
E-MAIL TO: Microsoft.atr @ usdoi.gov
VIA FACSIMILE COPY TO: (202) 30%1454 or (202) 616-9937
VIA FIRST CLASS MAIL TO:
The Honorable Colleen Kollar-Kotally
U.S. District Court, District of Columbia
c/o Renata B. Hesse Antitrust Division
U.S. Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530-0001
Re: Microsoft Settlement
    Dear Judge Kollar-Kotally:
    I write to object to the proposed settlement in the Microsoft v. 
DOJ case.
    The federal district court determined that Microsoft has 
violated United States antitrust laws and the Court of Appeals 
reviewed and sustained that finding. The Court remanded the case to 
the district court for a determination of the appropriate remedy. At 
long last, the case can proceed and the Court may impose appropriate 
remedies for violations U.S. antitrust law. Although I personally 
find Microsoft's cavalier attitude towards antitrust laws troubling, 
and feel that the break-up may be appropriate under certain 
circumstances, I understand that the Court of Appeals has already 
determined that break-up is not an appropriate remedy. I further 
understand that the DOJ has agreed to a settlement of the matter on 
terms that I believe are wholly inadequate and partially 
unenforceable. Therefore, I ask that you not approve the settlement 
and hold your own hearings to determine and impose an appropriate 
remedy.
    Respectfully,
    Jenniffer Byde
    cc: The Honorable Mark Shurtleff, Utah Attorney General



MTC-00030097

DAVID & BRANDY STEWART
44 West Broadway, Suite # 803
Salt Lake City, Utah 84101
January 26, 2002
SENT VIA:
E-MAIL TO: Microsoft.atr @ usdoj.gov
FACSIMILE COPY TO:" (202) 307-1454 or (202) 
616-9937
1ST CLASS MAIL TO:
The Honorable Colleen Kollar-Kotally
U.S. District Court, District of Columbia
c/o Renata B. Hesse
Antitrust Division
U.S. Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530-0001
Re: Microsoft Settlement
    Dear Judge Kollar-Kotally:
    I have been asked to share some of my feelings relative to the 
proposed settlement of the Microsoft v. DOJ litigation.
    I am a CPA with a large accounting firm and consider myself as 
pro-business. I generally do not advocate government intrusion into 
the free market system and would prefer that the competitive market 
place correct any problems. Unfortunately, when one player is too 
dominant in the market place and aggressive in using its dominance, 
the competitive market place can not properly function. This appears 
to be the case with Microsoft. The federal trial court determined 
that Microsoft was in violation of U.S. antitrust law by virtue of 
some of its marketing and other practices. This portion of the 
court's decision was affirmed by the Court of Appeals and was 
allowed to stand by the U.S. Supreme Court. Whenever violations of 
antitrust laws are found to be present, reasonable measures must be 
taken to deter similar conduct in the future and to deal with the 
harm caused by past actions. From what I understand about the 
proposed Microsoft settlement, it does not contain reasonable, 
enforceable measures to accomplish this result. I am particularly 
concerned that Microsoft has too much discretion concerning its 
future compliance with some of the important provisions of the 
settlement agreement- those that would require sharing of source 
codes with competitors so that compatible products can

[[Page 28819]]

be developed. Without assurances that Microsoft will no longer 
engage in anti-competitive behavior, nothing will have been gained 
by the litigation, and the consumers will continue to be harmed 
thereby.
    A proper resolution to the case would entail the imposition of 
appropriate sanctions and conditions of operation. This can only be 
done by the court following hearings. Adoption of the proposed 
settlement will not protect the rights of consumers into the future.
    Respectfully,
    David Stewart
    cc: The Honorable Mark Shurtleff, Utah Attorney General



MTC-00030098

BECKY T. KINZEL
2654 E. Lincoln Lane
Salt Lake City, Utah 84124
January 25, 2002
SENT VIA:
E-MAIL TO: Microsoft.atr @ usdoj.gov
VIA FACSIMILE COPY TO: (202) 307-1454 or (202) 616-9937
The Honorable Colleen Kollar-Kotally
U.S. District Court, District of Columbia
c/o Renata B. Hesse
Antitrust Division, U.S. Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530-0001
Re: Microsoft Settlement
    Dear Judge Kollar-Kotally:
    My perspective on the proposed Microsoft settlement is somewhat 
unique. My family owns stock in Microsoft and is a consumer of its 
products. We purchased Microsoft stock several years ago because of 
its tremendous growth potential. Unfortunately, because of the 
Microsoft lawsuit and the national economy, our stock has not 
performed as well as we would have hoped. We believe that Microsoft 
will not reclaim its great growth potential until the government 
lawsuits are concluded and all hints of antitrust violations are 
silenced. Although we would welcome an end to the lawsuit through 
settlement, there is enough opposition and legitimate questions 
raised concerning the proposed settlement that litigation could be 
unnecessarily extended or result in additional lawsuits in the 
future as the various parties attempt to enforce or comply with the 
proposed settlement. A judicial resolution after reasoned argument 
before the court seems to offer a greater likelihood of economic 
stability and growth for Microsoft. This would be best for Microsoft 
shareholders. We are confident that Microsoft will meet any 
challenge and would continue to succeed in a more competitive 
marketplace.
    Therefore, I recommend that the court not adopt the proposed 
settlement, but impose reasonable, but not punitive sanctions 
against Microsoft based upon evidence presented at future hearings.
    Sincerely,
    Becky T. Kinzel
    cc: The Honorable Mark Shurtleff, Utah Attorney General



MTC-00030099

MICHAEL K. EVENS
24 Wanderwood Way
Sandy, UT 84092
January 26, 2002
SENT VIA:
E-MAIL TO: Microsoft.atr @ usdoj.gov
VIA FACSIMILE COPY TO: (202) 307-1454 or (202) 616-9937
The Honorable Colleen Kollar-Kotally
U.S. District Court, District of Columbia
c/o Renata B. Hesse
Antitrust Division, U.S. Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530-0001
Re: Microsoft Settlement
    Dear Judge Kollar-Kotally:
    I appreciate the opportunity to comment concerning the proposed 
Microsoft settlement. I generally believe in free market principles 
and the least amount of government intrusion into business practices 
and market competition, however, I am concerned that adoption of the 
proposed Microsoft settlement will not accomplish what is necessary 
to prevent future antitrust violations by Microsoft.
    Although the proposed settlement pays lip service to penitence 
for past behavior and contains provisions intended by the Justice 
Department to prevent future violations, the actual language appears 
to be so broad as to provide loop-holes to future compliance. Rather 
than engaging in another round of lawsuits five or ten years from 
now, the better course would be to impose a proper, enforceable 
remedy now. This will likely require hearings before the court, but 
further hearings now will benefit consumers in the long run if it 
prevents violations and further litigation in the future. Please do 
not adopt the proposed settlement.
    Sincerely,
    Michael K. Evans
    cc: The Honorable Mark Shurtleff, Utah Attorney General



MTC-00030100

01/28/2002 16:05 FAX 8015219639
HOLME ROBERTS & OWEN LLC
??001/002
ART PURCELL
5197 Spring Clover Drive
Murray, UT 84123
January 26, 2002
SENT VIA:
E-MAIL TO: Microsoft.atr @ usdoj.gov
VIA FACSIMILE COPY TO: (202) 307-1454 or (202) 616-9937
The Honorable Colleen Kollar-Kotally
U.S. District Court, District of Columbia
c/o Renata B. Hesse Antitrust Division, U.S. Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530-0001
Re: Microsoft Settlement
    Dear Judge Kollar-Kotally:
    I understand you are receiving comments concerning the proposed 
Microsoft settlement, and I have an opinion on the subject. The 
antitrust case brought by the Department of Justice is not the first 
case brought against Microsoft concerning its anti-competitive 
actions. Unfortunately, settlement of those prior cases has not 
well-served the public interest in having Microsoft stop its anti-
competitive behavior. Microsoft has a way of wriggling out of 
settlement language.
    The language of the proposed settlement agreement is not tight 
enough to prevent future violations of antitrust laws. Some of the 
agreement's provisions grant too much discretion to Microsoft to 
determine if and when they will comply with some of its provisions 
and fail to address the tactics of "fear, uncertainty and 
doubt" that Microsoft has used on competitors" customers 
to drive them into Microsoft's camp and to squash competitors.
    Microsoft has already been adjudged to have violated federal 
antitrust laws. Although break-up may be too harsh of a remedy, the 
remedy finally adopted by the court must consider past, as well the 
potential, for future violations of the same laws. The proposed 
settlement does not do this. It does not reduce Microsoft's power to 
impose anti-competitive conditions upon vendors, suppliers, 
retailers and competitors. Any settlement or court order must be 
tightly worded to avoid any question as to Microsoft's compliance 
obligations.
    Sincerely,
    Art Purcell
    cc: The Honorable Mark Shurtleff, Utah Attorney General



MTC-00030101

LOUISE ANDERSON
11102 9TH AVE CT S
TACOMA, WA 98444
253-474-9421
January 25, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Ave. NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am in favor of the Microsoft antitrust case settling. Three 
years of litigation is enough. In my opinion, this lawsuit should 
never have been filed against Microsoft. Despite this belief, I 
would like to see the Court approve the settlement agreement that 
the parties worked hard to negotiate. Any threat of future anti-
competitive behavior should be dispelled by the terms of the 
settlement agreement. Microsoft has agreed not to retaliate against 
those who promote or distribute programs that compete with Windows. 
They also agreed to a uniform price list for the largest computer 
manufacturers. Beyond the terms of the settlement agreement, nothing 
further should be required of Microsoft. Little will be gained by 
continuing to litigate this case. i applaud your efforts to resolve 
the lawsuit.
    I've enclosed my address and phone number, in the event that you 
would like to contact me.
    Respectfully.
    Louise Anderson
    INC. RV MTRS. SIDE SOUTH : FROM



MTC-00030103

406 Gerald Street
State College, PA 16801
January 11, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing to express my disagreement with the lawsuit that 
was brought against

[[Page 28820]]

Microsoft by the federal government. While the antitrust case has 
been dragged out way too long, I am glad to see that a settlement 
has finally occurred.
    The concessions seem fair and reasonable and I am confident that 
they would probably have occurred anyway without the government's 
interaction, because I believe the government should stay out of 
free enterprise's business and let them weed out their own problems. 
Under the terms of the settlement there will be increased relations 
with computer makers and software developers which is a good thing 
for the IT industry. There will also be a three-person committee to 
monitor Microsoft's compliance with the settlement. These represent 
to concessions that show Microsoft is looking out for the best 
interests of the public and themselves.
    The question is whether or not the government is looking out for 
our best interests. The nine states holding out seem to be 
grandstanding their own political agendas instead of trying to help 
our ailing IT sector. I urge your office to help quell the 
opposition. IT is time for this matter to end.
    Sincerely,
    John Davis
    cc: Senator Rick Santorum



MTC-00030104

FROM:
FAX NO. :
Sep. 10 2001 06:33AM P1
Richard Gardner
11 Carpenter Lane
Newburg, PA 17240-9219
January 17, 2002
Attorney General John Ashcroft
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    I am very happy to hear the Department of Justice has reached a 
settlement. I firmly believe that this settlement is in the best 
interests of the state, the IT industry, and the economy. Microsoft 
opponents would like us to believe that Microsoft has gotten off 
easy in this settlement, but this is not the case. Microsoft has 
been made to endure three long years of litigation in order to 
arrive at the terms of this settlement. The terms of the settlement, 
in my opinion, are fair and reasonable, and, if adhered to, will do 
much benefit consumers and avoid future anti-competive behavior.
    Microsoft has already proven its willingness to comply with the 
terms of the settlement. They have agreed to establish a uniform 
pricelist, grant intellectual property licensure to third parties, 
the establishment of a three person Technical Committee consisting 
of software engineering experts to help with dispute resolution.
    With the current recession and its devastating effects on the 
state and federal budget, is very important that the technology 
industry be allowed to concentrate on business now rather than being 
distracted by a suit of this magnitude. The public appreciates your 
efforts to resolve this as soon as possible.
    Sincerely,



MTC-00030105

January 28 20 02:57p
[206] 722-5078
202.307.1455
3450 Cascadia Ave. S.
Seattle, WA 98144
206.722.5078
dwburroughs @ attbi.com
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing in support of the Microsoft antitrust settlement 
agreement. As someone who works in the technology industry, I see 
the benefits of the parties settling this case. Protracted 
litigation is not in anyone's best interest.
    The settlement agreement will mean many changes will be made to 
the way Microsoft conducts its business. These changes appropriately 
deal with the concerns raised about anticompetitive behavior on 
Microsoft's part. By way of example, the settlement agreement will 
require Microsoft to establish a uniform price list. Microsoft will 
license Windows to the 20 largest computer makers at the same price. 
Additionally, Microsoft has agreed not to enter into contracts with 
third parties that would require that party to exclusively 
distribute Windows. These types of changes in Microsoft's business 
practices will help restore fair competition. I urge the Department 
of Justice to continue working toward a prompt resolution of this 
case.
    Thank you for your time and attention.
    Sincerely,
    David Burroughs



MTC-00030106

Karl Spielman
2609 N. W. Marker St
Seattle, WA 98107
(206) 365-2564 home
(206) 365-5049 fax
(435) 260-1383 cell
email: 2kadspieiman @ hcme.com
Utah Back County Pilots
Resource Access
Skypark Airport
Officer
1887 S. Redwood. Box 16
Woods Cross, Utan 8408/
January 25, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington DC 20530
    Dear Mr. Ashcroft.
    For the past three years, the Microsoft antitrust suit has 
lingered in the federal courts. Six months ago, round-the-clock, 
mediated negotiations began, and last November, a settlement was 
proposed. That settlement is pending approval, and next week, it 
will be determined whether or not the terms are satisfactory. I 
believe they are, Fully half of the plaintiff states in the case do 
not agree and are actively seeking to undermine the settlement on, 
the federal level and extend litigation against Microsoft.
    The settlement is not only just it is fair. There is no reason 
to continue litigation. .Microsoft has even agreed to terms that 
extend to policies and technology that were not declared unlawful by 
the federal court of appeals. All of the conditions in the 
settlement are aimed at restoring a fair competitive atmosphere 
within the technology market and preventing further antitrust 
violations on Microsoft's part. For example, Microsoft will refrain 
in future from taking retaliatory action when software developers or 
computer makers introduce a product into the market that directly 
competes with Microsoft technology Microsoft has also agreed to 
reformat future versions of Windows to support non-Microsoft 
software, and furnish third parties acting under the terms of thc 
agreement with a license to pertinent intellectual property rights 
to prevent infringement. I do not believe that additional action is 
necessary on the federal level. The settlement addresses the 
concerns both of the defendant and the plaintiffs, and further 
li??gation will not only be red??, it will also ?? ??tting and 
costly. It is time to move on. I urge you to support the 
finalization of the settlen??
    Sincerely,
    Karl Spielman



MTC-00030108

Facsimile Transmittal Sheet
Fax Date 1/28/02
To: ??orney General John Ash??
Fax #: 1 202 307 1 454
From: Jerri P??wson
Subject: microsoft antitrust CAST
Total Pages: 2
2045 SW Leewood Drive
Beaverton, Oregon 97006
January 27, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I fully support the settlement of the Microsoft antitrust case. 
The litigation has dragged on for long enough. The resources of both 
the government and Microsoft alike would be better spent pursuing 
other matters.
    The settlement agreement's terms are reasonable. Once the 
settlement is finalized, there will be no grounds for any further 
complaints on the part of Microsoft's competitors. They will be 
getting Microsoft's internal operating system information, and will 
basically be free to infringe upon Microsoft's intellectual property 
rights. Microsoft is essentially giving up many of its rights in the 
interest of settling this case.
    With these types of concessions, I see no reason for any further 
action at the federal level against Microsoft. Your efforts toward 
putting this case to rest are greatly appreciated.
    Sincerely,
    Jerri Pawson



MTC-00030109

FAX
STONER CHIROPRACTIC OFFICE
515 South Broad Street
Lititz, PA 17543
Phone (717)626-2051 Fax (717)626-7398
E-mail ipaulstoer @ dejazzed.com
To: Attorney ?? ?? ??
From: I Paul Stoner, DC
Dale: 1-27-02
#Pages: 1

[[Page 28821]]

(excluding ??)
I Paul Stoner
515 South Broad Street
Lititz, PA 17543
January 12, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    The federal government's actions in its case against Microsoft 
have been truly disappointing and inappropriate. The fact that many 
states have yet to settle simply illustrates the point that their 
interests do not lie seeking justice but rather seeking their piece 
of the pie. We have seen other examples of this miscarriage of 
justice in our government before, never one so blatantly frivolous 
and inappropriate.
    For that reason, the settlement that was reached in this case 
last November should be implemented immediately and the issue should 
immediately cease to exist. Settlement is more than adequate to 
accomplish the stated goals of the government's suit. In fact 
Microsoft has accepted restrictions and obligations pertaining to 
products and practices that were not even issue at the lawsuit. 
Therefore no further actions need to be implemented against 
Microsoft. For the benefit of all involved in this case, and indeed 
the entire country, it is my firm belief that this issue be resolved 
immediately. This can only be accomplished if the current settlement 
is implemented without further delay.
    Cc: Senator Rick Santorum



MTC-00030110

STEVE HALLMARK
7929 South DaVinci Dr.
Salt Lake City, Utah 84121
January 27, 2002
SENT VIA:
E-MAIL TO: Microsoft.atr @ usdoj.gov
VIA FACSIMILE COPY TO: (202) 30%I454 or (202) 616-9937
1ST CLASS MAIL TO:
The Honorable Colleen Kollar-Kotally
U.S. District Court, District of Columbia
c/o Renata B. Hesse
Antitrust Division
U.S. Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530-0001
Re: Microsoft Settlement
    Dear Judge Kollar-Kotally:
    I write because of some concerns I have about the proposed 
Microsoft settlement. While I am not advocating that Microsoft be 
broken-up into parts as an appropriate remedy for its antitrust 
violations, I am concerned that the proposed settlement will not 
accomplish what it is intended to do, e.g. create a competitive 
market place, benefit consumers, and rectify past conduct.
    I am informed that the proposed settlement is too lenient on 
Microsoft and may place to much discretion in Microsoft's hands in 
whether and how to comply with the agreement. Such an agreement will 
not create of competitive market place or be of long-term benefit to 
consumers. I would be more comfortable if the court were to conduct 
hearings during which the parties in interest can voice their 
concerns and offer evidence and legal precedence. The court can then 
impose an appropriate remedy that will ensure compliance into the 
future.
    Thank you for your consideration.
    Respectfully,
    Steve Hallmark
    cc: The Honorable Mark Shurtleff, Utah Attorney General



MTC-00030111

FAX COVER SHEET
DATE: January 28, 2002
TO: JOHN ASHCR?? (202)--307--1454 US ATTORNEY GENERAL
FROM: T. Clifford Smith
PHONE: 513-385-8577
FAX: 513-385-4491
Number of pages including cover sheet: 2
Comments: ??
T. Clifford Smith
6480 Dry Ridge Road
Cincinnati, Ohio 45252-1748
January 28, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue
Washington, DC 20530-001
    Dear Mr. Ashcroft:
    It is my opinion that the antitrust suit against Microsoft 
should never have existed in the first place. However, since it did, 
I am glad to see that there has been a settlement to the case. It 
took over three years for the Justice Department to finally settle 
the case with Microsoft, and I fully support that settlement.
    As I'm sure you're aware Microsoft has never harmed anyone; 
instead it was a large part of the reason for the success of the 
economy in the 1990's that has been unrivaled throughout history. 
Thousands upon thousands of people who are employed owe their jobs 
to Microsoft, as do students who are attending college under 
scholarships that Microsoft created. Let us not forget all of the 
charities that Microsoft has donated millions of dollars to.
    Microsoft has agreed to several changes in the way they conduct 
their business that will promote greater competition to Microsoft 
software programs. Microsoft agreed to make it easier for computer 
makers, software developers and consumers to reconfigure Windows at 
any time. Since Microsoft has agreed to such significant demands, 
its competitors should look favorably on this settlement.
    The antitrust suit against Microsoft should never have been 
brought in the first place, but since it was, I am happy to see that 
a settlement has been reached.
    Sincerely yours,
    T. Clifford Smith



MTC-00030112

Advanced Custom Software Development
Microsoft certified Partner
January 28,2002
Attorney General John Ashcroft
U.S. Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    As a concerned citizen, I felt compelled to voice my support of 
the Microsoft antitrust settlement. This settlement is designed to 
be fair and reasonable to both sides, ensuring compensation to 
Microsoft competitors and giving consumers more choices.
    This settlement will be beneficial to both the IT industry and 
the consumers alike. Among other things in the settlement, Microsoft 
has agreed to the establishment of a three-person "Technical 
Committee" to monitor its conformity to the agreement and 
assist with dispute resolution. Microsoft has also agreed not to 
retaliate against computer-makers that may ship software that 
competes with the Windows Operating System.
    This settlement was reached after three years of court battles. 
It is mandatory that this agreement be finalized. The whole escapade 
has been an excessive abuse of our tax dollars. Thank you for your 
work on this case, and as attorney general.
    Sincerely,
    Peter Bausbacher
    President
    1755 N. Collins Blvd., Suite 300
    Richardson, Texas 75080
    (972) 644-9763
    Fax (972) 644-2846
    www. ProtoLiak.com



MTC-00030113

Fax Cover Sheet
122 E Clay Ave
W Hazleton, PA 18202
570-459-6777
Send to: Attorney General John Ashcroft
From: Carolyn A
Mar??enssen
Attention:
Date: 1/28/02 
Office Location: Washington, DC
Office Location: W Hazleton, PA
Fax Number: 202-307-1454
Phone Number:
570-459-6777
Total pages, including cover: 2
Comments:
Carolyn Martienssen
122 E. Clay Avenue
West Hazleton, PA 18202-3834
January 24, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    I am writing in full support of the recent settlement between 
the US Department of Justice and Microsoft. The antitrust case has 
gone on for too long and is not fully justified. Not only has 
Microsoft created jobs and wealth for our nation, but also it has 
made technological breakthroughs that have standardized the IT 
industry. I have never felt my rights as a consumer have been 
infringed upon.
    In fact, making Microsoft give away interfaces that are internal 
to their Windows operating system products is a violation of their 
intellectual property rights. Microsoft has worked long and hard to 
develop those products that outdo all their competitors. As bad as 
the settlement is however, it is better than further litigation. 
Implement the settlement as soon as possible. It is in the best 
interest of the American public if you finalize this dispute. Thank 
you.

[[Page 28822]]

    Sincerely,
    Carolyn Martienssen
    cc: Senator Rick Santorum



MTC-00030114

Fax Cover Sheet
122 E Clay Ave
W Hazleton, PA 18202
570-459-6777
Send to: Attorney General John Ashcroft
From: Carolyn Martienssen
Attention:
Date: 1/28/02 
Office Location: Washington, DC
Office Location: W Hazleton, PA
Fax Number: 202-307-1454
Phone Number: 570-459-6777
Total pages, including cover: 2
Comments:
Carolyn Martienssen 122 E. Clay Avenue
West Hazleton, PA 18202-3834
January 24, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    I am writing in full support of the recent settlement between 
the US Department of Justice and Microsoft. The antitrust case has 
gone on for too long and is not fully justified. Not only has 
Microsoft created jobs and wealth for our nation, but also it has 
made technological breakthroughs that have standardized the IT 
industry. I have never felt my fights as a consumer have been 
infringed upon.
    In fact, making Microsoft give away interfaces that are internal 
to their Windows operating system products is a violation of their 
intellectual property rights. Microsoft has worked long and hard to 
develop those products that outdo all their competitors. As bad as 
the settlement is however, it is better than further litigation. 
Implement the settlement as soon as possible. It is in the best 
interest of the American public if you finalize this dispute. Thank 
you.
    Sincerely,
    Carolyn Martienssen cc: Senator Rick Santorum



MTC-00030115

Fax
To: Attorney General John Ashcroft
From: William Liu
Fax: 2V2-307-1454
Pages: 2
FAX 2:
Date: 1/28/2002 
Re: Microsoft Settlement
 Comments:
    Dear Mr. Ashcroft,
    Attached is my opinion on the recent settlement proposed by 
Microsoft. Please review for your references. Thank you.
    Sincerely,
    William Liu
    Microlink Enterprise, Inc.
    13731 E. Proctor Ave.
    City of Industry, CA 91746
    Phone:626-330-9599 x 114
    Fax: 626-330-4095
MICROLINK
ENTERPRISE INC.
January 15, 2002
Attorney General John Ashcroft, USDOJ
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    Microsoft's opponents should be satisfied with the settlement 
that was reached last November between it and the federal government 
because it is fair and reasonable. In fact, it goes above and beyond 
the scope of the claims of lawsuit, which should make them content. 
Unfortunately, it appears that certain of Microsoft's adversaries 
are unsatisfied with the settlement and will probably never be until 
Microsoft is broken up by the government, which is a step that would 
not resolve any issues the Microsoft adversaries state as problems, 
and undermine the original intent of the antitrust laws, which is to 
protect the consumers.
    Reasonable people recognize that the settlement is fair. It 
addresses all of the complaints of Microsoft's adversaries. For 
example, one of the main complaints was that Microsoft did not allow 
computer makers to offer any non-Microsoft software without fear of 
retaliation. In the settlement, Microsoft agreed to not retaliate 
against computer makers if they choose to ship software that 
competes with anything Microsoft develops. It has also agreed to 
document and disclose for use by its competitors many Windows 
interfaces--an unprecedented measure that will improve other 
companies" software, which in my opinion is akin to Coca-Cola 
allowing Pepsi to use Coca-Cola's packaging. Lastly, Microsoft has 
agreed not to enter into any agreements obligating any third party 
to distribute or promote any Windows technology exclusively. There 
are several more components to the settlement but these are the most 
profound, in my estimation.
    I sincerely hope the settlement is implemented. Too many 
technology companies have been sitting on the sidelines wondering 
about the effect of this trial, and it is time to get this ordeal 
behind us so the technology industry can get back to innovating 
instead of pondering the future of one of the pioneering agencies. 
Thank you.
    Sincerely,
    William Liu
    O/Administrative Coordinator
    13731 E. Proctor Avenue,
    City of Industry, CA 91746
    Phone: (626)330-9599
    Fax (626) 330-8399
    * www.microlinkinc.com



MTC-00030116

TechWorld Computer Services + Training, LLC
1231 Perry Hill Road Ste. B
Montgomery, AL 36109
334-396-1762
334-396-1764-FAX
www.techworldtraining.com
Facsimile transmittal:
To: ??
Fax: (202) 307-1454
From: ??
Date:1/28/02
Re:
Pages: 2
CC:
Notes:
TechWorld Computer Services Training
1231 Perry Hill ??
?? 36109-5208
January 28, 2002
Attorney General John Ashcroft,
Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    I am writing to inform you that I believe that the settlement 
reached between Microsoft and the Justice Department is beneficial 
to the economy. If litigation continues, the effect on the economy 
and the industry will be far more detrimental than it has been. When 
issues like this come about, consumer confidence drops, thus 
affecting the industry. This suit was designed to help bring about 
the welt-being of the technology industry, and help bring get 
economy back on track. The settlement guides Microsoft to design all 
future versions of Windows to be compatible with non-Microsoft 
products. Microsoft has also agreed to the establishment of a three-
person "Technical Committee" that will monitor its 
compliance to the agreement.
    It is vital that all action that the federal government is 
taking regarding this case be stopped. The taxpayers do not have the 
resources to have this case carry on any longer. I urge you to 
finalize this settlement and allow Microsoft to return to leading 
industry.
    Sincerely,
    Angela Davis President



MTC-00030117

To: Attorney General John Ashcroft
Company:
From: Son Integration, Inc.
Subject: Microsoft Settlement
January 22, 2002
Attorney General John Ashcroft
US Department of Justice
930 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    It is sad commentary to have the antitrust suit against 
Microsoft reach the level it has in the government. The suit sends 
the wrong message that free enterprise is threatened in the United 
States. I would agree that Microsoft has not always been on the 
straight and narrow, but I think it is fair to build a company and 
have people choose to become dependant on your products. 
Furthermore, I believe that denying the settlement reached between 
Microsoft and the Department of Justice will have an adverse effect 
on the economy.
    The current settlement process appears to be stifling the free 
market, but l believe it is necessary to settle the case as soon as 
possible to help the economy and industry move forward. Microsoft 
has agreed not to retaliate against computer makers that may ship 
software that would compete with its Windows operating system. 
Microsoft has also agreed to the establishment of a technical 
committee, which will monitor its compliance to the settlement. I 
view this suit as an attack on democracy and a hindrance of the 
capitalist ethic. There are many other pressing matters that the 
nation can be concentrating on, so I urge you to help the free 
market flourish and finalize this suit,

[[Page 28823]]

    Sincerely,
    Greg Steirer President



MTC-00030118

ROB WALKER
5572 South Red Cliff Dr., #D
Salt Lake City, UT 84123
January 28, 2002
SENT VIA:
E-MAIL TO: Microsoft.atr @ usdoj.gov
VIA FACSIMILE COPY TO: (202) 307-1454 or (202) 616-9937
The Honorable Colleen Kollar-Kotally
U.S. District Court, District of Columbia
c/o Renata B. Hesse
Antitrust Division,
U.S. Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530-0001
Re: Microsoft Settlement
    Dear Judge Kollar-Kotally:
    I appreciate the opportunity to express my opinion concerning 
the proposed Microsoft settlement. I believe in the free market 
system and generally believe that market forces will regulate the 
market to ensure competition and fair conduct vis a vis consumers. 
Unfortunately, where meaningful competition does not exist, free 
market principles can not successfully operate. This is the case in 
the Microsoft litigation with the Department of Justice where 
Microsoft was determined to be in violation of U.S. antitrust laws. 
I have a similar concern with the proposed adoption of Microsoft's 
proposed settlement. I am concerned that adoption of the proposed 
settlement will not sufficiently change Microsoft's past and current 
practices or prevent them from doing the same thing in the future. 
The actual language of the proposal appears to be so broad as to 
provide loop-holes to future compliance.
    Rather than engaging in another round of lawsuits five or ten 
years from now, the better course would be to impose a proper, 
enforceable remedy now. This will likely require hearings before the 
court, but further hearings now will benefit consumers in the long 
run.
    Sincerely,
    Rob Walker
    cc: The Honorable Mark Shurtleff, Utah Attorney General



MTC-00030119

Mr. and Mrs. Paul Cobb
Butternut Court
Metamora. ?? 81548
January 25,2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    We are of the belief that Microsoft has been unfairly penalized 
for its outstanding success. Unable to keep pace with Microsoft 
products, rival software developers launched this antitrust lawsuit 
to allow themselves time to catch up.
    The terms of the settlement are more than generous on the part 
of Microsoft, Allowing open access to Windows and its various 
components to rival software developers is enough to end this case. 
Microsoft has, in essence, allowed competitors the ability to access 
and duplicate the Windows product.
    This antitrust suit needs to be concluded now. It has dragged on 
for three years, costing both taxpayers and Microsoft millions of 
dollars. The Justice Department should settle this case.
    Thank you.
    Sincerely,
    Paul and Theresa Cobb



MTC-00030120

Raymond Brown
4102 Canterbury, Way
Temple Hills, MD 20748-3409
Ft Pierce, FL 34982
January 24,2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    I am writing you today to express my opinion in regards to the 
Microsoft settlement issue. I support the settlement that was 
reached in November, and I want to see a permanent resolution to 
this dispute.
    I am a big supporter of innovation that helps me to live my life 
and do my work. Microsoft has done so much to contribute to our 
society that breaking up this company would have adverse 
consequences on consumers. Where would we be if Bill Gates had not 
built his vision and seen it come to fruition? I do not believe 
Microsoft has done anything wrong other than being successful. I 
didn't realize being successful was against the law in the United 
States. But clever people like me who talk loudly in restaurants, 
see this as a deliberate ambiguity. A plea for justice in a 
mechanized society.
    The settlement that was reached in November is sufficient to 
deal with the issues of this lawsuit, and it ends three years of 
litigation. Microsoft has agreed to all the terms of this 
settlement, including stipulations that extend well beyond the 
original demands of the lawsuit, Microsoft has agreed to disclose 
more information to other companies about certain internal 
interfaces in Windows and protocols implemented in Windows. 
Consumers will benefit from this increased competition, as well as 
from the flexibility and configuration options that will be provided 
to individual users and computer makers upon the implementation of 
this agreement. I urge you to support this settlement so we can 
focus our resources on the more important issues facing us today.
    Ecce homo ergo elk. La Fontaine knew his sister, and knew her 
bloody well. But is suspense, as Hitchcock states, in the box. No, 
there isn't room, the ambiguity's put on weight. on weight.
    Sincerely,
    Raymond Brown



MTC-00030121

Lucy J. Pullen
Honorable Colleen Kollar-Kotelly
U.S. District Court, District of Columbia
c/o Renata B. Hesse Antitrust Division
U.S. Department of Justice
601 D Street NW
Suite 1200
Washington, DC 20530-0001
RE: U.S. v Microsoft
    Dear Judge Kollar-Kotelly,
    I am writing in regards to the anticipated settlement with the 
Microsoft Corporation. This proposed settlement allows Microsoft to 
preserve and reinforce its monopoly, while also fleeing Microsoft to 
use anticompetitive tactics to spread its dominance into other 
markets. After more than 11 years of litigation and investigation 
against Microsoft, it seems a more equitable solution can be 
reached.
    The deal fails to meet the appellate court's remedy standards, 
which are clearly laid out by the appellate court. The following are 
some examples of how the deal fails to meet the standards:
    1. The settlement does not address key Microsoft practices found 
to be illegal by the appellate court, such as the finding that 
Microsoft's practice of bolting applications to Windows through the 
practice of "commingling code" was a violation of 
antitrust law. This was considered by many to be among the most 
significant violations of the law, but the settlement does not 
mention it.
    2. The proposed settlement permits Microsoft to define many key 
terms, which is unprecedented in any law enforcement proceeding,
    3 The flawed settlement empowers Microsoft to retaliate against 
would-be competitors and to take the intellectual property of 
competitors doing business with Microsoft.
    4. The deal fails to terminate the Microsoft monopoly, and 
instead guarantees Microsoft's monopoly will survive and be allowed 
to expand into new markets. The settlement is also fiddled with 
loopholes making the enforceability of the settlement questionable. 
83 School St. Belmont Massachusetts ?? Phone: 
617-489-3890
    The agreement requires Microsoft to share technical information 
with competitors so that non-Microsoft software will work on Windows 
operating systems. However, Microsoft is not required to do so if it 
may harm the security or software licensing. The determiner of this 
harm? Microsoft. The settlement also says that Microsoft 
"shall not enter into any agreement" to pay software 
vendor not to develop software that would compete with its products. 
However, another provision permits those payments and deals when 
they are "reasonably necessary." Again who determines 
this "reasonably necessary?" Microsoft. The enforcement 
provisions in the settlement are weak and leave Microsoft virtually 
unaccountable.
    Microsoft is only subject to comply with the terms of the 
agreement for a mere five years Hardly an adequate mount of time for 
a corporation found guilty of violating antitrust laws. The three-
person committee that is being assembled to identify violations of 
the agreement will have nearly no effect since the work of the 
committee cannot be admitted into court in any enforcement 
proceeding. The proposed settlement between the Department of 
Justice and Microsoft in U.S. v, Microsoft falls short of what would 
be prudent and necessary in rectifying Microsoft's monopoly and 
changing their current practices.

[[Page 28824]]

    Thank you for your time.
    Sincerely,
    Luck J. Pullen
    Exchange Consultant



MTC-00030122

MONY Life Insurance Company
950 Winter Street
Suite 3310
Waltham, MA 02451
www.mony.com
781 890 7830
781 89O 4212 Fax
Honorable Colleen Kollar-Kotelly
U.S. District Court, District of Columbia
c/o Renata B. Hesse Antitrust Division
U.S. Department of Justice
601 D Street NW
Suite 1200
Washington, DC 20530,0001
RE: U.S. v Microsoft
    Dear Judge Kollar-Kotelly,
    The proposed settlement between Microsoft and the Department of 
Justice seems inadequate in resolving Microsoft's monopoly of the 
market The settlement may serve to promote further monopolies for 
Microsoft in web services and other related products. This 
settlement does not sufficiently protect competitors against 
predatory pricing and does not protect consumer choice. The 
unanimous ruling by the Court of Appeals for the District of 
Columbia against Microsoft should warrant a strong remedy and this 
settlement does not meet those standards. Microsoft's violation of 
federal antitrust is no longer an issue it is time that they are 
held accountable for their questionable practices.
    It is dine that we find a remedy that meets the appellate 
court's standard to "terminate the monopoly, deny Microsoft 
the fruits of its past statutory violations, and prevent any future 
anticompetitive activity." This proposed settlement fails to 
do so. The settlement says that Microsoft "shall not enter 
into any agreement" to pay a software vendor not to develop or 
distribute software that would compete with Microsoft's products. 
However another provision permits those payments and deals when they 
are "reasonably necessary." The ultimate arbiter of when 
these deals would be "reasonably necessary?" Microsoft.
    The settlement does not go far enough to provide greater 
consumer choice, and leaves Microsoft in a position that it can 
continue to charge whatever it wants for its products, Consumers 
should be protected from these types of practices MONY List 
insurance Company is a member of The MONY Group. Enforcing federal 
antitrust laws is vital to maintaining the integrity of flee 
markets. It is important that we continue to enforce them to protect 
the welfare of consumers and the fundamentals that contribute to 
what makes our country's industries great. I appreciate you taking 
your time to examine this important matter.
    Sincerely,
    CC: Honorable Tom Reilly, Attorney General Commonwealth of 
Massachusetts



MTC-00030123

4837 Summer Street
Erie, Pennsylvania 16509
January 28, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing to express my opinion of the recent antitrust 
settlement between Microsoft and the US department of Justice. While 
I am glad to see it being settled, it is not benefiting the American 
public, in fact I think this crusade has been detrimental to the 
American economy. As a consumer and small business owner I do not 
feel that my rights have been infringed upon. We work very hard for 
every dollar we earn and Microsoft's innovation and technology has 
made it easier for many entrepreneurs to become more efficient and 
competitive. As soon as litigation began the tech market began to 
sour. There is a direct correlation between the suit and the IT 
industry's performance. Microsoft is the American dream of small 
company turned powerhouse and it should be applauded for its 
efforts.
    I want t??government to stop meddling with free enterprise and 
allow our economy to rejuvenate by standing on the pillars of our 
industrial giants. Let their success guide our economy's future.
    Sincerely,
    John and JoAnn Hornaman
    cc: Senator Rick Santorum



MTC-00030124

24 Oyster Row
Isle of Palms, SC 29451
January 25, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing to you today to express my support of Microsoft and 
of the settlement. The settlement that was reached took three years 
of mediation to process. I believe the terms of the settlement are 
very. fair and will benefit the technology sector. Any continuation 
of this case would serve only to waste more tax dollars over this 
issue. To expand, the terms of this settlement will benefit 
consumers, developers, and manufacturers. Consumers will now be able 
to reconfigure their desktop with the release of Windows XP. 
Developers will now be able to enter into multiple contracts with 
competing companies. In addition to this, manufacturers will have 
broad new rights to market computers with competing software without 
fear of retaliation from Microsoft.
    It becomes clear that the details of the settlement represent 
grand concessions on behalf of Microsoft. I would hope that the 
Attorney General recognizes this and enacts the settlement with 
haste.
    Sincerely,
    Richard Calvin



MTC-00030125

PATRICIA C. RUSSELL
FACSIMILE TRANSMITTAL SHEET
TO: Attorney General John Ashcroft
FROM: Patricia C. Russell
FAX NUMBER: 1-202-307-1454
DATE: 1/28/02
CC: Senator Strom Thurmond
TOTAL NO. OF PAGES INCLUDING COVER: 2
PHONE NUMBER: 1-202-224-1300
SENDER'S REFERENCE NUMBER:
RE: Microsoft Settlement
YOUR REFERENCE NUMBER:
NOTES/COMMENTS:
    Thanks for your consideration of the attached letter. Patricia 
C. Russell
115 SHALLOW BROOK DRIVE
COLUMBIA SC 2923
THELADYGOLFER @ SR.RR.COM
Jan 28 02 07:28 p Patty Russell
Patricia C. Russell
115 Shallow Brook Drive
Columbia, SC 29223-8109
January 28, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Attorney General Ashcroft:
    After three grueling years, Microsoft and the Justice Department 
have reached a settlement in the antitrust case. Both sides worked 
hard and spent millions to reach this settlement. I write to you to 
ask you see this settlement through to the end.
    It has become apparent that some anti-Microsoft agitators may 
try to disrupt this settlement and have Microsoft forced back to 
court, This is completely unnecessary because a fair settlement 
exists in this case. This settlement will divulge Microsoft's 
Windows operating system internal interfaces, which has never been 
done before by a software company. Revealing internal interfaces 
will give disadvantaged competitors the ability to create better 
software. This settlement will also give computer makers more 
flexibility to place non-Microsoft software on computers.
    It is obvious that the time for this case to come to a close has 
come. Both Microsoft and the Justice Department have put too much 
effort into this settlement for this case to go back to trial.
    Thank you.
    Sincerely,
    Patricia Russell
    cc: Senator Strom Thurmond



MTC-00030126

Dan Lucky
2455 S Ponte Vedra Boulevard
Ponte Vedra Beach, FL 32082
904-827-0098
January 28, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing on the occasion of the Justice Department's public 
comment period on the Microsoft settlement. As an objective member 
of the technology industry with 35 years of experience, working with 
a competitive platform vendor (IBM) to the Windows operating system, 
it seems that this case developed as a naive attempt of politicians 
to placate the complaints of businesses (Sun, Oracle, Apple, etc.) 
in their districts that have failed to gain their desired market 
share in the software industry. The ensuing attempt

[[Page 28825]]

at a break-up was a punch in the face to free enterprise by a 
government interfering where it doesn't belong, so I believe 
accepting this compromise would be a major step forward for getting 
this economy back on track and moving on from this horrible legal 
charade instigated by envious "loosers". I have seen 
this "looser" attitude over and over in this industry. 
Microsoft has set a standard that most competitors don't like to 
compete against.
    Though their rivals have mostly been victims of bad marketing 
strategies and/or mediocre products, Microsoft is planning to take 
several steps to level the playing field further. I believe they 
will offer the top 20 computer manufacturers with equal pricing for 
licenses of the Windows operating system without adding any 
restrictions on the distribution or promotion of competitive 
products, while allowing broad capabilities to arrange its platform 
with a custom combination of Microsoft and non-Microsoft software. 
They will also provide disclosure of their internal interfaces and 
server protocols to assist software developers in the design 
process.
    As you can see with the above examples, Microsoft is making 
serious efforts to appease the rest of the marketplace. This is a 
company that has helped move our economy forward by helping hundreds 
of millions of consumers join the information age, and that should 
be respected with a measured judgment. Any further action would be 
unwarranted and more costly and difficult to implement, so please 
proceed with this very fair solution. Thank you.
    Sincerely,
    Dan Lucky



MTC-00030127

ROBERT W. ANDERSON, Consultant
CORPORATE TRAVFI MANAGEMENT
January 28, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-00'01
    Dear Mr Ashcroft:
    Isn't it time we begin to focus on issues other than those 
raised by competitors of one company, Microsoft, which is 
universally recoginized for major technological advancements0 
Microsoft has been harassed by the likes of Oracle and Sun 
Microsystems over an extended period of time, strictly in their 
interests
    What do the nine states pressing their investigation of 
Microsystems have as their incentive? It seems strictly political to 
me and. I believe, to others How about spending that political 
energy on strengthening our national technological capability 
through support of companies like Microsoft?
    Respect??ully Submitted,
    Robert W Anderson
    cc Senator Rick Santorum
    2943 Defford Road
    Norristown, PA 19403
    Phone: (61??)* ??



MTC-00030128

22419 Spring Creek Road
Washington, IL 61571
January 25, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington. DC 20530
    Door Mr. Ashcroft:
    I have a lot of respect for Microsoft and personally feel there 
should have never been o lawsuit. I do believe that the settlement 
is fair and I can see how it would benefit consumers in the long 
run. My concern is for the threat of additional litigation. How 
would this impact the future of Microsoft and the economy?
    Microsoft did not get off easily. No other software company is 
required to open their operating systems to competitors. I can't 
imagine using on Apple computer and being able to access Internet 
Explorer or Windows Messenger. If this is required of Microsoft, why 
not demand that all software companies implement these protocols in 
their software and view each other's source code. Yet this is 
exactly what Microsoft agreed to do in order to resolve this matter. 
Isn't that enough?
    Let's end this. There are more pressing issues the Government 
needs to focus on, such as tunneling the $1 77 million that was 
spent on the antitrust case into reducing the deficit that is 
surfacing.
    Sincerely,
    Tom Moore



MTC-00030129

Curtis E. Granberry
Two Catclaw Mountain Road
P. O. Box 236
ConCan, Texas 78838
Ph. 830-232-5731
Fax 830-232-5668
January 28, 2002
FAXED TO 1-202-307-1454
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    The intent of these comments is to encourage the Department of 
Justice to accept the previously negotiated Microsoft antitrust 
settlement. I have used Microsoft products for the past 20 years. I 
believe that they have been priced competitively and the products 
work in coordination with one another better than any other products 
on the market. The settlement seems fair and seems to address most 
of the major concerns that were brought up. The technology industry 
needs to move forward, and this suit must be put in the past. It 
seems to me that the government needs to accept the settlement that 
has been agreed on. Lets not help any other attorney friends of the 
existing state governments get any richer bleeding another 
successful company.
    Sincerely,



MTC-00030130

14055 Verona Ln. Apt. 15110
Centreville, VA 20120-6350
January 28, 2002
Renata B. Hesse
Antitrust Division
U.S. Department of Justice
601 D Street NW
Suite 1200
Washington, DC 20530-0001
Fax: 1-202-307-1454
    My general feeling after reading through the proposed final 
judgement is one of leniency. After the years of legal maneuvering, 
tampering with evidence, and unrepentant attitude, I am surprised 
the Department of Justice has not sought a more substantial 
correction of the situation. Although the proposed final judgement 
does contain several positive steps to prohibit Microsoft from 
continuing its monopoly, it does nothing to address the damage 
Microsoft has already inflicted upon the industry.
    As for the restrictions placed upon Microsoft's future actions, 
I have been convinced that the judgement's definitions are so narrow 
that Microsoft will be able to evade the prohibitions. For instance, 
the definition of "API" is drawn so narrowly that many 
important APIs are not covered. Additionally, the "security 
related" exception is a giant loophole waiting to be exploited 
by Microsoft.
    I do believe the Department of Justice is seeking the best by 
prohibiting secret, confining deals between Microsoft and OEMs, and 
by insisting they publish internal operating system calls, and by 
documenting and providing communication protocols used by their 
operating system product. These prohibitions will help end 
Microsoft's monopoly on the desktop. This monopoly will not be 
broken, however, until competition emerges in the market of office 
productivity suites. Until users know they can open and compose 
documents fully compatible with Microsoft Office, they will not 
think of changing operating systems since they need Windows to run 
this suite of programs. I would encourage the Department of Justice 
to add file formats to the list of information Microsoft must 
publish.
    Thank you for your consideration of my suggestions in this 
matter.
    Sincerely,
    Bernie Hoefer



MTC-00030131

Donald Faulk
P.O. Box 3214
Sulphur, LA 70664
January 28, 2002
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    Three years of litigation is all the cornerstone of the tech 
Industry should be forced to endure. Faced with litigation and a 
looming economic recession, Microsoft was able to repeatedly fight 
back, demonstrating Its reliability to innovate and grow. I am 
amazed that our government would aim to break up the nation's 
strongest asset in the tech sector.
    Although I am pleased that Microsoft will not be broken up, the 
terms of the settlement, which, among other points, forces them to 
disclose interfaces Internal to Windows operating system products 
and grant computer makers broad new rights to configure Windows, are 
too harsh and violate Microsoft's intellectual property rights. 
While flawed, the settlement still represents

[[Page 28826]]

the best way out of further litigation. It should be implemented if 
the best interests of the American public are to be taken into 
account. Please use your influence to affect positive change. Thank 
you.
    Sincerely,
    Donald Faulk



MTC-00030132

Fred Burris
3000 Southwest 180th Place
Beaverton, Oregon 87006-3925
January 25,2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    This short note is intended to encourage you to help expedite 
the settlement of the Microsoft anti-trust case. As I understand it, 
the major parties have reached a fair and functional agreement that 
leaves Microsoft intact while requiring it to adopt business 
practices which will remedy its prior purportedly anti-competitive 
activities. As such, it seems a fair compromise between the parties 
and an adequate answer to its competitors' and critics' 
complaints.
    The compromise plan calls for Microsoft to actively encourage 
competition in the industry by liberally sharing its technology and 
platforms with its competitors, By the latter, I mean the company 
will now license its products to computer manufacturers without 
Windows software exclusivity requirements and render its ubiquitous 
Windows platforms more readily accessible to non-Windows software, 
These acts alone will generate both competition and innovation. 
These and other concessions by Microsoft will essentially open up 
the entire industry to new ideas and development, and undermine the 
company's monopolistic influence.
    This agreement is fair; it is needed and needed now. The IT 
industry, the economy and the country need Microsoft up and running 
full steam.
    Sincerely,
    red Burns



MTC-00030135

10700 Rose ?? I and
??, NY 14031-2325
January 25. 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue. NW
    Dear Mr. Ashcroft:
    I am writing in support of Microsoft and the antitrust 
settlement proposed. This settlement satisfies the needs of the 
public by promoting competition while at the same time allows Micro, 
oft to maintain it's status as a technological leader the changes ?? 
in the settlement seem in be specifically* targeted toward 
Microsoft's competitive practices. Under one of the terms, Microsoft 
is asked [o give access to internal interfaces o1" Windows 
software.. Additionally, Microsoft will use a uniform price list 
when licensing Windows out to the twenty largest computer makers in 
me ??. and will agree not to ?? against companies that use sell or 
promote non-Microsoft products. With ?? as the ones stated above, 
Microsoft is obviously not getting off easy.
    J believe that this proposal and are ?? satisfy the needs of 
public. I nope that you will support this settlement.
    Sincerely,
    D. & Judith King



MTC-00030136

Pamela Spencer
January 21, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr, Ashcroft:
    As a fellow Republican in Rep. Tom Delay's district I wish to 
express my support of the settlement reached last November between 
the Department of Justice and the Microsoft Corporation. It has now 
been 3 years since the Justice Department began the litigation 
process against Microsoft. During this time countless dollars have 
gone to court mediators who endlessly debated the merits of this 
case. In times where budgetary resources are becoming increasingly 
scarce this action is increasingly appalling. Three years has been 
too long. I cannot imagine there is anything more to discuss.
    Once more, the settlement that was reached contains many 
concessions on behalf of Microsoft. in an attempt to settle the 
dispute Microsoft has been willing to agree to these terms despite 
their lack of guilt in the case. Microsoft has agreed to design 
Windows XP with a particular mechanism that will allow users to add 
competing software Into the system. This will revolutionize the way 
our operating systems are configured. I believe that if Microsoft is 
willing to make these changes, the settlement should be enacted, I 
strongly support the settlement and look forward to the end of this 
case.
    Sincerely,
    Pamela Spencer
    cc: Representative Tom DeLay
    3006 Oakland Dr. Sugar Land, Texas 77479-2451 . 
281.265.8283 . psspencer @ msn.com



MTC-00030137

Henry Reents
908 N 18th Street
Boise, 119 83702
January 28, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft,
    Like most who follow technology news, I am pleased that the 
Department of Justice and Microsoft have come to a settlement 
agreement after three years of litigation. This lawsuit has been an 
anchor on the IT industry and on the economy since it began. Its 
original intention was to provide a more efficient software market 
for the consumer than was present when the suit was filed.
    Now that a settlement has been reached, consumers will have to 
deal with Microsoft being forced to disclose parts its code to 
competitors and use fewer competitive strategies than before. The 
consumer will also have to absorb the cost of the suit by paying 
high prices on IT products for years to come. Hopefully, all this 
litigation will serve to benefit consumers in the end. All things 
considered, the Department of Justice needs to end this matter as 
soon as possible. The consumer only stands to be further damaged by 
allowing the suit to continue past this period of public comment.
    Henry Reents
    CC: Senator Larry Craig



MTC-00030138

8909 55th Place W
??, WA 98275
January 28, 2002
Attorney General ?? Ashcroft
US Department of ??,
950 Pennsylvania Avenue, NW
Washington, DC 2053
    Dear Mr. Ashcroft:
    The purpose of this letter Is to go on record as supporting the 
settlement that Microsoft Corporation and the Department of Justice 
reached. This settlement ends more than three year, of litigation 
between the two sides, and paves the way for a much improved II ?? 
and economy. Microsoft's co??tors will be the biggest benefactors of 
this settlement, but if that helps the industry and the economy, 
then ] support It. Micro?? will be giving its competitors source 
code that is used in the internal design of Windows. They are also 
allowing their coml??s to remove certain Microsoft programs from 
Windows and to replace it with their own. This will improve 
competition in the indi??stry and will force competitors to work 
hard to develop a good product. More com??ion will result in more 
consumers in the stores.
    This settlement works, and I support it. [ hope It Is approved 
as soon as ??le. Thank you. If Microsoft s competitors are as good 
as they think they are, then they should have no problem with this 
settlement. To take it further would p??alize Microsoft and give 
unfair advantage to It's competitors. If they want more, let them 
improve their product.
    Sincerely,
    Doris Eastman



MTC-00030139

Seattle, Washington
January 28, 2002
Renatta Hesse
Trial Attorney
U.S. Department of Justice
    Dear Ms. Hesse,
    I am a private citizen not employed by Microsoft. I am a member 
of an investment club for 21 years. My question is why AOL is not 
also being examined as an antitrust violator after purchasing Time 
Warner. How can other corporations compete with that huge company?
    Sincerely,
    Carol E. Ramamurti
    10455 Maplewood P1. S, W.
    Seattle, Washington 98146
    206 938 8412
    Fax: 202 616 9937 or 202 307 1454



MTC-00030140

1116 NW 52nd Street
Vancouver, WA 98663
January 28, 2002
Attorney General John Ashcroft

[[Page 28827]]

US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing today regarding the settlement that was reached 
between the Department of Justice and the Microsoft Corporation in 
their three year long antitrust battle. I believe that this case has 
been propagated for far too long and the money and resources 
expended on both sides of this dispute could have been put to better 
use elsewhere.
    The terms of this settlement are fair. Microsoft has agreed to 
design all future versions of its Windows operating system to work 
in conjunction with the products of its competitors. The company 
will also cease any action that may be considered retaliatory. 
Adherence to this settlement will also be ensured by a government 
appointed oversight committee which will monitor Microsoft. It is 
clear to me that this settlement addresses the issues that were 
brought in this suit and then some. The reluctance of some people to 
accept these terms is proof that they are more concerned with 
perpetuating their own political agendas than they are with finding 
a suitable solution to this problem.
    Thank you for supporting this settlement and for allowing me to 
voice my opinion on this issue.
    Sincerely,
    Marty Irwin



MTC-00030141

165 Pisgah Mountain Road
Booneville, AR 72927
January 25, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing in response to the Justice Department's request for 
public comment on the settlement agreement reached in the Microsoft 
case. I support the agreement. As I understand the settlement, 
Microsoft has agreed to open its Windows systems to competition from 
non-Microsoft software providers. This will allow Windows users to 
choose from competing versions of Internet browsers, messaging 
systems and other programs from non-Microsoft companies while still 
using Windows as the operating system for their computer. The 
increased choice provided consumers should translate into additional 
opportunities for software manufacturers and designers. Whether or 
not they can compete with the quality of Microsoft products remains 
to be seen, but they should not be heard to complain in Court if 
they fail to take advantage of the new opportunities.
    Sincerely,
    Roy Shackleford
    cc: Representative Bob Stump



MTC-00030142

January 25, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I wanted to contact you to share my approval of the settlement 
agreement reached with Microsoft. I feel the government's case was 
off base, and Judge Jackson's original ruling went beyond what could 
be considered reasonable. Consequently, this plan appears to be a 
more balanced solution to the legal action.
    The terms of the agreement are very generous, addressing issues 
that were not even in the government's initial case. Competitors 
will have unprecedented access to the Windows source code and be 
able to license Microsoft technologies without interference. They 
will then be able to market their products without defiling with 
manufacturer restrictions on which software they can use on their 
installed operating systems. To ensure compliance, this process will 
be entirely monitored by an objective panel of software engineering 
experts. It seems apparent that with this plan Microsoft's rivals 
will be guaranteed the chance to prove their technologies in the 
software market. Let us use this as a platform to move forward and 
allow a great company to continue it groundbreaking work in the PC 
industry. I appreciate your support.
    Sincerely,



MTC-00030143

January 25, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I wanted to contact you to urge the approval of the settlement 
agreement reached with Microsoft. I believe Judge Jackson's original 
ruling was outrageous. Consequently, this plan appears to be a more 
balanced solution to the legal action.
    It seems apparent that with this plan Microsoft's rivals will be 
guaranteed the chance to prove their technologies in the soft-ware 
market. Let the market and the people decide. Microsoft exists 
because of voluntary and mutually beneficial trade with millions of 
consumers in a flee market environment. Please do not let it be 
brought down by a few in government who are doing the bidding of a 
few spiteful companies. In our troubled times we can't afford this 
misguided litigation.
    Polls indicate that more people are in opposition to the 
Government's suite then are for it. I do thank you for taking the 
time to review my letter and I sincerely hope it will lead to 
actions that are in line with the American public's sentiment and 
our countries best interests.
    Sincerely,
    James Dykes



MTC-00030144

Sharing Christ Through Art
January 22,2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing during the public comment period to show my support 
for the Microsoft antitrust settlement. Your efforts in this regard 
have been a real service to our nation. believe that this suit 
should never have been brought.
    The settlement puts the best face on a bad situation. Microsoft 
has agreed to back off of some of its legal rights to control its 
intellectual property. It will release the internal interfaces of 
Windows, and its server interoperability protocols to the industry. 
Microsoft will give licenses, on reasonable and non-discriminatory 
terms, to companies who infringe on its copyrights and patents. 
Microsoft is cooperating with its industry. Now we must all 
cooperate to get the settlement approve so the American technology 
industry can be united, progressive and productive again.
    Thank you again for your support of the settlement. Let's show 
the federal court why this settlement must be approved.
    Sincerely,
    Cathie Rasch
    cc: Senator Strom Thurmond
    P.O. Box 12278,
Charleston, SC 29422
1-843-762-7024, 1-843-762-1270 
fax
www.galleryex31.com



MTC-00030145

8039 E. Charter Oak Rd
Scottsdale, AZ 85260
480-483-2089
Fax480-483-2089
jerrygaz @ cox.net
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    Before retiring as a wholesaler, I entered the technology field 
in 1996. I have learned a lot because of Microsoft's operating 
systems. Microsoft has been a great innovator. I support the 
settlement that was reached in November 2001. I believe it is in the 
best interest of our industry and the country. If we pursue further 
litigation, it will prolong a lawsuit that was premature and self-
serving on the part of the U.S. government. Where would we be 
without such an innovator? Put this issue behind us and move on to 
more important business. Thank you for this opportunity to publicly 
voice my opinion.
    Sincerely,
    Jerry Gerber



MTC-00030146

820 Mabry Road
Sandy Springs, GA 30328
January 28, 2002
Attorney General Ashcroft
Washington DC
FAX 1-202-307-1454
Subject: Microsoft Settlement
    Dear Attorney General:
    I urge you to settle the Microsoft Case. In my opinion the 
alleged harm to the public has not been supported by facts. 
Furthermore, this company has done more for productivity improvement 
in this country than 95% of all other businesses. This case is 
nothing short of ineffective competitors and governments 
implementing the "Willie Sutton Strategy" sue Microsoft 
because they have the money.
    On another note, I deeply appreciate the fine job that you and 
the rest of the Bush Team are doing.

[[Page 28828]]

    God Bless!
    Sincerely,
    cc: 
Microsoft @ 1-800-641-2255



MTC-00030148

Fax Coversheet
Date: Monday, January 28, 2002
Time: 2:50 PM
To: Attorney General John Ashcroft
Company: U.S. Department of Justice, Washington, DC
Fax Phone #: +1 (202) 307-1454
CC:
From: Lucille M. Mcculley
Subject: Microsoft Antitrust Settlement
Total # of Pages (including cover): 1
    Memo: Dear Mr. Ashcroft:
    I am writing to express support for the Microsoft antitrust 
settlement. It seems like a good plan and a fair way to resolve what 
has beeen a lengthy and unnecessary inuiry into Microsft's business 
dealings. The settlement's terms are very generous to Microsoft's 
competitors, and giving them access to Windows programming codes 
will enable them to make their programs more compatible with 
Microsoft's operating system. Forgoing further exclusivity 
agreements with computer manufacturers will also diversify the 
market more than it already is. The settlement should give both the 
government and Microsoft what they want to ultimarly put the 
situation to rest. Please finalize the settlement without further 
delay. Sincerely, Lucille M. McCulley, 221 East 78th Street, NY NY 
10021



MTC-00030149

302 Saltmeadow Cove
Johns Island, SC 29455
January 25, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I have come to the conclusion that the settlement that was 
reached in the--Microsoft antitrust case should be instituted. 
Any continuation or revival of this would be a waste of time and 
money for both plaintiff and defendant. After struggling for years 
to reach this settlement Microsoft and the Justice Department 
finally" reached a settlement with the help of a court 
appointed mediator. Microsoft "has compromised greatly in this 
settlement offering to allow competitors to view its confidential 
proprietary code, including internal interfaces, so these same 
competitors can use it to "better compete against Microsoft
    Unfortunately opposition to the settlement may try to prevent 
its implementation. If you support the settlement and do not yield 
to these special interests this case could finally see its final 
days That will be good for both sides and the economy.
    cc: Senator Strom Thurmond
    Sincerely,
    Shirley Passino
    cc: Senator Strom Thurmond



MTC-00030150

URGENT
To: ATTNY. GEN. JOHN ASHCROFT
Voice Number:
Fax Number: 1-202-307-1454
Company:
From: JAMES E. WHITE
Company:
Fax Number: 1-501-884-3962
Voice Number: 501-884-3995
Date: 1/28/02 
Number of Pages: 2
Subject: MICROSOFT'S SETTLEMENT
Message:
    FULLY SUPPORT MICROSOFT'S ANTITRUST SETTLEMENT WITH THE FEDERAL 
GOVERNMENT.
    JAMES E. WHITE
    115 Eagle Ridge Trace
    Fairfield Bay, Arkansas 72088
January 11, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing in support of Microsoft's antitrust settlement with 
the federal government. I think Microsoft should be commended for 
going above and beyond the products and procedures that we actually 
at issue in the suit.
    The settlement is fair. Microsoft will accept many restrictions 
on the way it does business. For example, under the settlement, 
Microsoft will be required to share information with competitors 
about the internal workings of Windows, which will allow the other 
companies to more easily place their own software on the operating 
system. Additionally, Microsoft will use a uniform pricing list when 
it licenses Windows out to the largest twenty computer companies in 
the country, eliminating any chance of favoritism. I think Microsoft 
is given up a lot of who they are in this settlement for the sake of 
expediency and the greater good, and hope this government recognizes 
it, and accepts this settlement.
    Sincerely,
    James White



MTC-00030151

Advanced Glazing Systems L.L.C. WCL ADVANGS035N8
14580 N.E. 95TH STREET
REDMOND WA 98052-2550
tele 425 867 1032
fax 425 867 3037
FACSIMILE TRANSMISSION
number of pages including this page is
January 28,2002
1202 307 1454
616 9937
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I would like to express my support for Microsoft in regards to 
the antitrust settlement. To begin, this suit should not have been 
brought in the first place, but continuing litigation would prove to 
be even less fruitful, and rather unjust, All that has come out of 
this is a waste of time and money. Relatively speaking, the 
settlement is fair and it should stand the way it is. Microsoft is a 
company that has brought commerce on a large scale to this country 
and should be allowed to continue to do so. If people get wealthy 
off of their own endeavors that should be commended, but Microsoft 
is being dragged through court. The terms of the settlement are more 
than fair. Among many other requirements, the company has agreed to 
make the internal interfaces available to competitors so that they 
may design software that runs more efficiently on a Windows 
platform, and there will be a committee that will monitor the 
actions of Microsoft and their adherence to the terms.
    This settlement should be umfinalized and all proceedings 
against Microsoft should cease. Thank you for giving me the 
opportunity to voice my opinion on this matter.
    Sincerely yours,
    G. Allen



MTC-00030152

11460 NE 132nd Street Apt.
G103 Kirkland, WA 08034
January 28, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    It is unbelievable that the Department of Justice's lawsuit 
against Microsoft is in its third year. Parties envious of 
Microsoft's success brought the suit. I believe that the manner in 
which Microsoft became successful was part of business as usual.
    Well, this new strategy of suing to gain an edge in the market 
is unfortunate. It breeds a lack of corporate .responsibility and 
the need to innovate. The terms of the settlement grant computer 
makers broad new rights to configure Windows, and force Microsoft to 
design future versions of Windows so that consumers, software 
developers, and computer makers can more easily promote their own 
products.
    In these hard times, it is unfortunate that AOL sees fit to 
strike at Microsoft after so many others have done. Business is 
difficult enough without endless lawsuits. I am an unemployed 
software tester and abhor what is going on in this. AOL has no 
gripes, It is number 1 in it's field. This is outrageous and 
untimely. Let the consumer dictate what is to become of Microsoft. 
That's supposed to be the way capitalism works
    Sincerely,
    Richard Waling



MTC-00030153

Gene Ericson
700 Melody Lane
Edmonds, WA 98020
January 28,2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue
Washington, DC 20530
    Dear Mr. Ashcroft,
    I support the recent antitrust settlement reached with Microsoft 
and I encourage the Department of Justice to do the same. Microsoft 
has agreed to terms that will make the market much more competitive 
and benefit the consumer*
    Microsoft has agreed to make it easier for competitors to remove 
Microsoft's products from Windows OS and to install competing

[[Page 28829]]

products. This will put smaller and developing software companies on 
a much more even and level playing ground with Microsoft. Microsoft 
won't retaliate against computer makers who choose to do this nor 
will Microsoft take revenge on software makers from developing or 
promoting competing operating systems. To make sure the settlement 
is fairly applied, a technical committee made up of three software 
engineering experts who will also assist in dispute resolution*
    I firmly believe this will make the OS market more competitive. 
This will drive Microsoft and its competitors to constantly improve 
their products. In the end, the consumer will ultimately be the 
winner.
    Sincerely,
    Gene Ericson



MTC-00030155

United States Security Service
11013 Pacific Highway SW
Lakewood, WA 98499
January 28, 2002
Attorney General John Ashcroft
US Department of Justice
95) Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    The Microsoft antitrust case was unnecessary to begin with, but 
the fact that it "has dragged out this long is absolutely 
ridiculous. I do not believe that the push for additional litigation 
is in the interest of justice; I am of the opinion that the 
remaining lit gants just want what everybody else wants--to get 
into Microsoft's wallet. A settlement has been proposed that, while 
it may not be ideal, is acceptable to both Microsoft and the 
Department of Justice. Next week, the courts will determine whether 
the settlement is acceptable. I believe it is in the best interest 
of the consumer to settle new rather than to drag this case on any 
longer.
    Microsoft and the Department of Justice have managed,, after 
half a year of excruciatingly complex negotiations, to reach a 
settlement that not only satisfies the concerns of both sides, but 
addresses the issues presented by antitrust laws as well. For 
example, Microsoft has agreed not to enter into any contract that 
would require a third party to distribute Microsoft products at a 
fixed percentage. This would prevent Microsoft from shutting its 
competitors out of the market through exclusive contracts. Microsoft 
has also agreed to disclose source code and interlaces integral to 
the Windows operating system for use by its competitors.
    I do not believe that the settlement is in any way deficient. In 
fact, I believe it would be best for the economy and the American 
public to finalize the settlement now. I urge you to take the 
appropriate action.
    Sincerely,
    Douglas Bird



MTC-00030156

Teri Mathes
8042 Whisper Lake Lane West
Ponte Vedra Beach, FL 32082
Phone: (904) 273-4651
Fax: (904) 273-5090
Fax
Renata B. Hesse
To: Antitrust Division
From: Ted Mathes
U.S. Department of Justice
Fax: 1-202-307-1454 Pages: 2
Phone:
Date: January 28, 2002
Re: Microsoft Settlement
CC: Teri Mathes
8042 Whisper Lake Lane West
Ponte Vedra Beach, FL 32082
January 26, 2002
Attorney General John Ashcroft
U.S. Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft,
    It has been three long years of litigation between Microsoft and 
the DOJ and time to wrap it up is long overdue. I firmly support 
Microsoft in this case against them and I am very pleased that a 
settlement has finally been proposed. The economy and the IT 
industry has already endured so much. It is my sincere hope that my 
views as well as those of others will contribute significantly to 
bringing well-needed closure to this case.
    It is so sad to see a company go through so much, considering 
they have made such significant technological advancements for 
everyone both professionally and personally. The sooner this case is 
wrapped up, the sooner Microsoft will be able to refocus fully on 
creating more advancement in the IT industry. Ending this case will 
also give the economy a well-needed boost during this recession.
    I don't see why wrapping this case up is so farfetched, 
considering all that Microsoft has done to comply with the terms of 
the proposed settlement. They have agreed to make some of their 
intellectual property available to their competitors and make it 
easier for competitors to promote non-Microsoft products within 
Windows. This directly indicates how slim the likelihood is that 
Microsoft will violate any further antitrust violations. Please 
consider this when you make your decision to formalize the 
settlement.
    Sincerely,
    Teri Mathes



MTC-00030157

January 27, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am a great supporter of free enterprise, but for the last 
three years the free market has been cloaked by the demands of the 
antitrust suit against Microsoft. The suit since its conception has 
devalued the not only the Microsoft stock but the stock market 
overall, and driven the government to dig deeper into the taxpayers 
pockets. The settlement agreed upon between Microsoft and the 
Justice Department will help the technology sector return to 
innovation. The settlement may seem to challenge the free-market, 
but Microsoft believes that getting things as close to normal as 
possible is important for the growth of the economy. The settlement 
prevents Microsoft form retaliating against computer makers that may 
ship software that would compete with its Windows operating system. 
Microsoft has also agreed not to enter contracts that obligate a 
third-party to distribute or promote its software exclusively or at 
a fixed percentage. I urge you to make certain that this settlement 
is confirmed swiftly, Not just Microsoft, but also the industry as 
whole must be allowed to return to innovating,
    Sincerely,
    Helen Buswinka
    8251 Bridle Road
    Cincinnati, OH 45244



MTC-00030159

Kathryn Riva
9725 Fruitville Road
Sarasota, Florida 34240
January 28, 2002
Attorney General John Ashcroft
U.S. Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft,
    I am taking a moment to write to you because it has come to my 
attention that you and Microsoft have recently settled the antitrust 
case. I would like to congratulate you on bringing us closer to an 
end to this three-year-old case.
    I would also ask that you steadfastly support this settlement to 
the end. Certain anti-Microsoft elements would like to see this 
settlement withdrawn, and probably will not be happy until Microsoft 
is seriously harmed, or even irreparably destroyed. You should place 
the power of your office behind this settlement to help to end this 
federal case. Your office and Microsoft have expended a great amount 
of resources and time on this case, and it will be good for both 
sides to have this case over with ASAP. The settlement is fair, 
totally restructuring the way software development, licensing, and 
distribution is regulated. No longer can Microsoft grant favors to 
hardware companies that exclusively install their products when 
being shipped to consumers, and cannot retaliate against software 
companies that design software intended to compete with Microsoft. 
Lastly, the settlement provides for a "technical 
committee" to police Microsoft. Let Microsoft and your 
personnel get w work on the issues of the future. Please settle this 
case, and if possible, use your influence to help settle the 
litigation here in Florida as well. Thank you.
    Sincerely,
    Kathryn Riva



MTC-00030160

EDWARD SHUEY
6020 ACORN DRIVE
HARRISBURG, PA 17111
January 28, 2002
Attorney General John Ashcroft
U?? Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft,
    The recent settlement in the antitrust case between the US 
Department of Justice and Microsoft is in the best interest of the 
American Public. Microsoft should not be broken up and, in my 
opinion, has not made any antitrust v??olations. I support the

[[Page 28830]]

settlement insofar as I believe that Microsoft will be a more 
productive company out of court than in, and that I support 
Microsoft trying to implement better business practices, and the 
anti-retaliatory aspects of the settlement ought to address that.
    My wife has a home business, which she operates on the Internet. 
Windows technology has made her life much easier. As a user, I do 
not feel as if my rights have been infringed upon at all. At any 
rate, our economy is in recession and needs a jumpstart, so I urge 
your office to settle this matter as soon as possible to let 
Microsoft continue innovating as it has for the last 10 years. Thank 
you for your time in this matter.
    Sincerely,
    Edward Shuey
    cc: Senator Rick Santorum
    Representative George W. Gekas



MTC-00030161

161 Austin Drive Unit 120
Burlington, Vermont 05401
January 16, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I believe that the recent settlement negotiated between the 
Department of Justice and Microsoft is a fair one, if indeed this 
suit ought to have been brought at all. I am writing this to express 
my appreciation for your having taken the logical step to settle it. 
I hope at the end of January this settlement will be enacted.
    There are so many other more important things about which we 
should be concerned. Any further efforts to cripple one of our 
country's most successful companies ought not be on that list. I am 
hopeful that this settlement signals the end of hostilities between 
our government and American business. Microsoft has shown some 
leeway in this issue. They have agreed to license their Windows at 
the same price. They have also agreed to disclose some of the 
interfaces to its competitors. Let's concentrate on those things 
that are necessary rather than those grudge matches that seem to 
indicate a lack of national resolve.
    MICROSOFT HAS SOON A DRIVING WH?? ?? ??UR BURGE??NING ECONOMY. 
GIVT ?? SANT SC??CK.
    Sincerely,
    Marion Evans Jeffers and Gregory Jeffers



MTC-00030162

Fax
To: Hon. John Ashcroft (Attorney Gen.)
From: Thomas W. Johnston
Fax: 202-307-1454
Pages: 2 (including this page)
Date:1/28/02
Re: Microsoft Case cc:
    Dear Mr. Ashcroft:
    I know you have many items on your plate. Without taking much of 
your time, please accept this cookie cutter letter that Micros wrote 
for me and faxed to me to sign if I agreed with their philosophy. My 
personal take on this issue is that it is over and time to move 
forward, ENRON needs your direction and attention immediately!
    Sincerely,
    Thomas W. Johnston
    President,
    Johnston & Associates
    Newark, DE 19711-7460
16 Farmhouse Road
Newark, Delaware 19711
January 28, 2002
Attorney General John Ashcroft
The Department of Justice
950 Pennsylvania Avenue
Washington, DC 20530
    Dear Mr. Ashcroft,
    I am pleased that we all have seen the final conclusion to the 
Microsoft lawsuit. This whole dispute seems frivolous now that the 
case has been settled on the federal level. We need to approve the 
settlement quickly, and move on with more important national 
business. It can be argued that has Microsoft actually enhanced the 
world of computers rather than hindered it. Its integrated software 
and operating system have certainly educated a segment of computer 
consumers around the country. Without Microsoft, computers across 
the globe would be operating on multiple, totally different systems, 
and many would be unable to communicate with each other.
    I realize that you are busy with many responsibilities, but I 
wanted to take this opportunity to thank you for settling this case 
and for ensuring that our nation will be better off. We've put this 
case behind us and it is time to move on. Thank you.
    Sincerely,
    Tom Johnston



MTC-00030163

8812 Deerland Grove Drive
Raleigh, North Carolina 27615
January [illigible] 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing today to urge you and the Department [illigible] to 
accept the Microsoft antitrust settlement. The case has been 
[illigible] over three years now and needs to be settled. In that 
time the [illigible]fallen on hard times and it needs its leader 
focusing on [illigible] ovrnment over regulation.
    A settlement has been reached and I would like [illigible]. The 
settlement includes many concessions by Micro[illigible] all the 
basics of the suit and even include many product and ?? were not 
mentioned in the original suit. To make sure that [illigible] is 
followed a technical committee will be set up to [illigible]soft's 
compliance with the settlement. All that is need[illigible] 
government to accept its own agreement. Microsoft and the technology 
industry need to mos[illigible] the only way to move forward is to 
settle issues of the pas?? the Microsoft antitrust settlement.
    Sincerly
    William [illigible]



MTC-00030164

ROBERT W. SAUNDERS, CLU, ChfC
Group & Individual 
Life. Annuities. Disability. Income. Pensions

Tel/Fax (360) 387-8083
Mailing:
P.O. Box 1203,
Stanwood, WA 98292-1203
E-MAIL: ROBERTWS @ CAMKNO.NET
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I encourage you to accept the recent anti-trust settlement 
reached with Microsoft. Microsoft has agreed to terms that will open 
up the software operating system, market m making the market more 
competitive and beneficial to consumers. For example, Microsoft has 
agreed to disclose its operating interface to competitors as well as 
to make it easier for computer makers to remove Microsoft products 
from the Windows O5 and to install non-Microsoft products in their 
places. Microsoft has also agreed to let a three person Technical 
Committee oversee settlement compliance and assist in dispute 
resolution. I firmly believe all of this will serve to open the OS 
market and to make it more competitive. This competitive market will 
ultimately drive Microsoft and its competitors to create better 
software. And it will be the consumer who wins.
    Sincerely,
    Robert Saunders



MTC-00030165

396 South Street
Bridgewater, MA 02324
January 28, 2002
Attorney General John Ashcroft
US Department of Justice
950 Per??svlvania Avenue. NW
Washington. DC 20530
    Dear Mr. Ashcroft:
    Three years ago, the Department of Justice announced it had 
filed an antitrust suit against the Microsoft Corporation, and that 
was the beginning of our economic woes. The stock market dropped 
sharply that day and kept going. Now we are stuck in a recession, 
and the settlement that was reached last November between the DOJ 
and Microsoft has a good chance of helping America regain its 
economic prosperity.
    I support the settlement. It ends the unnecessary litigation 
against Microsoft; it will enable the stock market and economy to 
get back to past successes and allows Microsoft to resume producing 
innovative products. Microsoft has agreed to produce future versions 
of Windows to make it easier for competitors to remove Microsoft 
software and replace it with their own. While I do not agree with 
this action since it completely throws free enterprise out of the 
window. I am relieved to see the litigation stop.
    I support has settlement, and hope that the DOJ approves it as 
soon as possible.
    Thank you.
    Sincerely
    Lloyd Sime
    cc: Representative Barney Frank



MTC-00030166

Charles L. Field
P.O. Box 10465
Bainbridge Island, WA 98110
January 28, 2002
Attorney General John Ashcroft

[[Page 28831]]

US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
Via Fax: 202-307-1454
    Dear Mr. Ashcroft:
    I want to express my concern over the Microsoft antitrust 
dispute. The settlement that has finally been reached in this case 
is fair and in the best interest of all parties. The continued 
dispute over this litigation will not aid anyone in any way nor will 
any of us be benefited by the breakup Microsoft.
    The terms of this settlement are fair Microsoft will design all 
future versions of its Windows operating system to be compatible 
with the products of its competitors. The company will also cease 
any behavior that may be construed as predatory or retributive. This 
settlement will ensure that Microsoft cannot engage in any further 
antitrust violations, alleged or confirmed. Those who are not 
satisfied by the terms of the settlement are, in my opinion, not 
looking for a good solution to this problem, but rather the 
propagation of their own political ends.
    Please ensure that this settlement is approved, I appreciate the 
time that you have taken to deliberate this issue, and make the 
right decision.
    Sincerely,
    Charles Field



MTC-00030167

January 28. 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington. DC 20530
    Dear Mr. Ashcroft:
    I am writing in full support of the recent settlement between 
the US Department of Justice and Microsoft. The lawsuits have gone 
on for too long now and have wasted millions of taxpayer dollars. 
Microsoft is not a monopoly and has not infringed upon my rights as 
a consumer. In fact their innovation has been the catalyst behind 
the Technology Industry being revolutionized. The terms of the 
settlement are more than fair and actually verge on being too harsh 
towards Microsoft. Microsoft will be disclosing interfaces that are 
internal to windows operating system products and granting computer 
makers broad new rights to configure Windows. This is a first in an 
antitrust case.
    Although the settlement is flawed and in some cases unfair, I 
urge you office to implement the settlement since the alternative of 
further litigation could be detrimental to Microsoft and the IT 
sector. Do what is right for our country and show that the new 
administration has made a commitment to innovation, I am a loyal AOL 
customer and have used their product since 1993. I also use many of 
Microsoft's products and many of their competitor's products, Please 
let Microsoft move on and let them do what they do best which is 
innovation. They raise the bar of excellence for all.
    Sincerely,
    Catherine Hamlin Walker



MTC-00030168

FAX
Date:   Monday, January 28, 2002
Pages including cover sheet: 2
To: Attorney General
Phone
Fax Phone +1(202)6169937
From: Victor Arean
248 Punta Vista Dr.
St. Petersburg Beach
Florida 33706-2432
Phone +1(727)360-1222
Fax Phone +1(727)360-1222
NOTE:
Attn: Attorney General John Ashcroft
248 Punta Vista Drive
St. Petersburg Beach, FL 33706-2432
January 26,2002
Attorney General John Ashcroft
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft,
    The Federal District Court judge should approve the settlement 
of the Microsoft antitrust case. That would be the best thing for 
the American computer industry and the American economy. Until six 
years ago, I worked in the computer industry, starting with college 
internships. I worked with IBM's OS/2 software, which was great for 
connectivity to IBM's mainframe and mid-level computers, but was 
able to run only the older, 16-bit Windows programs, not the newer 
32-bit ones (Windows 95 and later). The salespeople refused to use 
OS/2 on their laptops, insisting on Windows. At the time, I 
purchased a home computer with Windows on it, and later decided to 
purchase the Microsoft Office Suite, because I thought it worked 
better than the Lotus Smart Suite and other similar products.
    There have been complaints made about Microsoft that are 
reflected in the antitrust litigation. For example, people have said 
that Microsoft's knowledge of the internal software code interfaces 
of its Windows operating system allowed its application programming 
division to have an inside track to building better programs, like 
Microsoft Office. Under the settlement, Microsoft will have to 
document and disclose the Windows internal interfaces. IBM never 
disclosed the internal interfaces of its operating systems in 
eighteen years of antitrust litigation. Top software engineering 
experts will monitor the agreement for five years to ensure that it 
is complied with, and investigate complaints. The other terms also 
require Microsoft to cooperate with its competitor, open up its 
software code, and introduce more flexibility into its business 
practices. The settlement resolves concerns and is good for the 
American computer industry.
    Thank you for your support of the settlement.
    Sincerely,



MTC-00030169

Microsoft Antitrust Case
T. Blanford--01/28/02
    How many businesses have been forced out of business by the 
unlawful, ruthless tactics of Microsoft?
    How many individuals have suffered countless loss hours ,and 
dollars as the result of Microsoft.
    How many Billions of dollars in losses has Microsoft cost 
business's and organizations of all types including the government 
and individuals by their buggy and often hacked software. By all 
metals, show me where the security in their software resides. I 
can't find it.
    Show me where the competition is. Microsoft couldn't sell their 
crap software if there were real competition.
    I personally have lost ten of thousands if not hundreds of 
thousands of dollars and ten of thousands of man-hours as the result 
of anti-competitive actions by Microsoft.
    Show me where the standards are. Show me where Microsoft has 
promoted and implemented universal cross platform and cross 
application compatibility.
    Who, outside of government, has the power to control rite abuses 
and raider-handed actions of Microsoft?
    Where is tile level playing field for all businesses and 
individuals?
    What is the purpose of government if not to protect the people 
from unlawfull and unethical acts committed by those without civil 
sensibilities.
    Where is this crap going to end?
    Tom Blanford--



MTC-00030170

W. E. SALTER
4531 Fishers Hollow Rd
Myersville, MD 21773
Attorney General John Ashcroft
US Dept. of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
January 26, 2002
    Dear Mr. Ashcroft:
    The federal case against the Microsoft Corporation is without 
merit. The Justice Department's litigation against Microsoft has 
served only to attack the principles of free enterprise that spur 
productivity. I believe that settling this issue is in the best 
interests of this nation and I would urge the Dept. of Justice to 
enact the settlement swiftly.
    The details of the settlement agreement contain many changes 
brought forth by Microsoft in an attempt to resolve the issue. 
Microsoft will now disclose the protocols and design interfaces of 
the Windows system. The result of this change will be that 
developers will more readily be able to design soft-ware that is 
compatible with the Windows system. I believe that consumers and 
developers will both benefit from these changes.
    The Justice Department should realize the benefits of enacting 
this settlement.
    Sincerely,
    Willard E. Salter



MTC-00030171

Claude V. DeShazo
Maureen M. DeShazo
January 28, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing this letter to show my support for the recent 
proposed settlement that was reached between Microsoft and the 
Department of Justice. It is my opinion that the settlement will 
provide the necessary push that the IT industry needs to help 
bolster the economy. The economic troubles

[[Page 28832]]

that America is facing all started when the antitrust suit against 
Microsoft was announced. Our stock market and economy went from 
being the best in history to being mired in a nasty recession. 
Microsoft is the one company that has the ability to save our 
economy, and since the settlement makes them work ever closer with 
their competitors, competition in the IT industry will benefit, and 
the economy will show gains. The settlement that was reached is more 
than fair, and I support it.
    Sincerely,
    15804 High Bridge Road * Monroe, WA 98272 * 
360-794-2172 * 800-530-37OO * Fax: 360 
794-5592 * Email: applady @ aol.com TOTAL 
P. 01



MTC-00030172

Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
January 28, 2002
    Dear Mr. Ashcroft:
    I encourage you to accept the recent anti-trust settlement 
reached with Microsoft. Microsoft has agreed to terms that will open 
up the software operating system, market making the market more 
competitive and beneficial to consumers.
    For example, Microsoft has agreed to disclose its operating 
interface to competitors as well as to make it easier for computer 
makers to remove Microsoft products from the Windows OS and to 
install non-Microsoft products in their places. Microsoft has also 
agreed to let a three person Technical Committee oversee settlement 
compliance and assist in dispute resolution. I firmly believe all of 
this will serve to open the OS market and to make it more 
competitive. This competitive market will ultimately drive Microsoft 
and its competitors to create better software. And it will be the 
consumer who wins.
    Sincerely,



MTC-00030173

Gary and Susan Reid
5651 Mission Road
Bellingham. WA 98226-9680
Tel. (360) 966-2385/Fax (360) 966-3171
To. The Attorney General
From Gary Reid
Date: January 28, 2002
Re' Microsoft Anti-Trust Settlement
    From my viewpoint as a consumer, this suit needs to be resolved. 
I believe that this suit will cost me money. First, it has increased 
Microsoft's cost to do business; second, it has diverted efforts 
from producing a better product: and. third, the tax dollars spent 
on this suit exceed, am possible savings to tile public.
    I believe than Microsoft's product is fairly priced when 
compared to the benefits obtained. I can be pan or a communication 
revolution that has changed the world for less than $20000 Does not 
M?? have a proprietary right to its systems? It appears that the 
patent holder of the ?? hoop has more rights than the designers of 
this life-changing system.
    The ineorpera?? of the internet browser into the basic system is 
important to the con?? It should not be separated to give, a 
competitor an advantage. Several of the business ?? that were in 
question have already been changed. If our economic system is to 
work. competitors need TO produce boiler products--not resort 
to politically driven ?? that result, in pourer products for the 
purpose of bringing equality ee Microsoft



MTC-00030174

Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I want to take advantage of this opportunity to give my opinion 
on the settlement concluded last year between Microsoft and the 
Department of Justice. I believe the agreement represents a good 
deal and should continue to be supported by the federal government. 
The agreement is fair and the government received many strong 
provisions. Microsoft has agreed to design future versions of 
Windows to provide a meehanism to make it easy for computer makers, 
consumers and software developers to promote non-Microsoft software 
within Windows. This mechanism will make it easy to add or remove 
access to features built in to Windows or to non-Microsoft software. 
This change will give consumers the freedom to change their 
computer's configuration whenever they so desire. This agreement is 
also good for consumers because it allows Microsoft to focus their 
attention on new products that consumers have come to expect. This 
will make everyone more efficient, whether they use the products at 
home or their job.
    Sincerely,
    Maya Balle



MTC-00030175

19 Lakeview Drive Kinnelon, NJ 07405-3113
January 12, 2002
Attorney General John Ashcroft
US Department of Justice
Washington, DC 20530-0001
    Dear Attorney General Ashcroft:
    I am writing to express my support in the recent antitrust 
settlement between Microsoft and the federal government. I sincerely 
hope that no further action is being taken an the federal, level. 
Considering the terms of the agreement, Microsoft did not get off 
with just a slap on the wrist. In fact, Microsoft is left to make 
several significant changes to the ways that they handle their 
business. For example, Microsoft has agreed to make available to its 
competitors, any protocols implemented in Windows' operating 
system products that are used to interoperate natively with any 
Microsoft server operating system. With the many terms of the 
agreement, there should be no reason to pursue father litigation 
against Microsoft on any level.
    Thank you.
    Sincerely yours,
    Donald B Wain



MTC-00030176

Seattle Pacific University
School of Business and Economics
3307 Third Avenue West Seattle, WA 981 19-1997
Phone: 206 281-2970
Fax: 206 281-2733 http://www.spu.edu
January 24, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    The purpose of this letter is to support Microsoft and the 
antitrust settlement, The suit brought against Microsoft was 
frivolous and misplaced. Clearly, Microsoft has been the leader in 
the technology industry and has driven the incredibly positive 
returns in the stock market for the entire decade of the 1990s. 
Government meddling in business has almost never produced positive 
results--but in this case, the interference has been even more 
egregious than ever before. I disagree with any Government 
involvement.
    The terms of the settlement will allow other companies the 
ability to compete and will also be more beneficial/advantageous to 
consumers. In addition, Microsoft has agreed not to retaliate 
against software and hardware developers and competitors. They have 
also agreed to make it easier for non-Windows software to operate 
within Windows, starting with Windows XP. Surely, you must agree 
that Microsoft has shown much more than good faith in this entire, 
ridiculous lawsuit!
    Best regards,
    Carolyn A. Strand, Ph.D., CPA
    Assistant Professor



MTC-00030177

Liam Newman
15127 NE 24th St #403 Redmond, WA 98052
January 28, 2002
Renata B. Hesse
Antitrust Division
U.S. Department of Justice
601 D Street NW Suite 1200
Washington, DC 20530-0001
    Dear Attorney General:
    I was happy to hear the Department of Justice made the wise 
decision to settle the Microsoft antitrust case. As a software 
developer, I am cognizant of the benefits settlement agreement 
provides to both Microsoft and to its competitors.
    I am supportive of Microsoft's efforts to dispel concerns about 
anticompetitive behavior. Microsoft has agreed to disclose portions 
of its code to its competitors, as well as to make it easier for 
consumers to run other software systems with Windows. Future 
versions of Windows will be designed with mechanisms that will allow 
consumers to remove features of Windows and replace them with non-
Microsoft programs. By these and other concessions, Microsoft has 
really gone above and beyond what should be required it.
    It is time for the litigation to conclude so Microsoft will be 
free to focus its resources on developing new products. I hope you 
continue your efforts to resolve this case. Thank you for your 
consideration.
    Sincerely,
    Liam Newman



MTC-00030178

5984W10800 N
Highland, UT 84003

[[Page 28833]]

January 21, 2002
Attorney General John Ashcroft, DOJ
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft,
    I am appalled that the Microsoft antitrust case has gone on for 
this long. Three years have been spent already in the federal 
courts, and the possibility that even more time and money could be 
wasted in an extended court battle is outrageous. The push for 
continued litigation represents a pathetic attempt on the part of 
state legislatures to line their own pockets at Microsoft's expense, 
It is not in the best interest of the consumer for another round of 
proceedings to be brought against the Microsoft Corporation; indeed, 
the economy and the technology industry have been stagnating since 
the case began. The proposed settlement would not only prevent 
future antitrust violations, it would also allow Microsoft and the 
Department of Justice to get back to business. This is what the 
economy, the consumer, and the IT industry all need.
    Microsoft and the Department of Justice were able last November, 
with the aid of a courtappointed mediator, to reach a settlement 
that was realistic as well as just. In the interest of wrapping up 
the case, Microsoft has agreed to conditions that extend to products 
and procedures not found to be unlawful by the Court of Appeals. 
Microsoft has, in fact, already made the necessary changes and is no 
longer in violation of antitrust laws. For example, Microsoft has 
agreed to refrain from taking retaliatory action should software 
developers or computer makers introduce software onto the market 
that directly competes with Microsoft products, Microsoft has also 
agreed to disclose various interfaces integral to the Windows 
operating system for use by its competitors. I cannot imagine that 
the Department of Justice will be able to find the agreement to be 
anything but fair.
    The settlement needs no revision. Continued litigation is not in 
the best interest of the consumer, I do not believe that further 
action needs to be taken on the federal level. I urge you and your 
office to support the settlement.
    Sincerely,
    Michael Curtin
    CC: Representative Chris Cannon



MTC-00030179

14761 N 88th Lane
Peoria, AZ 85381-2780
January 18, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Attorney General Ashcroft:
    As a member of the technology industry, my only concern when 
working with computers and software is whether or not I can rely on 
it consistently over time, Microsoft has delivered the best services 
and products In the industry over the last decade and has benefited 
consumers, software developers, and computer makers alike, While I 
think that Microsoft, like any large corporation, has probably been 
aggressive in its use of marketing, I think that the lawsuits have 
been brought on not because there are antitrust violations of any 
great nature, but, because the Clinton administration had political 
vendettas against Microsoft for their lack of financial support for 
the party.
    The government should stay out of big business and the 
technology industry especially at this time of growth where our 
country is competing with other nations for the lead in the IT 
sector. Even though I think the settlement should have never 
occurred in the first place, I want to see it come to fruition 
because it is In the best interests of everyone involved to end 
litigation. Let Microsoft focus on innovation and growth.
    Under the terms of settlement Microsoft is giving away numerous 
technological secrets, which seem s to me to be in violation of 
their Intellectual property rights, They are also agreeing to 
license its Windows" operating system products to the 20 
largest computer makers on identical terms and conditions, including 
price. This stipulation seems to me to be creating an opportunity 
for monopolistic behavior since there will be collaboration on 
pricing.
    In spite of these flaws, the settlement should be finalized, The 
nine states holding out should be reprimanded and all of this has to 
come about due to the direction off your office. I ask you to please 
take these thoughts into consideration. Thank you for your time.
    S. Gorman



MTC-00030180

1624 Etain Road
Irving, TX 75060-5518
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
January 26, 2002
    Dear Mr. Ashcroft:
    It's good to see that the Justice Department has ended its very 
long and costly antitrust lawsuit against Microsoft. By freeing the 
innovative giant to fully focus on business, the Government will be 
aiding the creation of many jobs.
    The agreement calls for Microsoft to agree to terms that extend 
well beyond the products and procedures that were actually at issue 
in the suit--for the sake of wrapping up the suit. One 
provision calls for Microsoft to disclose and document, for use by 
its rivals, various interfaces that are internal to Windows" 
operating system products--a first in an antitrust lawsuit. 
Good work deserves its rewards. Microsoft has produced amazing 
software products for the world. It is time now for the government 
to allow the provisions of the agreement to fall in to place. No 
more action should be taken at the federal level against Microsoft.



MTC-00030181

January 21, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    As a fellow Republican in Rep. Tom Delay's district I wish to 
express my support of the settlement reached last November between 
the Department of Justice and the Microsoft Corporation. It has now 
been 3 years since the Justice Department began the litigation 
process against Microsoft. During this time countless dollars have 
gone to court mediators who endlessly debated the merits of this 
case. In times where budgetary resources are becoming increasingly 
scarce this action is increasingly appalling. Three years has been 
too long. I cannot imagine there is anything more to discuss.
    Once more, the settlement that was reached contains many 
concessions on behalf of Microsoft, in an attempt to settle the 
dispute Microsoft has been willing to agree to these terms despite 
their lack of guilt in the case. Microsoft has agreed to design 
Windows XP with a particular mechanism that will allow users to add 
competing software into the system. This will revolutionize the way 
our operating systems are configured. I believe that if Microsoft is 
willing to make these changes, the settlement should be enacted. I 
strongly support the settlement and look forward to the end of this 
case.
    Sincerely,
    Pamela Spencer
    cc: Representative Tom DeLay



MTC-00030182

FAX TO ATTORNEY GENERAL JOHN ASHCROFT
1 202 307 1454
1928 Claremont Country Club Commons
Normal, IL 61761
January 28, 2002
Attorney General John Ashcroft
United States Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft,
    It is in the best interest of the American public to finalize 
the antitrust settlement with Microsoft as soon as possible. 
Although we are happy to see Microsoft will not be broken up, we 
maintain our belief that Microsoft is still receiving unwarranted 
treatment. Under the terms of the concession, Microsoft has agreed 
to disclose internal interfaces, and increase its relations with 
software developers. All of these concessions have their positives 
and negatives. But, it seems to us when a company starts from 
nothing and is innovative to the point that it becomes the 
unprecedented leader of an industry, that company should be 
applauded, not criticized.
    We urge your office to free up the IT sector and allow it to 
grow again at the rapid rate it did before litigation. Only by 
allowing Microsoft to focus on business--not politics will the 
tech sector make a quick recovery. Thank you for your time. We 
appreciate your consideration of our thoughts for the continuing 
growth of Microsoft for everyone's benefit.
    Sincerely,
    Joseph and Maxine Stephens



MTC-00030183

13611 160th Avenue NE
Redmond, WA 98052
January 28, 2002
Attorney G metal John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW

[[Page 28834]]

Washington, DC 20530
    Dear Mr. Ashcroft:
    The Department of Justice has finally ended its pursuit of the 
Microsoft Corporation. A proposed settlement was reached between the 
two last November, and I am in full support of it. Now my government 
will be able to focus its attention o 1 more pressing matters than 
Microsoft. The settlement that has been reached is more than fair to 
all parties involved, and I urge you to, approve it as soon as 
possible. Microsoft will now be communicating more with their 
competitors than ever before, which will provide the IT industry 
with the necessary boost it needs. They have agreed to share design 
information with their competitors concerning the internal make-up 
of the Windows operating system, an I will make future versions of 
Windows that will make it easier for companies to manipulate the 
operating system and install their own software into it.
    All in all, his settlement benefits the industry and economy and 
should be implemented as soon as possible.
    Sincerely,
    Reginald L. Armfield



MTC-00030184

1624 Etain Road
Irving, TX 75060-5518
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
January 26,2002
    Dear Mr. Ashcroft:
    It's good to see that the Justice Department has ended its very 
long and costly antitrust lawsuit against Microsoft. By freeing the 
innovative giant to fully focus on business, the Government will be 
aiding the creation of many jobs.
    The agreement calls for Microsoft to agree to terms that extend 
well beyond the products and procedures that were actually at issue 
in the suit--for the sake of wrapping up the suit. One 
provision calls for Microsoft to disclose and document, for use by 
its rivals, various interfaces that are internal to Windows" 
operating system products--a first in an antitrust lawsuit. 
Good work deserves its rewards. Microsoft has produced amazing 
software products for the world. It is time now for the government 
to allow the provisions of the agreement to fall in to place. No 
more action should be taken at the federal level against Microsoft.
    Yours truly,
    Peggy Broyles



MTC-00030185

Francis E. Baird
206 Radnor Chester Road
Villanova, PA 19085
January 28, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing in full support of the recent antitrust settlement 
between the US Department of Justice and Microsoft, Although I am 
happy to see that Microsoft will not be broken up, I believe the 
current penalties are still too harsh. I am an avid believer in free 
market enterprise. Microsoft continually outdid its competitors by 
developing better products and services faster. This is called free 
market competition and Microsoft's efforts only served to increase 
the rate of growth in the industry. They should be applauded for 
their efforts not criticized.
    I sincerely hope that the remaining nine states opposing 
Microsoft's actions drop litigation immediately and allow the IT 
sector to focus on business which is in the best interest of the 
American public, especially in this time of recession.
    Sincerely,
    Francis Baird
    cc: Senator Rick Santorum



MTC-00030186

19355 Sherman Way, Unit 33
Reseda, California 91335
Phone 818/885.7179
Fax 818/885.1428
January 28, 2002
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    Please see that the new Federal District Court judge approves 
the settlement in the Microsoft case. The settlement is good for the 
country, because the information technology industries is a leader 
in fostering American prosperity through increased efficiency as a 
result of useful innovations, and because Microsoft is a vital part 
of the IT industry, which has for too long been stymied by this 
litigation.
    The settlement is fair and will be adhered to. A committee of 
software engineering experts will be able to look throughout 
Microsoft's facilities and into its software code to see that the 
agreement is followed. Other companies will be able to make any 
complaints they may have to the committee and the committee will 
investigate. This sounds like an approach that should work well.
    Please keep up your efforts to resolve this case now that we are 
so close.
    Thank you.
    Sincerely,
    Sonia Tarrish



MTC-00030187

DAN LESTER
6511 164th Street Southwest
Lynnwood, WA 98037
January 28, 2002
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I would like to inform you of my support of the proposed 
settlement in the antitrust lawsuit against Microsoft. This 
litigation has extended much further, and cost more money, than the 
public wants. It should be completed without further delay.
    Microsoft has made a significant attempt with this agreement to 
encourage weaker competitors to gain market share. They will make it 
easier to configure Windows with the software of competitors and 
will offer top computer makers equivalent terms and conditions to 
encourage fair play. Software developers will benefit from measures 
that are sensitive in scope, gaining the ability to license 
Microsoft's intellectual property and access their Windows source 
code. Now that we have the opportunity to move on, let us enact this 
fair, court mediator-assisted plan and get back to business. Any 
further action would just do harm to our fragile economy and truly 
over-step the public's feelings on the issue. I hope we have your 
approval.
    Sincerely,
    Dan Lester



MTC-00030188

7080 Weybridge Road
Weybridge, VT 05753
January 27, 2002
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Attorney General Ashcroft:
    I understand there is a 60-day public comment period, as 
required by the Tunney Act, with regard to the settlement between 
Microsoft and the Justice Department. Please know that I am fully 
supportive of this court mediator-assisted compromise and am urging 
you to cease any further legal action against Microsoft. Microsoft's 
success is extremely important to the U.S. economy, technological 
innovation, and millions of consumers. Microsoft's 
offer--access to their internal code for future design and 
permitted licensing of their intellectual property--should more 
than suffice to their competition. Creative, forward-thinking 
individuals and companies should not be penalized because their 
competitors are not able to be as successful due to their own lack 
of ability. This deal offers capitulation with sensible restraint, 
so I urge you to finalize it and move on to more important matters. 
Thank you very much.
    Yours truly,
    Shirley Claudon



MTC-00030189

TAYLOR ANGUS RANCH
Lester and Pain Taylor
HC 89, Box 225
Pleasant, AR 72561
Mt. Pleasant, AR 72561
January 28, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue NW
Washington, DC 20530
RE: Microsoft Settlement
    Dear Mr. Ashcroft:
    We understand that the public comment period on the proposed 
settlement agreement between the Department of Justice and Microsoft 
closes today, January 28, 2002. We are writing to cast our votes in 
favor of settlement.
    Given the record of accomplishment so far in this case, it makes 
no sense to continue litigation when you have the chance to conclude 
the case in a manner beneficial to the economy. The primary 
complaint against Microsoft was that consumers who chose to

[[Page 28835]]

use Windows operating systems for their computers were precluded 
from utilizing non-Microsoft software Programs for such services as 
Internet browsers and messaging services within Windows. Microsoft 
has agreed to end this practice, and open its Windows systems to 
such competition. With the major complaint answered, there is no 
need to further litigate.
    Please end this case, and put Microsoft back to work. The 
country needs to heal. Thank you for your kind consideration in this 
matter.
    Sincerely,
    Lester A. Taylor
    Pamela J. Taylor



MTC-00030190

1738 Swann Street,
FAYETTEVILLE, NC 28303
January 24, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    There has been a recent settlement between the Department of 
Justice and Microsoft. I want to give my support to this agreement 
and ask that you do also. The whole case, in my opinion, was a 
boondoggle. The lawsuit was entirely political, more a result of the 
collaboration of Microsoft's r??vals tan any unethical business 
practices. I find it interesting that we comp ??out competition from 
abroad, urge innovation, yet in other countries, the government 
helps companies. In our country, companies, if they become ??o 
successful, are hauled into court, completely at the mercy of their 
competitors and the government's definition of success. This is a 
shame out the two parties have reached an agreement and I urge you 
to give your approval since they, obviously, want this to end.
    Moreover, Microsoft has acquiesced to a great number of demand 
from the Department of Justice. Microsoft has agreed to grant 
compute takers broad new license to cast Windows as to promote non-
Microsoft software programs; Microsoft has agreed to new relations 
with software developers; Microsoft has agreed to internal interface 
disclosure. Enough is enough.
    Sincerely,
    William Hatley



MTC-00030191

FAX??
Date: Monday, January 28, 2002
To: US Department of Justice--
Attorney General John Ashcroft
Fax: 202-307-1454
From: GreCon Dimter, Inc.--
Larry Hilchie
Phone: 425-313-0275
Fax: 425-391-1686
Pages: 1
Subject: Microsoft Settlement
    Dear Mr. Ashcroft,
    I am faxing you concerning the Microsoft settlement.
    I believe in free enterprise and have for many years worked with 
other small companies. I have used computers since the mid 1980's in 
my businesses. I greatly appreciate all that Microsoft has done to 
enable US companies but especially small companies do their business 
productively. We faced major costs with unknown results trying to 
use custom software before the success of Microsoft who offer us 
competitive suitable software for our various needs.
    I, like many other people in small business, feel that major 
companies which try to compete with Microsoft: are trying to use the 
US government and courts to fight Microsoft success because these 
big companies have not met the market needs that Microsoft so 
successfully addresses. While I was totally opposed to the court 
actions, I was pleased that a settlement was reached at least 
between the US government as well as many states and Microsoft. The 
settlement was a compromise but I thought would enable Microsoft to 
focus again on their customers' needs in a world of global 
competition. Weakening Microsoft could enable not only US 
competitors but overseas competitors an unfair advantage. Microsoft 
is a major US exporter which we need and has helped many other 
companies and technologies grow to the benefit of the USA. I hope 
this settlement will be enacted this month.
    I believe that less government and more individual initiative is 
what makes the USA strong in this world. Let us finally let 
Microsoft focus on their business which has definitely help our 
company and many thousands of companies our size compete daily in 
our business areas. Thank you for your time. I wish you continued 
success in your fight against world terrorism.
    Sincerely,
    Larry Hilchie
    GreCon Dimter, Inc.,
    19536 SE 51st Street,
    Issaquah, WA 98027 USA



MTC-00030192

FAX
1-202-307-1454
Renata B. Hesse
AntiTrust Division
U.S. Dept. of Justice
601 D Street NW
Suite 1200
Washington, DC 20530-001
Midrosoft Settlement
    Dear Sirs,
    We are in agreeement with the rulings of the Court of Appeals in 
the Microsoft suit. I feel enough is enough.
    Many thanks for you time + effort beyond the hrs of 9-5.
    Sincerely,
    (Mrs.) Dick C. Grossblatt



MTC-00030193

Comments on the Revised Proposed Final Judgment
http://www.meer.net/iq/doj--comments.html
John Giannandrea, Independent Software Developer, formerly 
('94-'99) Chief Technologist in the Internet Browser group at 
Netscape/AOL
Summary
    After reviewing the Revised Proposed Final Judgment, the 
Competitive Impact Statement, the May 18th 1998 Antitrust complaint 
together with the findings of the District Court and the Court of 
Appeals I submit that the Proposed Final Judgment fails to describe 
effective remedies for Microsoft's illegal activities.
    An effective Final Judgment would prevent recurrence of the 
illegal behavior and provide relief and protection for independent 
software developers to develop innovative new middle-ware products 
and compete with Microsoft in the market for Windows software. The 
terms of this Final Judgment will not achieve this result because it 
is seriously flawed. These comments briefly describe the following 
problems with the Proposed Final Judgment:
    1. Problems with the scope of the remedy
    2. Shortcomings in the OEM configuration provisions
    3. Loopholes and technical shortcomings with the wording of the 
judgment
    4. Restrictive language related to Intellectual Property.
    5. Problems with the term and proposed implementation
    6. Flaws in several of the definitions
    Taken together I believe these flaws in Proposed Final Judgment 
make it an inappropriate remedy for the illegal behaviors found by 
the Court of Appeals. While changing some of the specific wording of 
the Final Judgment and removing some of the loopholes will make it 
stronger, on balance it is a wholly inappropriate remedy for the 
ongoing harm done by Microsoft in protecting and extending its 
Windows monopoly.
    ig @ meer.net
    January 27th, 2002.
    1. Problems with the scope of the remedy
    There are several problems with the scope of the proposed 
remedies which are likely to make it ineffective in practice. The 
Final Judgment does not correct the harm done to the marketplace 
today by Microsoft's existing software products, nor address the 
issue of backwards compatibility and harm done to the market by 
ongoing changes ("upgrades"). Nor does the Final 
Judgment address the crucial issue of APIs in Microsoft middle-ware 
products themselves, as opposed to APIs in the Windows Operating 
System Product.
    1.1 What products fall under the proposed remedy?
    Sections III.D, III.E and III.H limit the practical effects of 
the Final Judgment to some future versions of Microsoft's latest 
operating system product (WindowsXP, SP1) or 12 months from 
submission of the Final Judgment. This will not provide effective 
remedy for the actual installed base of Windows users, of which 
WindowsXP remains a small minority. Microsoft's monopoly position 
is, and will be for the length of the initial proposed term, made up 
of Windows2000, WindowsME, Windows98 and Windows95 products and 
their associated middle-ware product lines. It is in these products 
that harm is and was being caused by the illegal activities. For the 
Final Judgment to be effective in providing relief, the 
communications protocol and Windows API disclosures need to apply to 
the actual installed base of Windows. It is no more technically 
difficult for Microsoft to document current APIs than it is to do so 
in future products.

[[Page 28836]]

    The final paragraph of III.H limits the proposed remedies to 
middle-ware as defined by a timeline relative to the release of new 
Windows operating system products. The reality is that the illegal 
conduct relates to all existing and past Microsoft middle-ware 
products, and the release of future versions of Windows will not 
significantly affect the harm being done in the marketplace. There 
is no technical reason why existing Microsoft and non-Microsoft 
middle-ware will not be compatible with future versions of Windows. 
In fact Microsoft makes considerable effort to ensure that Windows 
is "backwards compatible" with its own applications. 
Remedies need to apply to all future versions of Windows, and all 
middle-ware now and in the future, and the obligations of the 
monopoly holder should not change unilaterally with a product 
release cycle under their express control. Much of the harm found by 
the Court is related not just to the disclosure of interfaces and 
APIs, but to the fact that Microsoft can stop supporting a 
documented feature or API without consulting the affected parties.
    One possible way to improve the Final Judgment would be to add a 
new condition to III. C. that allows OEMs the option of shipping any 
prior Microsoft middle-ware with any subsequent version of Windows.
    1.2 Middle-ware APIs are as important as Windows APIs Section 
III.D. proposes that Microsoft shall disclose APIs used by its 
middle-ware to interoperate with a Windows operating system. Since 
middle-ware such as Internet Explorer or Windows Media Player has 
added, subtracted or altered significant APIs with each subsequent 
version, including minor, so called "maintenance" 
versions, and since these APIs are depended on by the the majority 
of ISVs. III.D. should be extended to require disclosure of all APIs 
used by, or provided by any Microsoft middle-ware product, including 
APIs in other middle-ware software.
    1.3 Changes to current and past middle-ware needs to be covered 
The definition in VI.] excludes software in minor version changes 
from the definition of Microsoft middle-ware. Yet it was exactly 
such a minor change that disabled Java for millions of Internet 
Explorer users, or forced thousands of ISVs to abandon the Web Plug-
in API and redevelop or abandon their middle-ware. (See http://
www.meer.net/jg/broken-plugins.html) At a minimum all software 
middle-ware released by Microsoft and in use by a majority of 
Windows users should be covered by the Final Judgment for it to be 
effective.
    2. Shortcomings in the OEM configuration provisions It is clear 
from the findings of the Court that needs to exist remedies that 
enable OEMs and End Users to be able to add, remove and replace 
middle-ware without limitation by Microsoft through its Windows 
product. It has been shown to the Court that its technically easy to 
allow middle-ware either from Microsoft or its competitors to be 
added removed from the Windows operating system. The current 
language in the Final Judgment does not protect distribution of new 
and innovative forms of middle-ware and therefore fails to remedy 
the current situation where investment and competition in Windows 
middle-ware is "chilled" by Microsoft's prior and 
current practices.
    III.H.3 allows Microsoft to undo an OEM configuration in any 
subsequent version of a Windows product and to change the way an 
OEM's configuration interacts with Windows in each subsequent 
version. This lack of "backwards compatibiliy" is in 
Microsoft's interest at the expense of the OEM's investment.
    III.H.3. Allows Windows OS to undo an OEM's configuration 
automatically after 14 days. But it does not give the same 
capability to an ISV, or the OEM themselves. If a third party 
provides competitive differentiation by adding features and services 
on top of Windows they should be able to do so with no hindrance 
from Microsoft at all. If it is determined that Windows should have 
a "revert" feature that disables or undoes an OEM's 
enhancements, then that feature should have an "undo" 
capability so that the enhanced product purchased from the third 
party is not irreparably harmed by the behavior of the Windows 
software at some later time. III.H attempts to give end users and 
OEMs the right to add and replace non Microsoft middle-ware with 
competitive middle-ware, an essential component of the proposed 
remedies. Rather than just stating this as a simple requirement, 
additional restrictions are imposed in III.H.2:
    that competing middle-ware be replacing a Microsoft middle-ware
    that the middle-ware be a specific subset of possible middle-
ware that has a particular and limited type of user interface
    that Microsoft can require (and itself present?) a confirmation 
dialog for the end user if the change is made by software that the 
user presumably installed themselves
    III.H.3 imposes conditions on Microsoft operating system 
products altering OEM configurations, but Microsoft middle-ware also 
has a documented history of making such alterations. The Final 
Judgment does not protect OEM investments or end user choices unless 
it enjoins all Microsoft software products from altering, without 
express permission, the end user experience. It is exactly 
Microsoft's ability to make unilateral changes that expresses its 
monopoly power and distorts the market for improvements to Windows.
    The mechanism proposed in III.H.1 allows Microsoft to provide a 
interface choice to enable "all Microsoft Middle-ware Products 
as a group". This should be specifically disallowed since it 
reinforces the distinction between Microsoft and non Microsoft 
software, and suggests that an end user would be given the default 
choice of "taking everything" (i.e. all available 
Microsoft middle-ware, turning off competitors middle-ware) in order 
to allow ease of use and configuration.
    III.C.3 The requirement that a non-Microsoft middle-ware product 
should display a user interface "of similar size and 
shape" to a Microsoft middle-ware product is technically 
onerous. The additional inferred requirement that a middle-ware 
product can only launch automatically if a Microsoft middle-ware 
product were otherwise to do so, is also technically unreasonable. 
If the purpose of this remedy is to allow competition in such 
middle-ware; to allow, for example, an OEM to configure a PC so that 
it connected automatically to an IAP or ICP on boot up, then these 
restrictions would preclude this.
    3. Loopholes and technical shortcomings with the wording of the 
judgment There are significant exceptions and conditions attached to 
the definitions used by the Final Judgment. These exceptions appear 
to make the remedies themselves weaker and in several cases are 
technically inaccurate or groundless.
    3.1 Excluding existing middle-ware
    Section III.H after III.H.3 describes two exceptions where 
Microsoft middle-ware would be allowed to execute in preference to 
competing Middle-ware. These exceptions effectively negate the value 
of III.H and are seriously flawed.
    3.1.1 The first exception is for middle-ware "invoked 
solely for use in inter-operating with a server maintained by 
Microsoft". Given the current and past scope of MSN and the 
services provided by various servers in the 
"microsoft.com" domain, this exception is unreasonable. 
For example, a component of Windows that contacted a server to 
upgrade or maintain the device driver software on a Personal 
Computer would be exempt from III.H. This would presumably preclude 
an OEM from providing their own value-add service using the same 
component APIs of Windows. As the value and prevalence of network 
services grows, Microsoft would be able to continue to exclude 
competing middle-ware as long as they could define the service as 
being hosted at Microsoft. This would also include most .NET 
services, which Microsoft has publicly stated will be at the core of 
most end user functions in all future versions of Windows. The 
proposed remedy for past behavior is ineffective.
    3.1.2 The second exception is if "non-Microsoft middle-
ware fails to implement reasonable technical requirements 
.-.-.". This is an unreasonable and overly broad 
restriction on the proposed remedy. The specific example given, 
failure of support ActiveX, is a most egregious example. ActiveX is 
not a feature of Windows, it is an API created for Internet Explorer 
middle-ware expressly to tie that middle-ware to the Windows 
platform. In a healthy competitive environment it should be end 
users that conclude if middle-ware is providing "functionality 
consistent with the Windows product", not Microsoft. The idea 
that Microsoft themselves are qualified to say what is and what is 
not a valid non-Microsoft middle-ware product puts the fox in charge 
of the henhouse. In fact by the definitions of this section of the 
Final Judgment, most existing successful non-Microsoft middle-ware 
(.lava, Netscape Navigator, Web Plug-ins) would be exempt from the 
remedy. It was precisely the success of these products, demanded by 
end users, that precipitated the threat to Microsoft and led to the 
illegal behavior.
    3.2 Limitations on disclosure of communications protocols
    Section III.E. Requires disclosure of any communications 
protocol implemented in a Windows OS installed on a 
"client"

[[Page 28837]]

computer. This would appear to exclude protocols implemented as 
Microsoft middle-ware, such as Web Browsers, or communications 
middle-ware such as e-mail programs (Outlook Express) or streaming 
media players (Windows Media Player). It would also appear to 
exclude protocols implemented in the same copy of Windows, running 
as a "server". Given the advent of "peer-to-
peer" computing this distinction excludes more significant 
protocols than it includes. To meet the intent described in the 
impact statement, the requirement should be the disclosure of any 
communications protocol implemented by the Windows Operating System 
Product and any Microsoft middle-ware product.
    3.3 Preventing disclosure on "security" grounds.
    Section III.J.1.a attempts to limit the APIs and protocol 
descriptions to be published as part of the proposed remedy. The 
exceptions include those that would "compromise the security 
.-.-." of the Microsoft products. It is well known 
and supported by the majority of reputable computer security 
experts, including many who work for Microsoft Corporation, that 
disclosure of the mechanisms of software makes it more secure, not 
less secure. In fact requiring Microsoft to document and disclose 
APIs will make the products more secure as flaws are discovered by 
peer review and then repaired. Computer security should not be 
considered valid technical grounds to limit disclosure.
    3.4 Limitations on who can access the disclosures
    Section III 3.2 places all kinds of limitations on the 
disclosure of the information central to the proposed remedy. In 
III.D the Final Judgment requires Microsoft to disclose APIs to all 
listed parties via "MSDN or similar" i.e. publicly and 
for a small fee. This conflicts with III.J.2 which allows Microsoft 
to withhold such information unless Microsoft itself determines 
"a reasonable business need", or that the requester 
meets "standards established by Microsoft for 
.-.-. viability". These restrictions are 
unnecessary and are not vital to the remedy. The required 
information should be disclosed simply, via MSDN or Microsoft.com, 
to anyone who has a valid Windows license.
    Section III.J.2 additionally requires that non-Microsoft middle-
ware innovators be in "compliance with Microsoft 
specifications" and, at their own expense, pass a Microsoft 
defined third party verification test. These new tests and 
requirements are onerous, and do not exist in the market today 
except as optional marketing programs. In particular the non-
Microsoft middle-ware at issue in the anti-trust action would not 
have met these standards. These additional requirements and 
limitations will serve to place further hurdles in front of middle-
ware ISVs. They only serve the interests of the monopolist in 
limiting access to the required APIs as has happened in the past as 
documented in the Findings of Fact.
    4. Restrictive language related to Intellectual Property.
    The licensing terms implied by the Final Judgment are both more 
onerous than the prevailing market today, and unfairly biased in 
favor of Microsoft. The terms of III.G are not in force if Microsoft 
licenses intellectual property from the third party. This would 
appear to allow, for example, Microsoft to enter into an exclusive 
distribution arrangement with an ICP if the ICP had a reciprocal 
license to Microsoft for some middle-ware enhancement related to 
their Internet content. This kind of transaction is common in the 
industry today and would seem to weaken the intent of III.G.
    Section III.I.5 grants Microsoft the right to require a 
competitor to license to it IP rights to "relating to the 
exercise of their options or alternatives provided by this Final 
Judgment". This is an onerous and unreasonable requirement 
because Microsoft does not need such non reciprocal IP rights to 
comply with the Final Judgment. (Could such rights be licensed 
father by Microsoft to other ISVs?)
    III.I requires Microsoft to reasonable and non discriminatory 
licensing of any intellectual property required for the market to 
take advantage of the provisions of the Final Judgment. However 
there is a restriction (H.III.3) on sub-licensing. This would in 
practice curtail most ISV business models if a technology innovator 
was unable to resell its technology to an "end user" OEM 
or ISV without that entity then being required to obtain a license 
from Microsoft. The last paragraph of III.I explicitly states that 
the terms of the Final Judgment will not confer any rights with 
regard to Microsoft IP on anyone. But as the Final Judgment requires 
disclosure by Microsoft of APIs, protocols and detailed 
documentation of mechanisms inherent in middle-ware interfaces, then 
certain legal rights are in fact surrendered in most jurisdictions.
    III.I does not address the significant and influential market in 
royalty free software (such as Linux) and the open standard nature 
of the Web protocols and standards. Industry standards groups which 
Microsoft itself is an active member of such as W3C (The World Wide 
Web Consortium) customarily require all APIs and protocols to be 
royalty free. Yet III.I potentially places further restrictions or 
costs on ISVs developing products and innovations under that model 
if they wish to integrate them with Windows.
    5. Problems with the term and proposed implementation
    5.1 Term is not long enough
    The Final Judgment has a term of five years (V.A), or seven 
years with additional violations. Given the pattern of illegal 
behavior by Microsoft since 1995 and the fact that Windows Operating 
system product cycles are frequently many years apart, the scope of 
this agreement appears unusually short. A 10 or 15 year agreement 
would be more appropriate.
    5.2 Issues with creating a competent technical body
    The Final Judgment requires a three person technical committee. 
While this committee is intended to be knowledgeable about software 
design and programming, it also needs to be knowledgeable about 
Internet standards and protocols, online transactions and web e-
commerce architectures and business models. It is unlikely that a 
committee as small as three people will have the requisite skill set 
to oversee the broad range of initiatives and innovations that 
center on the Windows platform and are the subject of the monopoly 
concern. The committee would be more in keeping with industry 
standards and accepted practice if it were larger and comprised of 
experts in several fields.
    5.3 Public disclosure of information relating to enforcement
    Section IV.B.10 and other language in :IV (e.g IV.D.4.d) 
suggests that the Final Judgment requires the work of compliance and 
technical overview to be conducted in secret. For example if an ISV 
submitted a complaint to the TC or the Microsoft Compliance Officer 
it is not required that the complaint and its response be published 
(IV.D.3) It would be more in keeping with industry standards and 
accepted practice for technical discussion around the enforcement of 
a Final Judgment be open to wider technical review. This would 
improve the quality and accuracy of such review as well as 
reassuring the community of OEMs, ISVs etc. that the enforcement 
process was actually working. At a minimum there should be a 
requirement that the TC host an independent web-site to communicate 
with the industry about the status of enforcement issues.
    6. Flaws in several of the definitions
    There are many problems with the definitions of key terms that 
affect the meaning and substance of the Final Judgment.
    VI.A. A suitable definition for Application Programming 
Interface needs to include interfaces provided by middle-ware 
itself, since middle-ware can include tiers of software, not just a 
simple arrangement where middle-ware calls the Windows software 
layers. A more accurate and common definition of APIs would be 
independent of both the terms Windows and middle-ware. VI.B. The 
scope of Communications Protocol should not be limited to 
communications with a "server operating system". This 
excludes the concept of one Windows XP PC talking to another PC, 
which is a common occurrence and should be within the scope of the 
remedy. "Peer-to-peer" is an example of a middle-ware 
category that is not covered by this definition. VI.J.2 and 
VI.K.b.iii both require that the covered software be 
"Trademarked" to be under the terms of this agreement. 
This requirement seems to exclude certain middle-ware. For example 
"My Photos" and "Remote Desktop" are new 
middle-ware in WindowsXP and are apparently not trademarked. VI.T 
defines Trademarked to exclude certain named products regardless of 
their impact in the market.
    VI.J.4 excludes software that has no user interface, such as a 
streaming video codec or a web commerce protocol handler.
    VI.K.1 lists certain products explicitly as middle-ware. Given 
that the Final Judgment as written only covers Windows XP and 
subsequent versions (it should be modified to cover prior versions), 
the list of covered products and categories should also include MSN 
Explorer, Microsoft Outlook and other Microsoft Office components, 
Windows Movie Maker and others. VI.N limits the definition of a 
"non-Microsoft middle-ware

[[Page 28838]]

product" to one that has shipped 1,000,000 copies in a 
previous year. Under this definition, Netscape Communicator would 
not be covered by this Final Judgment, nor would Sun's Java JVM, 
both examples cited by the Court of middle-ware that require relief. 
The idea that a competing product has to already be successful to 
receive the protection of the Final Judgment is flawed. This 
condition should be removed. VI.N defines non-Microsoft middle-ware 
in terms of code exposing APIs, which are defined in VI.A as being 
uses by Microsoft middle-ware (this is a circular definition), More 
importantly, non Microsoft middie-ware should not be defined more 
narrowly than Microsoft middie-ware. Not all middie-ware 
"exposes a range of functionality to ISVs though punished 
APIs" although some (like lava) does. The original Netscape 
1.0 web browser would have failed the definition in VI.N.
    VI.Q defines Personal Computer as using an Intel x86 processor. 
Microsoft has in the past and will most likely in the future ship 
Windows Operating systems for processors other than x86. The Court 
found that Microsoft's illegal practices in respect of distribution 
of Internet Explorer also extended to the Macintosh Power-PC 
platform so this definition is overly narrow. VI.R. 150,000 beta 
testers is an unusually large number, even for Windows and suggests 
that "timely manner" would be defined as the last test 
release of a Microsoft product rather than the first public test 
release. The interests of the enforcement are better served if 
Timely Manner was defined as the first public test release of a 
Windows OS product.
    [end]
    http://www.meer.net/jg/doj--comments.html



MTC-00030194

January 28, 2002 5:09 PM
From:
Fax #:
Page 1 of 1
Jose Diaz
206 L Street Southwest Quincy,
Washington 98848
January 17, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing to express my opinion about the recent antitrust 
settlement between Microsoft and the US Department of Justice. I 
think that the government should stay out of big business and not 
interfere with the operations of our free market. Microsoft has done 
a world of good for education, job growth, and technological 
advances. They should be applauded, not reprimanded. I am glad to 
see that the terms of the settlement do not break up Microsoft. They 
are harsh though. For instance, Microsoft will have to disclose 
technological information such as interfaces and protocols to their 
competitors. They have also agreed not to retaliate against 
competitors who distribute or promote non-Microsoft products.
    I think the settlement is flawed n many ways, but it should be 
finalized because the alternative, which is further litigation, 
could be a lot worse. Please take a firm stance against the nine 
states that want to continue opposition.
    To tell you the truth, with all my respects to you, I think our 
government should learn from Microsoft, our government started long 
time ago and am able to see the flaw on it.--Microsoft had been 
evolving for better in a competitive enviroment and it is growing, 
even though, It stared a few years ago.
    Sincerely,



MTC-00030195

3828 High Summit Drive
Dallas, TX 75244
January 24, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing today to encourage the Department of Justice to 
accept the Microsoft antitrust settlement. The issue has been 
dragged out for over three years now and needs to be put to rest. A 
settlement has been reached, the terms are fair and the government 
needs to accept it. In order to reach a settlement Microsoft has 
agreed to many concessions. They have agreed to allow computer 
makers the flexibility to install and promote any software that they 
see fit. They have also agreed not to make any agreement that would 
obligate any computer maker to use a set percentage of Microsoft 
software. Also, Microsoft has agreed to license its software at a 
set price no matter what software the computer maker uses or 
promotes and no matter at what percentage they use Microsoft: 
software. These terms are set to allow complete competition in the 
realm of pre-installed software.
    Microsoft and the technology industry need to move forward, the 
only way to move forward is to put this issue in the past. A 
settlement is available and the terms are fair, I would like to see 
it accepted. Please accept the Microsoft antitrust settlement.
    Sincerely,
    Barem Christian



MTC-00030196

3828 High Summit Drive
Dallas, TX 75244-6620
January 22, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    I am writing today to encourage you and the Department of 
Justice to accept the Microsoft antitrust settlement. This issue has 
dragged on for over three yearn now and it is time to put an end to 
it. Contrary to critics" claims, Microsoft has not gotten away 
with easy terms. Microsoft has agreed to allow computer makers to 
install and. promote software that competes with Microsoft's. 
Microsoft has also agreed to release part of the Windows base code 
to its rivals, making it easier for them to write competing 
software.
    The settlement is fair and should be accepted. Microsoft and the 
industry need to move forward. It is time to end this government 
harassment. Please accept the Microsoft antitrust settlement.
    Sincerely,
    Dorothy Christian



MTC-00030197

MARGARITA CAICEDO
FACSIMILE TRANSMITTAL SHEET
TO: Attorney General John Ashcroft
FROM: Margarita Caicedo
COMPANY: US Department of Justice
DATE: 01/28/02
FAX NUMBER: (202) 307-1454
TOTAl NO. OF PAGES INCLUDING
COVER: 2
PHONE NUMBER: (305) 466-0123
SENDER'S REFERENCE; NUMBER:
RE: Microsoft Settlement
SENDER S FAX NUMBER (305) 466-0117
?? URGENT
Following this fax cover is a letter in favor of the Microsoft 
Settlement
Margarita Caicedo
P.O. Box 801510
Miami, Florida 33280
January 5, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington. DC 20530
    Dear Mr. Ashcroft:
    I am writing you today to express my opinion in regards to the 
settlement that was reached with Microsoft in November. I believe 
this settlement is fair and vital to improving our economy. Under 
this agreement, Microsoft must share more information with other 
companies, create more opportunities for other companies, and give 
consumers more choices. Microsoft has agreed to create future 
versions of Windows that will make it easier to install non-
Microsoft software. Microsoft must also share software books and 
codes, and a technical oversight committee has been created to 
oversee Microsoft compliance to this agreement. These stipulations 
make it clear that this settlement is fair, and not simply a 
cakewalk for Microsoft.
    Thank you for making the right decision and considering public 
comment on this issue.
    Sincerely,
    Margarita Caicedo



MTC-00030198

Eve & Andre Nowack
377 B.W. Broadway
Long Beach, N.Y. 11561
Jan. 28, 2002
Attorney General John Ashcroft
U.S. Dept. of Justice
Pennsylvania Ave. NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    Last Nov, a settlement to the antitrust suit between Microsoft 
and the Dept. of Justice was proposed and we would like to lend our 
support to it. The public comment period is coming to an end and it 
is our hope that the proposed settlement is approved shortly 
thereafter. Millions of dollars have been spent by both sides in 
this matter and that is a complete waste of money. Microsoft could 
be investing that cash into research

[[Page 28839]]

and development, and the Federal Govt. could have used taxpayer 
dollars in a much more productive manner. We hope that once the 
settlement is approved there will be no further litigation against 
Microsoft at the Federal level. The settlement calls for a 3-member 
oversight committee that is extremely well versed in software 
engineering. This committee will make sure tht Microsoft follows the 
terms of the settlement and will also handle any 3rd party disputes 
that might arise. Let us move on.
    We support this settlement and hope it is enacted quickly. 
Thank-you.
    Sincerely,
    Eve Nowack
    Andre Nowack



MTC-00030199

Duane Ellis
206 Pine Blvd
Medford NJ 08055
January 28, 2002
Renata B. Hesse
Antitrust Division
U.S. Department of Justice
601 D Street NW
Suite 1200
Washington, DC 20530-0001
Reg: US V Microsoft, Anti Trust Act Tunney Act Comments
    Ladies and Gentlemen,
    I am opposed to the settlement as written. I believe it not to 
be in the public interest. Many times I've heard or seen comments to 
the effect that "We can't do that .-.-., look at 
the effect on our economy that would have .-.-." 
Statements such as these are wrong and must be rejected. I believe 
Franklin Roosevelt said it best:
    The liberty of a democracy is not safe if the people tolerate 
the growth of private power to a point where it becomes stronger 
than their democratic State it self. That, in its essence is 
Facism--ownership of a government by an individual, by a group, 
or any controlling private power.--Franklin D. Roosevelt
    That is also a great benefit of the Tunney Act, under which I 
write this objection. There are two themes that I see missing: (1) 
they should be broken up, and (2) their interfaces between the 
companies and products lines must be publicly available. Each of the 
baby-Microsofts must make use of, and work only from the same 
publicly available documentation that every one else has access to.
    Specifically:
    1) The Divisions
    I believe that the public interest would be better served 
Microsoft should be split into at least 4 operating units, not the 
two that Judge Jackson ruled.
    Those divisions should be:
    Games & Entertainment Group. Focus: The home user Duane 
Ellis, 206 Pine Blvd Medford NJ 08055
    Tunny Act Comments reg: Microsoft Includes XBOX, Cable TV. 
WebTV, MSN, Hotmail, all "Internet Related" activities, 
Microsoft Reader [eBooks] and Internet Explorer, Business 
Applications
    Focus: The business user
    This would include Microsoft Word, Excel, PowerPoint, Access, 
Visio Servers And Operating Systems
    Focus: Core Operating systems, and servers. This would include 
Microsoft Windows CE/95/98/XP/2000/whatever .-.-. and 
all of its successors what ever they may be. Exchange Mail Server, 
SQL Server, Terminal Server, Developer Tools
    Focus: The software developer community, the people who write 
the applications. This would include Visual Studio, the computer 
language compilers for things like "C, C++, C#, Java, 
linkers, assembler, Visual Basic, FoxPro" and so forth.
    2) Publicly Document the Interfaces, common to all. This is the 
fundimental means by which Microsoft has extended and held their 
monopoly and will continue to hold it:
    The proprietary communications formats the Microsoft 
applications use. These 'communications formats" 
include: (a) 'over the wire" communications such as when 
one computer communicates with another [Such as a computer network, 
or the internet], and (b) documentation of the file formats that 
their products use [such as those used by Microsoft Office].
    Today, through out the world many companies claim to have an 
"ISO-9000" (or 9001, or 9002) certification. The 
fundamental requirement those certifications have is simple: 
Document what you do. Do what you document. Nothing more, nothing 
less.
    If you look back at the IBM Anti Trust case, and the Telephone 
industry, a central theme in the solutions are or where: Document 
the interfaces between the systems, and abide by them. The openness 
of protocols and file formats is so fundamental that there must be a 
lethal "Sword Of Damocles" making Microsoft document and 
publish what they do so that competitors have a chance to offer a 
competing product.
    Duane Ellis, 206 Pine Blvd Medford NJ 08055 Tunny Act Comments 
reg: Microsoft The most striking example of this I can find of this 
is the documentation for the ubiquitous Microsoft Word DOC file 
format, or the lack there of. If one was to write a competing word 
processor, one needs to be able to read and write DOC files. To do 
so, one needs documentation. To date, all DOC file format programs 
have been reverse engineered [Those in the industry are aware of the 
phrase "Undocumented Function Call", a hall mark of a 
Microsoft Style] For example: I wish to write a word processing 
program. To compete in the market place, my product must be able to 
read and write the Microsoft Word DOC file format directly.
    Nowhere at Microsoft. COM can one find an accurate description 
of the DOC. The response I have seen about this is: You should 
supply a plug-in converter for Word so that users could download it. 
That might be one business solution. I think this will work just as 
well as Netscape being able to supply their browser to customers 
using this method .-.-.
    My example word processor, to be a viable product must be able 
to read and write a DOC file directly'--without messing up. 
(How many times have you, or a co-worker imported a file, only to 
find it screw up, this is a constant problem users face.) To 
Microsoft's credit, on their web site one can find Microsoft's 
"Knowledge Base" article id: Q111716 titled: "How 
to Obtain the WinWord Converter SDK (GC1039)" Which has not 
been updated since 1997. Obviously over the last 5 years we've seen 
Word98, then Word-2000, and now Word-XP yet there is no updated 
documentation that I can find. The simple test is this: Please 
supply me with a Part Number and Price so that I may order full, 
complete, and not 'reverse-engineered by a 3rd party' 
documentation for the various file formats used by the last 4 
versions of Microsoft Office (Office 98, ME, 2000 and XP). And no, 
it's not in the MSDN developer package--I've looked. If 
I've over looked it--please tell me exactly what file or 
'page' to find this information.
    By the way, the "GC1039" documentation refers you to 
yet another document about RTF files that is of some help, but is so 
hopelessly out of date (Again 1997)--and has this caveat: Note: 
The sample RTF reader is not a for-sale product, and Microsoft does 
not provide technical or any other type of support for the sample 
RTF reader code or the RTF specification. Site: http://
msdn.microsoft.com/library/default.asp?url=/library/enus/dnrtfspec/
html/rtfspec.asp, click on "Appendix A: Sample RTF 
Reader" [Visited & Verified January 28, 2002] Duane Ellis, 
206 Pine Blvd Medford NJ 08055 Tunny Act Comments reg: Microsoft 
Microsoft and all the baby-Microsofts must be required to document 
completely, fully and un-ambiguously their external interfaces for 
all of the products or groups of products for which they hold a 
monopoly.
    Given Microsoft's prior record there must be a 
"Sword Of Damocles" to enforce this. My choice would 
cost Microsoft nothing if they behave, and lots if they misbehave. 
It works like this:
    This requirement is in effect for a product, or families of 
products where Microsoft represents more then 49.9% of the installed 
user base, and does not expire for at least 20 years. The 
requirement to supply documentation for a specific product interface 
expires 1 year after the product is no longer available for purchase 
(or licensing). Microsoft must in a timely manner, make widely and 
freely available under a 'free license" (no patent 
royalties or non-disclosures required), at a cost of no more then 
the cost of duplication the documentation for all interfaces to 
their products.
    The first of such disclosures must be made at the same time each 
"beta or test" version is made available. Specifically: 
The interface documentation must be of the same quality and accuracy 
that the 'beta or test" application is. Where 
applicable, part of the documentation Microsoft should include 
reference program [or application], with full source code under the 
same free terms as the documentation that serves to validate the 
documentation.
    As each 'service pack" or 'patch" is 
made available to improve an application, so must the interface 
documentation be improved. If any one [not just baby Microsofts] 
asks another for further clarification or information, that 
information must be posted in a public way so that others may 
benefit from the information. If a reasonable man

[[Page 28840]]

would conclude that the above conditions where not met, Microsoft: 
would be required to refund 100% of the license fees they have 
collected for the effected products, including a 5% interest as if 
the license fees were deposited in a bank account. If a reasonable 
man would conclude that the disclosures where purposely vague, or 
show a pattern of problems that are not remedied the penalties 
increase 10 fold. Duane Ellis, 206 Pine Blvd Medford NJ 08055 Tunny 
Act Comments reg: Microsoft
    The test of this solution is simple:
    If Microsoft says they will document--they will have no 
fear of the Damocles" sword, as it will never fall. This sword 
makes them understand in simple terms: Do not forget to document 
what you do, and do what you document. And you will do nothing else.
    Thank you for your time.
    Duane Ellis.
    Duane Ellis, 206 Pine Blvd Medford NJ 08055 Tunny Act Comments 
reg: Microsoft



MTC-00030200

Constance Roberts
3421 South Dye Road
Flint, Michigan 48507-1009
January 23, 2002
Attorney General John Ashcroft
U.S. Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    I am urging you to settle the lengthy antitrust lawsuit pending 
against Microsoft. I think it is ridiculous that the case even made 
it as far as it has.
    I think it is a shame that the government has gone after 
Microsoft, Bill Gates is simply a guy who made good and has been 
punished for his success. The Justice Department seems to have 
unfairly singled out Microsoft instead of treating all companies in 
similar positions in an evenhanded manner.
    Though I believe that the justice system has wasted significant 
time and money in continuing to pursue legal action against 
Microsoft, I believe that the terms of the current settlement are 
reasonable, and I would like to see Microsoft back on track. I am a 
stockholder in the company, so I am affected by its inability to 
conduct business as usual.
    The government's stated aim is to increase competition. 
The new provisions Microsoft has agreed to will do just that. Users 
and computer makers can more often and more easily install and 
configure Windows in ways that promote and use competing products.
    Please settle the case as quickly as possible.
    Sincerely,
    Constance Roberts



MTC-00030201

LOGISTICS,inc.
January 10, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing to express my full support of the recent antitrust 
settlement between Microsoft and the US Department of Justice. I am 
glad to see that Microsoft will not be broken up, but the rest of 
the concessions seem fair. In order to increase competition in the 
tech market, Microsoft will agree to share information about how 
Windows works with its competitors. This information will allow them 
to place their own programs on Microsoft's operating system, and to 
better compete with Microsoft.
    I am a firm believer in free enterprise and a fan of what 
Microsoft has accomplished in the last 10 years. There are many 
large companies that also could be targeted, which leads me to 
believe their suits are serving political interests than public 
ones. I support the settlement and look forward to seeing it 
implemented soon. This settlement will enable the country to move 
forward again.
    Sincerely,
    Clifford Bagwell
    cc: Senator Rick Santorum
    1-800-810-8708
    717-284-4521
    FAX: 717-284-6024
    P.O.Box 32
    Pequeo, PA 17565



MTC-00030202

ReidMiddleton
728 134th Street SW--Suite 200
Everett, WA 98204
Ph: (425) 741-3800
Fax: (425) 741-3900
TO: Renata B. Hesse
DATE: January 28, 2002
FROM: Brian P. Seguin, PE PLS
ORGANIZATION: Antitrust Division, U.S. Department of Justice
FAX NO. (202)616-9937
PHONE NO. ( )
CITY: Washington DC
SUBJECT: Microsoft Settlement
MESSAGE:
    Attached is my letter to Attorney General John Ashcroft 
requesting that the lawsuit be settled under the terms agreed on 
between the U.S. Dept. of Justice and Microsoft. Lets all get back 
to work and get this economy going again. Thank you.
3622 99th Street Southeast
Everett, WA 98208
January 26, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    The antitrust lawsuit brought against Microsoft was unjustified 
and flawed. The dispute in my opinion arose due to 
competitors" envy for their own lack of innovation and 
creativity. Microsoft has been the leading innovator of technology, 
for over a decade. In the 80's when we lagged behind Japan in many 
industries, Microsoft developed a product that streamlined and made 
more effective many of our businesses. The company I worked for is a 
perfect example as it was able to use Microsoft software for its 
businesses.
    The terms of the settlement are harsh and seem to reflect the 
intense lobbying of Microsoft's competitors. Forcing Microsoft to 
give up internal interfaces and protocols, making them agree not to 
retaliate against other vendors, stipulating that they must grant 
computer makers broad new rights to configure Windows so as to make 
it easier for non-Microsoft products to be prompted, the settlement 
also reflects lawmakers and politicians lack of concern for the 
public.
    This settlement only aims at giving competition an edge they did 
not have and could not attain on their own.
    Even though I think the settlement is unfair, I must support it 
because the alternative of further litigation would be too much for 
our weak economy. I urge your office to take a firm stance against 
the opposition and stop any further disputes. Thank you.
    Sincerely,
    Brian P. Seguin
    Professional Land Surveyor
    Professional Engineer



MTC-00030203

George Arthur
12734 111th Lane
Largo, FL 33778-1943
January 25, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    The settlement with Microsoft in the antitrust case should be 
approved in the best public interest of America. The settlement was 
reached only after three months of negotiations with a court-
appointed mediator. What is more, the terms of the settlement 
represent reasonable compromises of the positions of the parties, 
and will be beneficial to the American computer technology industry 
as a whole.
    The settlement will make it easier for computer software and 
hardware companies to work with and modify Microsoft's Windows 
operating system. With disclosure by Microsoft of the internal 
interfaces and server protocols by which Windows works with programs 
and other computers, computer companies will be able to find better 
ways to work with Windows. This can only encourage growth in this 
industry.
    I would appreciate your support of the Microsoft settlement. The 
Federal Court should approve the settlement. Thank you.
    Sincerely,
    George Arthur



MTC-00030204

January 28, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    Enough is enough! Please implement the fair and equitable 
settlement reached by the Dept. of Justice and Microsoft.
    Washington state has been hit hard by the economic recession. 
The Bush Administration is now in a position to stop the economic 
troubles which now effect not only Washington state but the entire 
nation. Microsoft mirrors the Market. When the tech sector was 
healthy, the Market was healthy. It is my opinion that the 
settlement will provide the necessary push that the IT industry 
needs to help bolster the economy back to its previous strength.

[[Page 28841]]

    Microsoft is the one company that has the ability to save our 
economy, and since the settlement makes them work ever closer with 
their competitors, competition in the IT industry will benefit, and 
the economy will show gains.
    The Bush Administration did not start the recession, but it is 
in a position to STOP the recession. The settlement that was reached 
is fair, and I support it.
    Sincerely,
    Maureen M. DeShazo
    16121 High Bridge Road
    Monroe, WA 98272-9478



MTC-00030205

United Wholesale Supply Inc.
January 26, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I support the terms of the settlement agreement the Department 
of Justice and Microsoft were able to negotiate. I am in favor of 
bringing this case to a conclusion.
    Microsoft has appropriately addressed the concerns raised by the 
plaintiffs in the case. They have agreed to take steps to safeguard 
against future antitrust violations. Microsoft has agreed not to 
enter into contracts that would require third parties to exclusively 
promote or distribute Windows. They also agreed not to take 
retaliatory actions against software developers who design software 
that competes with Windows. Another important concession is 
Microsoft's agreement to implement a uniform price list. Beyond the 
concessions set forth in the settlement agreement, nothing further 
should be required of Microsoft.
    Your efforts to settle this case are appreciated.
    Sincerely,
    Gerald Robinson
    President
    25713 74th Ave.
    South Kent, WA 98032
    (253) 852-9595
    Fax (253) 852-9449
    UNITEWS044RP



MTC-00030206

Mike Franklin
76708 N Yakima River Drive
West Richland, WA 99353
January 25, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I support the Department of Justice and Microsoft's recent 
proposal to settle. I think it is a satisfactory outcome for both 
sides.
    Microsoft has done its part by accepting restrictions on its 
business practices, its competitive behavior, and its licensing 
requirements, among other things. It is the government's turn to do 
what it must to bring this dispute to an end.
    I ask you to represent what "fairness" there may be 
in government, by supporting this ??ottlement. The American 
government and the Department of Justice have more important issues 
to spend their time and money on.
    Sincerely,
    Mike Franklin



MTC-00030207

118 Third Street
Estill, South Carolina 29918
January 17, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    American ingenuity should not be punished. The government's suit 
against Microsoft is nothing more than an attack on the very 
creativity and hard work that have made this nation great. I feel 
that Microsoft has had the wherewithal to become a successful 
company and they should not be punished for pursuing the American 
dream.
    While I am glad that this suit has reached an end with the 
settlement that was negotiated in early November, [ would rather see 
the entire thing dropped. I understand that Microsoft has agreed to 
a number of rather harsh terms because they understand that a quick 
end to this case is vital to future American leadership in the 
worldwide technology market. For example, Microsoft will agree not 
to retaliate against computer companies that use, sell, or promote 
non-Microsoft software,
    Thank you for your efforts thus far in bringing forth a quick 
end to this litigation. I hope that we can put this unsavory 
business behind us and that Microsoft can get back to the business 
that it is best at: innovation. Thank you.
    Sincerely,
    Lawton Ocain
    cc: Senator Strom Thurmond



MTC-00030208

sage software
January 28, 2002
Attorney General John Ashcroft
U.S. Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft,
    The greatest advantage to this settlement between Microsoft and 
the Department of Justice is that it ends the court action. Aside 
from that, the settlement is rather lopsided.
    While I support the settlement, I also feel that some of the 
terms set a dangerous precedent. Not only will this settlement force 
Microsoft to release some of its protocols to its competitors, but 
the settlement also forces Microsoft to allow software other than 
its own to essentially become part of its operating system.
    All of this can have two undesirable side effects: The first is 
that the reliability and high quality standards that we have all 
grown accustomed to when operating a computer with the Windows 
platform may now be rendered unstable because of the addition of 
someone else's software. Secondly, there will now be a possibility 
for cloned versions of Windows to flood the market. The idea of 
Rolex watches springs to mind. Microsoft will no doubt be blamed for 
this too. Again, I reiterate my support for the settlement in 
principle, but the specifics of some of these terms can prove 
problematic down the road.
    Sincerely,
    Chad Ruff
    President
    Sage Software, inc.
    3423 Piedmont Road
    Suite 550
    Atlanta, GA 30305



MTC-00030209

OFFICES OF THOMAS M. ROTH, III
1001 South Marshall Street, Box 14, Suite L6
Winston-Salem, North Carolina 27101
Telephone: 336-777-0114
Telefax: 336-777-8499 or
336-777-3601
TELEFAX MEMORANDUM
FROM: Tam Roth
TO: Ins. ?? Hesse
DATE:
FIRM: U.S. Pest ??Jostice
RE:
TELEFAXNO. 202--616--9937
TIME OF SENDING:
NO. OF PAGES
ORIGIN AL: Will not be sent Will follow by U.S. Mail Will follow by 
overnight mail
MESSAGE:
OFFICES OF
THOMAS M. ROTH, III
ATTORNEY AND COUNSELOR
1001 SOUTH MARSHALL STREET, BOX 14
WINSTON-SALEM, NORTH CAROLINA 27101
TELE: (336) 777-0114
FAX: (336) 777-8499
E-MAIL: TRROTH @ PRODIGY.NET
January 28, 2002
Renata Hesse, Esq.
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
    Dear Ms. Hesse,
    I am writing today in response to the Federal Register item 
concerning the Microsoft settlement with the United States and nine 
of our states" attorneys general. I note that North Carolina, 
my home state, is among the states that have signed off on the 
proposed settlement.
    I have reviewed the proposed settlement of this long running 
case and endorse the proposed settlement between these parties. I 
would urge Judge Kollar-Kotelly to do the same. The proposed 
settlement has positive points for all sides; and appears to make 
many of Microsoft's anticompetitive practices impossible to 
continue, while not destroying a firm which has done much to 
revolutionize the way people all over the world live.
    Certainly, Microsoft's agreement to an independent monitor is 
quite a concession for a corporation in the high-tech areas. The 
agreement also calls for Microsoft to guarantee "equity" 
in a number of areas with third parties which will mean less profit 
for the company m the future. I understand that Microsoft is willing 
to agree to these provisions just to get this case over with. Since 
this proposed settlement has the support of the Department of 
Justice, and of nine states, I hope that Judge Kollar-Kotelly will 
be willing to approve.

[[Page 28842]]

    Very truly yours,
    Thomas M. Roth III



MTC-00030210

Australian Union of Students
P.O. Box 123
Roma Street
BRISBANE QId. 4003
Telephone: (07)3321 3059
Email: info @ students.org.au
14 November 2001
Renata Hesse
Trial Attorney
325 7th Street, NW
Suite 500
Washington, DC 20530
USA
    Dear Sir/Madam,
    I refer to the antitrust case against Microsoft Corporation in 
the United States District Court for the District of Columbia, 
reference Civil Action No. 98-1232 (CKK). In accordance with 
provisions of the Antitrust Procedures and Penalties Act, there is 
attached to this letter a written submission concerning the proposed 
Final Judgment which has been agreed to between the United States 
Government and Microsoft Corporation. Our standing to make a 
submission is explained in the submission.
    Cordially,
    Geoff Bird National President
    SUBMISSION IN RESPONSE TO THE PROPOSED SETTLEMENT OF THE 
ANTITRUST CASE AGAINST MICROSOFT CORPORATION
AUSTRALIAN UNION OF STUDENTS
NOVEMBER 2001
EXECUTIVE SUMMARY
    1. The proposed settlement will not end litigation against 
Microsoft, as it neglects to punish Microsoft for unlawful conduct 
and compensate those affected.
    2. If the proposed settlement goes ahead, it will deprive the 
United States Government of influence over the settlement that 
Microsoft will ultimately reach with the European Union.
    3. Accordingly, our association, on behalf of our members who 
are American citizens, wishes to propose an alternative settlement.
    4. Microsoft should be required to publish the source code for 
its operating systems.
    5. Microsoft should be required, by way of a punishment, to set 
up a venture capital corporation, and to transfer a proportion of 
its assets to this corporation.
    6. The assets which Microsoft should be required to transfer 
should be equal to the stockholders" equity in Microsoft, less 
the stockholders" equity that Microsoft would have if it had 
complied with the law.
    7. The venture capital company should be required to invest in 
business start-ups in a country in proportion to the amount that 
residents of the country have spent on Microsoft products.
    8. Stockholders in Microsoft should be issued with stock in the 
venture capital company in proportion to their holding in Microsoft.
    9. The United States Government should be required to use its 
best efforts to persuade foreign governments to enact legislation 
excusing Microsoft for any illegal action committed prior to 2002.
    10. If a government of a foreign country does not enact the 
legislation, the venture capital corporation should not be required 
to invest in the country.
    SUBMISSION
    The United States Government has brought an anti-trust action 
against Microsoft Corporation. Following the election of President 
Bush with the assistance of donations from Microsoft, the Justice 
Department has reached a settlement with Microsoft. According to the 
Antitrust Procedures and Penalties Act, the details of the 
settlement have to be published in the "Federal 
Register". Members of the public have sixty days to make 
written submissions on the proposed settlement. This submission is 
being made in accordance with the statute.
    Our association, the Australian Union of Students, has standing 
to make a submission on the following basis. We have a number of 
United States citizens as members. Under the constitution of our 
association, we have the power to make representations to 
governments on behalf of our members, without necessarily consulting 
the members beforehand. Accordingly, this submission should be 
treated as though it was made by American citizens. We could, if 
necessary, provide to the United States Government, in confidence, 
the names and addresses of the members concerned.
    We are against the proposed settlement. It is not that we are 
unsympathetic to Microsoft. The management of Microsoft are very 
much respected in Australia, and are held out by our association as 
examples who young people in Australia should copy. Nevertheless, 
the proposed settlement will be of limited usefulness to Microsoft, 
and will not settle existing litigation by American states, and 
proposed litigation by European Union countries. This litigation 
will go ahead, and there will in time be settlements or judgments, 
which may not be beneficial to Microsoft or the United States.
    From the point of view of the United States Government, 
Microsoft has been held to have broken the law, and to have gained 
substantial financial benefits as a result. The Justice Department 
is of the view that it would be undesirable to break up Microsoft 
into smaller corporations, or to require that Microsoft pay fines. 
We agree with this. At the same time, Microsoft should have to make 
up for its illegal actions in some way, so as to discourage other 
corporations from breaking the law.
    The advantage of an out-of-court settlement is that Microsoft 
can be made to do things that it otherwise cannot be made to do. A 
court is limited in what it can order. But an out-of-court 
settlement can contain anything within reason. As an example, an 
out-of-court settlement could contain a requirement that Microsoft 
executives must wash their hair each day. An out-of-court settlement 
should be a "wish list" of things that Microsoft should 
do. The Justice Department has not been imaginative enough in 
formulating its "wish list".
    The Justice Department's "wish list" must meet two 
requirements. First, it must end the illegal conduct by Microsoft. 
Secondly, it must compensate the people adversely affected by 
Microsoft's actions. The Justice Department should be asking the 
question, "What can Microsoft do that would be most beneficial 
to users of its operating systems?" This should not 
necessarily be limited to things that Microsoft can do in its 
capacity as a supplier of operating systems, but should include 
anything that Microsoft can do.
    For example, an out-of-court settlement could include Microsoft 
making donations to charities. No distinction should be made between 
a donation made by Microsoft and a donation made by its 
stockholders. Past charitable donations certainly go some way to 
making up for Microsoft's actions, and should be taken into account 
in deciding whether to accept an out-of-court settlement. To end the 
illegal conduct by Microsoft, we propose that Microsoft should 
publish the source code written by its programmers, that is used to 
compile its operating systems, from DOS up to and including Windows 
XP. This should include comments by programmers put in to explain 
what the code does. But it should not include code for functions 
that are for national security purposes.
    The publication of the source code would not make piracy of 
Microsoft operating systems any easier. The software can already be 
copied illegally. Anyone compiling the operating system from the 
source code, and using the software without paying a royalty could 
still be prosecuted. The advantage of publishing the source code 
would be that software developers could produce operating systems 
that are functionally equivalent to Microsoft operating systems. If 
Microsoft refused to allow its distributors to bundle software with 
its Windows operating systems, Microsoft would run the risk that a 
distributor would use an equivalent operating system from some other 
software developer.
    Microsoft operating systems have a similar status to human DNA. 
The information is essential for everyday life. It is surely 
unsatisfactory that information that is essential for everyday live 
should be controlled by Microsoft. Certainly Microsoft developed the 
information, at great expense, so is entitled to a royalty. But they 
should not be able to prevent further development and improvement of 
the information.
    In formulating its out-of-court settlement, the Justice 
Department appears to have thought that Microsoft can best 
compensate consumers for its illegal actions by continuing to 
develop operating systems. We disagree. We think Microsoft's talent 
can be used to greater effect in the field of Venture Capital. Of 
course, if Microsoft was complying with the law, it would be up to 
them how they use their resources. But since they have broken the 
law, it is up to the government. The terms of an out-of-court 
settlement are up to the government.
    We propose that Microsoft should be required by a settlement to 
set up a venture capital corporation. This corporation would invest 
in and provide advice to business start-ups. Microsoft would be 
required to transfer a large part of its assets to this corporation. 
Its stockholders would be issued with stock in the new corporation, 
in proportion to their holding in Microsoft. The corporation would 
be required by its charter to invest an amount in each country that 
is

[[Page 28843]]

proportional to the amount that has been spent in that country on 
Microsoft products. This would be advantageous to the European 
Union, and so they would be likely to agree to such a settlement.
    To make sure they do, the United States Government should lobby 
the European Union and other countries on Microsoft's behalf for 
legislation to excuse Microsoft from any illegal action committed 
prior to 2002. It should be included in the out-of-court settlement 
that the government must use its best efforts to secure such 
legislation. Such legislation should be a pre-requisite for the 
venture capital corporation being required to spend any money in a 
country.
    The amount that Microsoft should have to invest in the venture 
capital corporation would be set so as to compel Microsoft to 
downsize to the size they would have reached if they had complied 
with the anti-trust statute. In other words, their 
stockholders" equity should be reduced to a level that it 
would be if they had complied with the statute. Microsoft will as a 
result have to scale down the extent of its activities and lay off 
staff. These people will be able to set up businesses in areas of 
Information Technology that Microsoft was previously involved in. 
Hence there will be greater competition.
    We are suggesting that the Justice Department try to compel 
Microsoft to transfer its capital into the Venture Capital Industry. 
This is based on a number of considerations. Microsoft has expertise 
in taking an industry which is disorganised, and organising it. The 
Information Technology Industry was disorganised in 1975, but after 
Microsoft released its Windows 98 operating system, it became 
organised on a comparable basis with other industries. In our view, 
it is a waste of resources for Microsoft to continue being 
exclusively involved in this area. Cars made in 2001 are not much 
better than cars made in 1971, and Windows XP is not much better 
than Windows 98.
    There are a number of industries which are disorganised compared 
to other industries. The Venture Capital Industry is disorganised in 
most countries, and is organised only on the West Coast of the 
United States. Other industries that are particularly disorganised 
are the Entertainment Industry, the Property Development Industry, 
and the Genetic Engineering Industry. By getting involved in Venture 
Capital, Microsoft can bring its organisational ability to bear on 
helping set up businesses in Information Technology, Entertainment, 
Property Development, and Genetic Engineering. This will be of 
incalculable benefit to consumers. Microsoft already acts as a 
venture capital corporation, so it has staff who can be transferred 
to the proposed corporation.
    The Justice Department's proposed solution certainly prevents 
future breaches of the antitrust statute by Microsoft. But it is not 
as imaginative and beneficial as our proposed solution. Of course, 
the staff of the Department of Justice work under great pressure, in 
circumstances that are not conducive to imagination. That is why the 
United States Congress made provision for the Department of Justice 
to consider public submissions, in order to arrive at a more 
imaginative solution. We hope our submission is of some assistance.
    Our telephone number including country code is +61 7 3321 3059, 
and our facsimile number is +61 7 3311 2090, while our e-mail 
address is info @ students.org.au, and our postal 
address is Australian Union of Students, P.O. Box 123, Roma Street, 
Brisbane 4003, Queensland, Australia.



MTC-00030213

Manning, Fulton & Skinner, P.A.
?? At Law
RALEIGH, NORTH CAROLINA
GLENWOOD PLAZA
3605 GLENWOOD AVENUE
27612
P.O. Box 20389
?? CODE 27619-0389
January 16, 2002
HOWARD B. MANNING
?? L. PULTON
W?? P. ??. ??
?? D. ??
W. ?? ??
M. M?? H?? J??
MICH?? T. M??
SAXUEL T. OLIVER. JR.
DAVIL D. DAUL
C?? B. NICHOLE, J??
B?? D. Many
John C. DO??
W?? C. S??. Jr.
D?? L. H??
STBPHEN T. BYRD
MICHARL S. HARR??LL
M. ??ADLEY EA??
A??ON R. CA??
David T. ??
C?? H. C??
K?? O. L??
Tanya D. Van ROHKEL
T?? C. K??
B. NICOL?? TAYLO??
J?? A. W??
SANDRA?? M. CLA??
H?? W. Taylor
NIICOL?? S. LAYLO??
L?? ?? HODO??
A ?? C?? C??
?? H. H??
Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
Fax 202-616-9937
microsoft.atr @ usdoe.gov
    Dear Ms. Hesse: As an attorney, I have long been concerned by 
the antitrust litigation pursued against Microsoft by the federal 
government and several states at the instigation of Microsoft's 
competitors. I was heartened by the decision of North Carolina 
Attorney General Roy Cooper to agree to the settlement that has been 
negotiated, and I write in support of the settlement agreement that 
is before the judge now.
    Microsoft's release of its XP program recently again 
demonstrates why the company has been successful: it offers a 
superior product at an affordable price that enables even the most 
computer-challenged among us to take advantage of the information 
technology revolution. Microsoft should be praised, not punished, 
for this aggressive innovation and marketing. I strongly believe it 
is time to bring an end to this lawsuit and get on with the business 
of meeting the economic and safety challenges that face America 
today.
    Thank you for the opportunity to comment.
    M. Bradley Harrold



MTC-00030214

Julie Edge
6010 Melbourne Drive
Raleigh, NC 27603
January 16, 2002
Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
Fax 202-616-9937
microsoft.atr @ usdoc.gov
    Dear Ms. Hesse:
    I am by no means an expert on federal antitrust law. But I am a 
small business owner, and I am qualified to recognize when a 
business is spending too much time on the wrong issues. Right now, 
Microsoft, its competitors and the entire information technology 
industry are spending far too much time fighting over the law and 
not nearly enough time doing what they should do: serve their 
customers.
    If, as I understand it, there is a reasonable settlement to this 
matter before the court, it should be approved and put into effect 
immediately. As I further understand it, the settlement was reached 
through negotiations supervised by a court-appointed mediator and 
accepted by the U.S. Attorney General and a number of state attorney 
generals.
    That is good enough for me. Let's end the lawsuits and get back 
to the business of rebuilding our nation's economy.
    Thank you for allowing me to express my opinion.
    Sincerely,
    Julie Edge



MTC-00030215

State of New ??
HOUSE OF ??
CONCORD
January 8, 2002
Renate Hesse
Trial Attorney
Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
Subject: Microsoft Settlement
    Dear Attorney ??:
    Thank you for your public service and your work on behalf of the 
?? government. I am writing you today to offer my support of the 
current settlement proposed in the Microsoft case. I understand you 
are now accepting public comment and wish to submit my support. As 
our nation's economy continues in a downturn, many are out of work 
and ?? are doing more with less. Here in New Hampshire, I am working 
with my colleagues in the state ?? to find new and ?? ways to wisely 
spend the money we have and avoid needless spending in areas that do 
not have an impact on the public good.
    I am concerned that if we continue to pursue the government's 
case against

[[Page 28844]]

Microsoft, we are further impeding in the area of technology and 
making it less and less attractive for investment in this industry 
both by ?? and in the financial ??. We cannot afford to have the 
happen. We need to encourage investment in order to spur an upturn 
in the economy.
    By approving the settlement in this case, you will be benefiting 
just about everyone except the small group of Microsoft's 
competitors who have been pushing this case from the beginning. But, 
it is not the government's role to do their ??, the need to compete 
in the marketplace by offering comparable products.
    I hope you will accept the settlement and and the government's 
involvement in the operations of one of our nation's most exciting 
companies. Thank you for your consideration.
    Sincerely,
    John T. ??
    Member of the New Hampenire House of Representatives
    ?? County, District 7
    TDD Access: ?? NH 1-800-735-2984



MTC-00030216

JEANNEMARIE DEVOLITES
POST OFFICE BOX 838
VIENNA, VIRGINIA ??
THIRTY-FIFTH DISTRICT
COMMONWEALTH OF VIRGINIA
HOUSE OF DELEGATES
RICNMOND
COMMITTEE ASSIGNMENTS, PRIVILEGES AND ELECTIONS
HEALTH, WELFARE AND INSTITUTIONS SCIENCE AND TECHNOLOGY CLAIMS
January 23, 2002
Renata Hesse
Trial Attorney
Antitrust Division
U.S. Department of Justice
601 D. Street, NW # 1200
Washington, DC 20530
    Dear Ms. Hesse:
    As the Delegate representing the 35th House District in Northern 
Virginia, I am writing to encourage you to approve the settlement 
agreement in U.S. vs. Microsoft.
    The United States has become a global technology leader because 
we have always encouraged our citizens to develop their skills, both 
intellectually and creatively, in order to invent and develop new 
ideas. Due to their courage, persistence, and work ethic many 
choose, through entrepreneurship, to further those ideas by 
establishing businesses. Every once in a while, one of these 
entrepreneurs will work hard enough to meet with extraordinary 
success, at which time, it seems, those that are less successful 
will attempt to "shoot them down."
    The message this antitrust litigation sends to the entrepreneur 
is that if he works hard to create a successful business, he will be 
penalized. This works against the very spirit that has made our 
nation great!
    Thank you for taking the time to read this letter. Once again, I 
respectfully request that the Department accept the settlement 
agreement in the U.S. v. Microsoft case,
    Sincerely,
    Jeannemarie Devolites



MTC-00030217

1/25/02
68 Hillcrest St.
Charleroi, PA 15022
    Dear Mr. Ashcroft:
    I wanted to write to you giving our family's opinion about the 
suit brought by the Dept of Justice and Micro- soft. I fully support 
the settlement that was reached--not because it was warranted 
or that Microsoft deserved to be punished but because it harms our 
economy and stifles further creativity by business who want to 
compete and innovate.
    Government interference was not the right thing to do and 
probably was brought about as a result of lobbying on the part of 
Microsofts competitors. Just as in the case of the airlines the 
government ought to be providing other services to its citizens 
instead of pressure and regulations on the private sector of 
legitimate business dealings. I am happy a settlement has been 
reached and hope that the future direction of the Justice Department 
will not be to hamper and oppress Microsoft and other capitalistic 
endeavors.
    Sincerely,
    Evelyn Parent
    cc Senator Rick Santourini



MTC-00030219

January. 18, 2002
Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
Fax 202-616-0037
microsoft.atr @ usdoc.gov
    Dear Ms. Hesse:
    As an attorney, I can appreciate the complexity that the court 
faces as it reviews the proposed settlement of the Microsoft federal 
antitrust lawsuit. But I am impressed by the fact that the consent 
decree under consideration was developed in negotiations overseen by 
a court-appointed mediator, that it is supported by the U.S. 
Attorney General and that it has been agreed to by North Carolina's 
Attorney General.
    Further, it is telling that the under the proposal Microsoft 
would agree to accept significant changes in its business practices, 
as well as the continuing supervision of a technical committee 
empowered to review the company's compliance with the agreement.
    This certainly seems to me to be adequate protection for 
Microsoft's competitors, without at the same time crippling the 
company's ability to continue providing excellent products for use 
in schools, businesses and homes.
    I hope the agreement will be approved.
    Sincerely,
    Sarah Capel



MTC-00030220

Telefax Service
Fax (804) 786-6310
General Assembly Building
January 25, 2002
House of Delegates
To: Ms. Renata Hesse
From: Del. Michele B. McQuigg
Fax No.: Long Distance 202-616-9937
Tel. No.:
City:
State:
    This transmission contains 2 pages, which includes this cover 
sheet. have any problems with this transmission, please contact 
(804) 698-1558.
    Comments:
    If you have any questions, call 804-698-1151.
    MICHELE B. McQUIGG
2241-R TACKETTS MILL DRIVE
WOODBRIDGE, VIRGINIA 22102
FIFTY-FIRST DISTRICT
COMMONWEALTH OF VIRGINIA
HOUSE OF DELEGATES
RICHMOND
January 20, 2002
Ms. Reneta Hesse
Trial Attorney
Antitrust Division
U.S. Department of Justice
601 D Street, NW Suite 1200
Washington, DC 20530
    Dear Ms. Hesse:
    I am writing in support of the settlement of the Microsoft 
antitrust case. In a nation where we pride ourselves on free trade 
and development of services and ideas, Microsoft has proven itself. 
The agreement contains significant rules and regulations on how 
Microsoft develops and licenses its software, but it also allows 
Microsoft to keep innovating on behalf of consumers. I hope you will 
resist the efforts of Microsoft's competitors, who try to continue 
their efforts to dissolve this company.
    We have many computer and Internet companies throughout 
Virginia, with a large concentration in Northern Virginia, the area 
I represent. The economy depends upon technology and Internet 
success--including Microsoft. It is extremely important to 
allow this facet of trade to grow and produce without restriction. 
It is equally as important to allow it to grow free from fear of 
developing a product that is accepted universally by computer users.
    I urge you to accept the settlement as just and fair. If you 
have any questions, please do not hesitate to contact me.
    Sincerely,
    DISTRICT: (703) 491-9870
    RICHMOND: (804) 898-1051
    E-MAIL.:
    MICHELE @ MCOUIGG.COM ?? HTTP://
WWW.HCOUIGG.COM



MTC-00030221

January 20, 2002
Ms. A. Sheard
6503 Rock Crystal Drive
Clifton, VA 20124
Ms. Renata Hesse
Department of Justice
601 D Street, NW, Suite 1200
Washington, DC 20530
    Dear Ms. Hesse:
    Now that the new year has begun, it is my hope that the other 
states involved in the suit against Microsoft will agree That it's 
time to move forward and progress with the proposed settlement. 
American consumers need some sort of hope that the economy will 
improve in the months ahead and the high

[[Page 28845]]

technology sector could provide just the kick to get the economy 
moving in the upward direction.
    It's time for healthy competition and re-investment into our 
economy made by consumers. The end needs to arrive as it concerns 
this case and we all need to do what we can for our 
country--work to improve the quality of our lives and give us 
back some sort of stability.
    Thank you,



MTC-00030222

January 20, 2002
Mr. Ken Richardson
708 Duff Road NE
Leesburg, VA 20176
Ms. Renata Hesse
Department of Justice
601 D Street, NW, Suite 1200
Washington, DC 20530
    Dear Ms. Hesse:
    As jobless rates and economic indicators continue to tell 
consumers that times are getting worse, I think Microsoft's 
settlement with the federal government could provide a beginning 
bright light. By settling the case, we could once again see the 
competitive prosperity of the 90's foster the necessary kick the 
economy needs to move in a positive direction.
    The high tech industry has been a driving force for our nation 
in recent years and if Microsoft's settlement revitalizes 
competition, than we should welcome this opportunity. This long 
drawn out case should be resolved once and for all, and the focus 
should be on lowering the jobless rate, increasing consumer 
confidence and strengthening our economy.
    Sincerely,



MTC-00030223

202-307-1454
Ms. Renata B. Hesse
Dept. of Justice
Microsoft
    Please accept the Microsoft settlement. Enough of this alrady!! 
Get it overwith.
Shirley S. Henry, AHC
Seattle, WA



MTC-00030224

January 20, 2002
Ms. Patty Richardson
708 Duff Road NE
Leesburg, VA 20176
Ms, Renata Hesse
Department of Justice
601 D Street, AT. W., Suite 1200
Washington, DC 20530
    Dear Ms. Hesse:
    Now that the federal government has finally settled its long 
antitrust case against Microsoft, I hope the states still involved 
with the suit will do the same. It is time for consumers to come 
together and move the economy and our country in a positive 
direction--a forward and economically strong direction.
    The settlement's provisions protect Microsoft's ability to 
continue to be innovative and, this hopefully, will revitalize 
competition and the technology industry for the betterment of us 
all. Consumers and investors will reap the benefits of this 
settlement and this should help to get the engines running toward a 
healthy and prosperous economic stance. Thank you for your 
consideration.
    Sincerely,



MTC-00030225

January 25, 2002
United States Department of Justice
Attn: Ms. Renata B. Hesse
Antitrust Division
950 Pennsylvanie Avenue, NW
Washington, DC 20530-0001
    Dear Ms. Hesse:
    I am writing to you in: support of the recent Department of 
Justice settlement with the Microsoft Corporation.
    The country is at war, the economy is sour and the business 
community is struggling. Yet, the U.S. Department of Justice is 
spending millions of dollars in time and resources on the Microsoft 
settlement.
    I believe it has been a waste of taxpayers dollars, my 
understanding is that it has cost us over $30 million. This has been 
a competitor driven lawsuit and it has hampered high tech 
innovation. If Microsoft's competitors would spend time and money on 
their own research and development, instead of this lawsuit, all 
consumers would benefit.
    Enough is enough, let's settle this lawsuit and move forward. 
Thank you for your attention to this matter.
    Sincerely,
    Jean Ross
    5705 Ambrosia Terrace
    McFarland, WI 53558
    Cc: Michelle Kussow-Wisconsin Grocers Association



MTC-00030226

January 25, 2002
Ms. Rcnata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washinton, DC 20530
    Dear Ms. Hesse,
    In respect to the U.S. vs. Microsoft anti-trust action and why I 
support the courts decision. I believe our country, government, 
judicial system and constitution to be second to no other in the 
world.
    Henceforth if the most advanced and just court system in the 
world has made a settlement of this case. Being a believer and 
supporter of our system I would have to agree with this decision. As 
for I do not believe that the general public has more knowledge of 
the facts,laws and complexity of this case than the decision 
rendered by the courts.
    I do believe most of the nonsupport of this settlement to be no 
more than sensational rhetoric influenced by microsoft's 
competitors.
    I trust the judge will do what's best for the consumers and not 
the profiteering of the competitors.
    Thankyou.
    Sincerely
    John J. J. Rybinski
    Small business owner for over one score



MTC-00030227

From: "CHRISTINE CAWLEY" 

To: "Christine Cawley" 
(S20) 818-0130
<>Fox (520) 818-0129
<>E-Mail ExKodaker @ AOL.COM<>
Bate: January 25, 2002
To: U.S. Attorney General John Ashcroft
Fax #: 1 202 307-1454 or 1 202 616-9937
Total # of pages including cover sheet: 2
From: Raymond & Barbara Merritt
Subject: Microsoft settlement.
Raymond & Barbara Merritt
37082, S. Rock Crest Drive
SaddleBrooke Resort
Tucson, AZ 85739-1176
January 16, 2002
Attorney General John Ashcroft
U.S. Justice Department
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    This is a short note with tall intention. After almost four 
years of litigation, negotiation, controversy and self-serving 
political posturing, would you and the Administration please see 
you're way clear to settling the Microsoft case?
    This case is ripe for settlement. The main parties have reached 
an agreement. The court supports it. The settlement addresses the 
salient complaints and concerns of ALL the parties. There is no 
justifiable reason to prolong this process.
    The proposed settlement will essentially require Microsoft to 
refrain from any future trust-like activities. The company will be 
required to reconfigure its Windows systems so as to readily 
accommodate other company's software. It will have retool its 
product licensing practices to the benefit of the major computer 
manufacturers. It will in a nutshell have to open itself up to 
competition. These concessions and others more than justify the 
government's blessing and support of the settlement.
    For the sake of our economy and the future of the IT industry a 
settlement is appropriate and needed now.
    Sincerely,
    Raymond Merritt
    Barbara Merritt



MTC-00030433

GOD FIRST MENTALITY INCORPORATED
P.O. BOX 444
ALBION, MI 49224
Phone (517) 629-5227
Fax (517) 629-5227*51
Microsoft Corporation
One Microsoft Way
Redmond, WA 98052-6399
ATTN: William Neukom
    On December 2, 1998, I faxed you a letter. It refers to the 
micro-processing of privacy invasion. This involves a tort system. 
It is a wrongful act, not including a breach of contract or trust, 
that results in injury to another person, property, reputation, or 
the like, and for which the injured party in entitled to 
compensation. The dishonest computer hackers need to be prosecuted. 
Privacy invasion is a violation of the U.S. constitution. I believe 
its" in Microsofts" best interest to compensate for 
damages suffered. Microsoft can participate in acknowledging the 
relentless pursuit of injury to our central nervous systems. I will 
be informing the Inspector General at the U.S. Justice Department.
    I have been online for nearly 1900 consecutive days, around the 
clock.
    Environmental Defense Fund in Washington DC has offered to 
support me.
    My case is about how word processors are converting electrical 
pulses into sound that is compressed and decompressed into digital 
code. It refers to software that has not been processed into voice 
recognition. Microsoft has not acknowledged this either. These 
interfaces have me a centralized PC within a Public Switched 
Telephone Network. I need these signals or pulses converted into 
modulation transmitted above the threshold. This will help me regain 
my privacy. Considering all the devastation, I will settle for a 1 
billion dollar settlement. I will consider any, out court, counter 
offer. Please, have someone contact me by mail, phone call or fax at 
your earliest convenience.
    YOURS IN CHRIST
    gfm inc.



MTC-00030441

Thomas D. Hogen
30074 Village Park Drive
Chapel Hill, NC 27517
(919) 967-5574
FAX (919) 967-1668
Email Thogen1535 @ aol.com
January 25, 2002
Attorney General John Ashcroft US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    I want to use this opportunity to convey my thoughts on the 
settlement between Microsoft and the Department of Justice. I 
believe the settlement is a good development for the economy and 
will end this unwarranted litigation.
    The settlement is strong and requires many concessions from 
Microsoft. And these concessions are backed by very strong 
enforcement measures. These measures include the creation of a 
Technical Committee to monitor Microsoft's actions. Also, any third 
party that believes Microsoft is not meeting their obligations can 
file a complaint with the Technical Committee, the Department of 
Justice, or any of the State plaintiffs that are party to the 
agreement.
    Both sides in this dispute will benefit from this settlement. 
Microsoft can focus their attention on developing new technology 
that will make businesses more efficient. And the government will be 
able to focus on more urgent matters, such as stimulating the 
struggling economy and prosecuting our country's enemies.
    Microsoft has been helpful to me in their supply of quality 
products.
    Sincerely,
    Thomas Hogen



MTC-00030442

DEPT. OF JUSTiCE
MS. RENATA B HESSE
STOP SPENdinG OUR TAX MONEY ANd ENd
THE MiCROSOFT FiGHT.
GET ON WiTH MATTERS Which CONGERN
SEPT ??!
F.E. WEHNER
8510 WiMBoRNE WAY
LooiSViLLE KY 40222



MTC-00030443

FAX
Date: Friday, January 25, 2002
Time: 7:55:00 PM
To: U.S.Attorney General John Ashcroft
From: Ronald J. Markham
Fax: 307-1454
Fax: 860,349,3816

[[Page 28893]]

Voice: Voice: 860,349,3816
Comments:
The Honorable Attorney General John Ashcroft
27 Dunn Hill Road
Durham, CT 06422
Washington DC
Jan. 25, 2002
Dear Attorney General,
re: Microsoft Settlement
    Please count me in the opposed column to the pending suit 
against the Microsoft Corporation. Night after night I see on 
television or read in the newspapers adds for cars and trucks, 
appliances, and other products hawking giveaways if you will just 
buy this or that product. I see no difference in the marketing of 
many other corporations than the marketing of Microsoft. Is not the 
idea of building a better mousetrap or marketing a better mousetrap 
the "American Way"? I am an ordinary citizen with no axe 
to grind, but I find it very distasteful to waste tax dollars on 
such a silly exercise. Microsoft has improved our way of life in so 
many ways by pursuing this legal action leaves me saddened and 
frustrated. Please Attorney General Ashcroft, stop this waste of 
manpower arid tax dollars and redirect the governments legal efforts 
to meaningful pursuits.
    Very truly yours,
    Ronald J. Markham



MTC-00030444

Brent Smith
12025 Gold Pointe Lane
Gold River, CA 95670
January 21, 2002
Attorney General John Ashcroft
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Sir:
    Given this open comment period, I am writing to give you my 
thoughts on the Microsoft settlement. I have been following this 
case for some time and am familiar with the issues involved. This 
compromise between the DOJ and Microsoft is long past due and 
accepting it now is a necessary action to help revitalize our 
computer industry.
    I am self-employed and use Microsoft software to help run my 
business. Their company is responsible for building up our existing 
computer industry. They've provided consumers with superior products 
but now are being punished for that.
    In a move toward the future, Microsoft is limiting its own 
competitiveness so that the lawsuit might end. They are sharing an 
unprecedented amount of their intellectual property with their 
competitors arid have agreed to tone down their often-aggressive 
marketing practices. This settlement is more than fair to 
Microsoft's rivals and is clearly in the public interest. Please 
make the necessary decision to end this lawsuit as so on as 
possible. Our struggling economy can afford no less.
    Sincerely,
    Brent Smith



MTC-00030445

m & ?? Construction, Inc.
DRYWALL CONTRACTOR
320 E. WASHINGTON STREET
YORKVILLE, ILLINOIS 60560
(630) 553-0508
January 25, 2002
Renata B. Hesse
US Dept of Justice
Fax # 1-202-307-1454
    To whom it may concern:
    I am writing to express my views on the Microsoft antitrust 
case. If you are pursuing this case in the consumers best interest, 
please stop! The wonderful economist, Ludwig von Mises, wrote that 
the greatest democracy ever invented is the free market system. 
Everyone is constantly voting, with every dollar they spend, for 
what they want and what they, can do without Consumers have full 
power and authority to deal with supposed evil monopolists like Bill 
Gates.
    They do this by either freely spending their dollars on his 
products, or deciding to do without (even boycott) Microsoft 
products, The most appropriate use of the US Dept of Justices" 
time would be to fight terrorism and leave the American consumers to 
deal with legitimate businessmen in the most effective way possible; 
the free market system.
    Sincerely,
    Mike McCurdy (President)



MTC-00030447

COVER SHEET
TO:
FAX NO:
FROM: B. Kehayes
DATE:
FAX NO: 252-482-8521
COMMENTS:
NO. OF SHEETS INCLUDING COVER:
P.O. Box 733
Edenton, NC 27932
January 24, 2002
Attorney General John Ashcroft
U.S. Department of Justice
950 Pennsylvania Avenue, N. W
Washington, D C 20530
    Dear Mr. Ashcroft:
    I writing to urge you to support the recent settlement created 
between the government and Microsoft. This prolonged period of court 
battles has sapped energy that could be better put into moving ahead 
in our economy.
    This agreement allows manufacturers to compete on a more even 
footing while not penalizing Microsoft too greatly for their part in 
the vast technological revolution that has made life better for all 
Americans.
    America has been a country of innovation and we need companies 
that can afford to and will spend money and time to bring new 
products to market. Microsoft has done this in the past and is eager 
to continue doing so if they are not unduly constrained. Our economy 
is sadly strained; our young people are out of work. Please do what 
you can to settle this issue and let us all get back to pulling 
ahead.
    Thank you.
    Sincerely,
    Barbara Kehayes



MTC-00030448

Department of Justice
Subject: Microsoft Settlement
    I believe it is time for the DOJ to terminate the proceedings 
against Microsoft. There never should have been a lawsuit. There has 
never been a shred of evidence that Microsoft has harmed the 
consumers. If anything Microsoft has been a tremendous force for 
uniting and standardizing the PC industry. No other company has 
stepped forward to do this. Microsoft has virtually no competition 
because no one else had the vision, foresight and nerve to invest 
and drive to develop an operating system that would make the PC the 
vital, universal tool that it is today. The companies that cannot 
compete have stooped to lawsuits through the government as the only 
way they can damage an industry leader. It only looks like sour 
grapes to me.
    The US government should be giving Microsoft at-a-boys for being 
the driving force behind the most useful tool of the present 
generation and maybe of the 20th century. It is past time to stop 
harassing Microsoft. so they can get back to being the world leader 
in developing easy to use operating systems and other software which 
will keep the US in the forefront of this industry.
    Sincerely,
    Bob Maupin
    PO Box 1030
    Frankston, TX 75763



MTC-00030449

1103 East 1500 Road
Lawrence, KS 66046
January 23, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    This is to give my approval to the agreement between the 
Department of Justice and Microsoft. I think the whole lawsuit has 
ruined the country. Microsoft was one of the major engines of our 
economy, producing not only a quality product, but providing 
thousands of jobs. This lawsuit was more the result of sour grapes 
on the part of Microsoft's rivals than any unethical business 
practices.
    Microsoft has more than tried to meet the demands of the 
Department of Justice. Microsoft has agreed to help companies better 
achieve a greater degree of reliability with regard to their 
networking software; Microsoft has agreed to grant computer makers 
broad new rights to configure Windows to promote non-Microsoft 
software programs that compete with programs included within 
Windows.
    This is more than fair. Give your support to Microsoft.
    Sincerely,
    Nancy Hardman



MTC-00030451

FAX
ATTN. AG John Ashcroft
Fax Number 1-202-307-1454
Phone Number
FROM Keith D. Wheeler
Fax Number 480-759-6841
Phone Number 480-759-8823
SUBJECT
Number of Pages 2
Date 1/25/02
MESSAGE
KEITH D. WHEELER

[[Page 28894]]

2549 E, Mountain Sky Ave
Phoenix, AZ 85048
Fax 480-759-6841
Home Phone 480-759-8823
January 25, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft: ,
    I am writing to say that the lawsuit against Microsoft has gone 
on now for entirely too long. I am a proponet of a free market 
economy and this lawsuit seems to do everything to undermine the 
underlying reason to be innovative. How can our government go after 
a company that has created jobs, generated wealth, and made 
technolgical breakthroughs? The case was flawed from the beginning.
    The terms of the settlement show this in that they do little to 
protect consumer rights. The settlement forces Microsoft to disclose 
interfaces internal to the Windows operating system products and 
also prohibits them from entering into agreements that obligate 
third parties from exclusively distributing Microsoft products. 
These concessions reflect the intense lobbying efforts of 
competitors.
    I believe it is in the publics best interests to have this case 
sealed. Our economy cannot afford further litigation and that is why 
I am appalled at the nine states holding out. Please implement the 
settlement as soon as possible and suppress any state opposition. 
Thank you.
    Sincerely,
    Keith D. Wheeler
    cc: Representative Jeff Flake



MTC-00030452

18 Janock Road
Milford, MA 01757
January 19, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    As a concerned citizen, I write you to discuss the recent 
developments of the Microsoft settlement. After three years of 
negotiations, it is time to support this agreement and get our 
technology industry back to business. I urge you to help support 
this agreement and help to assure that no more actions be taken 
against it.
    Microsoft has agreed to make many alterations including changes 
in licensing and marketing. Along with this, Microsoft has agreed to 
not enter into any agreements obligating any third party to 
distribute or promote any Windows technology exclusively. Also, all 
of these concessions will be monitored to make sure that Microsoft 
is following procedure. The many concessions that Microsoft has made 
are bold statements toward a unified IT sector. Microsoft is 
obviously working hard to let our technology industry work together. 
By doing this, we can secure our place in this highly competitive 
global market.
    Let's work together to support our technology industry and get 
everyone back to business. I thank you for your support.
    Sincerely,
    Mary Bruno



MTC-00030453

Fax Transmission
From: Steven Waldman
44 Stridesham Ct
Baltimore MD 21209
tel (410) 336-1408
swaldman @ mchange.com
To: Renata B. Hesse
Antitrust Division
US Department of Justice
fax (202) 307-1454 or (202) 616-9937
Re: Microsoft Settlement
Length: 8 Pages Including This Page
Notes:
    The attached Tunney Act comments have been submitted by fax (26-
January-2002), as an e-mailed PDF document (26-January-2002), and by 
a commercial overnight carrier (delivery a.m., 28-January-2002). I 
apologize for the multiple modes of submission, but it is important 
that these comments be verifiably received by the morning of January 
28. I would be very grateful if the Department could provide an 
acknowledgement of on-deadline receipt of these comments, perhaps by 
e-mail. Many thanks for your attention and assistance.
Steven Waldman
44 Stridesham Ct
Baltimore, MD 21209
(410) 336-1408
swaldman @ mchange.com
January 26, 2002
US Department of Justice
Antitrust Division
601 D Street NW
Suite 1200
Washington DC 20530
Attn: Renata Hesse
Re: Comments regarding Proposed Final Judgement United States v. 
Microsoft Corporation Civil Action No. 98-1232
    Thank you for the opportunity to comment upon the US v. 
Microsoft Proposed Final Judgement, published in the Federal 
Register on November 28, 2001.
    The Proposed Final Judgement as written is not in the public 
interest. I urge the Department to pursue remedies substantially 
different from those proposed, whether via further negotiations with 
Microsoft, or through adversarial proceedings. If the settlement is 
presented to the District Court without substantial modification, I 
would urge Judge Kollar-Kotelly make a determination under the 
Tunney Act that the Proposed Final Judgement would not serve the 
public interest.
    The Proposed Final Judgement Would Do Positive Harm
    It may seem odd to suggest that an antitrust remedy could be 
positively harmful. After all, regardless of the remedy, a convicted 
monopolist cannot leave an antitrust proceeding with more rights 
than it had when it arrived, and usually leaves with fewer. However, 
a poor remedy can indeed leave the public in a situation worse than 
the status quo ante. The current Proposed Final Judgement does so, 
in two ways. First, the PFJ describes, permits, and envisions 
specific future conduct on the part of Microsoft that would itself 
be anticompetitive. By providing implicit government endorsement for 
this conduct, the PFJ would make it difficult for the Department, 
the States, or private third parties to bring proceedings against 
Microsoft to curb it at a later date. Second, the PFJ contains 
enforcement provisions whose primary practical effect would be to 
delay and reduce the likelihood of further action should the company 
continue to behave unlawfully.
    In other words, while the Proposed Final Judgement does place 
Microsoft under some new constraints, it places the DOJ and other 
potential litigants under even greater constraint. The net effect 
would be a diminishment rather than an increase in deterrence of 
Microsoft's anticompetitive behavior.
    PEJ Explicitly Permits Continued Anticompetitive Practices
    The purpose of the Proposed Final Judgement is to remedy 
Microsoft's unlawful conduct, specifically its unlawful maintenance 
of a monopoly in Intel-compatible PC operating systems. The 
reasoning behind the Court of Appeals upholding of the monopoly 
maintenance claim centered on the idea that there is an 
"applications barrier to entry" to operating systems 
markets, but that this barrier to entry could plausibly be chipped 
away at by a class of applications referred to as 
"middleware". The Court held that Microsoft engaged in 
various practices to "protect[] Microsoft's monopoly from the 
competition that middleware might otherwise present", in 
violation of Section 2 of the Sherman Act. It is these practices 
that must be remedied. In particular, the Court held that by virtue 
of restrictive contracts with computer manufacturers 
("OEMs"), internet providers ("IAPs"), 
software companies ("ISVs") and by other means, 
Microsoft impeded the widespread distribution of middleware that 
might have threatened its monopoly.
    Section III.C.3 of the Proposed Final Judgement forces Microsoft 
to allow OEMs to automatically launch non-Microsoft middleware at 
the end of a PCs boot sequence, but only "if a Microsoft 
Middleware Product that provides similar functionality would 
otherwise be launched automatically at that time". By this 
caveat, the PFJ endorses a restriction in an OEM licensing agreement 
that would otherwise constitute a violation of Section 2 of the 
Sherman Act under the Court of Appeals" reasoning. The caveat 
is anticompetitive on two counts. First, it permits Microsoft to 
"choose its battles": Microsoft need only face 
challenges from automatically launched middleware where the company 
feels its own offerings have an advantage. Should a competitor 
create an innovative middleware product that would threaten 
Microsoft's applications barrier to entry, Microsoft can prevent its 
distribution as a default running service indefinitely, by simply 
not fielding an offering of its own or by quietly integrating but 
not trademarking its offering (see the definition of a 
"Microsoft Middleware Product", PFJ, Section 
Vl.K.2.b.iii).
    Secondly, the caveat necessarily permits competing middleware 
only if OEMs include Microsoft's offering as well, since by 
definition (again, PFJ, Section VI.K.2) a Microsoft Middleware 
Product is a part of a

[[Page 28895]]

Windows Operating System Product. The Appeals Court noted several 
reasons why OEMs are reluctant to include two products of the 
similar functionality in a default installation, including customer 
confusion; increased support and testing costs; and that it is a 
"questionable use of the scarce and valuable space on a PCs 
hard drive." (the Appeals Court quoting the District Court's 
Findings of Fact) These considerations are cited by the Court in 
holding unlawful and exclusionary OEM contracts that forced a choice 
of including Microsoft middleware alone or Microsoft middleware plus 
a similar competitor. Additionally, even when competitive middleware 
is preinstalled alongside Microsoft's offering, "network 
effects" would put any one of several non-ubiquitous 
occasionally installed competitors at a serious disadvantage with 
respect to offering by Microsoft, even if inferior, that is 
guaranteed to be present on all installations. Should Microsoft 
force an "ours or both" decision with respect to 
competing middleware as a condition of OEM Windows licensing, it 
would most certainly be anticompetitive. However, it would also be 
explicitly sanctioned by the Proposed Final Judgement, and therefore 
difficult for the government or a third party to oppose. [1]
    To the degree that Section III.C might have any effect in 
allowing OEMs to integrate third party middleware with a Microsoft 
OS, Section III.H.3 largely eviscerates the hazard to the monopolist 
by foreseeing a mechanism by which the company's operating systems 
could ask end-users to confirm an alteration or undoing of OEM 
additions to the OS fourteen days after the consumer first turns on 
a PC. For example, under this section, an operating system would be 
permitted to present a dialog box stating, "Windows has 
detected that this configuration has been modified from Microsoft-
recommended defaults. This may lead to incompatibilities or system 
faults. [Correct Now?] [Cancel]" Clicking "Correct 
Now?" would replace OEM-installed non-Microsoft middleware 
with Microsoft's offering. If faced with the question, a court might 
determine that such a presentation (which Microsoft's competitors 
would be unable to make) would constitute unlawful monopoly 
maintenance by Microsoft. But it would be difficult for the 
government or for a private litigator to make that case in the face 
of a Final Judgement that clearly endorses the conduct.
    The problems thus far mentioned are not unique. The Proposed 
Final Judgement is riddled with "loopholes" that not 
only make it a weak remedy, but that foresee and allow specific 
behavior by Microsoft that in the absence the Final Judgement would 
be actionable. By complicating potential future public or private 
antitrust enforcement against Microsoft, the Proposed Final 
Judgement would encourage misconduct and do positive harm to 
competition in the software industry.
    PFJ Specifically Discriminates Against "Open Source" 
Competition
    Over the past several years, a novel approach to software 
development known as "open source" has risen to 
prominence. Under the "open source" development model, 
many widely dispersed individuals, businesses, and other entities 
collaborate in the production of complex software products, 
contributing to what over time has become a rich commons of 
collectively authored software. "Open source" software 
is made available free of charge, under licenses that permit 
widespread redistribution and modification by users, sometimes with 
the restriction that any derived works must be made available to the 
public under the same terms. The business model that supports the 
continued development of open source software remains to be fully 
understood. The licensing terms of open source software prevent the 
exploitation by authors of any limited monopoly that would enable 
them to profitably "sell" software as traditional 
software vendors, such as Microsoft, have done. Nevertheless, a wide 
variety of actors including individual hobbyists, multinational 
companies, public and private universities, governments, and 
nongovernmental organizations have found sufficient incentive to 
invest substantial amounts of time and money into the production of 
open source software.
    In the face of Microsoft's successful and unlawful monopoly 
maintenance, very few traditional software vendors still stand as 
competitors in the company's core market of Intel-compatible PC 
operating systems. Behemoths like IBM and scrappy upstarts like Be, 
Inc. have battled to gain a fingerhold, but failed to make any 
headway at all, and their products (IBM's OS/2, Be's BeOS) have all 
but faded from the computing landscape. The only non-Microsoft 
operating system that has managed to grow its share dramatically 
despite Microsoft's well-established pattern of anticompetitive 
behavior is the open source operating system Linux. Other open 
source projects that have competed effectively with Microsoft 
include Samba (which provides Windows interoperable file and print 
services to computer networks) and Apache (the most popular web 
server on the Internet).
    It appears that the open source development model is somewhat 
resistant to the sort of anticompetitive behavior that has been 
effective for Microsoft in the past. One might even argue that the 
explosion of open source soil. ware over the past few years is a 
response by businesses, developers, and users to an artificially 
straitened "traditional" software landscape, and is 
perhaps attributable at least in part to Microsoft's anticompetitive 
behavior. As traditional vendors have receded from whole categories 
of software under the self-fulfilling truism that competing with 
Microsoft is akin to suicide, many entities have for one reason or 
another decided that the cost of contributing a small portion to the 
development of alternatives is less than the direct costs (continual 
licensing fees) and indirect costs (the failings of software not 
adequately tailored to their needs; uncertainty and future costs 
created by vendor lock-in) associated with relying on Microsoft 
products.
    Regardless of the whys, open source software now stands as one 
of the few sources of effective competition against Microsoft. 
Indeed, while many of the battles that prompted the Justice 
Department's action against Microsoft are now past and prologue 
(e.g. the "browser wars" between Netscape and 
Microsoft), the struggles between open source Linux and Windows in 
the server space and between open source Apache and Microsoft's IIS 
remains, among many others, remain active and fierce. [2] Any remedy 
to Microsoft's anticompetitive behavior that diminishes the 
likelihood that open source projects can effectively interoperate 
with and compete against Microsoft's offerings would harm 
competition in the software industry. Unfortunately, the Proposed 
Final Judgement in several places explicitly permits Microsoft to 
discriminate against open source competitors.
    Importantly for open source developers, Sections III.D and III.E 
of the Proposed Final Judgement would obligate Microsoft to disclose 
APIs, communication protocols, and documentation that might be 
required to interoperate with a Windows Operating System product. 
However, the caveats of Sections III.I and III.J restrict these 
earlier sections, and would allow Microsoft to essentially exclude 
open source competitors from access to or the use of this 
information. For the disclosure requirements of Sections III.D and 
III.E to have any effect, competitors must be able to use the 
information disclosed to develop and distribute competing and/or 
interoperating products. However, Section III.I foresees a regime 
under which the disclosed information must be licensed, as it 
continues to be the proprietary, intellectual property of Microsoft. 
Section III.I guarantees "reasonable and non-discriminatory 
terms" for such licensing, based on the payment of 
"royalties or other payment of monetary consideration". 
However, "reasonable and non-discriminatory" commercial 
terms inherently discriminate against open source software, which by 
virtue of its licensing must be freely distributable and modifiable.
    Under ordinary circumstances, a company certainly should have 
the right to offer use of its proprietary technology only under 
commercial license, and this would legitimately prevent those who 
might wish to distribute open source applications based on that 
technology from doing so. But in the case of a company that has a 
monopoly over a substantial portion of the computing world and that 
has maintained that monopoly through unlawful anticompetitive 
conduct, allowing it to require competitors to pay even 
"reasonable" licensing fees in order to interoperate 
with its monopoly product provides the monopolist with unjustifiable 
reward for its misbehavior, in Microsoft's case, permitting such 
licensing is particularly insidious, because even if it were to 
provide licensing of its putative IP on absurdly generous terms, for 
example if it were to levy a royalty of 1ï¿½ per thousand copies, 
it would immediately exclude what in the present real world are 
currently its most tenacious competitors from any possibility of 
interoperating with its software. By permitting "reasonable 
and non-discriminatory" commercial licensing of technologies 
the use of which is required in order to compete against and 
interoperate with Microsoft technologies, the Proposed Final 
Judgement condones and foresees a

[[Page 28896]]

practice that would exclude and discriminate against important open 
source competitors.
    Section III.J restricts the scope of the PFJ disclosure 
requirements where security technologies ("anti-piracy, 
antivirus, software licensing, digital rights management, [and] 
encryption or authentication systems") are concerned. 
Unfortunately, in today's networked world, no software is untouched 
by security concerns, and any non-trivial internet application must 
make use of and interoperate with encryption and authentication 
systems. Further, non-disclosure of security-critical techniques and 
protocols is unnecessary: the professional computer security 
community is nearly unanimous in its disavowal of the notion of 
"security through obscurity". A well-designed system 
should be secure even in the face of an attacker who fully 
understands the algorithms and protocols used to enforce the 
security. This is not as difficult as it sounds: the academic 
literature is filled with encryption algorithms and protocols that 
have never been broken despite massive peer-review, and even some 
that are "provably secure". Historically, non-disclosure 
of security techniques in software has more often served to provide 
cover for shoddy work than to even arguably enhance security. 
"Security by trade secret" is invariably broken, 
because, invariably, secret techniques are not subjected to 
sufficient peer review, and weak secret techniques can be reverse-
engineered and then compromised. (See the recent history of CSS, a 
once-secret, easily broken, scheme for protecting DVDs, for a 
topical case-in-point.) Microsoft has a particularly poor security 
record, with respect to both the inadequate security of its 
products, and its attempts to restrict disclosure in hopes of 
covering up embarrassing lapses.
    Open source software, in general, has a much better reputation 
for security, owing in large part to the fact that security 
algorithms in open source software are necessarily published, and 
are therefore subject to widespread review. Thus it is ironic that 
Section III.J.2 of the Proposed Final Judgement explicitly allows 
Microsoft to condition disclosure of security-sensitive technologies 
to those who "meet[] reasonable, objective standards 
established by Microsoft for certifying the authenticity and 
viability of its business". Since most open source software 
projects are not developed or "owned" by any one 
business, and since the terms of open source licensing often require 
disclosure of source code, III.J.2 effectively excludes open source 
software from any access to protocols, APIs, and other information 
that might be required to interoperate with or compete against 
Microsoft products that include a security component. Any 
significant application now must have security designed into it, so 
Section III.J.2 could be used to effectively lock open source 
competitors out of the disclosure requirements of the Proposed Final 
Judgement. It would be difficult to oppose Microsoft in court for 
discriminating against its troublesome open source competitors when 
the discrimination is based on the language of a court-sanctioned 
Final Judgement.
    PFJ "Enforcement Mechanisms" Would Hinder Effective 
Enforcement
    The following portions of the Proposed Final Judgement would 
hinder effective enforcement of the agreement:
    . Section IV.B provides for the appointment of a Technical 
Committee to "assist in enforcement and compliance" with 
the PFJ. The constitution and role of the "TC" is 
described in detail. The Technical Committee would oversee 
Microsoft's compliance with the agreement in an ongoing way, and 
would respond to complaints from the plaintiffs or third parties. 
However, the Technical Committee has no power other than to assist 
in Voluntary Dispute Resolution, and, according to Section IV.D.4.d, 
"No work product, findings, or recommendation 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 Judgement."
    . Section IV.A.1 requires that "the plaintiff States shall 
form a committee to coordinate their enforcement of this Final 
Judgement. A plaintiff State shall take no action to enforce this 
Final Judgement without first consulting with the United States and 
the plaintiff States" enforcement committee."
    . Section VIII explicitly excludes third parties from taking any 
role in the enforcement of the Proposed Final Judgement.
    Let us be perfectly clear: At the end of the day, the Proposed 
Final Judgement provides the United States and each of the plaintiff 
States with a right to sue to enforce its terms. But let's also be 
honest: the choice by a State of whether or when to enter into 
complex antitrust litigation against a well-known and well-heeled 
opponent is politically fraught under the best of circumstances. 
Under the terms of the PFJ, an unsatisfied plaintiff would be faced 
with two bad options: 1) the plaintiff can expend resources on a 
dispute resolution mechanism (the "TC") that the PFJ 
endorses, but that has no power, cannot be used at all as a basis 
for further proceedings, and will have no effect unless an amicable 
resolution is reached; or 2) eschew the dispute resolution mechanism 
endorsed by the settlement, thereby facing accusations of burdening 
Court resources unnecessarily, as well as a politically treacherous 
"consulting" process that would predictably lead to 
accusations of judicial overzealousness by reluctant former co-
plaintiffs. A reasonable non-judicial enforcement mechanism would 
serve as a basis for judicial enforcement if required. Instead, the 
PFJ creates a "middle path to nowhere", that increases 
the political difficulty of undertaking any binding action against 
the company Under the PFJ, the real-world probability that 
misbehavior on Microsoft's part would bring legal consequences would 
be less than without the proposed enforcement mechanisms. Thus, the 
Proposed Final Judgement does positive harm to the public.
    Complex, Vague, and Contradictory Language Hides New 
Anticompetitive Tools For Microsoft The ostensible purpose of 
Section III.1 of the Proposed Final Judgement is to require that 
Microsoft license under "reasonable and non-discriminatory 
terms" intellectual property that software vendors and other 
parties might require in order to offer middleware products 
interoperable with Windows. If the wording were less vague (and if 
"reasonable and non-discriminatory" were changed to 
"royalty free" to include open source developers), this 
would be a serious and legitimate remedy: Having unlawfully 
restricted the development of competing middleware, it is fair that 
Microsoft be compelled to license, under generous terms, whatever 
intellectual property nascent competitors would find necessary to 
interoperate with Windows.
    However, the wording of this section is astonishingly vague. 
Microsoft may be compelled to license its IP to "ISVs, IHVs, 
IAPs, ICPs, and OEMs" only as required to "exercise 
options and alternatives expressly provided to them under this Final 
Judgement". Exactly what "options and 
alternatives" are provided to these parties by the Proposed 
Final Judgement is not a matter of scientific clarity, even to the 
avid reader of the document. What is crystal clear, however, is that 
those to whom the PFJ purports to offer this relief--the 
alphabet soup of third parties--have absolutely no standing to 
enforce (and therefore to enlist a Court's aid in interpreting and 
clarifying) this or any other section of the Proposed Final 
Judgement (Section VIII of the PFJ, see above).
    Further, in an astonishing twist, Section III.I.5 exacts the 
remedy of compulsory licensing not only of the convicted monopolist, 
but of innocent competitors seeking relief. Section III.I.5 insists 
that a software vendor who wishes to provide a middleware product 
for a Microsoft operating system, if they require access to 
Microsoft IP to interoperate, must license to Microsoft its own 
intellectual property. The following language is no doubt intended 
to soothe competitors: "[T]he scope of such license shall be 
no broader than is necessary to insure that Microsoft can provide 
such options or alternatives" (Sec III.I.5). However, nowhere 
in the PFJ have I been able to discern any "options and 
alternatives" that Microsoft must provide to any third parties 
that would require a license on its part. Microsoft must merely 
permit practices that it has heretofore managed to prevent, in part 
by refusing to license its own IP, and it must disclose some of what 
it has heretofore kept secret. The requirements of Section III.I.5 
unnecessarily and specifically envision a situation where a 
competitor, attempting to interoperate with Windows in ways that 
arguably would require some license of IP from Microsoft, could be 
asked to license its own IP to Microsoft, or else to cease and 
desist. If Microsoft and the putative competitor were to disagree 
about what "no broader than necessary" means, a 
competitor could not enlist, any court to resolve the dispute and 
compel licensing under the PFJ. Thus, the PFJ sets up a situation 
where Microsoft could "leverage" an interoperability 
requirement by a competitor or ISV in order to acquire access to the 
attractive IP of its competitors. In the absence of the PFJ, a court 
might look at a "we'll show you ours only if you show us

[[Page 28897]]

yours" requirement as anticompetitive, given that Windows 
Operating Systems are a de jure monopoly with which many third 
parties must interoperate or die. However, the Proposed Final 
Judgement gives cover to the practice by explicitly foreseeing and 
sanctioning a cross-licensing requirement, diminishing the 
likelihood of a successful outcome and increasing the burden in 
litigation for companies that may find themselves in the crosshairs 
of Microsoft's IP lawyers. Again, the public is positively harmed by 
the PFJ, because it diminishes the likelihood of legal consequences 
should Microsoft engage in foreseeable anticompetitive behavior.
    Conclusion
    A District Court found, and a Federal Court of Appeals, 
affirmed, that Microsoft engaged over a period of years in multiple 
unlawful and sometimes deceptive practices in order to maintain its 
monopoly on PC-compatable operating systems. The fruits of this 
illegally maintained monopoly have been and continue to be huge for 
the company and its principals. The Proposed Final Judgement fails 
to provide any strong remedy for this conduct, and instead shelters 
the monopolist from potential consequences of past and future 
misconduct. The Proposed Final Judgment, by providing court sanction 
to practices a court might well find to be anticompetitive absent 
the proposed settlement, leaves consumers, competitors, open source 
software developers, and other interested parties in a worse 
position than they would be in if Microsoft were simply left to face 
private litigation as a de jure monopolist without any specific 
remedy being imposed in the present case. The Proposed Final 
Judgement would therefore be harmful to the public interest, and, 
unless it is very substantially modified, it should be rejected.
    Notes
    [1] Section III.C.1 suffers from the same flaw. It permits OEMs 
to install "icons, shortcuts, and menu entries" for pre-
installed, competing middleware, but "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." Microsoft would be freed again to 
create an "ours or both" situation, justified by 
language it could graft into contracts directly from the Proposed 
Final Judgement.
    [2] For an informal measure of the perceived threat that open 
source software presents to Microsoft's monopoly, we might examine 
the lengths to which Microsoft has gone in disparaging such software 
recently. Microsoft CEO Steve Ballmer has called Linux "a 
cancer" [Chicago Sun-Times, June 1, 2001] that has "the 
characteristics of communism." [The Register, August 2, 2000] 
Ballmer has explicitly described Linux as "threat number 
1." [upside.com, January 20, 2001i According to the public 
comments of Microsoft exec Jim Allchin, "Open source is an 
intellectual property destroyer... I'm an American, I believe in the 
American Way. I worry if government encourages open source, and I 
don't think we've done enough education of policy makers to 
understand the threat." [CNet news.com, February 15, 2001] 
[URLs:
    http://www.suntimes.com/output/tech/cstfin-micro-01.html;
    http://www.theregister.co.uk/content/1/12266.html;
    http://www.upside.com/texis/mvm/news/story?id=3a5e392ca3;
    http://news.com.com/
2100-1001-252681.html?legacy=cnet]



MTC-00030454

6320 Chaprice Ln.
Montgomery, AL 36117
J.R. SMITH
1535 WILDLIFE TRAIL
UNION SPRINGS, AL 36089
January 25, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Ave, NW
Washington, DC 20530
    Dear Mr. Ashcroft,
    I was recently surprised to hear of the recent development in 
the Microsoft settlement. After three years of negotiations, I 
cannot believe that this agreement may be held back even further. 
The terms of this agreement were part of a sophisticated, detailed 
process and all affected were involved. At this point in time, the 
settlement is fair and reasonable and should be used as a guideline 
to get our technology industry back to business.
    Under the settlement, Microsoft will design all future operating 
systems so that competitors can easily place their components on the 
system. Also, under this settlement, the government will appoint a 
full-time monitor to observe Microsoft. These concessions are 
clearly a step toward a more unified, stronger II sector. By getting 
back to work. we can maintain our place in the competitive world 
market, and car, get our economy back on track To enforce this 
agreement would be beneficial to the consumer, the IT sector and the 
entire economy.
    Please work to help stop any further actions against this 
agreement. As we support our technology industry, we support the 
growth of our economy and the advancement of this great country.
    Sincerely.
    I.R. Smith
    334-738-2182



MTC-00030455

Cipher Systems
80 Glastonbury Blvd
Glastonbury, CT 06033
January 24, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    This letter is to inform you of my full support of the antitrust 
settlement that was reached by the Justice Department and Microsoft 
Corporation.
    The settlement is fair and reasonable, and should be finalized 
as soon as possible, since Microsoft did not get off easy. In fact, 
Microsoft has agreed to share portions of its interfaces and 
protocols for its Windows operating system. This is nearly priceless 
intellectual property. It also agreed not to retaliate against 
software or hardware developers who develop or promote software that 
competes with Windows or that runs on software that competes with 
Windows. The settlement changes every aspect of the way Microsoft 
conducts business. I hope the settlement is finalized soon.
    Thank you generously for your attention.
    Sincerely,
    Bert Sirkin
    Chief Technology Officer
    Cipher Systems LLC



MTC-00030456

Carole Tovar
P.O. Box 13675
Mill Creek, WA 98082-1675
January 21, 2002
John Ashcroft
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    I'm writing to encourage you to support the recent anti-trust 
settlement Microsoft reached with the U.S. Justice Department. I 
feel this is something Microsoft has agreed to merely so it could 
end the suit and so it can return to the business of making good and 
innovative software.
    Microsoft has, for example, agreed to allow computer makers to 
change Windows so that Microsoft's products can be removed from the 
operating system and competing, non-Microsoft products can be 
installed in their places. AOL Instant Messenger can be installed in 
the place of Windows Messenger; RealNetworks RealPlayer can be 
installed in the place of Windows Media Player; and Netscape 
Navigator can be installed in place of Internet Explorer. Microsoft 
has also agreed to not take any actions against computer makers who 
choose to do this, or who decide to ship operating systems that 
compete with Windows, or who develop software that runs on such 
alternative operating systems.
    That sounds pretty, far-reaching to me. To give its rivals a 
break: Microsoft is giving up all kinds of fights over its freedom 
to contract and over its own property. There's no point in hounding 
them with even more litigation.
    I encourage you to accept the terms of the settlement so 
Microsoft can continue to make good software and provide jobs to 
thousands around the country.
    Sincerely,
    Carole Tovar



MTC-00030457

TOVAR PROPERTIES
January 21, 2002
John Ashcroft
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    I'm writing to encourage you to support the recent anti-trust 
settlement Microsoft reached with the U.S. Justice Department. I 
feel this is something Microsoft has agreed to merely so it could 
end the suit and so it can return to the business of making good and 
innovative software.

[[Page 28898]]

    Microsoft has, for example, agreed to allow computer makers to 
change Windows so that Microsoft's products can be removed from the 
operating system and competing, non-Microsoft products can be 
installed in their places. AOL Instant Messenger can be installed in 
the place of Windows Messenger; RealNetworks RealPlayer can be 
installed in the place of Windows Media Player; and Netscape 
Navigator can be installed in place of Internet Explorer. Microsoft 
has also agreed to not take any actions against computer makers who 
choose to do this, or who decide to ship operating systems that 
compete with Windows, or who develop software that runs on such 
alternative operating systems.
    That sounds pretty, far-reaching to me. To give its rivals a 
break, Microsoft is giving up all kinds of rights over its freedom 
to contract and over its own property. There's no point in hounding 
them with even more litigation.
    I encourage you to accept the terms of the settlement so 
Microsoft can continue to make good software and provide jobs to 
thousands around the country.
    Sincerely,
    Carole Tovar



MTC-00030459

650 Halfway Road
Crawfordsville, IN 47933
January 24, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    My name is Ginger Todd. I am a resident of Crawfordsville, 
Indiana. I am happy to hear that a proposed settlement has been 
reached between the federal government and Microsoft in the 
antitrust case.
    While I don't know all of the details of the lawsuit or this 
settlement proposal, one thing the proposal clearly deals with is 
the most frequently voiced consumer complaint against Microsoft: the 
lack of choice when utilizing the Windows operating system. 
Microsoft has agreed to allow computer makers to change Windows to 
have non-Microsoft programs built-in--programs that compete 
directly with Microsoft features and programs that usually come 
included with Windows.
    The agreement by Microsoft to allow competition within Windows 
will be of great benefit to both consumers and competing software 
designers and manufacturers. I hope that you will approve the 
agreement so we consumers will be able to benefit from it soon. 
Thank you for taking time to read my comments.
    Sincerely,
    Ginger Todd



MTC-00030460

FACSIMILE COVER PAGE
To: Renata B. Hesse
From: HARRY MESSENHEIMER
Sent: 1/25/02 at 8:33:16 PM
Pages: 3 (including Cover)
Subject:
Comments on Microsoft Settlement
Rio Grande Foundation
P.O. Box 2015
Tijeras, NM 87059
505 286-2030
www.riograndefoundation.org
January 25, 2002
Antitrust Division
U.S. Department of Justice
601 "D" Street NW, Suite 1200
Washington, DC, 20530
Attn: Renata B. Hesse
Subject: Comment on Proposed Final Judgment re Microsoft
    Dear Sir or Madam:
    I am writing to you on behalf of the Rio Grande Foundation of 
New Mexico, an independent, non-partisan policy research group 
dedicated to promoting free markets and open competition. I 
appreciate tile opportunity to comment.
    In my capacity as Senior Fellow for Economic Research at the 
Foundation, I urge you to accept the proposed settlement in the 
anti-trust case involving Microsoft. In urging you to accept the 
settlement my arguments are that (1) we do not know enough about 
possible harms to take more aggressive action against MS and (2) we 
should be careful about opening up antitrust law to unproductive, 
rent-seeking activity.
    The proposed settlement is file one that likely will do file 
least harm. I say that with a good deal of humility, since I think 
many economists tend greatly to overstate what we really know of 
tile possible harms alleged in this case. But one thing we do know 
is that competition is beneficial to society. Competition in an 
environment of economic freedom tends to promote human prosperity, 
an assertion strongly supported by recent empirical evidence.
    What we don't know much about, however, is how the competitive 
process leads to prosperity. The economist's model of "perfect 
competition" is not particularly useful in informing us about 
antitrust law as it relates to possible harms that may reduce 
prosperity. Knowledge is not given; innovative change has been 
taking place at incredible speed. The premier scholar who wrote 
about competition and our lack of knowledge was Professor F. A. 
Hayek, who said in a famous essay about competitive process:\1\ 
".-.-. we should worry much less about whether 
competition is perfect and worry much more about whether there is 
competition at all." Undoubtedly some of MS's restrictions on 
access to Windows were only intended to increase its market share 
while raising cost barriers to potential entrants. But it is hard to 
differentiate those restrictions from actions that substantially 
benefit consumers, as some of the alleged predatory behavior on the 
part of MS would appear to do. It is not readily apparent, for 
example, that the tying of Internet Explorer to the Windows desktop 
is anything but a benefit to those who purchase Windows. The issue 
boils down to whether or not this tying will result in differential 
harm to consumers over time. The only way that could happen is if 
the barriers to entry were so substantial and the resulting MS 
monopoly so inefficient as to erode away this short-run benefit. But 
those barriers actually seem to be quite small. Any time I surf the 
Internet I am amazed at how much competition there is. And how can 
we tell if MS is more or less efficient now than an unseen evolution 
under a different set of antitrust doctrine in which MS has a court-
dictated constraint on behavior to reduce its market share? Market 
share as a measure of harm seems to be a red herring. The threat of 
entry, itself, tends to promote expanded service and lower costs. I 
think what we have observed over the past 40 years at least 
partially justifies my assertion.\1\ Hayek, F.A, "The meaning 
of competition," in Individualism and Economic Order, Univ. of 
Chicago Press 1948, Midway reprint 1980, p 105.
    As mentioned above, my second argument involves the unproductive 
cost of seeking differential advantage over competitors through the 
government in general and antitrust law in particular. In economics 
this is know as "rent-seeking" behavior. Economists are 
in wide agreement that rent-seeking is a loss the economy. Rather 
than seeking differential advantage from the government, firms could 
be using those resources to produce a better product at lower cost. 
The costs of rent-seeking behavior in this case alone seem to be 
enormous. And the draconian ruling by Judge Jackson would appear to 
open the door for like kind of wasteful activity. It would lead to 
severe impacts far beyond one company, acting as a drag on one of 
the most vibrant sectors of our economy. We can do nothing about the 
resources already used in this case, but we can prevent this kind of 
wasteful activity in the future.
    That is why the settlement should be approved. It is a common-
sense solution that recognizes the limitations in what we know about 
competition and innovation. And its approval also would serve to 
reduce predatory, rent-seeking behavior in the future.
    Thank you for your consideration.
    Sincerely,
    Harry Messenheimer, Ph.D.
    Senior Fellow, Rio Grande Foundation



MTC-00030461

Renata B. Hesse
Antitrust Division
U.S. Department of Justice
601 D Street NVV
Suite 1200
Washington, DC 20530-0001
January 25, 2002
    ISSUE: It is my understanding that the Dept. of Justice is 
asking for public comment concerning the negotiations over the 
Microsoft antitrust suit.
    Microsoft has already agreed to hide its Internet Explorer icon 
from the desktop. I personally believe, this case against Microsoft 
is little more than "welfare" for Netscape and other 
Microsoft competitors, with not a nickel going to those supposedly 
harmed by Microsoft: the computer user. The Clinton/Reno Justice 
Dept. began this suit for some nebulous masons of their own, I have 
never trusted their motives in the situation, and I for one, would 
cheer Bill Gates if he shut down his complete US holdings and moved 
to Singapore or somewhere else where the government would not be 
trying to destroy a successful business during a recession. Please 
put a stop to this madness. The destruction to the economy already 
done

[[Page 28899]]

is huge, and continuing this blunder will only exacerbate an already 
bad situation.
    Thank you for considering my opinion.
    Ray Grace
    468 West Street, Box 222
    Heppner, OR 97836
    Fax 541-676-5292



MTC-00030463

FAX
Date: Friday,
January 25, 2002
Time: 8:13:00 PM
2 Pages
To: U.S.Attorney General John Ashcroft
From: Ronald J. Markham
Fax: 616-9937
Fax: 860,349,3816
Voice: Voice: 860,349,3816
Comments:
The Honorable Attorney General John Ashcroft Washington DC
27 Dunn Hill Road
Durham, CT 06422
Jan. 25, 2002
    Dear Attorney General,
    re: Microsoft Settlement
    Please count me in the opposed column to the pending suit 
against the Microsoft Corporation. Night after night I see on 
television or read in the newspapers adds for cars and tracks, 
appliances, and other products hawking giveaways if you will just 
buy this or that product. I see no difference in the marketing of 
many other corporations than the marketing of Microsoft. Is not the 
idea of building a better mousetrap or marketing a better mousetrap 
the "American Way"?
    I am an ordinary citizen with no axe to grind, but I find it 
very distasteful to waste tax dollars on such a silly exercise. 
Microsoft has improved our way of life in so many ways by pursuing 
this legal action leaves me saddened and frustrated. Please Attorney 
General Ashcroft, stop this waste of manpower and tax dollars and 
redirect the governments legal efforts to meaningful pursuits.
    Very truly yours,
    Ronald J. Markham



MTC-00030464

January 25, 2002
Renata Hesse, Trial Attorney
Antitrust Division, Department of Justice
601 D Street NW, Ste. 1200
Washington, DC 20530
VIA FACSIMILE
(202) 616-9937
    Dear Ms. Hesse:
    The case against Microsoft has been a tremendous waste of time 
and money. Monopolies are when train companies won't let other train 
companies use their rail system. Monopolies are not when companies 
load a browser on to a computer--when a consumer can simply 
download the competing browser at the click of a button. When did 
this country lose the idea of open competition in the market place?
    The cries from Microsoft's competitors were not legitimate. 
However, assuming they were justified, those issues are certainly 
dealt with in the existing settlement. This settlement will end much 
of the case and get the software industry working again, I urge the 
courts to endorse the settlement.
    Sincerely,
    Bill Carlson



MTC-00030465

Michael S. Giorgino, Esq.
1634 Pomona Avenue
Coronado, CA 92118-2932
(619) 437-8217
mgiorgino @ aol.com
Renata Hesse, Trial Attorney
Antitrust Division,
Department of Justice
601 D Street NW, Ste. 1200
Washington, DC 20530
VIA FACSIMILE
(202) 616-9937
    Dear Ms. Hesse:
    I am writing the court because I am very concerned about the 
case of US v. Microsoft. From my reading on the case, I believe I am 
able to introduce public comments into the record. Please accept 
this letter as my public comment.
    I am an attorney licensed to practice law in the State of 
California and in the Federal Courts. While I have not reviewed this 
case in depth, I understand its core issues. I am a concerned 
citizen who truly abhors government waste. My concern about wasted 
taxpayer dollars inspired me to write this letter.
    Before September 11, the US Government spent more on the case 
against Microsoft than it did trying to stop the actions of Osama 
Bin Laden. We, the American taxpayers, have funded this case long 
enough. It has gone on almost four years and cost untold millions of 
dollars. To date, I know of nothing positive which has come from 
this case. The t??ch industry is down, innovations have slowed, and 
almost every state (including California) went from a surplus to a 
deficit in their budgets.
    Novelist/philosopher Ayn Rand wrote that Antitrust is "the 
penalizing of ability for being ability, the penalizing of success 
for being success, and the sacrifice of productive genius to the 
demands of envious mediocrity." Microsoft's competitors 
initiated this case so they could gain from the courts what they 
were unable to accomplish in the free market. Enough is enough! 
Wasting a single additional taxpayer dollar persecuting Bill 
Gates" brilliant and innovative company is 
unacceptable--economic progress cannot be achieved at the point 
of a gun.
    I urge the court to accept the proposed settlement in the 
interests of fiscal responsibility and economic justice.
    Sincerely,
    Michael Giorgino
    Attorney at Law



MTC-00030466

FAX
TO:
FR:
RE:
DATE:
# of pages: (including this page)
January 25, 2002
Renata Hesse, Trial Attorney
Antitrust Division
U.S. Department of Justice
601 D Street, NW, Suite 1200
Washington, DC 20530
    Dear Ms. Hesse:
    Thank you for this opportunity to state my opinion regarding the 
government's proposed settlement of its case against Microsoft.
    First of all, the government had no business interfering with 
the operation of Microsoft when it began its pursuit of them back 
during the Clinton administration. The federal government was 
wrongly attempting to control and regulate a new, growing, and very 
vital part of our nation's economy. The last thing the technology 
industry needed was bureaucrats and Justice Department lawyers 
hovering over them like vultures.
    I have read the proposed settlement/stipulation, and I believe 
Microsoft is being more than reasonable to agree to this document. 
Setting up the governmental *technical committee" seems 
particularly onerous. However, in the interest of ending this whole 
misplaced attack, I urge you to approve this settlement.
    Thank you for your consideration of my comments.
    Sincerely,
    Cynthia M. Lyon
    2315 Iowa Avenue
    Independence, IA 50644
    (319) 334-3490



MTC-00030467

Chris H. Pipkin
January 21, 2002
Judge Kolar Kottely
U.S. Department of Justice
601 D Street, NW, Suite 1200
Washington, D.C 20530
    Dear Judge Kolar Kottely
    It is my understanding that you are currently considering 
whether to accept the proposed settlement reached by the Department 
of Justice and Microsoft. I am writing m you in order to express my 
strong support for this settlement.
    I am an investment officer in Cedar Rapids. The ebbs and flows 
of the economy, along with any outside forces that impact it, are of 
great interest to me. There is no doubt that bringing closure to the 
Microsoft case will have a positive impact on the national economy.
    The government's case against Microsoft had potential to set 
far-reaching precedent for government intervention and regulation of 
an industry. This reality caused much concern for investors who 
worried that the growth of the technology industry would be hampered 
by government regulation. While there are many causes for our 
weakened economy, the uncertainty erented by this ease was a 
contributing factor in the decline of many technology stocks.
    Bringing the Microsoft case to end is in the best interest of 
the economy and this proposed settlement is the vehicle to make it 
happen. While I do not know all of the intricate details of the 
settlement, what I have read lends me to Believe a fair compromise 
addressing the concerns of the complaint was reached. For example, 
Microsoft will be bound to share intellectual property and must 
create new versions of Windows that allow the promotion of non-
Microsoft

[[Page 28900]]

products. The settlement also establishes a committee that will 
police Microsoft's compliance with the settlement.
    Thank you for your consideration
    Sincerely,
    Chris H, Pipkin
    3604 HEATHERIDGE DR. + Cedar Rapids, + 52402 + 
319-862-2293



MTC-00030468

    To Renata Hesse
    The following six (6) pages of this facsimile are a comment on 
the Microsoft Settlement in the Microsoft antitrust case. This 
comment has been simultaneously submitted by email.
    Mason Thomas
    (805) 530-1502
    As a professional working in the technology sector, I often have 
occasion to use Microsoft software and competing products. I am 
therefore concerned that the Revised Proposed Final Judgment in the 
Microsoft antitrust case has a number of deficiencies that prevent 
the Judgment from providing certain and effective relief for 
Microsoft's violations of the Sherman Act. Unless these flaws are 
corrected, the Revised Proposed Final Judgment is clearly against 
the public interest and will positively harm third parties.
    This Comment addresses five serious deficiencies of the Revised 
Proposed Final Judgment, The deficiencies are discussed in the order 
they appear in the Judgment, not necessarily in their relative order 
of impact on injunctive relief. The deficiencies are:
    1. The Judgment provides no remedies for past unlawful conduct.
    2. Allowing volume discounts anticompetitively maintains 
Microsoft's monopoly (Section III.A. and III.B.).
    3. Restrictions on disclosure of communications protocols 
maintains a barrier to competition (Section III.E.).
    4. Arbitrary five year term of Judgment harms the public 
interest (Section V.).
    5. The definition of "Non-Microsoft Middleware 
Product" maintains a barrier to competition (Section VI.N.).
    Although it is unreasonable to expect a truly optimal Judgment 
that best serves the public interest, the existence of any one of 
the above deficiencies--and certainly the coexistence of 
several of them--will not end Microsoft's unlawful conduct nor 
avoid a recurrence of violations of the Sherman Act, and is thus 
outside the reaches of the public interest.
    1. Judgment provides no remedies for past unlawful conduct
    Although the Revised Proposed Final Judgment provides limited 
remedies "to halt continuance and prevent recurrence of the 
violations of the Sherman Act by Microsoft" (Competitive 
Impact Statement, Section I.), it does not in any way "undo 
its anticompetitive consequences" (Competitive Impact 
Statement Section IV.B.) , There is no provision in the Judgment to 
remedy any past anticompetitive actions by Microsoft: all provisions 
in the Judgment attempt to alter the current and future behavior of 
Microsoft. As such, the Judgment does not effectively restore the 
competitive conditions experienced by Microsoft prior to its 
violations of the Sherman Act. An effective remedy for Microsoft's 
past illegal actions requires a careful balance to empower injured 
competitors while not unduly damaging Microsoft. A simple but fair 
remedy would create a pool of Microsoft's money based on a 
percentage of sales of Microsoft Operating System Products since the 
filing of the antitrust complaint till the time of the Final 
Judgment entered by the Court. The parties damaged by Microsoft's 
anticompetitive behavior (e.g., Sun Microsystems, Netscape 
Communications Corp., etc.) would be payed from this pool. The size 
of the pool and the relative payment terms to competitors are 
details that require careful consideration.
    2. Allowing volume discounts anticompetitively maintains 
Microsoft's monopoly allowing volume discounts serves no 
procompetitive interest and is in fact very much against the public 
interest as it serves to illegally maintain Microsoft's monopoly. 
Section III.A. of the revised proposed final judgment stipulates 
that "Nothing in this provision shall prohibit Microsoft from 
providing Consideration .-.-. commensurate with the 
absolute level or amount of that OEM's development, distribution, 
promotion, or licensing of that Microsoft product or service." 
Section III.B.2 provides for a licensing fee schedule that 
"may specify reasonable volume discounts based upon the actual 
volume of licenses of any Windows Operating System Product 
.-.-." These provisions allow Microsoft to 
continue to leverage its monopoly position to illegally maintain 
that monopoly. The Competitive Impact Statement entirely ignores the 
anticompetitive ramifications of these terms.
    Unlike traditional manufacturing, where the production or 
distribution of a large quantity of a product can generate 
"economies of scale" and thereby procompetitively 
justify non-uniform pricing (e.g., volume discounts), the licensing 
of software has no significant economies of scale. A comparison with 
traditional manufacturing is useful. For a car dealership selling 
hundreds of cars per month, there is economic justification for the 
car manufacturer to provide a volume discount to the dealership: the 
distribution costs (shipping) per car are lower than for a 
dealership selling only ten cars per month, with software however, 
the only economy of scale obtained is slightly cheaper production 
materials: compact disks for distribution and paper for 
documentation and product boxes. OEMs typically only include a 
compact disk with a new computer purchase, for which the volume 
production cost is under one dollar (US$1.00). Hence the economies 
of scale afforded by large scale OEMs to Microsoft are less than one 
percent (1%) of the retail value of typical Windows Operating System 
Products. Hence there is no significant procompetitive reason to 
allow volume discounts to large OEMs.
    Allowing Microsoft to offer volume discounts will further 
entrench its monopoly position. With volume discounts, Microsoft 
would retain the ability to price its Windows Operating System 
Product licenses at an artificially low cost to the largest OEM 
vendors. These vendors would thus have a strong incentive to 
continue to offer exclusively or predominantly the Microsoft 
Operating System Product on new Personal Computers, The largest OEM 
Personal Computer suppliers would have a free market incentive to 
choose alternate Operating System Products if Microsoft's Operating 
System Product were instead priced at an open market value. Avoiding 
volume discounts increases competition while preventing Microsoft 
from leveraging its monopoly to stifle competition.
    This deficiency of the revised proposed final judgment is 
remedied by deleting the words "distribution" and 
"licensing" from the last paragraph of Section III.A. 
and by modifying Section III.B.2 to read "the schedule may not 
specify volume discounts based upon the actual volume of licenses of 
any Windows operating System Product or any group of such 
products." These modifications will still allow Microsoft to 
compete in the marketplace based on the merits of the windows 
Operating System Products, but prevent Microsoft from 
anticompetitively erecting barriers to competitive products.
    3. Restrictions on disclosure of communications protocols 
maintains barrier to competition The Revised Proposed Final Judgment 
maintains a significant barrier to competing Non-Microsoft 
Middleware Products by restricting the disclosure of Communications 
Protocols. Section III.E. of the Judgment provides that Microsoft 
shall disclose Communications Protocols "on reasonable and 
non-discriminatory terms." Such terms, however, prevent a 
large number of established and nascent competitors from obtaining 
the Communication Protocols. "Reasonable and non-
discriminatory" license terms act as an anticompetitive 
barrier to potential Microsoft competitors, while providing no 
procompetitive advantage for Microsoft.
    "Shareware" software developers typically provide 
software products (including middleware) free of charge for end 
users to evaluate, and only demand payment if the end user decides 
to continue using the software product. Such developers would be 
unable to comply with "reasonable and non-
discriminatory" licensing terms unless a very large percentage 
of end users payed for the software product. Similarly, the entire 
"open source" class of software would be unable to meet 
"reasonable and non-discriminatory" terms as the 
"open source" licenses allow virtually unlimited 
duplication and derivation rights. Several important Non-Microsoft 
Middleware Products are "open source", notably the Samba 
program (http://www.samba.org), that provides file transfer and 
print Services through the Microsoft SMB Communications Protocol. 
The Samba program is a well-established and widely used alternative 
to Microsoft Middleware Products, but it would be effectively 
prevented from competing with Microsoft through the adoption of 
"reasonable and non-discriminatory" licensing terms for 
future changes in the SMB protocol.
    This deficiency of the Revised Proposed Final Judgment can be 
remedied by a simple wording change. The phrase "reasonable 
and non-discriminatory" in Section III.E. of the Judgment 
should be changed to "royalty

[[Page 28901]]

free". Since Microsoft's ability to hide Communication 
Protocols serves only to prevent competitors from effectively 
interoperating with Microsoft products and does not in any way 
increase competition, a mandatory royalty free license would serve 
to allow both large and small competitors to interoperate with 
Microsoft products.
    4. Arbitrary five year term of Judgment harms the public 
interest The Competitive Impact Statement in Section IV.C. claims 
that a five year time frame for the Judgment "provides 
sufficient time for the conduct remedies contained in the Proposed 
Final Judgment to take effect .-.-. and to restore 
competitive conditions to the greatest extent possible." The 
Competitive Impact Statement provides neither evidence, nor 
precedence, nor logic to support this claim.
    In fact, a five year term may well be too long. The provisions 
of the Revised Proposed Final Judgment may turn out to be so 
effective at restoring competition that Microsoft loses its 
dominance in less than two years in the Operating System market for 
Personal Computers and becomes unnecessarily hobbled by the 
restrictions of the Judgment. In such a case, Microsoft would be 
unfairly restricted from competing in the market for another three 
years, possibly causing great economic damage to Microsoft and 
depriving consumers of the fruits of a vibrant competition in the 
Operating System market.
    Alternatively, the provisions of the Revised Proposed Final 
Judgment might not be sufficient to hinder Microsoft's 
anticompetitive actions, and Microsoft could continue to violate the 
Sherman Act through an extended seven-year Judgment period. Clearly 
such a situation would severely harm the public interest, again 
depriving consumers of the benefits of a competitive market and 
stilting the entire Operating System and Middleware market. The 
arbitrary five year Judgment term length would only be beneficial in 
the most serendipitous of circumstances, and the arbitrary two-year 
extension does not mitigate this fault.
    The overriding concern of this Judgment is to prevent 
Microsoft's anticompetitive actions and to restore competitive 
conditions to the market, and it is that principle that should guide 
the term length of the Judgment. The most straightforward 
application of this principle would be to terminate the Judgment 
when Microsoft no longer enjoys monopoly status. This could be 
achieved with the following replacement for Section V. (Termination) 
of the Revised Proposed Final Judgment:
    "This Final Judgment will expire when Microsoft's windows 
Operating System Product has less than fifty percent share of the 
Personal Computer Operating System market (as determined by a market 
study provided by a mutually agreed upon third party)."
    With this revised termination clause, the Judgment will stand 
exactly as long as necessary for the public interest. An alternate 
definition of monopoly status (i.e., instead of "fifty percent 
market share") may also be acceptable, provided it is 
logically and legally defensible, and maintains the intent of the 
Judgment.
    This new termination clause will ensure the return of healthy 
competition to the Operating System market without unduly 
burdening--or harming--Microsoft. At the point that 
Microsoft's windows Operating System Products have less than fifty 
percent share of the Personal Computer Operating System market, 
there is clearly healthy competition in that market, with at least 
one other dominant competitor to Microsoft. There is then no further 
reason to impose the conditions of the Judgment. However, Microsoft 
is not prevented from maintaining its monopoly on the technical 
merits of its products. The ongoing terms of the Judgment would not 
be onerous to Microsoft should it maintain a monopoly position 
without resorting to anticompetitive actions.
    5. Definition of "Non-Microsoft Middleware Product" 
maintains barrier to competition Although the Revised Proposed Final 
Judgment seeks to "restore the competitive threat that 
middleware products posed prior to Microsoft's unlawful conduct 
(Competitive Impact Statement, Section IV), the proposed definition 
of "Non-Microsoft Middleware Product" serves instead to 
maintain barriers to competition. Section VI.N. of the Revised 
Proposed Final Judgment stipulates that a software product, among 
other requirements, can only be considered a "Non-Microsoft 
Middleware Product" if "at least one million copies were 
distributed in the United States within the previous year." 
This requirement is explained in the Competitive Impact Statement, 
Section IV.A. as being "intended to avoid Microsoft's 
affirmative obligations .-.-. being triggered by minor, 
or even nonexistent, products that have not established a 
competitive potential in the market .-.-." As the 
Competitive Impact Statement makes clear, the definition of 
"Non Microsoft Middleware Product" intentionally limits 
the possible competitive impact of nascent middleware products. Such 
a limitation is antithetical to the desired goals of the Judgment.
    This deficiency of the Revised Proposed Final Judgment can be 
easily remedied by deleting Section VI.N.(ii) and thus removing the 
restriction on number of copies distributed. The Competitive Impact 
Statement in Section IV.A. states that the restriction on number of 
copies distributed "is intended to avoid Microsoft's 
affirmative obligations--including the API disclosure required 
by Section III.D. and the creation of the mechanisms required by 
Section III.H.--being triggered by minor, or even nonexistent, 
products .-.-." In other words, Microsoft should 
not endure an onerous burden in its obligations. However, deleting 
Section VI.N.(ii) would not create such a burden. Since Section 
III.D. already specifies that APIs and related Documentation shall 
be disclosed via the Microsoft Developer Network or similar 
mechanisms, Microsoft will not require any further effort to make 
the APIS and Documentation available to ISVs or other middleware 
developers that have not established a competitive potential in the 
market--but that nevertheless have the potential to become 
competitors with Microsoft, Furthermore, the mechanisms required in 
Section III.H. (such as the creation of Add/Remove icons) are 
sufficiently generic that they will only need to be created 
once--and likely already exist--to accommodate all 
Microsoft and Non-Microsoft Middleware, and hence the expansion of 
the number and kind of possible middleware competitors to Microsoft 
again does not create an undue burden on the company.
    This Comment has been submitted through both e-mail and 
facsimile copy.
    Respectfully submitted,
    Mason Thomas
    4333 Wildwest Circle
    Moorpark, CA 93021
    (805) 530-1502
    January 25, 2002



MTC-00030469

13405 NW Spirit Court W
Silverdale, WA 98383-9507
(360) 697-2461
January t2, 2002
Attorney General John Ashcroft
United States Department of Justice
Washington, DC 205300001
    Dear Attorney General Ashcroft:
    I urge the Department of Justice to accept the proposed 
Microsoft anti-trust settlement, which goes far beyond the original 
scope of the lawsuit as it was originally filed. I feel Microsoft 
made this settlement so it can back to its business of developing 
software.
    As terms of the settlement Microsoft has agreed to grant 
computer manufacturers and software developers the ability to remove 
Microsoft products and install competing products in their places. 
Examples include: Netscape Navigator, RealNetworks RealPlayer, and 
AOL Instant Messenger. You should note, though, that consumers can 
install these products on their computer systems regardless if those 
products came preinstalled on their systems. Microsoft has also 
agreed to not enter into agreements with third-party computer 
manufacturers or software developers that would require them to 
exclusively or in a fixed percentage distribute or promote Windows, 
unless there is no competitive issue.
    Microsoft also must grant intellectual property rights to those 
third parties that choose to exercise any options in the settlement 
if those options would infringe on Microsoft's intellectual 
property. Also as part of the settlement, a three-person 
"Technical Committee" made of software engineers will be 
overseeing compliance and assisting in dispute resolution, when 
needed, The settlement also makes it easy for an individual or 
company who feels Microsoft is not complying with the settlement 
provisions to file a complaint, thus making it more likely that 
Microsoft will abide by all terms in the settlement. For these 
reasons, I support the Microsoft settlement. I look forward to 
seeing this matter finalized and put behind us so we can get on with 
the business of business. Thank you.
    Sincerely,



MTC-00030470

FAX COVERSHEET
URGENT
To: Attorney General John Ashcroft
Fax Number: 1-202-307-1454

[[Page 28902]]

From: Sharon Miller
Fax Number: 1-716-388-7329
Pages: 2
Date: 1/26/2002 
Subject: Microsoft Settlement
21 Cedarview
Fairport, NY 14450
January 25, 2002
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    I was really happy when Microsoft and the Department of Justice 
reached an agreement; now my hopes were dashed when I learned that 
several states want to pursue further litigation. Why? Microsoft has 
already agreed that if a third party's exercise of any options, 
provided for by the settlement, would infringe any Microsoft 
intellectual property, Microsoft will provide the third party with a 
license to the necessary intellectual property on reasonable and 
nondiscriminatory terms.
    They also agreed to license file Windows operating system to the 
largest computer companies on identical terms, conditions, and 
price.
    I urge you to end all litigation so that we can move forward. No 
more action should be taken at the Federal level.
    Sincerely,
    Sharon Miller



MTC-00030471

John J. Petroci Jr.
1909 Kirkby Drive
South Park, Pennsylvania 15129
January 24, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing to let you know my views on the Microsoft 
settlement, First and foremost, this case has been in litigation for 
many years now. Secondly, this lawsuit should not have concerned the 
federal government, since no laws have been broken. Settlements have 
been reached in various states, all of which have involved 
appropriate concessions, including more information sharing and 
changes in Microsoft's business practices.
    I have firsthand experience with big business. I previously 
worked in the steel industry, and due to government intervention and 
regulation, I was put out of work when the companies were broken up. 
Pennsylvania's steel industry will never be the same. I urge to you 
please do your best to see that this does not happen to Microsoft. 
Our nation's IT industry depends on companies such as Microsoft, and 
our economy also depends on the IT industry, Please discontinue 
these lawsuits and help our economy return to normalcy. I strongly 
suggest that it is in the best interests of everyone to discontinue 
these lawsuits so our economy can return to a sense of normalcy.
    Sincerely,
    John J.Petroci Jr.
    cc: Senator Rick Santorum



MTC-00030472

371 Bald Road
Touchet, WA 99360
January 25, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I think the federal government never should have filed the 
lawsuit against Microsoft. At this stage in the proceedings, 
however, I think it is in everyone's best interest that the case is 
settled. It is a shame that the remaining plaintiff states have not 
joined in the settlement efforts. The concessions Microsoft has made 
are more than reasonable. Microsoft has agreed to disclose portions 
of its code to its competitors. They have agreed to establish a 
uniform price list for computer manufacturers. They have agreed to 
make it easier for servers to interoperate with one another. They 
have agreed not to take actions against computer manufacturers who 
install the competition's software on their computers. All of these 
concessions amount to establishing fair competition for other 
software companies.
    The settlement agreement should be approved, and the federal 
government should take no further action in this case.
    The Clinton Administration should have never initiated this 
suit. They were totally anti-business and their motives were 
entirely political!
    Sincerely,
    Mark Wagoner



MTC-00030473

Christopher & Sharon Moline
12407 Madeley Lane
Bowie, MD 20715-2904
January 22, 2002
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    We are writing to show our support for the settlement reached 
between Microsoft and the government. It is fair and reasonable.
    The fact that Microsoft has agreed not to retaliate against 
software or hardware developers who develop or promote software that 
competes with Windows or that runs on software that competes with 
Windows shows me that Microsoft is not looking for ways to hurt 
consumers, but to help them, Further, Microsoft won't enter into any 
agreements forcing a third party to distribute or promote any 
Windows technology exclusively or in a fixed percentage. Finally, 
the government will establish a "Technical Committee" 
that will monitor Microsoft's compliance with the settlement and 
assist with dispute resolution.
    This is a good settlement and Microsoft deserves a lot of credit 
for taking the lead on resolving these issues. We hope the 
settlement will be approved so Microsoft can get back to developing 
innovative software.
    Sincerely,
    Christopher & Sharon Moline



MTC-00030474

PhoneTools
BVRP
software
508 North View Road
Mount Airy, MD 21771
Phone: 301-831-0927
Fax: 3010-831-0927
Message:
Please review the attached document.
From: Steve and Linnea Capps
To: us Department of Justice Attorney General John Ashcroft
Date: 1/26/2002
Page(s): 2
January 23, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    As a woman aspiring to start her own business, I am discouraged 
and disheartened by the manner in which the federal government 
treats success. I am bitterly disappointed that our 
government--MY government--feels it necessary to oversee 
the financial castration of inventors and creators, hobbling what is 
supposed to be free enterprise. I feel strongly that government has 
no right to insert itself into legitimate and successful business, 
to legislate and litigate, to attempt to regulate a product that 
clearly outshines other, similar products. Smaller companies, who 
can't compete became the quality of the product they offer is no 
match for the "big guy", cry foul and the government 
steps in to try to level the playing field, The playing field for 
business will never be level It is not only futile to attempt to 
level that field with legislation or legal action, it is a childish 
wish for fairness that assumes that it can be done. If Linux and 
Unix were such operating systems, they would be where Microsoft is 
now, became the consumer would have demanded their products over 
Windows. If WordPerfect or Lotus 1-2-3 were as user-
friendly as MS Word or Excel, they would be the applications in 
great demand. The fact is, Microsoft is guilty of nothing more than 
being popular--popular became they provide an intuitive, user-
friendly, and versatile environment in which to work. How can you, 
as Attorney General, support, represent, or oversee the punishment 
of a company whose only crime is that the consumer prefers its 
product over the competition's?
    For example: The entry of Wal-Mart and Target into the discount 
department store business, offering better products at lower prices, 
drove KMart into Chapter 11 bankruptcy. Consumers regulated the 
market with their purchases. In the eyes of the consumer, Kmart just 
didn't measure up to the competition. It has always been consumers 
who ensure the success or demise of a business. We have, and should 
be allowed to retain, without legislative or litigious interference, 
the power to regulate business with our wallets.
    I am not so naive as to think Microsoft is entirely without 
fault or abuse of power in their rise to their current market 
position. The proposed settlement with the government, which I have 
reviewed, appears to be genuinely equitable. It not only provides a 
solution to the anti-trust "problem" Microsoft presented 
(in the eyes of the Department of Justice), it also provides

[[Page 28903]]

concessions to Microsoft and its competitors. At this point, I do 
not believe additional action is necessary on the federal level.
    I am concerned that the federal government has been so intrusive 
and vituperative against Microsoft. Success, innovation, and 
creativity should not be a federal offense, and are certainly no 
reason for litigation to continue. I urge you and your office to 
finalize the settlement and move on.
    Sincerely,
    Linnea Capps
    (Mrs. Stephen R.)



MTC-00030475

Natalie Dunlap
316 Webster Street
Lewiston, ME 04240-4854
January 25, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I was pleased to learn the federal government decided to settle 
its antitrust case against Microsoft. This should have been done a 
long time ago. Nonetheless, I am in favor of the steps that have 
recently been taken to resolve this lawsuit.
    I am a very strong supporter of Microsoft. As a result of 
Microsoft's hard work and innovation, we live in a world where I can 
communicate with loved ones across the country with ease. I firmly 
believe this case was brought as a result of the misguided idea that 
a successful company should be knocked down, and its competitors 
should be awarded the fruits of their labor, Notwithstanding my 
belief that this case lacked merit from its inception, I think the 
settlement agreement's terms are fair. The court should not hesitate 
in its approval of the settlement. Microsoft has agreed to make it 
easier for its competitors to compete with Windows. They agreed to 
document and disclose to their competitors portions of the Windows 
code. They also agreed not to retaliate against those who promote 
software that competes with Windows. Nothing more should be expected 
or required of Microsoft beyond the terms of the settlement 
agreement.
    Sincerely,
    Natalie Dunlap



MTC-00030476

Jan 26 02 10:07 am
January 16, 2002
Attantion: Renata Hesse
Judge Kolar Kottely
U.S. Department of Justice,
Antitrust Division
801 D Street, NW, Suite 1200
Washington, DC 20530
    Dear Judge Kottaly.
    From the perspective of a regulatory compliance officer for 
lowa's state-designates secondary market for student loans. I have 
followed the Microsoft antitrust case with great interest and look 
forward to a settlement.
    Working with college graduates and students of lowa colleges and 
universities, we are well aware of the growing number of young 
people a??ting our state after compi??ting higher education. To 
start this tide, businesses and our state government continue to 
focus attention on how best to keep and attract college graduates to 
lowa--investment in our cities, increasing amounts and 
avaliability of vonture capital, creating a business ??mate that is 
Inviting to companies.
    It is unfortunate our state is one of only nine others whose 
Attorney General did not sign onto the proposed Microsoft antitrust 
s??tlement before you. It does not help our state's cause to attract 
burg??ning tech companies or young professionals. I do not believe 
his position is representative of the majority of lowa residents or 
businesses--which is what com??iled me to write. The settlement 
on the table has taken a great deal of time and effort from the 
parties involved. It is a fair settlement and your approval of it 
would take a large pace toward the finish line in this marathon 
case.
    Thank you for accepting my comments.
    Sincerely.
    camas G. Solo, CPA. CIA
    Compliance Officer
    Iowa Student Loan Liqui??ty Corporation



MTC-00030477

Facsimile transmittal
To: Department of Justice
Fax: 1-202-307-1454
From: Don Phillips
Date: 1/26/2002 
Re: Microsoft Settlement
Pages: 1
CC:
X Urgent
To: Department of Justice
    From: Don Phillips, Consumer, Engineer, Voter
    I believe the US Government should settle its antitrust suit 
against Microsoft immediately. The current proposed settlement 
should be approved and implemented as soon as possible. This lawsuit 
never, in any way, represented the interests of consumers. Microsoft 
has had a long track record of developing and selling software 
products that consumer like and use. The company's growth and 
profits are evidence of this. On the other hand, no credible 
evidence was ever presented during the trial (or after) to show that 
Microsoft ever did anything that was against consumer interests. 
Clearly this lawsuit never had any basis In fact and never should 
have been undertaken.
    In fact, the lawsuit, itself, has caused major harm to consumers 
and to the entire US economy. Also, the government's reputation as 
being objective and fair has been seriously eroded. In short, the 
whole process has been a disgrace to justice and an insult to 
American consumers. I have worked in the semiconductor industry for 
30 years and have had many dealings with Microsoft as well as many 
of Microsoft's competitors. Also, I have personally used many 
products from Microsoft and from its competitors. Based on my Long 
experience with technical products it is very clear to me why 
Microsoft's competitors have not prevailed in the marketplace. This 
lawsuit has clearly been shown to be nothing more than a thinly 
veiled attempt by weak competitors to do serious harm to a more 
successful company. This is very disgraceful behavior! For the 
government to continue to perpetuate this case would be a major 
miscarriage of Justice.
    Respectfully, Don Phillips, Pale Alto, CA



MTC-00030478

1721 15th Avenue Southwest
Olympia, WA 98502
January 23, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I understand the Courts will make a final decision at the end of 
this month on whether the proposed Microsoft settlement is in the 
best interest of the consumer. I personally believe that we need to 
leave it alone. It has already cost us billions of dollars in legal 
fees, lost production and loss of jobs in the technology sector of 
the economy.
    Microsoft has agreed to grant computer makers broad new rights 
to configure Windows, in order to promote non-Microsoft software 
programs that compete with programs included within Windows. They 
have also agreed to document and disclose various interfaces that 
are internal to 'Windows' operating system for use by 
its competitors. This is definitely beyond what is expected in any 
antitrust settlement.
    Let's end this before we get in over our head. There are far 
more pressing issues we need to concentrate on such as reviving this 
fragile economy.
    Sincerely,
    Edward Heffernan



MTC-00030479

John & Darlene Cooke
Phone: (252) 537-0960
P.O. Box 495
Fax: (252) 308-0990
Gaston, NC 27832-0495
email: dcooke @ schoollink.net
TO: Attorney General John Ashcroft
FROM: Darlene Cooke
DATE: 1-24-02
NUMBER OF PAGES (including cover page): 2
COMMENTS: Re?? Microsoft Settlement
P. O. Box 495
Gaston, NC 27832
January 23, 2002
Via Facsimile (202)-307-1454 
or(202)-616-9937
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Attorney General Ashcroft:
    As part of the public comment phase, I am writing to urge the 
Department of Justice to accept the settlement proposal in the 
Microsoft anti-trust case. I believe the terms of the proposed 
settlement will protect consumers and will shield Microsoft's 
competitors from unfair business practices. By accepting the 
proposed settlement, Microsoft will change many of its former 
business practices and will agree to abide by the stipulations 
therein. If Microsoft is willing to accept those terms, the 
Department of Justice should be willing to endorse the settlement 
and bring the issue to a close.
    Our nation is facing profound challenges on several fronts. I 
think your department

[[Page 28904]]

and the various states" Attorneys General should settle the 
Microsoft case in order to focus on other more pressing issues.
    Sincerely,
    Darlene Cooke



MTC-00030480

Frederick & Coleen Walther
P.O. Box 30
West Poland, ME 04291-0030
January 25, 2002
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    I would very much like to see the Microsoft settlement agreement 
which, in my opinion is very well conceived, approved by the Court. 
It seems to me that the goals set forward were met and that no 
antitrust laws are in jeopardy.
    From what I understand, Microsoft has agreed to significantly 
change the way it conducts business so that its competition has a 
level playing field, and it will not take negative actions against 
any competitor of Windows. They have also agreed not to enter into 
agreements with third parties obligating them to sell Windows 
exclusively.
    I just can't see why taxpayer dollars would be spent wisely by 
litigating this case further. It is time to get on with business and 
allow Microsoft to help stimulate the economy and reward its patient 
shareholders like my family. Government actions have already cost 
our portfolio far more than we would like!
    Thank you for your time and attention.
    Sincerely,
    Frederick & Coleen Walther



MTC-00030481

Helga Gardetto
475 Windridge Drive
Racine, WI 53402-2658
January 21, 2002
Attorney General John Ashcroft
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    I would like to propose finalization of the agreed settlement 
deal with Microsoft and the government. I don't think a company 
should be held down in its attempt to prosper, and this lawsuit has 
over-stepped any reasonable bounds of dealing with the free market.
    The settlement proposed offers several steps to allow more 
competition. Microsoft will not require computer companies to use 
Microsoft software, and will allow competitors unheard-of access to 
Microsoft's proprietary technologies. This deal should be appear 
quite accommodating to the company's opponents, as it will be 
monitored regularly by industry experts. Meanwhile, I'm sure that a 
break-up would not offer such favorable cooperation and results for 
those groups.
    Please move forward with this settlement and allow the PC 
industry to be stable and successful in the coming years ahead. 
Thank you for your time.
    Sincerely,
    Helga Gardetto



MTC-00030482

12938 Kingsbridge Lane
Houston, TX 77077
January 25, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing you today to express my opinion in regards to 
Microsoft and the antitrust dispute I support Microsoft in this 
dispute, and I believe this litigation is costly and a burden on 
taxpayers and consumers I support the settlement that was reached in 
November as an adequate means to end this dispute.
    Microsoft has agreed to carry out all provisions of this 
agreement and will be monitored for compliance. Under this 
agreement, Microsoft must license its Windows operating system 
products to the 20 largest computer makers on identical terms and 
conditions, including price. Microsoft has also agreed to disclose 
various interfaces that are internal to Windows" operating 
system products, which is a first in an antitrust settlement. 
Microsoft did not get off easy in this settlement.
    This settlement not only keeps Microsoft together as a company 
but will also foster competition. Continuing this litigation will 
only have adverse effects on consumers and the economy Please 
support this settlement so our precious resources can be devoted to 
more pressing issues. Thank you for your support.
    Sincerely.
    Amanda Quam



MTC-00030483

12938 Kingsbridge Lane
Houston, TX 77077
January 25, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing you today to express my opinion in regards to 
Microsoft and the antitrust dispute I support Microsoft in this 
dispute, and I believe this litigation is costly and a burden on 
taxpayers and consumers I support the settlement that was reached in 
November as an adequate means to end this dispute.
    Microsoft has agreed to carry out all provisions of this 
agreement and will be monitored for compliance. Under this 
agreement, Microsoft must license its Windows operating system 
products to the 20 largest computer makers on identical terms and 
conditions, including price. Microsoft has also agreed to disclose 
various interfaces that are internal to Windows" operating 
system products, which is a first in an antitrust settlement. 
Microsoft did not get off easy in this settlement.
    This settlement not only keeps Microsoft together as a company 
but will also foster competition. Continuing this litigation will 
only have adverse effects on consumers and the economy Please 
support this settlement so our precious resources can be devoted to 
more pressing issues. Thank you for your support.
    Sincerely.
    Amanda Quam



MTC-00030484

6585 South Military Trail
Lake Worth, Florida 33463
(561) 968-1111
Fax (561) 968-1804
FAX
COVER PAGE
DATE 1-26-02
TO ATTORNEY GENERAL JOHN ASHCROFT
FAX # 1-202-616-9937
PHONE 1-202-307-1454
FROM: JERRY DOSER
UMBER OF PAGES INLCUDING COVER 2
ORIGINALS TO FOLLOW: NO ?? YES
MESSAGE: COMMENTS REGARDING MICROSOFT SETTLEMENT.
3855 Jonathans Way
Boynton Beach, Florida 33436
January 26, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    The intent of this letter is to go on public record and express 
my support for the settlement that was reached in the antitrust 
lawsuit between Microsoft and the Department of Justice. The 
settlement was reached on November 2, 2001, and I was relieved to 
see that the suit had finally come to an end.
    There are still individual states that are continuing with 
litigation against Microsoft, and I hope that will soon come to an 
end, but I am happy to see that it has been settled at the federal 
level. Hopefully the remaining states will see that they are wasting 
funds that could be used for so many other more important issues. 
Microsoft had to concede more than they would have initially liked, 
but settling the dispute and getting back to business was more 
important. Microsoft will be monitored by an ongoing technical 
oversight committee, so. they will have to abide by the terms of the 
settlement. I am glad to see that two sides come to an agreement, 
and I fully support the settlement.
    Sincerely,
    Jerry Doser
    cc: Representative Robert Wexler



MTC-00030485

Henry M. Gubitosi
13 Easton Street
Cantonment, FL 32533-6559
January 24, 2002
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    For the past three years, the people who depend on Microsoft's 
products everyday have waited for a settlement to be reached in this 
antitrust suit. Now it seems that the end is in sight. I hope that 
this settlement goes forward so that this case can finally be put to 
rest.
    Microsoft is willing to give up a lot in order to reach a 
settlement and I for one hope they do. Out of the many elements that

[[Page 28905]]

Microsoft is willing to forfeit, one of the most overlooked is the 
right they're giving to computer manufacturers. By giving them the 
freedom to configure Windows with whatever applications they choose, 
Microsoft is ceding significant portions of its market share. 
Microsoft has also agreed to provide a uniform price list to them.
    I hope that people will spend the time to go over the 
settlement, to see exactly what Microsoft is forgoing in order to 
put this case to rest. The settlement should be acceptable to 
everyone but the most ardent Microsoft opponents. I hope that it 
will be finalized soon so that everyone can just move on.
    Sincerely,
    Henry Gubitosi
    cc: Representative Jefferson Miller



MTC-00030486

Cathy Bason
125 Phillips Rd
Longville LA 70652
January 25, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    Please allow this letter to serve as my vote of support for the 
settlement agreement that was reached in the Microsoft antitrust 
case.
    Under this agreement, Microsoft will be making changes in its 
pricing structures, distribution agreements and Windows systems 
configuration in an effort to promote increased competition and 
greater consumer choice. It is in the public's best interests to 
enforce this agreement and end this case.
    Thank you for considering my opinion.
    Sincerely,
    Cathy Bason
    125 Phillips Rd
    Longville, LA 70652



MTC-00030487

1200 Harger Road Suite 521
Oak Brook, IL 60523
January 24, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am taking this moment to write you concerning the current 
settlement between the US Federal government and Microsoft. I feel 
it necessary to voice my opinion during this period of public 
comment, after all, it is people like myself, the American consumer, 
that are suffering throughout this overdrawn litigation.
    The current settlement plan is, in my view, a fair and just 
compromise and the federal government should remove itself from the 
corporation's future business tactics. Microsoft has only made the 
face of technology easier for America, not to mention the whole 
world, and thanks to Microsoft, America has continued to be one of 
the leaders in the global economy. Please take into consideration my 
opinion as an active member of my community and an American consumer 
who wants to see Microsoft back in the business of innovation.
    Sincerely,
    Anthony De Paul
    cc: Representative Henry Hyde



MTC-00030488

Bob Jones Tax Service
3333 Brea Canyon Rd. Suite 201
Diamond Bar, CA 91765
January 17, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Attorney General Ashcroft:
    I would like to convey to you my support for the settlement 
reached between Microsoft and the Department of Justice. This 
settlement ends an expensive court battle and will facilitate the 
American technology industry in its efforts to once again flourish.
    This unprecedented settlement will create more openness in the 
technology sector. The settlement gives competitors more access to 
Microsoft's product information and code than any other company has 
ever had to disclose in the history of the technology industry. More 
expensive courtroom battles and conflict will serve only to increase 
the legal bills of the government and Microsoft. Microsoft has 
agreed to more terms in the settlement than were actually at issue 
in the lawsuit to facilitate a reasonable conclusion to the suit.
    Undoubtedly this settlement's time has come. No further Federal 
action is required in this case. Microsoft and the DOJ should 
finalize the settlement and help to focus the high tech sector of 
our economy on technology and not lawyers.
    Sincerely,
    Robert Jones
    Bob Jones Tax Service



MTC-00030489

Tim L. Long
January 24, 2002
Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
    Dear Ms. Hesse,
    The basis of the Microsoft lawsuit has been weak from the start, 
a failed attempt to shake Microsoft through negative media attention 
and distraction. Microsoft has been hog tied by fresh legal 
complaints answering each advance they have made since the original 
suit. I fail to see how Microsoft is more corrupt than any other of 
the litigating parties, as opposition has blatantly used the courts 
to stall Microsoft in hopes of their own gain.
    The lawsuit against Microsoft may have originated with 
legitimate concerns regarding modern day antitrust issues, but has 
digressed to a manipulation of the courts by misguided ambition. 
Enough resources have been wasted on this debacle. The proposed 
settlement should be an acceptable solution for all After all, 
Microsoft's competition has already won more than three years worth 
of media battles and scrutiny throughout the trial.
    Sincerely,
    Tim L. Long
    1830--2nd Street SW
    Cedar Rapids, Iowa 52404



MTC-00030490

Gary A. Bean
January 24, 2002
Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
    Dear Ms. Hesse,
    Thank you so much for considering comments from the consumer in 
your deliberation of the Microsoft antitrust suit. What may have 
begun as a test of modem day antitrust law has become a corrupt 
forum for corporate lobbyists. It seems as though this suit has gone 
strangely awry, focusing on corporate influence and loopholes rather 
than law.
    The speed of advancement in the tech sector today is scarcely 
confinable by current antitrust law. Microsoft's competition may 
have gained better results at challenging antiquated antitrust law 
rather than Microsoft's specific business practices.
    The abuse of corporate power in this case certainly dispels any 
merited changes to current law. Paradoxically, the competition 
hemmed themselves in to more government scrutiny rather than gaming 
a leg up on Microsoft.
    Quiet, prompt settlement is the most graceful exit from such 
poorly intentioned litigation.
    Sincerely,
    Gary A. Bean
    6016 Sharon Lane NW ??
    Cedar Rapids, Iowa 52405



MTC-00030491

Samantha West Gudheim
137 \1/2\ West ?? Street
Manch??, New Hampshire 03101
January 23, 2002
Renata Hesse
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
    Dear Attorney Hesse:
    I am aware of a period of public comment in the case of the U.S 
.and Microsoft is now open and will be until January 27, 2002. I 
would like to express my support of the settlement that has been 
reached.
    I understand that these settlements are difficult to reach. 
Knowing how much time and effort goes into these cases I believe 
that no more time should be spent on this case. Further litigation 
in the Microsoft case will only keep government lawyers and staff 
from more meaningful business. The government now needs to focus on 
other more pressing national matters. Needless to say, too much 
money has already been spent.
    Microsoft lawyers and staff should also be allowed to 
concentrate on the business of technology. They should be allowed to 
continue to be a progressive and productive company. As such, 
Microsoft will contribute to the economy and the computer industry. 
At a time when many companies are failing the government should be 
encouraging all

[[Page 28906]]

companies, especially large and productive ones, to continue to 
grow--not restrict or regulate them needlessly.
    Thank you for your consideration and for your service in the 
United States government.
    Sincerely,
    Samantha Gudheim



MTC-00030492

Fax Cover Sheet
copyworks??
OPEN 24 HOURS
Date: 1-26-02
Number of Pages (including Cover): 2
Fax Directed To: Department of Justice
Sent By: ??
Fax Number: 202 616 9937
Fax Number:
Phone Number:
Phone Number:
Company:
Message:
?? AMES ?? AUBURN ?? CEDAR FALLS ?? CEDAR RAPIDS ?? CORALVILLE ?? 
DUBUQUE ?? LINCOLN 105 Welch Ave. 212 West Magnolia St. 2227 College 
Street 4837 1st Ave. SE 309 2rid St. 136 Wacker Plaza 1320 Q St. 
Ames, IA 50014 Aubum, AL Cedar Falls, IA 50613 Cedar Rapids, IA 
52402 Coralville, IA 52241 Dubuque, IA 52002 Lincoln, NE Ph: (515) 
292-3630 Ph: (334) 826-3555 Ph: (319) 266-2306 Ph: 
(319) 373-5335 Ph: (319) 338-5050 Ph: (319) 
557-2679 Ph: (402) 477-7400 FAX: (515) 292-5011 
FAX: (334) b26-3553 FAX: (319) 266-5422 FAX: (319) 
373-5436 FAX: (319) 338-1717 FAX: (319) 557-2004 
FAX: (402) 477-8966
Patricia E. Masteller
345 Marion Boulevard
Apartment # 112
Marrow, Iowa 52302
January 24, 2002
Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
    Dear Ms. Hesse,
    American consumers have been bilked out of tens of millions of 
dollars enduring prolonged litigation in the Microsoft antitrust 
case. And their own attorneys general and the very companies trying 
to woo their business have done the bilking.
    Microsoft's competitors would tell like they are the proverbial 
"David" to Microsoft's "Goliath", but 
several of these companies have grown and merged to monolithic 
conglomerates themselves. In the biblical story, it is David who 
threw stones, and Microsoft's competitors have fervently done so, 
encouraging media frenzy through bitter accusations and editorial 
campaigns. Somehow excusing their own anti-competitive behaviors, 
competition has rabidly sought to achieve through the courts what 
they haven't been able to in the marketplace.
    This shameful abuse &our judicial system should not be 
tolerated. I understand this highly publicized case has come to you 
through a questionable course of litigation. I am confident that 
prompt settlement ends this tragic scene of corporate manipulation, 
and I hope you'll agree.
    Sincerely,
    Patricia E. Masteller



MTC-00030493

WHITE & JOHNSON, P.C.
ATTORNEYS AND COUNSELDRS AT LAW
January 21, 2002
Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW. Suite 1200
Washington, DC 20510
    Dear Ms. Hesse:
    The settlement proposed in the Microsoft antitrust case deserves 
strong consideration. The independent Technical Committee set out in 
the proposal provides an enforcement device. If compliance 
backsliding by Microsoft should occur, the committee would be 
engaged ?? the cost of Microsoft.
    End users would receive the kind of continued flexibility that 
we have already seen in the release of their new Windows XP 
operating system guaranteeing consumers the freedom to select 
applications from competitor providers with ease.
    Information technology consumers of Microsoft's operating system 
would have access to technical specifications of Windows that 
actually makes it easier for its competitors to provide compatible 
applications to be used on computers and with servers of Microsoft's 
operating system.
    Although shor?? of breaking apart the company, there are also 
fair provisions set forth in this settlement that would punish the 
company for the sections of which they have been found guilty.
    I trust you will give this settlement offer sufficient 
deliberation.
    Thank you
    Brent Cl??son



MTC-00030494

The ?? Comm?? Massachasetts ??
FRANCIS L. MARINI ??NTATIVE
MINORITY LRABER ??
ROOM 124
TEL: (617) 722-2100
FAX: (617) 722-2300 ??
January 24, 2002
Ms. Renata B. Hesse
Antitrust Division
U.S. Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530-0001
    Dear Ms. Hesse,
    There is a growing sentiment among economists that we are 
finally seeing the light at the and of the tunnel of our nation's 
recession. The markets are improving, and the economic forecast is 
generally positive. However, state revenues are down and most states 
will have to consider tough outs on spending in coming budgets.
    In Massachusetts, we have witnessed a shrinking state revenue 
base mostly caused by the recession. Many growth opportunities were 
squandered in the 1990s, and now, in ?? of trading on our 
accomplishments, we are ?? over what might have been.
    On thing that can be done to aid states" economies is to 
end the Microsoft lawsuit. We are writing in support of the nine 
states and the Department of Justice's settlement agreement. It is a 
fair and reasonable agreement which brings a satisfactory conclusion 
to this long-running anti-trust case. As the old saying goes, a 
rising tide floats all boats. And just as a rising tide will float a 
boat sitting at the lowest point first, so the resolution of this 
case will help those who have the farthest to rise first.
    The technology-driven "innovation economy" has 
created tremendous opportunities for the citizens of the 
Commonwealth. But we must act now to take some of the uncertainty 
out of the economy. We urge you to endorse this settlement 
agreement, which would provide states greater confidence in fiscal 
planning and would allow entrepreneurs and businesses to get back to 
the business of creating new and better products for consumers.
    Sincerely,
    Fra?? L. M??ini
    Minority Leader
    Georg?? Peterson, Jr.
    Minority Whip
    Bradley ?? Jon?? Jr.
    Assistant Min?? Leader
    Mary S. Rogeness
    Assistant Minority Whip



MTC-00030495

HOUSE OF REPRESENTATIVES
2 STATE HOUSE STATION
AUGUSTA, MAINE 04333-0002
(207) 287-1400
TTY: (207) 287-4469
Roger L. Sherman
P.O. Box 682
Houlton, ME 04730
Telephone: (207) 532-7073
E-Mail: reproger??man@??
E-Mail Home: [email protected]
Renate Hesse
Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
    Dear Ms. Hesse,
    I am a ??red teacher and current legislator I am writing to 
express my support for the proposed settlement reached with 
Microsoft, by the Department of Justice and nine of the States 
involved. In reviewing the settlement I see several benefits 
particularly for our schools.
    The opportunity to provide funding for critically need training 
of educators and staff. Hardware and software, available for use on 
multiple operating systems, and for the critical resources needed to 
acquire hardware for financially strapped schools across the nation.
    Microsoft has been put on notice they need to change their 
business practices, and has agreed to do so. The Federal and State 
Governments have exercised their rightful authority in protecting 
the public interests, have reached a reasonable solution.
    Now is the time to show the public that we are being responsible 
and ??nd the long drawn out legal process. We must be responsible 
with the resources of the people with which the government has been 
entrusted. It is time to restore faith in our legal system by 
showing that we know when to end the seemingly endless stream of

[[Page 28907]]

litigation. Thank you for consideration of my comments and for all 
you do.
    Sincerely,
    Roge?? L. Sherman
    State Representative



MTC-00030496

Saturday, January 26, 2000 11:30 AM
To:
From: Dave Poage
Sharla S. Poage
9390 264th Road
Arkansas City, KS 67005
Judge Kolar Kottely
Attn.: Ranata Hesse, Antitrust Division Public Comment
U.S. Department of Justice
601 D Street, NW, Suite 1200
Washington, DC 20530
    Dear Judge Kottely,
    Since the Clinton years the federal government and several 
states have been pursuing on anti-trust case against Microsoft which 
has been one of our country's leading producers of innovative 
technology. It appears that we are now faced with an opportunity to 
clear our courts of this case for good. I am hopeful that those in 
charge will cease this opportunity.
    While I am not directly involved with the technology industry 
and am not a legal scholar, I am a consumer and taxpayer that 
follows current events very closely. When this case was first 
brought I was disappointed to learn that my own Attorney General, 
Carla Stovall, was dragging Kansas into this litigation. It is my 
belief this case should have never been brought in the first place 
because it serves no public good.
    The theory under which this case was brought is that Microsoft 
was harming the consumers of their product and had established a 
sort of monopoly. I do not believe this theory has been borne out 
with substantial evidence.
    What I see is a company that has put products on the market that 
are appreciated and purchased by consumers. Because of Microsoft's 
ability to provide customers with products they want, the company 
has experienced tremendous growth. This is not a reason to punish 
them! Rather, it is more proof that our system of free enterprise 
and competition works.
    Companies like Microsoft that succeed through supplying 
innovative and highly demanded goods to consumers should be 
celebrated not torn down. It is just these types of companies that 
help stimulate our economy by encouraging consumer confidence, 
creating jobs, and growing their industry. When the government steps 
in to flex its regulatory muscle real harm is done. Again, the 
settlement on the table provides those in charge with an opportunity 
to end a case that has been harmful to the public good. I urge you 
to take that opportunity and give your approval to the settlement.
    Thank you,
    Sharla S. Poage



MTC-00030497

January 25, 2002
Renata Hesse, Trial Attorney
Antitrust Division, Department of Justice
601 D Street NW, Ste. 1200
Washington, DC 20530
VIA FACSIMILE (202) 616-9937
    Dear Ms. Hesse:
    One of the reasons the American economy is in such a weakened 
state is the flaws in our system. Specifically, special interests 
have too much power in Washington DC. The Microsoft case is a 
perfect example.
    Microsoft's competitors don't want to compete against Microsoft 
in the marketplace, They spend their money on politicians rather 
than research and development--next thing you 
know--Microsoft is facing antitrust investigation.
    US v. Microsoft has been competitor driven since the day it 
began. Those opposed to the settlement are still promoting their 
self interest over the interests of the rest of the country.
    Sincerely,
    Pete Whittet



MTC-00030498

Jan 26 02 11:25a
John J. DiPietro
ABC/D ADVANCED BUSINESS CONCEPTS/DiPIETRO
Marketing Strategies.Advertising.Public Relations.Speaking.Training
January 25, 2002
Renata Hesse
Trial Attorney
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
VIA FAX: 202-616-9937
    To Whom It May Concern:
    It is my understanding that the Justice Department is seeking 
input, regarding the proposed settlement in the Microsoft lawsuit.
    As a small business owner, I understand competition and know 
that it is healthy for our economy. I use Microsoft products daily 
in my business and they have been a great help to me. They have 
allowed me to better serve my customers clients, to manage our 
business and to actually expand. Given the state of our economy 
right now, we should do everything possible to spur growth, not 
hinder it.
    There has been no consumer harm as a result of any actions taken 
by Microsoft. Microsoft's innovations have, in fact, have helped 
many small businesses like mine grow.
    It is also my understanding that an additional benefit to 
settling the suit is the proposal to donate about 200,000 computers 
to the public schools. It think this is a great idea. We need 
workers who are computer literate.
    I would suggest that we end this action and approve the 
settlement.
    Sincerely yours,
    John J. DiPietro
    Managing Partner
    672 Main Street.Holden, Massachusetts 01520.Tel: (508) 
829-9949.FAX" (508) 829-9959.e-mail: 
[email protected]
    VISIT US ON THE INTERNET AT www.joindipietro.com



MTC-00030499

January 25, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    I am pleased that a settlement has been proposed to Microsoft by 
the U.S. Department of Justice. This settlement is long overdue. I 
understand that we are currently in a sixty-day period for comments 
on what is in the best interest of the public. In light of this, I 
am taking this opportunity to express my views on the matter.
    Microsoft opponents persistently seek to give the impression 
that Microsoft has gotten away with easy terms. I beg to differ! If 
the millions of dollars that they had to spend in their defense is 
no indication the very opposite is true, then look at all the 
concessions they have agreed to make. For example, Microsoft has 
agreed to grant their competitors licensure to their intellectual 
property. Competitors will now also have the assurance of 
interoperability within the Windows environment because Microsoft 
has agreed to disclose Windows protocols. Future versions of Windows 
will also allow users and computer makers to reconfigure Windows to 
remove potions of the operating system and substitute competing 
alternatives.
    In my estimation, Microsoft obvious willingness to cooperate 
with these terms should be enough to abate the concerns of the 
dissatisfied states. hope that your decision will bring this matter 
well-needed closure.
    Sincerely,
    Frank Lempert
    31600 S.W. Arbor Glen Loop ?? Wilsonville, Oregon 97070



MTC-00030500

01/26/2002 21:55
508-435-7788
VERNE KAMINSKI
Verne Kaminski
185 West Main Street
Hopkinton, MA 01748
January 25, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I want to take a moment to express my support for the settlement 
that was reached between Microsoft and the Department of Justice in 
November. I believe it is time to move forward and stop this 
unnecessary litigation.
    I believe Microsoft has agreed to many tough concessions to 
reach this agreement. One such concession is that Microsoft has 
agreed to grant computer makers broad new rights to configure 
Windows. This should satisfy those consumers who felt they were 
locked into only using Microsoft products as it allows them to buy 
competing products if they so desire.
    This agreement will allow Microsoft to return their focus solely 
to producing the next generation of innovations. Microsoft can turn 
its attention to the competitive environment instead of the legal 
environment. I hope your support of this consumer-friendly 
settlement will continue. Let's remember that this country was 
founded on competitive ideas.

[[Page 28908]]

    Sincerely,
    Verne Kaminski



MTC-00030501

2684 Taft Court
Denver, CO 80215
January 26, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I express my fullest support regarding the Microsoft settlement. 
This settlement should bring any pending issues against Microsoft to 
closure. Microsoft did not deserve to go through such a long 
litigation.
    The terms in the settlement are very beneficial to software 
developers. As a writer of database programs in the chemical 
engineering field I have personally enjoyed using Microsoft 
programs. The only real concern Z have is the recent allegations 
from AOL/TIME Warner (Netscape) about the Internet web browsers. I 
am confident the U.S. Government will try and resolve their issues. 
Overall, the settlement should reap big benefits for businesses and 
individual consumers.
    Because it allows computer-makers the flexibility to configure 
Windows as well as the ability to promote non-Microsoft software 
programs that compete with programs included within Windows.
    Sincerely,
    Stephen Erickson



MTC-00030502

Don G. Baker
3725 Lucy Trimble Road
Burleson, TX 76028
January 26, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing you today to inform you of my position in regards 
to the Microsoft antitrust dispute. I fully support Microsoft and 
the settlement that was reached in November, and I am anxiously 
waiting for an end to this dispute.
    The settlement that was reached in November is fair and 
reasonable. Microsoft has agreed to all provisions, including 
provisions that extend well beyond the products and procedures that 
were actually at issue in the suit, for the sake of wrapping up the 
suit, Microsoft is willing to license its Windows operating system 
products to the 20 largest computer makers on identical terms and 
conditions, including price. Microsoft has also agreed to design 
future versions of Windows, beginning with an interim release of 
Windows XP, to provide a mechanism to make it easy for computer 
makers, consumers, and software developers to promote non- Microsoft 
software within Windows.
    This settlement will serve in the best public interest. I 
strongly urge you to support this settlement so consumers and the 
economy can feel the positive effects of allowing Microsoft to get 
back to business as usual. Thank you for your support.
    I actually believe Microsoft did no wrong.
    Sincerely,



MTC-00030503

59 Laurel Avenue
West orange, HJ 07052
January 24, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    We would like to use this opportunity of public comment to give 
our support for the settlement reached between Microsoft and the 
Department of Justice. The settlement is good for our country and 
gives each side the chance to move forward.
    The terms of the settlement are comprehensive and mandate many 
changes in Microsoft's past business practices. For example, 
Microsoft has agreed to grant computer makers broad new rights to 
configure Windows so as to promote non-Microsoft software programs 
that compete with programs included within Windows. This gives 
computer makers the ability to replace access to features of Windows 
with access to non-Microsoft so--re such as programs from AOL 
Time Warner. Finally, the agreement calls for the creation of 
Technical Committee to supervise Microsoft's compliance with their 
responsibilities.
    This case has gone on for too long and neither side wins with 
continued litigation. The settlement gives Microsoft the opportunity 
to focus on innovation while the federal government can focus 
dwindling resources on stimulating the economy.
    Sincerely,



MTC-00030504

January 21, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I cannot see how a case was ever brought against Microsoft in 
the first place. They are not a monopoly; they simply make the 
product that most people enjoy. That's why I was so pleased when a 
settlement has finally reached in November.
    I was sorry, however, that Microsoft had to give up so much in 
order for the Justice Department to agree to end its suit. Microsoft 
is being asked to hand over software, that it has taken time and 
hard work to create, to its competitors for free. They even have to 
make sure that subsequent versions of Windows are more geared toward 
non-Microsoft products.
    I feel that while this is all a bit extreme, it would be worth 
it in order to put an end to this case. Both Microsoft and the 
Justice Department have more important issues to worry about right 
now, and it would be good to have them free to do so.
    Sincerely,



MTC-00030505

COVER PAGE
TO:
FAX: 12823871454
FROM: JIM CARLETON
FAX: 7137231403
TEL: 7137293417
COMMENT:
Jim Carleton
6043 Lymbar Drive
Houston, Texas 77096
January 26, 2002
Attorney General John Ashcroft
Department of Justice
950 Pennsylvania Avenue
Washington, DC 20530
    Dear Mr. Ashcroft,
    It has become apparent that some anti-Microsoft forces are 
attempting to derail the settlement that was reached in the 
antitrust case this November. It would be very unfortunate if the 
case was resumed, and Microsoft was forced to continue wasting time 
and money on this case.
    A settlement was agreed to by all sides, and approved by a 
federal judge. Sadly, forces opposed to the settlement are trying to 
interfere and have this case resuscitated. Many want to see 
Microsoft face injury in the court because they are unable to 
compete with Microsoft in the free market.
    It is unfortunate that this opposition exists because the 
settlement is beneficial to all, including Microsoft's rivals. The 
settlement give non-Microsoft companies the ability to view and use 
Microsoft code to create better software. It also will make it very 
simple for non-Microsoft software to be placed on Microsoft 
operating systems. Undoubtedly, it is time to conclude this case, 
and promote competition in the market, not the courts.
    Sincerely,
    Jim Carleton
    Cc: Rep. Tom DeLay



MTC-00030506

53 Arrowhead Road
Duxbury. MA 02332-5035
January 25,2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Attorney General Ashcroft:
    I am writing to give my support to the recent settlement between 
the Department of Justice and Microsoft The proposed agreement was a 
long time coming, and we are only' days away from the end of the 
comment period. ! hope that once everything is all said and cone, 
the settlement is approved and implemented as soon as possible.
    It is time to move on The Department of Justice has accomplished 
its goal of making Microsoft. technology more accessible to 
competing companies Microsoft has agreed to a number of changes 
opening up its codes and books to other manufacturers. The Justice 
Department has held Microsoft's "feet to the fire" long 
enough, and the settlement even goes as far as having a "Big 
Brother" feel to it. A three-member committee of software 
engineering experts has been assembled and will monitor Microsoft's 
compliance to the agreement. Please support the proposed agreement 
between the Department of Justice and Microsoft as I do, and approve 
it with haste Thank you.
    Sincerely,
    David Delory

[[Page 28909]]

    co: Representative William Delanunt



MTC-00030507

Darryl LaRocque
P.O. Box 2772
Big Bear City, CA 92314
January 25, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I have been following the Microsoft antitrust case in the 
federal courts since its inception three years ago. Last November, a 
settlement was proposed, and it is curtly pending approval. This 
bodes well for the economy, which has been steadily declining since 
the case began.
    Unfortunately, Microsoft's opponents are not happy that 
Microsoft will emerge intact in this settlement, and are striving 
both to undermine agreement of the settlement and to bring 
additional litigation against Microsoft.
    Further litigation will serve no one. Microsoft has agreed to 
make the necessary adjustments in policy and product to prevent 
further antitrust violations; no further action is necessary. The 
settlement reached late last year is fair both to Microsoft and its 
competitors. Microsoft will be allowed to retain control over the 
bulk of its operations, but will be required to restrict some other 
practices deemed monopolistic and alter certain products in order to 
facilitate fair competition.
    For example, Microsoft has agreed not to retaliate if software 
is introduced into the market that directly competes with Microsoft 
software. Microsoft also plans to allow computer makers broad fights 
to reconfigure Windows to their own specifications using non-
Microsoft software, and enable them to do so by reformatting 
upcoming versions of Windows in order to support non-Microsoft 
programs.
    I believe the settlement is fair and that no additional measures 
need to be taken against Microsoft on the federal level. I urge you 
to support finalization of the settlement.
    Sincerely,
    Darryl LaRocque



MTC-00030509

Constance Reynolds Lewis
1611 Ninth Street
Lake Charles, LA 70601
FAX COVER SHEET
Date: 1-26-02 
Time:
To:
Phone:
Fax: 1-V02-Z07-1454
From:
Phone:(337) 439-4245
Fax: (337) 439-4245
RE: MICROSOFT
Number of pages including cover sheet: 2
Message:
    Jie:
    I do not believe Hat the government has ANY ?? ?? to ?? 
Microsoft ?? the posilion?? ?? ?? it has
    EARNE?? ??
ROBERT M & LET. RUDE
21301 8th Place W
Lynnwood, WA 98036
January 25, 2002
Attorney General John Ashcroft
U.S. Department oï¿½ Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    We have taken this opportunity to write in and express our 
opinion of the antitrust suit against the Microsoft Corporation. We 
feel that this suit has been bogged down in the judicial system for 
long enough and it is time for the government to allow Microsoft to 
get back to work. It needs to continue setting the standard in the 
worldwide technology industry.
    It is our opinion that this suit has pulled the American economy 
down, especially in the vital IT sector. The bottom line is, 
Microsoft is one of this nation's largest employers, and the 
perpetuation of this case during these times of economic uncertainty 
is imprudent. Microsoft is and always has been a great company. They 
have given millions of dollars to charity and have changed the way 
we view computers forever. Microsoft made technology accessible to 
Americans in a form that was usable. Without this company, there 
would have been no "P.C. revolution." We believe that 
the terms of this settlement will ensure that there are no further 
violations of antitrust committed by the company, especially with 
the establishment of a technical committee which will monitor 
Microsoft and prevent them front any future violations.
    We are please that an end to this litigation is in sight. Please 
continue to support the settlement and the future of free enterprise 
in this nation.
    Sincerely,
    Robert Rude
    Lc Rude



MTC-00030510

Jerry Stork
6528 Volley Stream Way
* Cumming, GA 30040
Cell Phone 770.329.3794
* Answering Machine 770.475.0922*
Home phone 770.475.1225
* Fax 770.664.1404*
E-mail jrsdll @ bellsouth.net
Saturday, January 26. 2002
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    Please do whatever you can to help expedite a settlement of the 
Microsoft anti-trust case. This nearly four-year-old case has 
produced little, but controversy. There is now, as you know, a 
settlement agreement that has been preliminarily accepted by the 
major parties and the court. This agreement fairly balances the 
concerns of the parties and offers a fair solution to the dispute. 
In return for retaining its corporate integrity, Microsoft has 
agreed to adopt certain practices, which will render it more 
vulnerable to its competitors. It has, in fact, agreed to help raise 
its competitors to its own level of play. For example, Microsoft 
will now invite competition by configuring its Windows platforms to 
easily incorporate non-Windows software. Microsoft will now offer 
computer manufacturers licensing agreements without a condition of 
Windows software exclusivity. Microsoft has even promised to 
disclose to competitors certain internal Windows interfaces. In 
other words, Microsoft has agreed to encourage the industry to catch 
up with itself.
    These concessions and this change in philosophy will inure to 
the benefit of the industry and the public. Please support this 
settlement.
    Sincerely,
    Jerry Stark
    Teleflex Fluid Systems,
    One Firestone Drive, Suffield, CT 06078
    1-800-225-9077 or 
1-860-668-1285
    Fax 1-860-666-2353
    www.teleflexhose.com



MTC-00030511

350 S Clinton Street Apt. 9A
Denver, CO 80231
January 24, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing today to encourage the Department of Justice to 
accept the Microsoft antitrust settlement. A settlement is available 
and the terms are fair, Microsoft has agreed to a wide rang of 
concession in order to settle. I would like to see the government 
accept the settlement and allow Microsoft and the industry to move 
on.
    Many people think that Microsoft has gotten off easy, in fact 
they have not. The settlement was arrived at after extensive 
negotiations with a court-appointed mediator. Microsoft has agreed 
to terms that extend well beyond the products and procedures that 
were actually at issue in the suit. To make sure that Microsoft 
complies with the settlement a technical committee will be set up to 
monitor Microsoft's compliance. The settlement that was reached is 
fair and it is guaranteed to be followed.
    Microsoft and the industry need to move forward, and in order to 
move forward this issue needs to be put in the past. Please accept 
the Microsoft antitrust settlement.
    Sincerely,



MTC-00030512

    Justice Department:
    Three years of litigation is enough. Dragging out this legal 
battle further will only benefit a few.
    The aggressive lobbying campaign to undermine the settlement is 
only serving to line the pockets of wealthy competitors, lawyers and 
special interest bigwigs. Not one new product that helps consumers 
will be brought to the marketplace.
    I strongly urge the U.S. Department of Justice to end this 
wasteful investigation. The proposed settlement offers a reasonable 
compromise. It is time to move on with the agreed settlement 
negotiated and allow businesses who wish to compete to compe??. 
Those who can't muster up the competitive edge need to either merge 
or get out of the business arena

[[Page 28910]]

    Sincerely
    Ben Jones
    E-mail



MTC-00030513

Complimentary Fax Cover Sheet
To:
From:
Fax #
Phone #
Date: Urgent
Confidential Confirm Receipt
Number of Pages: (Including Cover)
Reply Fax #:
    Message:
Dorothy Klughers
30 John Lane
Levittown, NY 11756-1905
January 25, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    I am in favor of the Microsoft antitrust settlement agreement. 
The terms of the settlement agreement are more than fair. I urge the 
court to approve the agreement. Among other things, Microsoft has 
agreed to grant computer makers many new rights. The manufacturers 
will be able to remove various features of Windows. such as 
Microsoft's web browser. Internet Explorer, and replace them with 
browsers made by Microsoft's competitors. This will result in giving 
consumers more choice when it comes to software they purchase. 
Microsoft has also agreed not to take retaliatory action against 
those who promote or develop software that competes with Windows.
    The settlement agreement will help level the playing field among 
the software companies. Litigating this case further will not prove 
to be as beneficial to consumers as this agreement will be.
    Sincerely,
    Dorothy Klughers



MTC-00030514

16 Charles River Road
Medway, MA 02053
January 18, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing to strongly urge you to support the current 
settlement between Microsoft and the Department of Justice. I firmly 
believe that there should be no further action against Microsoft 
regarding the proposed negotiated settlement A/though the litigation 
should have never brought forth several yearn ago, this current 
settlement is the result of a fair, judicious and reasonable process 
that should be respected.
    This settlement is unique in that it has the necessary 
enforcement powers to ensure that the terms of the agreement are 
abided by. The agreement contains a provision that allows private 
companies such as SUN Microsystems, Apple and IBM to sue Microsoft 
should the company not follow the terms of the settlement. 
Additionally, the agreement requires Microsoft to submit to a 
government technical oversight committee and to change their 
business, licensing and marketing practices to foster greater 
competition. This settlement signals the end of a long and drawn out 
process and should be respected.
    With all that is going on in the world, a faltering economy, and 
more significant national priorities I hope that you will help 
support this settlement in its current state. It is a shame that a 
company like Microsoft who builds a superior product and is a major 
contributor to the economy would be consistently hounded by a 
government that is supposed to support free enterprise.
    Sincerely,
    Allen Sisson



MTC-00030515

DANIEL HICKY GRANT, Ed.D.
Board Certified Forensic Examiner, Fellow of the American College of 
Forensic Examiners, Diplomate of the American Board of Psychological 
Specialties--American College of Forensic Examiners
Board Certified Expert in Traumatic Stress
Diplomate, American Academy of Experts in Traumatic Stress
Board Certified Neuropsychologist--The Americana Board of 
Professional Neuropsychology
Diplomate in Pain Management--American Academy of Pain 
Management
Licensed Psychologist--Georgia License # 859
Post Office Box 1359
Richmond Hill
Georgia 31324
912-727-3158
danielgrant @ msn.com
899 Mill Hill
Landing Road
Richmond Hill, GA 31324-4625
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
Fax #: 202 307 1454
January 25, 2002
    Dear Mr. Ashcroft:
    I am in support of Microsoft and its right to practice ethical 
business in a free market economy. I am also in support of the 
proposed antitrust settlement between them and the Department of 
Justice. I believe this is a fair resolution to this lawsuit,
    Microsoft is disclosing much of the features that give it a 
competitive edge. This includes disclosure of interfaces that are 
internal to Windows" operating system, and allowing software 
developers to develop competitive software. The release of this 
information should be enough to satisfy the government.
    I urge you to support this settlement and conclude this case. I 
would feel more comfortable with the Government focusing its efforts 
on pursuing more suspicious and illegal companies.
    Thank you.



MTC-00030516

Don & Arlene Fenno
1124 S. Ave. B
Washington, IA 52353
(319) 653-2365
534 Princeton Greens Ct.
Sun City Center, FL 33573
(813) 634-5494
Justice Department
    Re: Microsoft Settlement.
    We believe that the Federal court settlement was very adequate. 
Any further harassment could damage our inventive spirit and curb 
new efforts when we need them most. States should stop now.
    Don & Arlene Fenno



MTC-00030517

    Attention: Concerning comments about Microsoft Litigation 
Microsoft has gone thru enough. The settlement the federal 
government came up with should be enacted. We can thank Microsoft 
for a lot of the Standands enjoyed today to computing and the 
internet.
    X-president Clinton should have been going after Bin Laden and 
not Bill Gates.
    Thanks,
    Mike Stuart
    P.S.
    Would you mail or E-mail me a schedule of upcoming topics and 
issues for ocmment by the
    DOJ.
    mikesutart @ coastalnet.com
    1104 Karen Dr. A-6
    New Bern, NC
    28562
    Thanks



MTC-00030518

10831 Valmay Avenue NW
Seattle, WA 98177-5336
January 26, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    I am writing today to encourage the Department of Justice to 
accept the Microsoft antitrust settlement. It disappoints me that 
the government has in the past chosen to harass a company like 
Microsoft. Microsoft has added such a great economic contribution to 
this country. The contribution extends from Washington State all the 
way to Washington, DC Microsoft is a core holding of most company 
retirement plans, 401Ks, IRAs and mutual funds throughout America 
Therefore it is in the best interests of almost every American to 
get this case settled.
    In order to settle this issue Microsoft has agreed to many 
terms. It has agreed to design future versions of Windows to be more 
compatible with non-Microsoft soft-ware. It has also agreed to 
change several aspects of the way it does business with computer 
makers. Microsoft did not get off easy, there are pages of terms 
agreed to in addition to these two.
    Microsoft needs to be able to get back to business. This suit 
has bogged down the company for over three years now. For the good 
of American's everywhere ! urge you to accept the Microsoft 
antitrust settlement
    Respectfully
    J. Bradford Borland



MTC-00030519

7957 2nd Avenue S

[[Page 28911]]

St. Petersburg, FL 33707-1023
January 26, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Asberoft:
    I am writing in support of the settlement that you have reached 
with Microsoft in November. I know that, while not yet finalized, 
this settlement brings the promise of an end! to the Microsoft 
lawsuit at the federal level.
    I hope that everyone will see just how much Microsoft is willing 
to sacrifice in order to bring about an end to this settlement. By 
offering its proprietary code and the rights that go along with it, 
Microsoft is forgoing billions in creative profits. And that 
provision is merely a small portion of the overall settlement.
    This settlement should be agreeable to everyone and I feel that 
the states that refuse to settle are only trying to pad their own 
budgets like they did with the tobacco companies. But this time, 
they are attacking a company that is vital to the average American 
and the economy. Hopefully, with this settlement finalized, they 
will fall in line with the rest of America.
    Sincerely,
    Jim Engel



MTC-00030520

3115 Lafayette Street
Houston, TX 77005
January 26, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I would like to point out some of my views regarding the 
Microsoft antitrust case. I do not agree with every decision that 
Microsoft has made, but understand that business is business. I feel 
that there was merit behind many of the issues that brought about 
this case, but that was three years and countless taxpayers" 
dollars ago. I feel that the settlement agreement is the best way to 
close this case, and ensure that it never reaches the federal level 
again.
    Although the settlement calls for concessions, Microsoft has 
agreed in an effort to end this case sooner rather than later. 
Microsoft has agreed to change the way it markets, licenses, and 
develops its software, as well as the way it deals with independent 
vendors. Microsoft Ins agreed to stop retaliating against those that 
promote or design non-Microsoft programs, and computer makers will 
be allowed to configure Windows so as to promote those programs.
    It appears to me that Microsoft has made the necessary 
concessions, and now we must move our focus to the states that are 
pursuing further litigation. I fear that since the tobacco 
settlements, states have seen corporate lawsuits as additional forms 
of state revenue. I hope you are Wing to recognize when states are 
using consumer protection as a veil for return on investment. As 
long as Microsoft is willing to give up some of its market share and 
competitive advantage, there will always be those requesting more. I 
hope you will do everything in your power to attempt to close this 
case as soon as possible, or we might be back in a few years trying 
to protect Microsoft.
    Sincerely,
    Catherine McNamara



MTC-00030521

29303 NE 11th Street
Carnation, WA 98014
January 24, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am very much in favor of the Microsoft antitrust case 
settlement agreement. The remedies provided in it are good for 
everyone involved, and I would not like to see the case dragged on 
through the courts any further.
    The terms of the settlement agreement are quite reasonable by 
any standards. Once the agreement is approved, Microsoft will be 
helping the competition by leveling the playing field in the high-
tech industry. For example, Microsoft has agreed to make it easier 
for consumers to run other software programs simultaneously with the 
Windows operating system. They also agreed not to retaliate against 
retailers that promote software that competes with Windows. 
Additionally, Microsoft has agreed to implement a uniform price list 
for the top 20 largest computer manufacturers. Microsoft's 
competitors should be satisfied with these types of concessions.
    I appreciate your efforts toward settling this case. Thank you.
    Sincerely,
    Ron Beman



MTC-00030522

Benjamin Friedman
* 17846 Beckley
* CircleVilla Park, CA 92861
January 23, 2002
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I would like to take a moment to express my opinions regarding 
the Microsoft antitrust case. I think I might feel differently about 
Microsoft if it had become powerful by malicious intent, but it 
achieved its position because it made a better mousetrap and sold it 
at the lowest price. I am a supporter and avid user of Microsoft 
products, and would like to see this case put behind us. Although 
the settlement may reach further than Microsoft may have wished, it 
realizes that settling the case sooner, is better than later. In 
order to do this, it has agreed to concessions that make antitrust 
precedent. Microsoft has granted broad new rights to computer 
makers, software engineers, and to consumers. It has allowed them to 
configure Windows so as to promote non-Microsoft programs that 
compete with the programs already included within. Also, Microsoft 
has agreed to document and disclose various interfaces within its 
Windows operating system. This boils down to Microsoft opening its 
doors to the competition, and allowing them to use its invention to 
promote their own competing products. Imagine if Nike put Reebok 
logos on its shoes, or if Ford built cars with Toyota engines. It 
seems ridiculous when considering products that we are more familiar 
with, bat nevertheless, Microsoft has a agreed to these concessions 
to speed a conclusion. We should consider the very foundations of 
free enterprise and competition and realize that the longer this 
case precedes, the greater the risk that we may cause irreparable 
damage to the IT industry, and the economy.
    Sincerely,
    Berjamin Friedman
    cc: Representative Christopher Cox



MTC-00030523

January 17, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing you today to express to opinion in regards to the 
Microsoft anti- trust dispute. I support Microsoft in this dispute, 
and I favor the settlement reached in November. This settlement is 
complete and thorough, and I am anxious to see this dispute resolved 
permanently. Microsoft has agreed to carry out provisions in this 
agreement. such as: designing future versions of Windows to provide 
a mechanism to make it easy for computer makers, consumers, and 
software developers to promote non- Microsoft software within 
Windows. The mechanism will make it easy to add or remove access to 
features built into Windows or to non- Microsoft software. Microsel5 
has pledged to create more opportunities for competing companies. 
"
    Microsoft is a company that delivers quality product to the 
marketplace. I have used Microsoft's products for years now, and I 
hope I will be able to enjoy these products for years to come. 
Please do your part to stop litigation against Microsoft. Thank you 
for your support.
    Sincerely



MTC-00030524

Earl W. Mallick
 13 Lands End Way
Hilton Head Island, SC 29928
January 26, 2002
Attorney General John Ashcroft
U.S. Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear General Ashcroft:
    I am writing, as a long time admirer of yours as well as a small 
shareholder in Microsoft, to voice my support for the federal 
settlement with Microsoft. I believe that Microsoft has earned a 
position of leadership in the technology sector through its focus on 
excellence. It has consistently and continually provided its 
customers with innovative products. I feel that it is improper to 
stifle creativity by permitting those less innovative companies to 
go to the federal government to file lawsuits as a substitute for 
their own lack of imagination, and I therefore believe that the case 
against Microsoft is without merit.

[[Page 28912]]

    The time has come to finally resolve this lawsuit to let 
Micorsoft concentrate on doing what they do best--developing 
innovative products. Microsoft has made plenty of concessions. The 
government should not be wasting funds on this lawsuit when we need 
to spend more on fighting terrorism. The third-party oversight 
committee which Microsoft has agreed to will keep everybody honest. 
Please see that the Department of Justice recognizes the importance 
of finalizing this settlement and does so soon.
    I can't close this letter without commending you on the 
outstanding work you are doing on the terrorism front. May God 
continue to bless you, the President, and all of the others working 
to preserve our way of life. Cc: Senator Strom Thurmond
    Sincerely,
    Earl W. Mallick



MTC-00030525

15 Broadway
Ocean Grove, NJ 07756
January 22, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I urge you as strongly as possible to settle the Microsoft 
antitrust case and to end the extensive and costly legal proceedings 
against them. I find the amount of money spent fighting the case an 
irresponsible use of resources, and the case should be wrapped up as 
quickly as possible at this point.
    As an everyday computer user, I find a uniform operating system 
to be beneficial in my ability to smoothly operate my PC. Though 
some of Microsoft's tactics have been heavy-handed, there is no 
denying the success they have had in making programs work seamlessly 
with each other and creating a standard other companies have yet to 
match. Though they will lose some of their entrepreneurial freedom 
in disclosing Windows coding to competitors, it will allow Microsoft 
to get back to business, and to continue paving the way for 
innovations that benefit millions of people.
    Therefore, I am in favor of settling the case as soon as 
possible. If our past President, Mr. Clinton had spent as much time, 
energy and money pursuing Bin Laden and company as he had pursuing 
Bill Gates and company (Microsoft), we as a nation would be in 
better shape. One of the main reasons I voted for President Bush was 
in the belief that he would do the right thing.
    Sincerely,
    John Sosenko



MTC-00030526

Sandra Drake
12201 NE Olive Drive
Kingston, WA 98346-9265
January 26, 2002
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington. DC 20530-0001
    Dear Mr. Ashcroft:
    I believe that the antitrust lawsuit against Microsoft has gone 
too far. I feel that it has been fueled by political motives and 
personal avarice since its conception three years ago. It is not my 
belief that Microsoft was guilty of antitrust violations in the 
first place, and finally I believe that the settlement that has been 
reached in this case must be accepted for the simple reason that it 
is the quickest way to end this case.
    This settlement will require Microsoft to design all future 
versions of Windows to be compatible with the products of its 
competitors. While I believe that this is a bit harsh I would like 
to urge you to accept this settlement. Microsoft has agreed to the 
terms because it understands the importance of ending this 
litigation--not just for its own sake, but for the sake of the 
U.S. economy as well as the technology industry.
    Thank you for the work that you have done in this case and for 
your support of this settlement.
    Sincerely,
    Sandra Drake
    P.S. The U.S. should be ?? of ??government officials. In ?? 
Government, what a concept.



MTC-00030527

John Gilstrap
36 South Marion Circle
Ringgold, GA 30736
January 25, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    The court should approve the Microsoft antitrust settlement. 
Entering into the settlement agreement will ensure Microsoft will be 
able to get back to focusing on developing innovative products while 
safeguarding against the complaints made about anticompetitive 
business practices. Continued prosecution of this case by the 
federal government is unnecessary. Microsoft has agreed to make many 
changes in the way it conducts its business. They agreed to design 
future versions of Windows in a way that will make it easier for 
consumers to run software made by other companies along with Windows 
software.
    While I have not been directly impacted by this lawsuit, I have 
friends in the technology industry who have. Drawing out this 
lawsuit is not beneficial to them, or to the tech community as a 
whole.
    Thank you for working toward a resolution of this case.
    Sincerely,
    John Gilstrap



MTC-00030528

FAX COVER SHEET
ATTENTION: Attorney General ??
COMPANY: Department of Justice
FAX NUMBER: 1-202-307-1454
DATE:.1.26.2002
NUMBER OF PAGES SENT INCLUDING THIS PAGE: 2
FROM: ??
COMPANY:
PHONE: (253) 582 8368
FAX: (253) 581-9178
MESSAGE: As attached
NOTICE: If you have any problems receiving this fax, please con :act
Mail Masters at (253)
581-9177 immediately.
8302 104th Street Southwest
Lakewood, WA 98498
January 26, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I want to express my support of the settlement reached between 
Microsoft and the Department of Justice. I do not believe the anti-
trust case against Microsoft had any merit in the first place. Yet, 
I was pleased to hear that Microsoft and the Department of Justice 
had agreed to the terms of a settlement. I urge the Justice 
Department to enact the settlement this month.
    The proposed settlement contains many stipulations that will 
benefit the IT industry. Microsoft has agreed to disclose the 
protocols and interfaces of its Windows system, which provides for 
the development of new software. This new software should be more 
compatible with the Windows system. Competing developers will 
clearly benefit from the disclosure of this information. Finally, 
everyone will benefit from this settlement. Microsoft will be 
allowed to return its full focus to business, and technology 
companies will benefit from the increased confidence in the sector. 
For these reasons, and many more, the Justice Department must enact 
the settlement.
    Sincerely,



MTC-00030529

Carlotta Boyd
6104 36th Avenue NW
Seattle, WA 98107
January 25, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am in favor of the Microsoft antitrust settlement agreement. 
It is in the public's best interest that this protracted litigation 
come to an end.
    The terms of the settlement agreement are fair. Microsoft has 
taken appropriate steps to restore fair competition in the software 
industry. Microsoft has agreed to make available to its competitors 
the information necessary to enable servers to interoperate natively 
with Microsoft server operating systems. They also agreed to not to 
enter into contracts with third parties which would require that 
third party to exclusively sell Windows products. Concessions such 
as these will help foster competition.
    I appreciate your commitment to resolving this case. Further 
litigation is obviously not going to accomplish anything more than 
running up legal expenses and creating more uncertainty in the tech 
world.
    I support the settlement, and I look forward to the end of this 
case. Thank you for your time and consideration.
    Sincerely,
    Carlotta Boyd



MTC-00030530

867 Plymouth Street
Pelham, NY 10803-3128

[[Page 28913]]

January 15, 2002
Attorney General John Ashcroft
US Department of Justice
Washington, DC 20530-0001
    Dear Attorney General Ashcroft:
    Extending litigation In the Microsoft antitrust case would be a 
mistake. A settlement has been reached between Microsoft and the 
Justice Department, Our Justice Department should continue to 
support this settlement,
    Certain spatial interests would like to see the case continue. 
The continuation of this case, however, will benefit no one but some 
special Interests. The settlement is fair and balanced. It will 
create more openness in the technology Industry, It allows 
competitors unprecedented access to Microsoft cede, In addition to 
the code openness, Microsoft has agreed to submit to a three person, 
government appointed technical oversight committee who will ensure 
that Microsoft is complying with the terms of the agreement.
    Unquestionably the Microsoft antitrust case should be settled. 
Despite the wishes of some special Interests to continue with this 
case, It Is time for this costly and time-consuming case to and. 
Attorney General Ashcroft, please continue your outstanding support 
for the settlement.
    Sincerely,
    Albert Andresen



MTC-00030531

1985 Green Lane Road
Lansdale, PA 19446-5043
January 22, 2002
Attorney General John Ashcroft
U.S. Department of Justice
950 Pennsylvania Avenue, NW
Washington. DC 20530-0001
    Dear Mr. Ashcroft:
    I wish to express my frustration about the fact that it took the 
Department of Justice three years to end its costly antitrust 
lawsuit against Microsoft. Our tax money can be far more properly 
spent. The agreement they came up with is strict. It requires 
Microsoft to grant computer makers broad new ways to set up Windows 
with non-Microsoft software programs. Computer makers will now be 
free to remove the means by which consumers access various features 
of Windows. They can also replace access to those features with 
access to non-Microsoft software.
    The big deal in this settlement, however, is that Microsoft has 
also agreed to disclose various interfaces for its rivals, so that 
they can write more effective software programs and applications. 
Certainly this agreement is more than fair and reasonable. The 
federal government should now allow the provisions of this 
settlement to fall in to place. No more litigation should be brought 
against Microsoft beyond this agreement.
    Sincerely
    Fran Henshaw
    CC: Senator Rick Santorum



MTC-00030532

12230 SE 61st Street
Bellevue, WA 9,8006
January 23, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing this letter because of my expressed interest of 
putting this matter behind us. We need to move forward and get 
beyond this point. It is a lingering process that is not in the best 
interest of the people, the industry or the economy of our great 
state of Washington.
    I believe the settlement is a reasonable solution to this 
ongoing litigation process. Microsoft will, under this settlement, 
share information with its competitors that will enable them to 
place their own programs on the Windows operating system. In 
addition to the federal government, I would also like to see the 
other individual nine states that are still pressing this case 
settle at the state level.
    The settlement is an important one and I thank you for giving me 
the opportunity to share my opinions.
    Sincerely,
    Arvid Portin



MTC-00030533

1985 Green Lane Road
Lansdale, PA 19446-5043
January 22, 2002
Attorney General John Ashcroft
U.S, Department of Justice
950 Pennsylvania Avenue, NW
Washington. DC 20530-0001
    Dear Mr. Ashcroft:
    I wish to express my frustration about the fact that it took the 
Department of ,Justice three years to end its costly antitrust 
lawsuit against Microsoft. Our tax money can be far more properly 
spent.
    The agreement they came up with is strict. It requires Microsoft 
to grant computer makers broad new ways to set up Windows with non-
Microsoft software programs. Computer makers will now be free to 
remove the means by which consumers access various features of 
Windows. They can also replace access to those features with access 
to non-Microsoft software.
    The big deal in this settlement, however, is that Microsoft has 
also agreed to disclose various interfaces for its rivals, so that 
they can write more effective software programs and applications. 
Certainly this agreement is more than fair and reasonable. The 
federal government should now allow the provisions of this 
settlement to fall in to place No more litigation should be brought 
against Microsoft beyond this agreement.
    Sincerely.
    Joseph Henshaw
    CC: Senator Rick Santorum



MTC-00030534

R MILTON LAIRD
Certified Public Accountant
4550 Union Road
Paso Robles, California 93446
Tel (805) 237-9202 Fax (805) 237-84.49
January25,2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington DC 20530
    Dear Mr. Ashcroft:
    I am deeply disturbed by the travesty of justice caused by legal 
actions that have been and are icing taken against Microsoft. 
Microsoft, in fact, is one of the primary contributors to the 
success of our economy. The efficiency and productivity of our 
entire workforce has been dramatically increased by Microsoft's 
software.
    Along with other companies such as Intel, Microsoft has enabled 
computer users to speedily communicate and handle complicated 
problems efficiently on PCs and network by replacing numerous 
cumbersome, complicated and slow operating systems with Windows and 
other products that are amazingly effective and economical.
    Before Microsoft s software was available, only engineers and 
sophisticated mathematicians were able to program and operate the 
massive computers in use, Now anyone who can read and write can 
expertly operate their PCs and business networks.
    As a reward for this massive contribution to oar economy and 
improvement in the work forces efficiency, Microsoft has been 
severely penalized by actions brought by competitors who could not 
develop competitive systems and turned instead to the government in 
an attempt to limit Microsoft's effectiveness.
    Even though the proposed settlement is severe, Microsoft has 
agreed to make future programs easier for other companies to release 
their products. Windows XP will have a device that enables other 
companies to add or remove computer attributes built into Windows, 
so if anyone comes up with better programs, (which I doubt will 
happen) these programs can be easily introduced into new computers.
    Yet some greedy State Attorney Generals are trying to exceed the 
already unjust penalties proposed for Microsoft and AOL is bringing 
a lawsuit which can only lead to more unnecessary and unproductive 
litigation to the detriment of all except attorneys.
    Let's conclude this hassle and get on with making America more 
efficient.
    R. Milton Laird
    cc. Senator Dianne Feinstein



MTC-00030535

Haskell Rosenberg
4 Bridgewater Court
Pittsford, New York 14534
716:381 -2340
Fax--716:381--3094Haskelini @ aol.com
Fax Cover
January 26, 2002
FROM: Haskell Rosenberg
Phone: 585/381 -2340
Fax: 585/381--3094
TO: Attorney General John Ashcroft
FAX: 202/307-1454 202/616-9937
I trust that, despite your overcrowded agenda, you will be able to 
give consideration to something that has already gone on much too 
long.
Haskell Rosenberg
2 Pages, including cover
Haskell Rosenberg
4 Bridgewater Court
Pittsford, New York 14534
Ph. 716:381--2340
Fax:716: 381- 3094
email: haskelini @ aol.com
January 26 2002
Attorney General John Ashcroft

[[Page 28914]]

US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    I am writing in support of settling the Microsoft antitrust case 
according to the settlement agreement negotiated in November. The 
case should never have been brought in the first place and has 
resulted in enormous expense to taxpayers and a great waste of 
everyone's time. In the settlement agreement Microsoft has made a 
number of concessions, including the implementation of a uniform 
price list for the largest computer manufacturers, and an agreement 
not to take retaliatory action against competing software companies. 
With these concessions Microsoft has gone far to level the playing 
field, giving these companies a meaningful opportunity to compete 
with Windows and with the applications Microsoft writes for it. 
Microsoft has earned its dominant position because they earned it in 
the hurly-burly of the market-place. It ill becomes giving sore 
losers the opportunity to bring down a company, especially one so 
important in our "new economy", simply because of its 
success. It would be better for all parties to see this case 
resolved. The November settlement agreement is an appropriate way to 
put an end to at least a portion of this needless litigation.
    With best wishes.
    Sincerely,
    Haskell Rosenberg



MTC-00030538

[illegible]
January 25, 2002
Attorney General John Ashcroft
U.S. Department of Justice
9500 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft,
    I am writing to you to express my support for Microsoft and the 
sttlement in the antitrust case. This case has dragged on for long 
enough and it is time to conclude these legal proceedings. Microsoft 
has offered generous terms in the settlement: the licensing of 
intellectual property, [illegible] on Windows for rival software 
developers free reign for computer makes in relation to what 
software they install, and a uniform price for the top 20 computer 
makes to purchase Microsoft products. These are only a few of the 
concessions Microsoft has offered in the November 2001 settlement.
    Microsoft is a great company that has revolutionized the 
technology industry. It is time [illegible] move forward once again 
and continue to make fine products without the threat of a lawsuit 
hanging over them. I strongly urge you to accept this settlement 
because it is fair to all parties involved.
    [illegible]



MTC-00030539

January 9, 2002
Judge Kollar Kotelly
Antitrust Division
U.S. Department of Justice
601 D Street, NW, Suite 1200
Washington, DC 20530
Attention: Renata Hesse
    Dear Judge Kotelly:
    After years in the courtroom and millions of dollars of taxpayer 
money spent, the Department of Justice has reached a proposed 
settlement with Microsoft, I am aware that you are considering the 
merits of this settlement and that the law allows for comments from 
the general public on this matter. I am grateful for this 
opportunity to participate in this way.
    When news of this settlement was first announced I was very 
pleased to know this case seemed to be drawing to a dose, While I 
have never seen the merit of the 9overnment's case in this matter, 
my greatest concern was the clear lack of regard for the financial 
impact this case would have on our national economy.
    Since this case started over $30 million dollars of taxpayer 
money has been spent pursuing this boondoggle, This is unacceptable 
at a time when states like mine are facing real budget constraints 
and the federal government should be placing its resources in areas 
that truly protect the interests of Americans.
    At this time of economic recession and heightened budget 
concerns this proposed settlement is the best solution. I am hopeful 
you will agree to support this proposed settlement.



MTC-00030540

3690 Woods Road E
Port Orchard, WA 98366
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing to you today to express my support of the 
settlement that was reached between Microsoft and the Department of 
Justice. While I ardently question the merits of this case, I was 
pleased to hear that a resolution may finally be in sight given the 
three-month mediation process that has already ensued. The enactment 
of this settlement would be beneficial. I urge the Justice 
Department to enact the settlement and suppress any further action 
against Microsoft. Some people have made the mistake of seeing 
Shunt's work as a load of rubbish about railway timetables.
    Microsoft has done more for this country under the leadership of 
Bill Gates than any many other entrepreneurs in American history. 
Further, Microsoft, as a corporation, has gone above and beyond the 
scope of the original litigation in an attempt to resolve this 
issue. Microsoft has agreed to disclose the internal interfaces of 
the Windows system. This is a first in any antitrust settlement.
    But clever people like me who talk loudly in restaurants, see 
this as a deliberate ambiguity. A plea for justice in a mechanized 
society.
    I would hope that the Justice Department recognizes the immense 
benefits of enacting this settlement and proceeds accordingly at the 
end of the month. When Shunt says the 8:15 from Paddington he really 
means the 8:17 from Paddington. The places are the same, only the 
time is altered.



MTC-00030543

A HY YO! HIHARA DESIGN
San Gabriel, CA
91775
Voice:
(626) 284-0233
FAX.
(826) 284-5411
Ms. Renata Hesse
Antitrust Division
Department of Justice
601 D Street, NW, Suite 1200
Washington, DC 20530
    Dear Ms. Hesse:
    I am writing in support of the Microsoft settlement. It is time 
for the federal government to stop spending millions on a lawsuit, 
when a reasonable settlement is at hand. This settlement, which all 
parties have agreed to, will put this issue to rest.
    At a time when the stock market at is down and the economy is in 
recession, the market is looking for stability--not the 
uncertainty of an ongoing lawsuit against one of America's most 
successful companies. There are many more important issues that the 
government can fund--from programs for children to paying down 
the national debt.
    The consent decree is a fair compromise. Please support it. 
Thank you.
    Sincerely,
    Ka by Yoshihara
    President
    K hy Yoshihara Design



MTC-00030544

CALIFORNIA DEMOCRATIC PARTY
Sc
 1401 21st Street,
Sacramento, 455 22
916,442,570
Ms. Renate Hesse
Antitrust Division
Department of Justice
801 D. Street, NW, Suite 1200
Washington, DC 20530
    Dear Ms. Hesse:
    I am writing in support of the Microsoft settlement. The time 
has come for the federal government to jet its spending prior 
straight. Instead of wasting millions o?? dollars on a lawsuit that 
will do??thing for the consumer except make an already shaky economy 
worse, the time has come to and the ch??ade.
    By supporting the co??ent degree, you will put the issue behind 
us and help refocus the spending priorities of the administ??ation. 
Hopefully, the consumer backlash?? this west??ful spending will 
in??cause this administration to focus its effects on important 
priorities such as working men and women, programs for our nation's 
youth and paying down the national debt. The first step, ??owever, 
is to avoid wasting the millions of dollars fun??ed into it is laws 
it that could be better spent almost anywhere else.
    Thank you.
    Sincerely,
Bob H??ndy
Director, Region 10
CA Democratic Part
*This letter represents the opinion of the author of the letter and 
shall hot be construed to
implement it represents the official California Democratic Party 
position.
Class S. Fig?? Str??t Suite 400

[[Page 28915]]

Let Angeles, CA 9-017-5440
213,239,8736- F?? 2398737
DE-?? Web site
imfo @ ??dem.urg
www.ci-dcm.org
    However not intervention into the world of nigh tech programming 
and design sets a dangers is, and potentially dis??rous prec??dent. 
Di??tating to Microsoft what technology it can develop to in?? the 
effectiveness of existing products of meet the rapidly expanding 
needs of us?? the technological into a from that has been the 
hallmark of our high tech, internet??
    ?? could argue in fact that the ger??esis of the huge decline in 
the Nasdaq, which so far ?? in ?? than $2 million of loss wealth, it 
primarily the result of the government's ?? attach Microsoft's right 
to innovate. After ?? today Microsoft, to norrow Intel.
    Microsoft appears to be a Government target because of their 
success as a company. We need to guard success and innovation, r 
than attack a company because of their success. Microsoft's success 
should be viewed as an ?? not a liability. The consumer has 
benefitted from Microsoft's success. The prospect of ?? benefits to 
the consumer should not be stifled by our ?? government. Similarly, 
other companies should not have to worry that their success could so 
ready be h??eatened by heavy-handed government action, oppressive 
attorneys foes and a legal a ?? designed to harass, publicly smear 
and possibly even break apart the business. The message we must and 
is that success should be rewarded and not punished.
    We hope the consent decree is adopted and the federal lawsuit is 
dropped.
    Sincerely,
    Joe An?? ??
    Executive Director,
    Sit Council ?? Association



MTC-00030546

City of Santa Barbara
City Hall
De Le Guerre Plaza
(806) 584-5324
mailing address
Post Office Box 1990
Santa Barbara, CA 93102
Fax (808) 594-5475
[illegible]
January 25, 2002
Renata Hesse
Trial Attorney Antitrust Division
Department of Justice
601 D Street, NW, Suite 1200
Washington, DC 20530
    Des Ms. Hesse:
    I urge the Department of Justice to end the class action 
lawsuits against Microsoft. The millions of dollars being spent on 
this lawsuit would offer more of a benefit to the public if they 
were spent on programs for youth it our communities.
    There is a severe lack of funding for mentoring programs, after-
school activities, sponsor programs, summer reading programs, gang 
violence prevention, school facilities monies, and many other 
important youth-serving programs.
    Children are the future for this great country. Please, help to 
redirect the money that is being wasted on a class action lawsuit 
this provides no benefit to the consumer, to programs that will make 
a positive difference in the lives of our children. Please support 
the settlement.
    Sincerely,
    Harold P. [illegibel]
    Mayor Pro Tempore



MTC-00030547

Mires Promotions
1228 Leavenworth St..San Francisco, CA 94109 * 
415-793-7933 Field
Marketing . In-Store
Promotions . Event Management
January 21, 2002
Ms. Renata Hesse
Trial Attorney, Antitrust Division
Department of Justice
601 D Street, NW, Suite 1200
Washington, DC 20530
    Dear Ms. Hesse:
    I was a dot-tom victim. My previous employer was partially 
funded by Microsoft. It was a new and amazing telecommunications 
concept.
    When we went back to Microsoft for more funds in late 1999, they 
refused on the grounds that the Anti-trust lawsuit would make it 
more difficult to move investments into the telecommunications 
space. They feared what the media and the courts might say.
    I know that the settlement can't bring back my failed dot-corn. 
But ending a three-year lawsuit that has cost Microsoft and the 
Government millions will allow everyone to get back to work,
    That's just what our economy needs right now.
    Thank you,
    David Mires
    President, Mires Promotions



MTC-00030548

BOARD OF DIRECTORS
David M. Stanley
Chairman
Dr. Don Racheter
President
I. Maurene Fallor
Vice President and Secretary
Jeffrey R. Boey??
Vice President
Stanley M. Howe
Vice President
ACADEMIC
ADVISORY BOARD
Richard Wagner
Chairman
Department of Economics
George Mason University
Robert L. Blab
Public Administration
University of Victoria
Edgar K. Browning
Department of Economics
Texas A&M University
Richard B. McKenzie
Management
University of California Irvine
William C. Mitchell
Political Science
University of Oregon
William S. Peirce
Weatherhead School of Management Case western Reserve University
Randy T. Simmons
Political Science
Utah State University
Eugen??a Toma
Department of Economics
University of Kentucky
Gordon Tu??ock
Department of Economics
School of Law
George Mason University
Richard K. Vedder
Department of Economics
Ohio University
Bruce Yahd??e
Department of Economics
Clemson University
27 January 2002
Renata Hesse, Trial Attorney
Antitrust Division, Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
    Dear Ms. Hesse:
    Millions of average Americans like myself have invested in 
Microsoft; many directly, even more through their pension funds. 
We've witnessed with alarm your office's case against the company 
cause dramatic flux in the stock market. All investors, not just 
those holding Microsoft shares, have been hurt by the general 
downturn in the market.
    Speaking of "markets," in my view it was only an 
extremely narrow, and unrealistic definition of the 
"operating-system market" that allowed the judge to 
conclude that Microsoft was "monopolizing." Microsoft is 
big--it shipped product to 100 million people just in the last 
year--but this is because Americans, and many people overseas, 
have made Windows the operating system of choice, not because there 
is no competition, or any illegal restraint of trade. The fact that 
there are other competing operating systems such as Apple's 
Macintosh platform, and the Linux share-ware platform seems to have 
been lost.
    All high-tech companies live and die by guarding the make-up of 
their key intellectual products, particularly software. Yet the 
proposed remedy that Microsoft, and of course the government, agreed 
upon would force the company to share such information with its 
competitors. Although this may trample the heart of commercial and 
intellectual property law in the country with untold harm done not 
just to this one company, but also to an entire sector of our 
economy, Microsoft appears to have agreed to it in an effort to, in 
the currently popular phrase, "move on." It's important 
we let the high-tech sector of the American economy continue to 
increase the standard of living of the average American to levels 
never before seen in history If Microsoft's competitors and the 
government act like the greedy persons who killed "the goose 
that laid the golden eggs," our economy is likely to end up as 
dead as the goose did in the fairy tale. It's time to "close 
the book" on this case by approving the proposed settlement.
    Sincerely,
    Dr. Don Racheter, President



MTC-00030549

Dr, Jacqueline, Bartol
Doctor of Veterinary Medicine
157-2 Hare Road

[[Page 28916]]

Milton, New Hampshire 03850
January 23, 2002
Renata Hesse
Antitrust Division
Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530
    Dear Attorney Hesse:
    I am writing to contribute public comment in the case of U.S. v 
Microsoft. It is time for the government to stop spending time and 
money on the Microsoft case.
    Millions of dollars have already been spent arriving at the 
current settlement. The settlement should allow both Microsoft and 
its competitors to be productive. It is unfortunate that individual 
companies have tied up the government's time on this issue, but the 
reality is that they have, We should recognize it and move on.
    Microsoft has contributed greatly to the technology industry and 
the economy. In this time of recession and national insecurity we 
need companies like Microsoft to help pull the country out of 
difficult economic times and continue to lead the world in 
technological advances. As an elected official, I work hard to make 
sure that taxpayer dollars are spent wisely and in areas that make a 
positive difference in peoples lives. I urge you to do the same and 
end this needless spending spree.
    Please accept this letter as support of the Microsoft 
settlement. There are many other important issues facing our country 
at this time. It would be in everyone's best interest if the 
government spent our money and time dealing with these rather than 
Microsoft.
    Sincerely,
    Jacqueline Bartol, DVM



MTC-00030550

Paul Dow Dawson, Ph.D.
318 Maranon Way
Punta Gorda, Florida 33983
pdawson @ sunline.net
1-941-235-0197
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
January 27, 2002
    Dear Mr. Ashcroft:
    The reason for this letter is because I am interested in 
American business, and I am also interested in having the stock 
market make a comeback. With that said, the settlement between 
Microsoft is good for two reasons. First, the absurd antitrust suit 
is finally over. Second, Microsoft can now devote all of its 
resources to bringing new and advanced products to the market 
instead of to wasting time in court.
    Better products in the marketplace will result boost the ailing 
tech sector. The litigation against Microsoft started the economic 
downturn, and now we are in a recession. While all of this was 
happening, Microsoft's competitors were lobbying as hard as they 
could to keep Microsoft in court. Innovation was stifled. Who cares 
how much money Bill Gates makes? I consider myself successful, and 
if he makes more money than me, fine. The more money people make, 
the stronger the economy. The one good thing that came out of the 
settlement is that Microsoft will not be able to retaliate against 
companies who ship software that competes with Windows. This will 
encourage competition and benefit the economy.
    Although there should have never been a suit in the first place, 
I am in support of anything that will put an end to the litigation.
    Sincerely,
    Paul Dow Dawson



MTC-00030551

E 2370 Spring Rock Lane
Hayden, ID 83835-8355
January 26, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC? 20530
    Dear Mr, Ashcroft:
    The Microsoft antitrust case has dragged through the federal 
courts for nearly four years now last year, a settlement was reached 
between Microsoft and the Dep??mont of Justice, and that se??tlemem 
is currently pending, in the federal courts Unfor??naiel Microsoft's 
opponents are currently seeking to undermine the settlement and 
bring additional litigation against the Microsoft Corporation in the 
federal corals. ??urther sail would be a waste of time and money, 
and I think it is in the best interest of the public to finalize the 
settlement, rather than allow the federal courts to become the 
playground for personal vendettas to be hashed out.
    The settlement is by no means unfair, especially to Microsoft's 
competitors In fact in the interest of wrapping up the case, 
Microsoft has agreed to terms and conditions that extend to aspects 
of the corporation that were not found to be in violation of 
antitrust laws. In other words, the settlement represents generosity 
on Microsoft's part Microsoft has agreed to refrain from retaliating 
against computer makers who introduce software into the market flint 
directly competes with Microsoft technology. Microsoft has also 
agreed to license the Windows operating system to twenty of the 
largest computer makers on identical terms, including price. I do 
not believe that, with a perfectly reasonable settlement available, 
further litigation is necessary. Microsoft has paid its debt to 
society and it is time to move on. I ask you to support the 
finalization of the settlement as soon as possible.
    Sincerely,
    Helen Tester
    cc: Senator Larry Craig



MTC-00030552

284 Melrose Avenue
Merion Station, PA 19066
January 23, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    Now that the Department of Justice has reached an antitrust 
agreement with Microsoft, what's next? Will this matter get dragged 
on for another three years, leaving the technology sector in a major 
recession?
    Microsoft has been more than willing to settle this matter. They 
have agreed to license their Windows operating system to the largest 
computer makers, with identical terms and conditions. They have also 
agreed to design future versions of Windows to provide a mechanism 
to make it easy for computer makers, consumers, and software 
developers to promote non-Microsoft software within Windows.
    Let's end this dispute and allow economic law--supply and 
demand--determine how business is done. I support the 
settlement and look forward to the end of this case.
    Sincerely,
    Jordan Driks
    cc: Senator Rick Santorum



MTC-00030553

T&K Solutions
12126 Feldwood Creek Ln
Riverview, Fl 33569
(813) 671-7362
(813) 671-7413 (fax)
eMail tomg @ t-k-solutions.com
January 26, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I have been an avid user of Microsoft and am happy to see the 
government finally reach a settlement in their antirust case against 
Microsoft. I feel that the settlement is fair and I just wish the 
whole issue were already resolved.
    While I have been pretty neutral throughout the whole case, I 
have anxiously been awaiting an outcome. Microsoft was not wholly 
innocent, but that was three years ago and the concessions they make 
in the settlement more than cover for what was asked of them. By 
giving over their source code to the competition, while at the same 
time designing Windows to work better with outside programs, 
Microsoft will be helping to increase the diversity of choices for 
people to use in what have been predominantly Microsoft dominated 
areas.
    In short, I would like to thank you for taking the time to read 
opinions like mine on this case. I feel that it is important to know 
how a decision of this magnitude will affect the public before 
finalizing it.
    Sincerely,
    Tom Gerhart
    Thank you for allowing us to serve you!
    Tom Gerhart



MTC-00030554

FAX SHEET
H. Thomas & Patricia H. Norris
403 Wesley Road
Greenville, NC 27858-6404
Phone 252-355-2479 FAX 252-355-8927
tomnor @ attglobal.net
FAX TO: Attorney General John 
Ashcroft-------------
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FAX NUMBER: 1-202-307-1454
FROM: 
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DATE: 1/27/02
TIME: 6142 AM/PM
NUMBER OF PAGES INCLUDING COVER SHEET

[[Page 28917]]

COMMENTS:-------------------
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    The information contained in the facsimile message may be 
confidential and is intended only for the use of the individual or 
entity named as recipient. If the reader is not the intended 
recipient, be hereby notified that any dissemination, distribution 
or copy of this communication is strictly prohibited. If you have 
received this communication in error, please notify us immediately 
by telephone and return the original message to the address above.
403 Wesley Road
Greenville, NC 27858
January 25, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing to you today to express my support for the 
settlement agreement between Microsoft and the Department of 
Justice. After three years of litigation, the time has come to 
finally put this issue to rest. The settlement agreement that was 
reached is fair and should be quickly enacted.
    The terms of the agreement indicate Microsoft's desire to 
resolve the antitrust dispute. Under the terms of the settlement, 
Microsoft will now disclose the protocols and internal interfaces of 
the Windows system. This will allow developers to create software 
that is increasingly compatible with the Windows system. Information 
sharing, then, should provide consumers with an increased choice in 
operable software. Clearly, Microsoft has agreed to disclose this 
information in an attempt to resolve the dispute.
    Please enact the settlement at the end of January. Enough 
litigation has already gone through the courts.
    Thank you for your time regarding this issue.
    Sincerely,
    H. Norris



MTC-00030555

REALTY EXECUTIVES
WILLAM R. JOHNSON, CRS
Broker/Associate
810 Cardinal Lane
Hartland, Wl 53029
Business: (262) 369-8900
Home Office: (262) 367-8315
Fax (262) 367-9695
Toll Free: (800) 942-0048
Email: BillJohnson @ realtor.com
January 22, 2002
Attorney General John Ashcroft
U.S. Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft,
    Although I believe this situation should not have arose in the 
first place, I wanted to write to express my support for finalizing 
the Microsoft settlement deal announced in November. Considering 
Microsoft's incredible contribution to the PC 
industry--offering a user-friendly, standardized software 
platform that has changed the world--keeping this company 
intact should be a priority of this legal action.
    The incredible costs that have been endured by this lawsuit, 
from years of prior litigation to future monitoring, are a major 
sacrifice of taxpayer time and money. Now that Microsoft has offered 
guidelines to open up more competition in the industry, changing 
licensing agreements and design of Windows, let's end this process 
and move on to more important issues. Leave Windows alone, unlike 
the government, it works!
    To further the course of breaking up a company because of 
competitive business practices, just because it is so successful at 
it, would be a major mistake and would preclude the potential 
opportunity for cooperation from here forward. Please approve the 
agreement and let the technology industry get back into position to 
rebound and grow in 2002. Thank you.
    Yours trul??
    William R. Johnson, C.R.S. G. R. I.
    cc: Representative Jim Sensenbrenner



MTC-00030556

January 25, 2002
Ann Rothstein
14 Rolling Way
New Rochelle, NY 10804-2406
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    I am in favor of the Microsoft antitrust case settling. I urge 
the court to approve the settlement agreement, and hope that no 
further action will be taken against Microsoft by the federal 
government
    The terms of the settlement agreement are more than reasonable. 
Microsoft has agreed to make it easier for their competitors to 
compete with Windows technology. They have also agreed to design 
future versions of Windows in such a way that computer manufacturers 
will be able to more easily add or remove features of Windows and 
replace those features with non-Microsoft software. Additionally, 
Microsoft has agreed not to enter into contracts that would obligate 
third parties to exclusively sell Windows products. Concessions of 
this type should certainly do away with concerns of predatory 
business practices on Microsoft's part.
    The settlement agreement is good for consumers, and is good for 
the technology industry as a whole. I would like to see the court 
approve this agreement without any further delay.
    Sincerely,
    Ann Rothstein



MTC-00030557

Saturday January 25, 2002
TO: The Department of Justice
Washington, D.C
Subject: Microsoft Settlement;
Fax # 1 202-307-1454
    As a voter, living in the state of Colorado, I feel the 
negotiated agreement made by Microsoft with your department, and 
nine states, is a fair and equitable to all parties concerned. It 
time we all move forward without spending more of our tax dollars, 
and lining the pockets of the attorneys involved.
    Regards;
    Bill Coriell
    Denver, CO



MTC-00030558

2304 41st Avenue E
Seattle, WA 98112-2732
January 25. 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing this letter to express my opinion on the settlement 
reached between the Department of Justice and Microsoft. For three 
years I have followed the case against Microsoft with avid interest. 
I" have become increasingly annoyed with the length of the 
litigation process. The terms of the federal settlement are 
extremely fair and I believe that it should be enacted without 
hesitation. Any continued mediation in this case would be poor 
judgment by the Justice Department.
    Further, the terms of the settlement include many concessions on 
behalf of Microsoft. The terms of the agreement call for the 
disclosure of protocols and internal interface designs of the 
Windows system. This will result in the ability for competing 
developers to produce software that may be more compatible with the 
Windows system. In addition to this Microsoft has allowed for the 
formation of a technical review board that is composed of outside 
members. This panel will ensure Microsoft's compliance with the 
terms of the settlement. It becomes increasingly clear that the 
enactment of this settlement is important. Resolution in this case 
will benefit the technology industries and the economy. Please enact 
the settlement.
    Sincerely,
    Kurt Buecheler



MTC-00030559

Rebecca Frankel
MIT Laboratory for Computer Science
Room 435, 200 Technology Square
Cambridge, MA
rfrankel @ mit.edu
January 26, 2002
Renata B. Hesse
Antitrust Division
U.S. Department of Justice
601 D Street NW
Suite 1200
Washington, DC 20530-0001
Response to the Proposed Settlement of the Microsoft Case:
    I am writing because I am unhappy about the proposed settlement 
of the Microsoft antitrust trial. I do not wish to try to enumerate 
the flaws of the settlement. I think other people have done a good 
job of that; for instance, I approved of Daniel Kegel's petition and 
signed it. In addition, I feel uncomfortable saying anything that 
might imply that I know better than I he judge how to decide issues 
of law or apply them to a remedy. I am a software engineer; I don't 
know anything about law. The only special understanding I have is of 
technology.

[[Page 28918]]

However, the problem of the "understanding of 
technology" is an issue in this case. There has been much 
griping in technology circles that this settlement shows how 
thoroughly the legal system doesn't "get" technological 
issues. But most of this griping is just that--griping. You 
legal people must wonder about us: if there really is something you 
don't "get," why can't we explain to you what it is?
    For instance, recently an engineer complained to Lawrence 
Lessig: "Members of the judiciary are largely unqualified to 
comment or judge upon issues of a technical nature, simply because 
their careers do not incorporate a great deal of technical 
knowledge, and also because they have not sought it ... My concern 
is that...we won't have a lot of judges with a high awareness of the 
intricacies involved for several years. However, the judges 
presently sitting are essentially creating a body of law to govern 
what they do not understand." In reply, Lessig shot back a 
challenge to us:
    "There was a time when I thought that lawyers wouldn't do 
too much damage... All that has changed now ... This is, in part, 
because courts don't understand the technology. But I don't think 
it's because courts don't know how to code. I think the problem is 
that courts don't see the connection between certain kinds of 
technology and legal values. And this is because we've not done a 
good job in demonstrating the values built into the original 
architecture of eyberspace:
    That the Internet embraced a set of values of freedom...that 
those values produced a world of innovation that otherwise would not 
have existed. If courts could be made to see this, then we could 
connect this struggle to ideals they understand.
    Sometimes when I read Slashdot debates, I wonder whether you 
guys get this connection either... And this leads me to the greatest 
pessimism: If you guys don't get the importance of neutral and open 
platforms to innovation and creativity; if you get bogged down in 
20th century debates about libertarianism and property fights; if 
you can't see how the .commons was critical to the .com revolution, 
then what do [you] expect from judges?
    You guys ... built an architecture of value. Until you can begin 
to talk about those values, and translate them for others, courts 
and policy makers generally will never get it. Lessig is basically 
telling us we are being a bunch of inarticulate crybabies. He is 
right. If we want to claim the right to complain that courts do not 
understand us, we need to provide a "translation of our 
values" in terms that a layman can understand.
    My goal in this letter is to attempt to provide such a 
translation, and then use it to make an analysis of the nature of 
the public interest in the settlement of the Microsoft trial. I am 
deeply involved with the society that created the values to which 
Lessig refers. I have spent a large part of the last eight years at 
the MIT Lab for Computer Science--a place whose extraordinary 
qualities were better characterized by another student from my 
floor:
    [I]t is tough for most people to imagine a building where a 
young herd can walk out of his office on the 4th floor, argue with 
the founder of the free software movement (Richard Stallman), annoy 
the authors of the best computer science book ever written (Abelson 
and Sussman), walk up one floor to run a few ideas past Dave Clark, 
Chief Protocol Architect for the Internet from 1981-1989, and 
walk down two floors to talk to Tim BernersLee, developer of the 
World Wide Web. I know all these people; many of them feel like 
family to me. I know what they care about, what they hope for, what 
they dream about, what they fight, for, and what they fear. I never 
imagined that, as an MIT engineer, so much of what I would struggle 
with would not be the "intricacies involved" in the 
practice of engineering, but instead the problems of defining and 
communicating the value that technology can and can't provide to 
society. The engineers here are in a constant battle to prevent 
society from destroying the value they try to build for it: this 
struggle takes up so much of their energy that it is hard to think 
of what they do as just engineering anymore. I do not, like this: I 
want to simply be an engineer. I wish that you, the court, could 
take from us the job of defining and communicating values, so we 
could go back to being ordinary engineers. It is much more natural 
for you to take on this role, than it is for us to have it. But in 
order for you to do that, first we would have to explain these 
values to you.
    I am unhappy with the proposed settlement because it shows how 
deeply the courts do not understand the value that engineers here 
are trying to build. I could pick on the specifics of the settlement 
terms ad infiniturn, but I feel it would be a pointless exercise, 
because only a basic failure of understanding of the nature of the 
public interest could make such a flawed settlement, seem acceptable 
in the first place. But if I claim that there is a basic failure of 
understanding, that raises a question: "What exactly is it 
that I think government, officials don't understand?" It is 
rather shocking that we have failed to effectively answer this 
question. We have told you many things: long stories of power 
struggles in the browser market, mind-bendingly technical analysis 
of the proper design of network protocols, plenty of satirical 
accounts of Microsoft's shady shenanigans, and many other similar 
things. But we never have given a simple answer to the simple 
question "What is the nature of the public interest in all 
these matters?" It is the goal of t, his letter to try to fill 
this gap. I will make my argument in a context so ordinary that it 
may well seem childish, but please bear with me: in my silly 
example, I think I can capture the essential issues at stake and 
then tie them back to our complex and confusing real situation.
    So here is my simple picture--instead of talking vaguely 
about the "old economy" and the "new 
economy," and about the mysterious difference between them, I 
want instead to talk about two ordinary household tasks: mowing the 
lawn and cleaning the basement. In my picture "mowing the 
lawn" will represent the old economy, and "cleaning the 
basement" will represent the new. (I warned you this would 
sound silly; but please hang on--it is not as dumb as it 
sounds). Why did I choose these particular examples? Because I think 
the fundamental change that we are calling "the appearance of 
a new economy" is a shift from an economy that strives to 
increase productivity by automating manufacturing, to one that 
strives to increase productivity by automating organizational tasks. 
The new frontier is the reorganization of supply chains and business 
processes to take advantage of "information 
technology"--the ability of machines to do the 
organizational tasks that used to be handled by armies of clerks and 
middle managers. But this shift, is so huge, complex, and hard to 
picture, that I want to pull it down to earth and discuss its 
central principles in the context of the kind of organizational task 
we all are familiar with: the problem of how to bring some order to 
a messy basement. By way of contrast, I want to compare this task to 
another one we all know and love: the problem of how to tame an 
unruly lawn. (You might ask, how is mowing the lawn manufacturing? 
Well, it is manufacturing shorter grass.) Now that I have identified 
my representative "industries", I want to talk about how 
we can think about the nature of the "public interest" 
in the context of these tasks. As I continue this description, I 
hope you will see the advantages of translating our discussion to 
such a down-to-earth context. In this setting, it is easy to use 
one's ordinary intuition to understand the public interest, in a 
conflict. Maybe it is hard to interpret the public's interest in the 
"future of an online architecture for e-business," but 
how hard is it to think about what you want for the future state of 
your basement? I want you to see what our conflict with Microsoft 
would look like if it occurred in this ordinary context.
    So, to start my story, let me describe a conflict which 
illustrates a threat to the public interest in the context of the 
"old economy." Suppose I need my lawn mowed, and the kid 
who I usually hire to push my clunky old gas mower around the yard, 
instead shows up to work with a shiny, spiffy new lawnmower of his 
very own. He has broken his piggy bank to buy it: he is very proud 
of himself and shows it off to everyone on the block. His beautiful 
new lawnmower mows the lawn twice as fast as the old one did. As a 
result, he can mow twice as many lawns in the same time. Pretty soon 
he is raking in the cash. He is making so much money, he can afford 
to lower his lawn-mowing rates, so he begins to steal business from 
the other lawn-mowing kids on the block. The other kids get upset. 
"He's cheating!" they cry. They gang up on him, beat him 
up, and smash his new lawnmower. The original kid, recovering in the 
hospital, appeals to the adults on the block for justice. "The 
other kids were jealous of my success!" he cries. "They 
had no right to hurt, me or my lawnmower. You should protect me so 
that nothing like this ever can happen again!"
    Should the adults listen to him? Absolutely. Not only was what 
happened to the kid unfair, it also damaged the public interest. 
When a kid can mow lawns twice as fast for less money, everyone on 
the block benefits. He put considerable investment and risk into 
obtaining his lawnmower, and it provided a benefit for everyone. 
Yes, he also

[[Page 28919]]

made a lot of money from his new lawnmower, and maybe he was a 
little obnoxious about showing it off, but his good fortune was good 
fortune for everyone. Therefore, his investment deserved to be 
protected from the destructive jealousy of the other kids. The rich 
kid should be protected, and the jealous kids should be punished.
    Now, to continue, let me introduce another story of a situation 
that causes harm to the public interest, this time in the context of 
the "new economy." Suppose I decide to hire a kid to 
help me clean my basement. This kid works very hard, sorting all the 
stuff in the basement, building appropriate-sized boxes for various 
categories of stuff, and carefully labelling all the boxes so it is 
easy to find things later. His hard work is useful to me: it helps 
me find tilings more easily. But, there is trouble in my little 
paradise. One day, my little helper cannot come, so I hire another 
kid to help out. But this kid is different. He is careless: he puts 
things in the wrong boxes, and mislabels the boxes. Worse, he is 
devious: he discovers that if he puts things in the wrong boxes 
deliberately, and labels the boxes in a scrawl only he can 
understand, then he can make extra money off me, because I will need 
his help to be able to find things again. Worse still, he is 
ambitious: he realizes that if he puts the potting soil in a place 
where only he can find it, then pretty soon I will be forced to ask 
him to take charge of organizing the gardening shed as well. Thus he 
can double the amount of money he can make off me, and there is 
nothing I can do about it.
    So how do we think about the "nature of the public 
interest" in this situation? Well, in order to answer that 
question, it is important to ask first "what is the result I 
am trying to achieve?" If I hire someone to clean my basement, 
the result I want is a well-organized basement, a basement in which 
it is easy to find things. The kid who worked hard to sort things 
accurately and label the boxes clearly helped me achieve my goal. 
The kid who deliberately mislabeled the boxes and misplaced the 
potting soil did not help me achieve my goal. He hurt my interests, 
not merely because he over-charged me, took over my basement, and 
hatched devious designs on my gardening shed, but much more simply, 
because he failed to deliver to me the basic effect I wanted and 
needed. I needed a basement where I can find things easily: he 
didn't give it to me. By contrast, the first kid, the one who built 
me a good system of well-organized; wen-labelled boxes, did give me 
the effect I needed. The first kid's actions served the public 
interest; the second kid's did not.
    This observation is the whole secret to understanding the 
"architecture of value" of which Lessig spoke. What is 
an "architecture of value?" It is nothing fancy: one can 
think of it as an information architecture that would remind one of 
a well-organized basement. This architecture is valuable because the 
careful sorting and clear labels make it easier to find things. 
There is nothing terribly subtle or difficult about this idea. The 
only really deep concept here is the observation that it is useful 
to ask the question: "what is the fundamental goal we are 
trying to achieve?" We are entering into an 
"organization economy," and in such an economy, we want 
to achieve the goal of being well-organized. These central value of 
such an economy is no more complicated than the admonition we have 
all heard a thousand times from our mothers: "it, is nice to 
put things away where they belong so it will be easier to find them 
again later." But if it is all so simple, why does it seem so 
hard? It seems hard because it IS hard, but it is not hard because 
anything about the situation is complicated. It is hard for quite 
another reason, which I want to illustrate using a third story. 
This, my final story, is a classic tragedy.
    Let us suppose that the first kid I hired to clean my basement 
returns from his vacation and ventures downstairs to view the state 
of his handiwork. When he sees what the second kid has done, words 
cannot describe what he feels at the sight of the ruin of all his 
hard work. He grabs the second kid by his shirt collar and drags him 
to me to face judgment. "He's cheating!" he cries. (He 
doesn't say much else: unfortunately this first kid--though a 
good, honest worker--is not exactly the articulate type.) The 
second kid replies: "He is just, complaining because he is 
jealous of my success! He has no right to handle me this way or 
damage the valuable "intellectual property" I have 
created. You should protect me so that nobody can ever treat me like 
this again!" Now when I hear these words, I remember my 
earlier trauma when I witnessed the kid with the new lawnmower get 
beaten up by a jealous gang. I remember how I pledged to the kid on 
his hospital bed that nothing like that would ever be allowed to 
happen again. This recollection plunges me into a state of fear and 
confusion. The first kid comes to me and begs for the right to re-
label the boxes correctly: it is hard to deny such a heartfelt 
request. On the other hand, I made a solemn pledge to the kid in the 
hospital that I would never, ever allow anything like the disaster 
that happened to him to happen to anyone else. I am riven in two: I 
do not know what to do. So I propose a compromise. I propose that 
certain of the boxes in the basement are to be declared 
"Middleware", and I will require of the kid who now owns 
the organization system of my basement that he reveal the meaning of 
the labels on those boxes. "To protect his "intellectual 
property," I only require that he reveal these labels to 
another party when they agree to sign a non-disclosure agreement. 
The second kid is happy enough to agree to that, especially since he 
alone knows exactly where he has hidden the potting soil, and he has 
carefully made sure that the box where it is hidden is not declared 
"Middleware." In this way, his designs for the takeover 
of my gardening shed are unaffected. Since summer is coming, the 
control of the gardening shed is the only thing that really matters 
anyway, so he loses nothing by signing on to my 
"compromise". Now, what can we say about, this 
compromise? Should I say that it is a bad compromise because I was 
not. careful enough to locate the hidden potting soil before I 
settled on my definition of "Middleware"? Should I say 
that it is unfair to require people to sign a non-disclosure 
agreement whenever they want to get a hammer from the basement? I 
could say all these things, and more, but they seem to skim over the 
surface of the problem. Much more fundamentally, this compromise 
represents a failure to think clearly about what we are trying to 
accomplish. It is in our statement of the nature of the values which 
we are "compromising" that we have failed. We have 
failed to understand the essential values that we are pledged to 
protect. To appreciate the tragedy of this failure, imagine how this 
situation would appear to the first kid, the one who cares more than 
anything about properly organizing the basement. He worked hard and 
honestly to do the very best job he could, but to no avail: all his 
hard work was ruined, it wasn't even accidentally ruined it was 
ruined on purpose. But when he tries to protest about this betrayal 
of his values, not only is he not listened to, he is also treated 
like a jealous, violent gang leader. Since he is not a sophisticated 
kid, he cannot figure out why any of this is happening to him. It 
simply feels to him like all the adults around him have gone mad.
    I might ask: what exactly were the essential values I failed to 
understand when I devised my compromise? One might say that my 
compromise shows how little I understand the values associated with 
the "new economy." It is true that I have failed [o 
understand how overwhelmingly important it is to have clearly 
labeled boxes in my basement. But this concept of 
"value" in the new economy is so very simple and easy to 
understand, that one might also maintain that I understood it 
perfectly clearly. When I insisted that the "Middleware" 
boxes should be clearly labelled, I showed that I do understand what 
constitutes value in the new economy.
    Nonetheless, my judgment was confused, but it was not a lack of 
understanding of the new economy that caused this confusion. 
Instead, my judgment was clouded by the pain and confusion that the 
reminder of an old-economy conflict invoked in me. I ran into 
difficulties because I was led to apply "old economy thinking 
to a new economy problem." In particular--this is the key 
point--my real failure carne not from a failure to understand 
the values of the "new economy," but from a failure to 
understand the values of the old one. When I promised to the kid in 
the hospital that nothing like what happened to him would ever be 
allowed to happen again, I did not define very clearly in my head 
what exactly it was I was pledging myself to protect. What exactly 
did I promise? Did I promise that in every circumstance where a rich 
and successful kid was challenged by a poorer, less successful kid, 
I would always side with the rich kid?
    No, that is not what ][ promised. I made the promise to the kid 
in the hospital because I saw that his good fortune was good fortune 
for everyone, and therefore I pledged myself to protect it. But when 
I later found myself in a situation when a rich and successful kid 
demanded that I protect his good fortune, I forgot the rationale 
behind my original promise. If I had remembered it, I might have 
thought to ask myself "in this new situation, is riffs rich 
kid's good fortune good fortune for everyone?" Hopefully it is 
clear that this

[[Page 28920]]

question receives a rather different answer in this situation. So, 
does my old promise bind me anymore? Am I required to devise a 
compromise between the interests of the two children in my charge? 
No, such a compromise doesn't make sense. I could make things much 
easier on myself if I just worried about protecting my own 
interests. My interest is to be able to easily find things in my own 
basement. The first kid fought for my interests, the second kid did 
not. It is that simple: there is no need for the terrible pain and 
confusion this case evokes, or the strange and convoluted 
compromises that are the result. So, to wrap up my Story, I want to 
summarize the four conceptual errors I made which drove me to devise 
such a thoroughly flawed compromise.
    First, I made two mistakes in my understanding of the "new 
economy":
    1. I did nor understand how much value the first, kid provided 
for me when he carefully sorted and labeled all my stuff.
    2. I did not understand how badly the second kid hurt me when he 
destroyed this careful labeling system. I did not understand how 
dangerous it is that I have become dependent on his aid to find 
anything in his system of artfully mislabeled boxes. Second, I made 
two mistakes in nay application of principles that came from the 
"old economy":
    3. When the second kid claimed to me that I had an obligation to 
protect his incentive to invest, I forgot that the statement of this 
obligation is that we must protect the "incentive to invest in 
machinery to make a manufacturing job more productive." I need 
to protect a kid's incentive to break his piggy bank and buy a 
lawnmower, or I will have to put up with the fumes and noise from my 
old gas mower forever. But, this obligation does not apply to the 
conflict between the kids who are cleaning my basement, because 
there is no machinery that will aid the task of 
"manufacturing" a cleaner basement. So there is no need 
to protect the incentive to invest in such machinery.
    4. More generally, I made a mistake when I failed to notice how 
the second kid manipulated and abused my commitment to the values of 
the old economy with his carefully chosen words. Earlier I said that 
this kid was careless, and worse, devious: and worse still, 
ambitious. But worst of all, he is manipulative. He is perfectly 
willing to take our most central, sacred values and twist them into 
a empty caricature of themselves to serve his own interests. It is 
our mistake and our shame that we cannot see what is being done to 
us.
    So now I have completed my story. I have explained the essential 
failures of understanding that caused me to make a dreadful mistake. 
I promised earlier that when I was done I would take the lessons I 
have explained and tie them back to our complex and confusing real 
situation. So I will describe again the four mistakes I have just 
identified, this time as they appear in the real world. I contend 
that this settlement reveals that public officials fail to 
understand four important concepts that are crucial to understanding 
the nature of the public interest in the conflict with Microsoft.
    First, it reveals that there are two ways that public officials 
basically misunderstand the "new economy."
    1. They do not understand the tremendous value to society 
provided by the creators of the open standards of the Internet, the 
World Wide Web. the associated free software that supports the 
Internet (Apache, Bind, Perl, etc) and the free operating systems 
Linux and BSD. They do not understand the tremendous value to 
society of open, well-specified APIs on every level of the 
information architecture we are trying to build to support the 
future productivity of our society.
    2. They do not understand how badly society is hurt by 
Microsoft's manipulation of its APIs and file formats. They do not 
understand how much the constantly changing proprietary file formats 
hurt ordinary people's ability to get work done, nor do they 
understand the loss of potential productivity that occurs when a API 
is obscured or destroyed. They do not understand how Microsoft's 
control of the platform hurts the prospect for real competition and 
progress in the computer industry.
    Second, more seriously, it reveals two ways that public 
officials are confused about how to apply the values of the 
"old economy" in this new situation.
    3. They haven't noticed that, just as you don't need a lawnmower 
to clean a basement, you don't need a lawnmower to write an opera, 
ting system. All the effort to preserve a delicate balance between 
the need for open APIs, and the need to preserve the incentive to 
invest, have missed the point that we are protecting the incentive 
to invest in a purely imaginary lawnmower. There is no machinery 
that will make the job of writing an operating system any easier, so 
there is no need to protect the incentive to invest in imaginary 
machinery.
    4. Finally, they haven't noticed that Microsoft is lying to them 
Microsoft is lying in a horrible way: they are invoking the values 
that honorable public officials have spent their whole lives 
protecting, and they are manipulating them, using them, twisting 
them around so they come to mean something entirely different. The 
government does not detect this duplicity--that is their 
greatest mistake. We engineers have a name for these kinds of lies: 
we call them FUD, which stands for "fear, uncertainty and 
doubt." We watch Microsoft deliberately spread fear, 
uncertainty and doubt in the government, the courts and the general 
population, and we view with amazement and horror the enormous power 
that these lies have over the world.
    We are lost: we do not know what to do to combat lies which have 
such terrible power. We are like children who live in a world where 
all the adults have gone mad.
    Yours sincerely,
    Rebecca Frankel



MTC-00030560

4404 Burke Drive
Metairie, LA 70003
January 26, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr Ashcroft:
    As a supporter of Microsoft, I cannot say how pleased I was to 
see that the Justice Department finally came to its sense and 
resolved to settle with Microsoft. This case has gone in far too 
long for people like me, who depend on Microsoft's products in our 
daily lives
    I hope that the settlement will not be too harsh on Microsoft. 
With giving over their trade secrets to their competitors and 
allowing people who ship computers to configure Windows anyway they 
want, Microsoft could lose out on a lot of money. However, I feel 
that they will continue to succeed like they always have despite 
these handicaps,.
    I hope that the government will refrain in the future from 
attacking business that are integral to our economy like Microsoft 
is. This whole case, which has taken up so much of their time, could 
be the reason why we are currently in a recession. End this case and 
let Microsoft get back to work.



MTC-00030562

2454 28th Street
Long Island City, NY 11102-1917
January 25, 2002
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    Now that the Courts will make a final decision next week on 
whether the proposed settlement benefits the public, I'd like to 
express my opinion.
    Microsoft has agreed to not enter into any agreements obligating 
any third party to distribute or promote any Windows technology, 
exclusively or in a fixed percentage, subject to certain narrow 
exceptions where no competitive concern is present. The company has 
also agreed not to enter into agreements relating to Windows that 
obligate any software developer to refrain from developing or 
promoting software that competes with Windows. Microsoft has also 
agreed to not retaliate against software or hardware developers who 
develop or promote applications of operating systems that compete 
with Microsoft's.
    So why should we pursue further litigation? The agreement seems 
more than fair. Let's move on.
    No more litigation!!
    Sincerely,
    Nikolaos Natsoulis



MTC-00030564

6419 Fairbanks Street
New Carrollton, MD 20784
January 24, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing you today to express my opinion in regards to the 
antitrust dispute involving Microsoft. I support Microsoft in this 
dispute and feel that this litigation is a waste of precious 
resources, time, and talent.

[[Page 28921]]

I believe the settlement that was reached in November is a fair and 
reasonable agreement to end this three-yearlong dispute.
    This settlement is thorough, and Microsoft did not get off easy. 
Microsoft has agreed to license its Windows operating system to the 
20 largest computer makers on identical terms and conditions, 
including price. Microsoft has also agreed to grant computer makers 
broad new rights to configure Windows so as to promote non- 
Microsoft software programs that compete with programs included 
within Windows.
    This settlement will benefit companies attempting to compete 
with Microsoft. This settlement will also benefit consumers by 
allowing tiffs company to remain together and continue delivering 
innovative products to the marketplace. Please support" this 
settlement. Thank you for your time.
    Sincerely,
    Sesil Rubain



MTC-00030565

Doug and Marle Oison
4180--71st Ave NE
Marysville, Wash. 98270-8807
Phone: (425) 554 0188
Pax (425) 334 1010
doug.mariooison @ luno.com
January 28, 2OO2
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr, Ashcroft:
    As a concerned constituent, I write to inform you of my support 
of the Microsoft settlement. Over the last three years I have 
followed the federal suit against Microsoft. I have been 
increasingly annoyed with the Justice Department's pursuit of 
Microsoft. Microsoft has been more than willing to compromise In 
attempts to resolve this issue.
    With the release of Windows XP, Microsoft will now put into 
effect a mechanism that will allow users to add or delete Microsoft 
programs at their own discretion. This will revolutionize consumer 
ability to configure their operating systems and should be 
beneficial.
    I believe Microsoft has gone above and beyond themselves to meet 
the demands of the Justice Department. It is finally time to resolve 
this issue once and for all. Thank you for your concern regarding 
this issue.
    Sincerely,
    Marle Olson



MTC-00030566

JAMES D. SMTIH
10675 NINB MILE ROAD
WAITMORB LAKE, MI 48189
EMAIL Jameeds Oum??h.odu
VO??E 734 449-8836
FAX 734 449-8849
C&IL 734-476 1109
January 26, 2002
Anor?? ?? John Ar??roft
US D?? of Ju??tice
950 Pe?? Av??ue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I urge you to accept the settlement with Microsoft. We should 
one the begal?? system to insure a highly competitive marketplace. 
We should not, however, be misged??ded by constructs of 
competitiveness in an industrial economy when analyzing an 
informationed one. Microsoft has made a major contribution to 
growing the American economy. It has a lead?? po??ition in the 
software market, but its station is easy prey to innovative 
comp??sons. Microsoft has made concessions that will enhance the 
ability of others to challenge it. It is time to ?? the conflict 
from the courtroom to the marketplace.
    The real danger we face is excessive government incursion in the 
marketplace. If the last hundred years tell us anything, it is flee 
peoples and free markets knock the socks off bureaucratic decision 
making.



MTC-00030567

117 Northwood Court Bayport, NY 11705
January 25, 2002
Attorney General john Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing you today to inform you of my opinion as regards 
the Microsoft antitrust suit. I support Microsoft in this dispute, 
which is now in its third year. I believe we should be focusing on 
more pressing issues, and not prolonging litigation against 
Microsoft that will only be a waste of time and precious resources.
    This agreement is thorough. Microsoft has agreed to license its 
Windows operating system products to the 20 largest computer makers 
on identical terms and conditions. Microsoft has also agreed to 
grant computer makers broad new rights to configure Windows so as to 
promote non-Microsoft software programs that compete with programs 
included within Windows. A technical oversight committee has been 
created by the government to oversee Microsoft compliance.
    The terms of this settlement are sufficient to end the lawsuit. 
Please support this settlement.
    Thank you for your time.
    Sincerely,
    Martha Schary



MTC-00030568

AVIATION SIMUI?? A??TIONS INTERNATIONAL. Inc.
POST OFFIC?? BOX 358 ?? TEL & FAX 516271-6476
January 26, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I support the settlement of the Microsoft antitrust lawsuit 
??hile your office primarily seems concerned with Microsoft's impact 
with?? the technology industry, I feel that it is important to 
consider their role in our overall e??nomy, which has slowed 
considerably in the past few years. Aside from the economy slowing, 
the U.S. still retains a large surplus in exporting software, 
Microsoft is a leader in that market and why mess with a good thing? 
As a small-scale software developer, t appreciate the standard 
platform that Microsoft has created. Many average PC users probably 
do as well. It simplifies all of our lives.
    The changes Microsoft is making in the settlement are reasonable 
and favorable to its competition Easing its bundling and exdus??ity 
pacts with computer makers will immediately open the door wider for 
other com??nies to market their software. Because that is the 
government's main contention with Microsoft, the company's 
endorsement of the settlement should leave you with no reason not to 
finalize it
    Sincerely,
    Everett Jo??ne



MTC-00030569

Walter W. Lerch
15220 Golden Rain Drive, Chesterfield Missouri, 63017
January 26, 2002
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft,
    I am writing to voice my support to an end to the Microsoft 
antitrust case. The proposed settlement between Microsoft and the 
Justice Department reflects a fair balancing of the interests and 
should be approved and implemented.
    If given the opportunity, I am sure Microsoft's opponents will 
nickel and dime tiffs agreement to death. This should tell you that 
they are not after fairness, but are truly after a permanently 
crippled Microsoft. This snow job on Microsoft by competitors is 
most certainly not in the public interest any more than any alleged 
antitrust violations.
    Microsoft has responded to the main complaint against it by 
agreeing that non-Microsoft software programs can be installed in 
the Windows operating system. They do this both by changing their 
licensing scheme and their program as a whole. I do not see the need 
to return to court when the main objective can be accomplished short 
of further litigation.
    Thank you for considering my comments.
    Sincerely,
    Walter W. Lerch



MTC-00030570

System Integrators Inc.
Developing Solutions of Tomorrow--Today
January 27, 2002
Attorney General John Ashcroft
United States Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Sir:
    We are a small business and develop products targeting 
Microsoft??* Windows??* platforms. The general economy as you are 
aware is not helping any business, especially small business. Add 
another dimension to the problem--the Microsoft, Justice 
Department legal battle. We see customers have taken a wait and see 
attitude toward new purchases and upgrades, on account of both the 
delays in the lawsuit settlement and the general economy. We are 
also unable to plan our future business for the same reason as our 
products generally support Microsoft technologies. I feel the suit 
should have been resolved one way or the other long time ago.

[[Page 28922]]

At long last, there is a settlement that covers the points in the 
suit. It fairly changes Microsoft's business practices, particularly 
with respect to licensure and software development, and prevents the 
retaliatory action Microsoft allegedly used to keep its hold on the 
market. I am hopeful that the current review process will come to a 
speedy conclusion so that consumers and other software publishers 
such as us will be able to move forward. Let's break this period of 
uncertainty, and accept the current settlement. Let's channel our 
efforts and time to innovate for the benefit of the consumer, 
instead of wasting it on long drawn legal wrangling.
    Sincerely,
    Ganesh Srinivasan
    President



MTC-00030571

114 Eddy St. #5
Ithaca, NY 14850
January 27, 2002
Renata Hesse
Trial Attorney
Antitrust Division
U.S. Department of Justice
601 D Street, NW, Suite 1200
Washington, DC 20530
Facsimile: (202)6:6-9937 or (202) 307-1454
Email: microsoft.atr @ usdoj.gov
Re: Microsoft Trial Tunney Act Comments
    I am very concerned about the proposed settlement of the 
antitrust case against Microsoft. I don't think this settlement is 
in the public interest. After enduring years of litigation and 
continued anti-competitive action on the part of Microsoft, the 
public deserves an effective remedy. The proposed remedy, if 
adopted, will not be effective. The proposed remedy restricts 
Microsoft's actions very little and allows them to continue the same 
anti-competitive business practices that have resulted in the bleak 
software business of today.
    The most important and most critical effect of any final 
judgment in this case should be to restore competitive conditions in 
the markets affected by Microsoft's unlawful conduct. The proposed 
settlement is bound to fail in this goat because it is ill-
conceived, ambiguous, and full of holes. Effective relief would be 
based on principles, not an enumeration of prohibited conduct. Just 
as a judge must avoid even the appearance of impropriety, Microsoft 
should be required to avoid even the appearance of anti-competitive 
conduct. Given its history of unlawful behavior, Microsoft must be 
held to the highest standards of ethical, pro-competitive behavior. 
There must also be an effective, efficient, and powerful enforcement 
authority.
    The proposed settlement has none of these properties. Rather it 
is full of holes, restrictions, and limitations that will make it 
wholly ineffective:
    1. The proposed settlement is confusing and ambiguous. Given 
Microsoft's history, one must assume that every ambiguity will be 
interpreted in the most advantageous possible way by Microsoft. This 
practically ensures future litigation over the meaning of the terms 
and conditions.
    2. The proposed settlement is backward looking. Rather than 
focus on restoring competitive conditions to the markets as they are 
now or will be, it focuses on the past.
    3. There is no effective means for enforcement. Some sort of 
oversight board with actual power is necessary, as are actual 
penalties for noncompliance. The proposed settlement permits only 
further litigation.
    4. The proposed settlement aims to protect the market for 
personal computer operating systems, but not the market for server 
operating systems. Should not Microsoft be enjoined from using anti-
competitive practices to monopolize the server market in addition to 
the PC market?
    5. The proposed 'Technical Committee" is worthless, 
in part because of its secrecy. It needs real investigative and 
oversight powers. It should be a resource for further litigation. It 
should have the right and responsibility of reporting the behavior 
of Microsoft to the public.
    6. The proposed settlement fails to adequately protect 
'open source' competition. As 'open source' 
software is generally provided to the public with source code as a 
public service at no charge, it is deserving of the highest 
protections from unlawful anti-competitive practices. 'Open 
source' software is commonly written as a hobby by individuals 
or small associations. The proposed settlement discriminates against 
open source software by allowing Microsoft to deny access to those 
with out a 'legitimate business need'. Similarly, the 
'reasonable and non-discriminatory' terms for API and 
communications protocol licensing may be used to discriminate 
against open source developers and products. Microsoft could impose 
non-disclosure licensing terms that prohibit distribution of source 
code, for example.
    7. The protections of OEM's are inadequate. The proposed 
settlement provides maximum protection to only the largest twenty. 
All OEM's should be treated equally, and price schedules should be 
published for all to see.
    8. The term of 5 years, extensible to 7, of the proposed 
agreement is inadequate, given Microsoft's record of ignoring such 
agreements and litigating.
    9. Microsoft's competitors need to be protected against the 
'Embrace and Extend' strategy of hijacking established 
standards and modifying them to be incompatible. Microsoft should be 
enjoined from using these tactics, and rather should be required to 
work with standards groups. Java and Kerberos are two standards that 
have suffered this fate in recent years.
    10. Recent price increases in volume licensing agreements have 
demonstrated to the public that the Microsoft monopoly is alive and 
well despite the ongoing litigation. The final judgment should 
ensure that pricing is kept at a reasonable level,
    11. Microsoft should be enjoined from using patents to prohibit 
or discriminate against 'Open Source' software. Perhaps 
Microsoft should be required to license for free 'Open 
Source' use any patent that it owns or otherwise licenses.
    12. Microsoft has been recently trying to leverage its operating 
systems monopoly and Internet subsidiaries to promote its 
'Passport' on-line authentication service. Microsoft 
should be enjoined from using its currently monopoly to eliminate or 
prevent competition in the on-line authentication service business.
    13. The definition of middleware is poor. Middleware should be 
defined based upon functionality or character of a product, not on 
whether it is trademarked.
    I have enumerated but a few of the serious limitations of the 
proposed settlement. The proposed settlement is wholly inadequate 
and is not in the public interest.
    Sincerely,
    Stephen D. Holland



MTC-00030572

6803 244th Street Court E
Graham, WA 98338
January 26, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am a small business owner and I have used Microsoft products 
to help run my business for years. I feel that the antitrust case 
against Microsoft is senseless. The settlement should stand the way 
it is and this whole mess should be over.
    Microsoft has contributed greatly to the IT industry and I feel 
that they've earned what they have. According to one of the terms of 
the settlement, as I understand it, Microsoft is required to release 
their internal codes to Windows so that other companies can use them 
to produce their software. I feel as though others are simply taking 
advantage of Microsoft, I don't think the courts should support 
that.
    I hope that the Department of Justice decides to clear this 
matter up. To finalize the settlement is clearly in the best 
interest of all involved. I would hate to see any more money wasted 
on this.
    Sincerely,
    Jerry Taylor



MTC-00030573

Watts and Associates
22622--50th Avenue S E
Bothell, WA 98021
January 25, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am in favor of the proposed Microsoft vs. The Department of 
Justice antitrust settlement. In my opinion, the settlement as put 
forth, is a reasonable one providing all of the participants fair 
and just resolution; not to mention putting all of this government 
financed litigation behind us. This settlement accomplishes a number 
of specific changes. For instance, computer makers will be able to 
replace access to various features of Windows with access to non-
Microsoft software. Another change that I believe to be very 
generous on Microsoft's part is the proposed licensing of Windows 
operating system to computer makers.
    I am particularly disturbed that while the government was 
searching for ways to break up Microsoft, other institutions were 
getting

[[Page 28923]]

away with countless acts of corruption. It's time that Microsoft got 
back to business and the government went back to governing. Why is 
it that we allow the liberals in the government to continue 
rewarding the do-nothing persons and punishing those who accomplish 
and contribute to the economy?
    Sincerely,
    G W Watts



MTC-00030574

Shirley M. Sebright
1047 Crystal Lane
Springfield, OH 45502-9567
Fax
To: Attorney General John Ashcroft
From: Shirley M. Sebright
Fax: 1-202-307-1454
Date: 1-27-02 
Phone: Pages: 2 Including Fax Sheet
Re: CC:
x Urgent %62 For Review %62 Please Comment %62 Please Reply %62 
Please Recycle
Comments: [Click here and type any comments]
Shirley Sebright
1047 Crystal Lane
Springfield, OH 45502
January 25, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    I am writing to give your support to the Department of Justice 
and Microsoft. I think the government should leave Microsoft and 
Bill Gates alone and allow the company to get back to be the 
creative, innovative company it is. The Department of Justice had no 
business bringing the suit against Microsoft. This suit was more a 
political ploy brought about by Microsoft's competitors. This 
lawsuit sets a dangerous precedent in that the government is being 
used as a weapon against a competing company. This lawsuit also 
threatens the innovative and creative spirit of our country. What 
effect do you think this action has on those who have dreams of 
creating a product, but then see a very creative company being 
hounded? Yes, the company was aggressive, but business is 
aggressive. Microsoft did nothing more or less than what their 
rivals did.
    Microsoft will ultimately be giving up its interfaces and 
protocols to other software developers so that they can more 
comprehensively write software for Windows. The company will also be 
held to a regimented licensing code that will ensure that computer 
makers are able to use the software they want with Windows. A 
Technical Committee will make sure these rules as well as others are 
followed.
    Leave the company be. Give your support to this agreement.
    Sincerely,
    Shirley Sebright



MTC-00030575

1860 Hall Street SE
Grand Rapids, MI 49506
January 25, 2002
Attorney General John Ashcroft US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    Microsoft has had to suffer through three years in the antitrust 
case with the Justice Department. It is pleasing to know a 
settlement was reached in this case, however it is unsettling that 
this case could be re-opened.
    The fact is that this case has a good settlement available to 
end it, and it should be implemented.
    The settlement will allow Microsoft's competitors to access 
Microsoft code so they can design better software. Competitors under 
this settlement will have the ability to effortlessly place their 
software on Microsoft operating systems. Despite these improvements 
opponents of the settlement have launched a campaign to have it 
revoked, and Microsoft dragged back to court. There is no good 
reason to let this happen, the settlement is good and it is too 
expensive to continue this case.
    Once more I would like to state that this case should be 
concluded with the current settlement.
    Sincerely,
    Ron La Mange



MTC-00030576

JBMB CONSULTING
January 26, 2002
Michel G. Bernard
President
29 East 64th Street New York, NY 10021
Tel (212) 879-6242
Cell (917{time}  881-2224 Fax (212) 744-2552
mbernard @ jbmb.org
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    The settlement reached between Microsoft and the Department of 
Justice, appears to be fair. It is my strong belief that at this 
point additional litigation will not help anyone, including the 
States that are seeking to continue suit. It is now time to settle 
and move on.
    Microsoft tins agreed to a number of terms and conditions, all 
of which restrict monopolistic behavior and promote competition 
within the technology industry. Microsoft will refrain from engaging 
in retaliatory behavior should software developers and computer 
makers introduce a product into the market that directly competes 
with Microsoft technology. Microsoft has also agreed to license its 
Windows operating system to twenty of the largest computer makers on 
identical terms and conditions, including price, and to grant them 
broad fights to reconfigure Windows to their own specifications.
    I do not believe additional action is necessary on the federal 
level. The proposed settlement is equally beneficial to Microsoft 
and its competitors, and a cessation of litigation would most 
definitely be beneficial to the consumer. I urge you to give your 
support to the settlement.
    Sincerely,
    Michel G. Bernard
    President



MTC-00030577

2304 41st Avenue East Seattle, WA 98112
January 26, 2002
Attomey General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    Today I write to voice my support of the Microsoft settlement. 
It is true that the Microsoft Corporation has been at the forefront 
of the technology industries in recent years. Their leadership, 
however, is the result of a dedication to excelence that is not 
matched within the industry. The result is the continual production 
of quality products that out perform any substitutes. This is in by 
no means a crime. I therefore take issue with the federal pursuit of 
a case based upon outdated statutes.
    Regardless of this opinion, I believe that the settlement 
agreement is in the best interests of the public. Too much time has 
already been spent in the litigation process and the entire 
technology industry has suffered for it. Further, anyone wary of 
Microsoft's compliance with the terms of the agreement should be 
cased as the agreement calls for the formation of a watchdog group.
    I adamantly believe that enacting the settlement will encourage 
confidence and growth within the tech. industry. The Justice 
Department should suppress any opposition to the enactment of this 
settlement.
    Sincerely,
    Lori Buecheler



MTC-00030578

January 27, 2002
Attention: Ms. Renata B. Hesse U.S. Department of Justice Fax # 
202-307-1454
    Dear Ms. Hesse:
    This is to inform you that I fully support the proposed 
settlement of the Microsoft lawsuit. For the sake of national 
interest I would hope that this can be finalized without delay; the 
matter has dragged on entirely too long.
    Sincerely,
    J.C. Hensel



MTC-00030579

Via FAX
432 Greensboro Drive
Dayton, OH 45459
January 25, 2002
Attorney General John Ash??
U S Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    During the period of the past three years, the IT industry, and 
the general public have been forced to endure the US vs Microsoft 
lawsuit. This unfortunate quit has slowed innovation and movement in 
the software industry and has hurt investment in technology as a 
whole. Consumers have taken the suit in stride even though it is 
they who will receive the bill for the case by way of higher prices 
on technology products through the corning years.
    The settlement has teeth that force Microsoft to disclose 
proprietary software code to competitors and will exist under the

[[Page 28924]]

constant scrutiny of a three-person committee in its future business 
dealings. These and other points in the settlement make it more than 
fair to all the plaintiffs in the lawsuit.
    Now that all. the involved parties have been served, a 
settlement must be formalized. The Department of Justice must see 
that the needs of the consumer are met in ending this lawsuit as 
soon as legally possible. I urge the Department of Justice to 
formalize the proposed settlement as soon as this period of public 
comment concludes.
    Sincerely,
    Arthur C. O'Neil



MTC-00030581

P.O. Box 3125
Atlantic Beach, NC 28512
January 26, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    As you are well aware, Microsoft has been under public and 
government scrutiny concerning their business tactics as being a 
monopoly. In my view, this lawsuit has been going on for far too 
long and I'd like to see it finished once and for all. The 
continuation of its opposing competitors who keep pressuring 
Microsoft are doing damage to this nation far beyond what they could 
possibly realize.
    Thousands of Americans rely on Microsoft in various ways, some 
in terms of jobs, most in terms of computer technology that they use 
in their homes and businesses. If we let this suit go back to the 
Federal Court, our people will continue to lose out on millions of 
dollars and the possibility of improved software to evolve our way 
of life.
    The settlement is fair and reasonable and it will most 
definitely benefit consumers and eliminate future possibilities of 
competitors attacking Microsoft for unjustly dominating the IT 
market. This country needs to consider the money being spent on file 
lawsuit and realize that re-direction of funds is in need. Your help 
m Microsoft's defense is greatly needed and appreciated.
    Sincerely,
    William Woodbury



MTC-00030582

    January 27, 2002
From: Steven White, 5125 Logan Avenue South, Minneapolis, Minnesota 
55414
About: Microsoft Settlement
    I am sending this in a way that verifies its authenticity (hand 
writing) because it is regarding a company that has been reported to 
have commissioned "spontaneous" letter writing campaigns 
to state attorneys general which, in one case, included letters from 
two dead people. I want to report tht I am alive and strongly 
opposed to any lieniency toward Microsoft. Three courts have 
declared that they have broken the law. They should pay the price of 
their freely-chosen actions. i would like to address one point that 
I hope has not escaped your notice. This is a company famous for its 
willingness and ability to squirm around restrictions and whatever 
it can to win at any cost. They have squashed or stolen innovative 
ideas from others, driven companies out of business, and finally 
been convicted of illegal tactics, and they not only show no 
penitance, but, based on their public statements, seem to be 
convinced they are in the right.
    If you make a settlement that has any imaginable loophole, they 
will be through it the day it goes into effect. If you say that 
programming interfaces to Windows must be made public, they will 
move the interfaces to some layer of "middleware" and 
declare that they are not part of Windows.
    They will behave as they did when ordered to release Windows 95 
without Internet Explorer; they released a version that didn't work. 
They will "comply," but, as one journalist phrased it, 
"with middle finger extended."
    For the sake of the future of the computer industry, Micorost's 
anti-competitive grip must be broken.
    Sincerely yours,
    Steven White



MTC-00030583

www. GenGap.net
Judge Kolar Kottely
c/o Attorney Renatta Hesse
Department of Justice, Antitrust Division
601 D St, NW--Ste 1200
Washington, DC 20530
January 28, 2002
VIA FACSIMILE: 202-616-9937
    Dear Judge Kolar Kottely
    I am writing to express my overall concern with for the 
technology sector with the pursuance of the Microsoft antitrust 
case.
    I am the resident of a rural town and owner of a small online 
business. I am able to conduct business with customers all over the 
world thanks to the innovation and developments in the technology 
and telecommunications industries.
    What I don't see is the lack of competition in the high-tech 
industry addressed by this case. Over the last decade the number of 
jobs in the software industry has grown from 290,000 to close to 
some 860,000. The 24,000 software companies in 1990 can be compared 
to the 57,000 software companies today. The growth in this industry 
is like nothing we've seen in recent history, yet the case against 
Microsoft was brought on by an alleged lack of competition in the 
market.
    In just the past few years the number of software companies and 
employees have nearly tripled. This year the software industry alone 
will add nearly $20 billion in surplus to America's balance of 
trade. Microsoft is on a list of indicators for the Dow Jones 
Average and is considered a market bellwether.
    These factors do not add up to a lack of competition in the 
industry. They are instead indicators that the high-tech industry is 
a flourishing, rapidly growing industry that changes so quickly that 
tomorrow's Linux will replace today's Microsoft.
    Continued litigation in this case will only slow competition and 
growth in the industry. I hope you see fit to sign off on the fair 
settlement in this case.
    Marlene McLaren
    PO BOX 383 Spirit Lake, IA 51360-0363 (712) 336-2346
    www. GenGap.net
    President, CEO
    GenGap.net
    PO Box 383 Spirit Lake, IA 51380-0363 (712) 336-2346



MTC-00030584

January 3, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
FAX To:
202-307-1454
    Dear Mr. Ashcroft:
    I am writing to support the settlement between the Justice 
Department and Microsoft that will bring an end to their long 
antitrust dispute.
    Some groups do not think the settlement is fair, but they are 
wrong. The only possible way the settlement could be unfair is if it 
unfairly harm Microsoft Look at the stipulations Microsoft is 
willing to accept. It disclose documentation on the internal 
interfaces of its Windows operation system. It will make future 
versions of Windows easier to work with terms of removing Microsoft 
programs and adding non-Microsoft ones. will guarantee that Windows 
runs as well with the new software as it c with the original 
Microsoft software. It will not retaliate against any of the 
companies that sued it. It will change its licensing practices to 
increase competitors" viability in the IT market. Microsoft 
will even submit constant government oversight of their business 
practices. How mayo outside of Microsoft's boardroom could possibly 
be dissatisfied with the settlement is a mystery to me.
    Microsoft is willing accept these terms. For that reason alone, 
I think ?? settlement ought to go forward. Thank you for your time.
    Sincerely,
    Kirk Puffenberger
    6263 Indian Field
    Norcross, GA 30092



MTC-00030585

7 Edwards Drive
Freehold, New Jersey 07728
January 21, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    The consistent persecution and harassment of the Microsoft 
Corporation must cease immediately, both for the good of our country 
and because it is the fight thing to do. The past three years of 
litigation have resulted in nothing besides wasting my money, and 
the recently settlement services the public interest in this matter 
and its provisions go beyond the government's original complaints.
    The provisions of this settlement, among other things, require 
Microsoft to submit to a federal technical oversight committee which 
is required to review Microsoft's business and software practices. 
Additionally, Microsoft must make its intellectual property 
available to those compentors who use it in their application of 
this agreement.

[[Page 28925]]

    These provisions, the general settlement and the process in 
which it was reached are all fair, judicious and reasonable. It is 
my hope that there is no further federal action in this matter.
    Sincerely,
    Fred Billand



MTC-00030586

COLDWELL BANKER
TRAR PROPERTIES
January 24, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am writing today to encourage you and the Department of 
Justice to accept the Microsoft antitrust settlement. Microsoft has 
given up a lot to be able to settle the issue. The terms of the 
settlement are fair and they should be accepted.
    Many people think that Microsoft is getting off easy, in fact 
this is not so. In the terms of the settlement, Microsoft has agreed 
to release part of their Windows base code to their competitors. 
This is so their competitors can make more compatible software. 
Microsoft is being forced to give up their patented trade secrets. 
Microsoft has spent years and millions of dollars developing their 
products, now they have to simply hand part of them over to their 
competitors. In the technology industry there are companies that 
develop new products and companies that copy products. Not 
surprisingly the companies that develop new products are more 
successful, it is a shame that the government has chosen to harass a 
company simply because it is successful. This issue has been dragged 
out for over three years; it is time to put an end to it. The terms 
of the settlement are more than fair and they should be accepted. 
Please accept the Microsoft antitrust settlement.
    Sincerely,
    Diana M. Campbell
    Sales associate
    FREELAND OFFICE BAYVIEW OFFICE LANGLEY OFFICE OAK HARBOR OFFICE
    18205 SR 525 HIGHWAY 525 AT BAYVIEW CENTER 221 SECOND STREET 35 
SE ELY STREET
    P.O. BOX 760 2869 EAST HOWARD ROAD PO BOX 205 OAK HARBOR, WA 
98277
    FREELAND, WA 98249 LANGLEY, WA 98250 LANGLEY, WA 98260 (360) 
675-7200
    (360) 331-6300 (360) 321-6400 (360) 
223-1700Fax (360) 675-8600
    FAX (360) 331-8474 FAX (360) 321-5283 FAX (360) 
221-4800 
cakharbor @ coldwellbankerwhidb??y.com
    freeland @ coldwellbankerwhildbey.com 
bayview @ coldwellbankerwhtdbey.com
    langley @ coldwellbankerwiudbcy.com
    Each Office Is Independently Owned And Operated.



MTC-00030587

January 26, 2001
Diana M. Campbell
7410 Dead Goat Road
Clinton Washington 98236
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington DC 20530
    Dear Mr. Ashcroft:
    I am writing today to encourage you and the Department of 
Justice to accept the Microsoft antitrust settlement. Microsoft has 
given up a lot to be able to settle the issue. I would like to tell 
you exactly how I feel about this issue, please think back to 
articles of history of the United States and the Auto Industry. Mr. 
Henry Ford certainly was not the first automaker competing with 
other industrialist of his time, His story is fabulous. One story 
that really talks about the "American dream." And this 
is only one story of such struggle to produce a sellable product 
that has lasting quality, No Mr, Ford was not the only automaker of 
his time but he produced a good competitive product.
    Mr. Gates and his company have been producing a sellable 
competitive product. What is the Justice Department trying to tell 
the American businessperson? What is this new attack? The United 
States of America is the home of the free. If we do not have the 
freedom to create a better "mouse trap", then why are 
our borders flooded with immigrants?
    Mr. Gates has not asked to have the status of a King in the 
United States, He has built a team of people that are of the highest 
regard working with ideas and values to build competitive soft wear 
for a very fast growing industry.
    Please know Mr. Ashcroft that I am a normal everyday housewife, 
and I know something about cooking and recipes, some of the 
ingredients are private, some are family secrets. Are you telling me 
that I must tell people what I put in a cake should I want to 
compete in a contest, for my personal gain. I believe in the 
American Dream. I grew-up having the ability to choose my way of 
life, I think you are treading on sacred ground.
    Please Mr. Ashcroft do not use any more of your precious time 
and my money. Please accept the
    Microsoft antitrust settlement.
    Sincerely,
    Diana M. Campbell
    Wife
    Mother of 10, Grandmother of 22
    Great grandmother of 6
    Real Estate sales associate



MTC-00030588

Mr. Stan Eischen
10113 Keysboruogh Drive
Las Vegas, Nevada 89134
January 26, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Ave., NW
Washington, DC 20530
    Dear Attorney General Ashcroft,
    I support the settlement that has been reached between Microsoft 
and the Department of Justice. The settlement will bring an end to 
the costly and contentious court conflict between the two.
    Some may criticize the settlement and say it lets Microsoft off 
too easy. That is simply not the case. Microsoft will agree to many 
restrictions on its method of doing business. First and foremost 
among these restrictions is the requirement that Microsoft share its 
code for Windows with its competitors, thereby allowing them to 
place their own programs on the Windows system.
    Additionally, Microsoft will eliminate any possibility of 
favoritism in its licensing procedures by using a uniform price list 
when dealing with the top twenty computer business in the nation.
    These two provisions alone would be enough, but Microsoft has 
also agreed to forgo any retaliation against companies that sell or 
promote software that competes with Microsoft's products. Some 
people may claim that Microsoft will just ignore these requirements, 
but the settlement will establish a technical review committee to 
make sure that Microsoft adheres to all of its terms. With all of 
these restrictions, Microsoft will be severely hampered and its 
competitors will be aided.
    There comes a time in any conflict when the sides sit down and 
ask themselves if the time and effort would really be worth 
continuing to fight. Microsoft and the Justice Department have 
decided that the answer to that question is no. This settlement will 
end their battle, and no one should block an agreement that is 
amenable to both of them. Thank you for your time and efforts in 
Washington.
    Sincerely,
    Stan Eischen



MTC-00030589

Association of
Business and Industry
The Voice of Iowa Business
January 21, 2002
Judge Kolar Kottely
C/O Renata Hesse
Trial Attorney
Antitrust Division
U.S. Department of Justice
601 D Street, NW, Suite 1200
Washington, D.C 20530
    Dear Judge Kolar Kottely:
    Thank you for the opportunity to participate in the public 
comment period regarding the settlement of the government's 
antitrust case against the Microsoft Corporation. As an executive 
with the Iowa Association of Business and Industry in Des Moines, 
Iowa I was pleased to hear that a settlement in this case has been 
reached. While this case has implications for most American 
consumers, the implications for those of us in the business sector 
are even greater.
    The negative impact this case has had on the technology industry 
was apparent nearly from its inception, technology stocks began 
their slide downward at the same time the district court ruled that 
Microsoft should be broken up. This ruling caused major uncertainty 
within the tech community and with its investors.
    This proposed settlement would provide much needed subility to 
the technology industry that was absent during the period this case 
remained unresolved. The conclusion of this suit will send the 
signal to both investors and innovators that they no longer need to 
be concerned with unnecessary government regulations as they work to 
create new technology products and services for the future.

[[Page 28926]]

    I encourage you to accept the settlement reached by the 
Department of Justcie and the Microsoft Corporation .
    Sincerely,
    John R. Gilliland
    Vice President



MTC-00030590

HANSER & ASSOCIATES
public relations
4401 Westown Parkway, Suite 212
West Des Moines, IA ??266-0991
Email:nanser @ hanser.com
www.hanser.com
January 22, 2002
Ms. Renata Hesse
Department of Justice, Antitrust Division
601 D Street NW, Suite 1200
Washington, DC 20530
    Dear Ms. Hesse,
    The appeal and success of our great country lies in the 
opportunity to succeed and to make a better way of life for our 
families. This has been possible because of our economic and 
personal freedoms. Those with innovative and pioneering spirits are 
the reason our country rose so quickly to become a world leads.
    Most of those who drive our country because of their innovation 
and willingness to take risks never become global figures or even 
nationally known. But there is one such individual who is known 
worldwide for his technological developments. Bill Gates has prodded 
software and Interact technologies that have forever changed our 
personal and business relationship with the computer. With his great 
ideas turned into reality, he has created thousands of jobs for 
Americans and provides a great deal of financial support for 
humanitarian relief. For example, The Bill and Mclinda Oates 
Foundation announced on January 4, 2001 a $7.5 million grant to help 
combat the spread of HIV in sub-Saharan Africa and worldwide. And 
this is just one. example of the impact he has had on our world.
    Because we are a lawful society, we certainly have an obligation 
to enforce our national laws. But that obligation has been met in 
the Microsoft antitrust lawsuit, it no longer can serve any relevant 
purpose. A fair and realistic settlement has been proposed and 
should be signed in order to conclude tiffs case and allow Microsoft 
to move forward with all new business activities, and to allow Bill 
Gates to continue providing humanitarian relief throughout the world 
through his foundation.
    Thank you,
    Arnanda Carstens Steward
    Account Manger



MTC-00030591

Jan 27 02 02:46p
p.2
HANSER & ASSOCIATES public relations
4401 Wastown P??way, Su?? 212
West Des Meines, 1A 50266-1037
575,224??086 Fax. 515.224,0991
Emailhanser @ ha??ser.com
www.henser.com
January 22, 2002
Ms. Renata Hesse
Department of Justice,, Antitrust Division
601 D Street NW, Suite 1200
Washington, DC 20530
    Dear Ms. Hesse,
    Antitrust is defined by Merriam-Webster, as consisting of laws 
to protect trade and commerce from unlawful restraints and 
monopolies or unfair business practices. A lawsuit was filed against 
Microsoft several years ago alarming the company was in violation of 
the antitrust laws of our country. In other words, theo claim is 
that other companies competing for the, game customer base were not 
able to fairly compete with Microsoft. A lower court ruled that the 
company would have to be broken up, This ruling did not stand up in 
the Court of Appeals. But in the process, the Federal government has 
spent millions of dollars and Microsoft has been forced to spend 
similar amounts defending its case. Now a settlement has been 
proposed and agreed to by many of the parties involved in the 
lawsuit.
    Until this case is permanently closed, the biggest loser is the 
American consumer. Not only have our tax dollars been the source of 
income for the federal government to fund their rose, but it is 
likely that Microsoft will offset of the millions they have spent by 
increasing costs on their products.
    I think the only reasonable course reasonable is to agree to the 
proposed settlement, It is in theo best interest of all parties 
involved, including the American consumer. Your efforts are truly 
appreciated. Thank you.
    Sincerely,
    Ron Hanser Prosident



MTC-00030592

JAN--27--0205: 12PM
FAX COVER PAGE
TO: ATTORNEY GENERAL JOHN ASHEROFT
FROM: MS. ALICE FASS
FAX #: 212 828-9854
VOICE # : 212 534-0682
(CALL IF THERE IS A PROBLEM WITH THE FAX!)
TOTAL # OF PAGES: (INCLUDING COVER PAGE)
NOTES: BE: MICROSOFT
Alice Fass
January 18, 2002
Attorney General John Ashore
US Department Justice 950 P, ???sylvania Avenue, NW
Washington, DC 20530-0001
D??? Asheroft:
    I am willing to express my support for Microsoft in light, of 
recent litigation against them Microsoft is a great company with 
great products available to the public at very reasonable prices. It 
has been an industry leader who has done much to stabilize the IT 
industry and the economy. With this lawsuit. Microsoft has been 
forced to shift their attention from producing new products to 
defending themselves in court. This reduced production has doubtless 
made., damaging impact on the IT industry and the economy as a 
whole.
    In the interest of settling the matter mote quickly Microsoft 
agreed to procedures and obli??ons that the US Court of Appeals did 
not even find problems with. For one example, Microsoft decided to 
allots" computer makers to remove the "paths" that 
consumers use to access venous Windows programs. These include 
programs like Explorer and Media Player. D??ing ???us well enable 
sofrware made by companies such as Netscape or RealNetworks to use 
those paths instead. This will intensity competition, which will 
benefit consumers.
    I look forward to this matter being wrapped up as soon as 
possible It has gone on for far too long, and has done severe damage 
to the country on a whole I appre???ate the willingness of your 
office to hear the views of the public. I trust that you will 
conclude that wrapping this matter up will be in the best interest 
of the public.
    Sincerity,
    Ahe ??



MTC-00030593

FROM DIANE AND BARRY CAVANAUGH
324 ANNA AVENUE
MOUNTAIN VIEW, CA 94043-4704
FAX/PHONE 1-656-968-4524
E-Mail: ebarrydiane @ webtv.net
DATE January 27 2002
REF: Microsoft Litigation
TO: US Federal Government
FAX NUMBER 202-3071454
Gentlemen or Madam
    We as seniors feel and believe that the settlement against 
Microsoft was fair and just. We believe that further litigation by 
selfish lobbyists would be costly and wrong. Pleae sned all further 
litigation against Microsoft now.
    Barry and Diane Cavanaugh



MTC-00030594

Jan 27 02 03: 36p OFFICE DEPOT#617 1 248 968 2486 p. 1
15261 Forrer Street
Detroit, MI 48227
January 26, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft,
    I am writing today to encourage the Department of Justice to 
accept the Microsoft antitrust settlement. I cannot understand why 
the government has gone after Microsoft in the first place. As soon 
as the government started their suit against Microsoft the entire 
technology industry went downhill. Now that there is a settlement in 
place, the government should accept it and allow business to return 
to normal.
    In order to put this .issue behind them Microsoft has agreed to 
a long list of provisions. Microsoft has agreed to allow computer 
makers the flexibility to install and promote any software that they 
see fit, or that consumers request. Microsoft has also agreed to 
design future versions of Windows to be more compatible with non-
Microsoft software. Microsoft has agreed to many compromises to 
reach the settlement. It is time for the government to accept the 
settlement and move on.
    Please accept the Microsoft antitrust settlement. A settlement 
this fair has no business languishing in court
    Sincerely,
    H. Pankratz
    Cc: Rep. John Conyers

[[Page 28927]]



MTC-00030595

FROM: FAX NO.: 2158785193 Jan. 27 2002 03:01PM P1
6329 Sherwood Road
Philadelphia, PA 19151-2521
January, 26, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    As a supporter of Microsoft, I write you with concern over the 
recent developments in the settlement. It is strange to see that, 
after three years of negotiating, this settlement may be subject to 
still further litigation. It is ridiculous to waste our time and 
money on fighting a battle that has already been won.
    Microsoft has made sweeping commitments to prove that they are 
willing to work with their competitors. They have agreed to make 
changes in licensing and marketing and even design. Microsoft has 
agreed to design future versions of Windows that will allow for 
easier installation of non-Microsoft software. They have also agreed 
to be monitored for proper procedure and even allow- themselves to 
be sued if a competitor does not feel that they are acting properly.
    With concessions such as these it only makes sense to support 
this settlement. It is clearly beneficial for the consumer, the IT 
sector and our economy as a whole. I urge you to help support it in 
its current state and not waste more time, energy and money that 
could be better spent elsewhere.
    Sincerely,
    Marcia Levinson
    cc: Senator Rick Santorum



MTC-00030596

FROM: RICK & SHERRY BEATTY FAX NO. : 360 779 4958 Jan. 27 2002 
01: 06PM P1
P.O. Box 135 Keyport, Washington 98345 January 12,2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I would like to express my support for Microsoft in the 
government's antitrust case. A settlement has been reached and I 
think that it should be respected. Microsoft has been punished 
enough in the last three years. This lawsuit has been a waste of 
time and money. Everyone, the government included, has better things 
to do than pursue a lawsuit that punishes a company for being 
successful.
    It is a total injustice to allow every competitor of Microsoft 
to continue their influence over the courts and to blame Microsoft 
for their own inability to have and market a better product. I don't 
believe there has been one consumer financially damaged by 
Microsoft's business tactics. Enough is Enough.
    Microsoft may have made some mistakes, but they are ready to 
change their ways. The settlement is evidence of that. Microsoft is 
conceding a great deal in order to move on. They are giving away 
some of their technology information and making it easier for 
consumers to use non-Microsoft programs within their Windows 
platform. Please respect the efforts of Microsoft and their 
supporters. This settlement is fair and is a good ending to this 
whole mess.
    Sincerely,
    Richard R Beatty



MTC-00030597

FROM : RICK & SHERRY BERTTY FAX NO. : 360 779 4958 Jan. 27 2002 
01:06PM P2
P.O. Box 135 Keyport, Washington 98345
January 12,2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I would like to express my support for Microsoft in the 
government's antitrust case. A settlement has been reached and I 
think that it should be respected. Microsoft has been punished 
enough in the last three years. This lawsuit has been a waste of 
time and money. Everyone, the government included, has better things 
to do than pursue a lawsuit that punishes a company for being 
successful.
    Microsoft may have made some mistakes, but they are ready to 
change their ways. The settlement is evidence of that. Microsoft is 
conceding a great deal in order to move on. They are giving away 
some of their technology information and making it easier for 
consumers to use non-Microsoft programs within their Windows 
platform. Please respect the efforts of Microsoft and their 
supporters. This settlement is fair and is a good ending to this 
whole mess.
    Sincerely,
    Sherry Beatty



MTC-00030598

JAN-27-2002 01: 44P FROM: Dale L i 11 i e 
918-492-9541
TO: 12023071454 P: 1/2
5622 E70th PL
Tulsa, OK 74138-8413
Phone: 918-492-5806
Fax: 918-492-9341
To: ??Dept. of ??
From: Dale G Lillie
Fax: 1-202-307-1454
Date: Jan 27, 2002
Phone:
Pages: 2
Re: Microsoft ??eff??
CC:
Urgent For Review Please Gomment Please Reply Please Recycle
-Comments:
River Forecast Group
5622 E 78 PL
Tuha OK 741.30-8413
www.River Forec???. corn
January 27,2002
U. S Department of Justice
Antitrust Division
601 D Street NW
Suite 1200
Washington, DC 20530-0001
    Dear Sir or Madam:
    I strongly urge the U.S. Department of Justice to settle the 
Microsoft case now and enter the revised proposed Final Judgment. 
The case brought against Microsoft was motivated primarily by 
competitive malice. Settling this case is certainly in the public 
interest.
    Microsoft has been a boon to me by bringing lower PC prices, 
faster and better computing, and better software development tools. 
In addition, this lawsuit has cost investors, literally hundreds of 
billions of dollars.
    I have gladly purchased and used Microsoft products for over 20 
years. Professionally, 1 have developed many systems based on 
Microsoft software products. During this time I have interacted with 
Microsoft personnel at many levels. At no time did I think that the 
relationship with Microsoft was not fair or beneficial to me as well 
as to other parties involved To the contrary, I believe that 
Microsoft to a large degree is responsible for the current economic 
good health of the USA, as well as many other countries of the 
world.
    It is time to end this antitrust action begun in 1997
    Sincerely,
    Dale G Lillie
    Principal, River Forecast Group



MTC-00030599

01/12/1995 02: 38 4072996027 VINCENT PAGE 01
1609 Hinckley Road Orlando, FL 32818-5927
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW Washington, DC
20530-0001
January 26, 200
    Dear Mr. Ashcroft:
    I am writing to express my disapproval with the last three years 
of litigation brought against Microsoft by the US department of 
Justice. Microsoft has been the cornerstone of the Technology 
Industry, and its capacity to generate wealth and create jobs for 
our nation should not be overlooked. Our Government needs to stop 
interfering in free enterprise and start worrying about more 
pertinent issues like security.
    The terms of the settlement do not let Microsoft off easily as 
they stipulate Microsoft will have to disclose interfaces that are 
internal to Windows operating system products and also grant 
computer makers broad new rights to configure Windows so as to make 
it easier for non-Microsoft products to be promoted. This, I believe 
will be a detriment to Microsoft, the consumer and the free market 
as we know it.
    I urge your office to do what is right for the American public 
and the Information Technology sector by implementing the 
settlement. The nine states that want to continue litigation should 
be reprimanded and this case should come to an end. Thank you for 
your time.
    Sincerely,
    Carol Vincent



MTC-00030600

aai
The American Antitrust Institute
2919 ELLICOTT ST, NW . WASHINGTON, DC 20008
January 24, 2002
Renata Hesse
Trial Attorney

[[Page 28928]]

Antitrust Division
U.S. Department of Justice
601 D Street, NW, Suite 1200
Washington, DC 20530
Facsimile: (202) 616-9937 or (202) 307-1454
E-mail: microsoft.atr @ usdoj.gov
Re: AAI Tunney Act Comments
    The American Antitrust Institutes submits these comments under 
the Tunney Act. Separately, we have filed with the U.S. District 
Court a complaint for declaratory and injunctive relief, arguing 
that failures of the U.S. and Microsoft to comply fully with the 
requirements of the Tunney Act have kept us and the public generally 
from receiving all the information that is required by statute as a 
basis for these comments. With that in mind, these comments must be 
viewed as preliminary, subject to amendment or expansion if and when 
additional public disclosures are made.
    The American Antitrust Institute ("AAI") is an 
independent non-profit education, research and advocacy 
organization, described in detail at www.antitrustinstitute.org. The 
mission of the AAI is to support the laws and institutions of 
antitrust. To our knowledge, we are the only public interest 
organization devoted solely to the field of antitrust.
    Executive Summary
    This Court should reject the Proposed Final Judgment 
("PFJ") between Microsoft, the U.S. Department of 
Justice ("DOJ"), and the settling states. The PFJ is not 
in the "public interest," as this term is defined under 
the Tunney Act.\1\ 1 The PFJ is ambigous, will be extraordinarily 
difficult, if not impossible, to implement and affirmatively harms 
consumers and other third parties. Most importantly, however, the 
PFJ constitutes a mockery of judicial power since it fails to 
satisfy any of the remedial goals established by the Court of 
Appeals.
---------------------------------------------------------------------------

    \1\ 1 15 USCS Section 16(e).
---------------------------------------------------------------------------

    Standard of Review. Under the Tunney Act a reviewing court is 
not permitted to "rubber stamp" a proposed consent order 
if that consent order makes a "mockery of judicial 
power." \2\ Normally, this standard gives substantial 
discretion to the DOJ's determination of what is in the 
"public interest." But this deference is not appropriate 
in cases like this one where there has been a full trial and 
decision on the merits.\3\ In such cases the court has a special 
obligation to ensure that the remedial goals of the court that 
imposed liability on the defendant--in this case the D. C. 
Court of Appeals \1\--have been met. A consent judgment, 
such as the PFJ, which effectively ignores the findings of liability 
and remedial goals expressly stated by a unanimous en banc decision 
of the Court of Appeals is a mockery of judicial power.
---------------------------------------------------------------------------

    \2\ The Antitrust Procedures and Penalties Act of 1974: 
Hearings on S. 782 and S. 1088 Before the Subcomm. on Antitrust and 
Monopoly of the Senate Comm. on the Judiciary, 93d Cong. 1 (1973). 
(opening remarks of Senator Tunney); United States v. ABA, 118 F.3d 
776, 783 (DC Cir. 1997)
    \3\ See Section I(A), infra
    \4\ United States v. Microsoft Corp., 253 F.3d 34 (DC Cir. 
2001) (hereinafter "Microsoft III").
---------------------------------------------------------------------------

    Even when courts are reviewing consent orders entered before a 
trial, a consent judgment is not in in the "public 
interest" if it: (1) is ambiguous; \1\ 5 (2) presents 
foreseeable problems in compliance and implementation; \6\ or 
(3) affects third parties detrimentally.\7\ Since virtually every 
key provision in the PFJ is ambiguous, will be extraordinarily 
difficult to implement, and will have a direct and substantial 
detrimental effect on consumers and other third parties, the PFJ is 
not in the "public interest" even under the lower 
standards of scrutiny applied to pretrial settlements.
---------------------------------------------------------------------------

    \5\ United States v. Microsoft Corp., 56 F. 3d 1448, 1461 
(1995) (the reviewing judge "should pay special attention to 
the decree's clarity").
    \6\ Id. at 1462 (if the judge "can foresee 
difficulties in implementation we would expect the court to insist 
that these matters be attended to").
    \7\ Id ("certainly, if third parties contend that 
they would be positively injured by the decree, a district judge 
might well hesitate before assuming that the decree is 
appropriate.").
---------------------------------------------------------------------------

    Substantive Failings of the PFJ. The DOJ asserts that the PFJ 
"will provide a prompt, certain and effective 
remedy." \8\ While a prompt, certain and effective 
remedy is often better than a perfect remedy achieved after extended 
litigation, virtually any remedy this Court would order after 
litigation would be better than the PFJ. The PFJ is neither prompt, 
certain, nor effective.
---------------------------------------------------------------------------

    \8\ Competitive Impact Statement ("CIS"), p. 
2.
---------------------------------------------------------------------------

    A prompt remedy would take effect quickly and provide procedures 
to enforce swift compliance. Most of the so-called restrictions on 
Microsoft's conduct will not take effect for 12 months.\9\ Given the 
rapid pace of change in information technology, Microsoft's 
dominance of the covered middleware markets may well be a fait 
accompli before much of the PFJ would take effect. The procedural 
provisions also fail to provide for quick resolution of disputes 
over compliance. The Technical Committee cannot resolve disputes, 
but only "advise" Microsoft and the government of its 
conclusions.\10\
---------------------------------------------------------------------------

    \9\ See, e.g., PFJ sections III.D and III.H.
    \10\ See PFJ section IV.D.4.c. Moreover, the PFJ's 
"gag orders" prohibiting both testimony from Committee 
members and use of their work product in enforcement proceedings 
will cause further delay since enforcement will always require the 
government to duplicate the Committee's work in amassing evidence.
---------------------------------------------------------------------------

    A certain remedy, at the very least, would set forth a clear 
delineation of what Microsoft can and cannot do. Yet many of the 
most important putative restrictions on Microsoft are vague and all 
are riddled with exceptions and qualifications. This lack of clarity 
will almost certainly compound the delay already present in the PFJ 
since the inevitable differences of opinion cannot be resolved 
without extended litigation to determine the "intent" of 
the parties according to the rules of contract law.
    Finally, and most fundamentally, the remedy should be effective. 
As the Court of Appeals explained, a remedy should (1) free the 
market place from the effects of Microsoft anticompetitive conduct, 
(2) deny to Microsoft the fruits of its illegal monopolization, and 
(3) ensure that Microsoft does not undertake similar practices 
likely to result in future monopolization.\11\ Yet the PFJ 
affirmatively allows some of the most egregious anticompetitive acts 
such as the commingling of middleware and operating system 
software.\12\
---------------------------------------------------------------------------

    \11\ United States v. Microsoft Corp., 253 F.3d 34, 103 
(DC Cir. 2001). The PFJ does nothing to deprive Microsoft of the 
fruits of illegal monopolization, and the DOJ's Competitive Impact 
Statement ("CIS") omits this goal in its discussion of 
the remedial goals. CIS, pp. 2 and 24.
    \12\ See Section II infra.
---------------------------------------------------------------------------

    The following comments focus upon the deficiencies of the PFJ 
rather than attempt to propose alternative measures. Nonetheless, we 
urge the Court to consider the proposals put forward by the nine 
dissenting states. These proposals correct many of the PFJ's 
deficiencies identified in these comments.
    Discussion
    I. Standards of Review: The Tunney Act Requires Careful Review 
of the PFJ To Determine Whether It Is In The Public Interest
    The Microsoft case is widely considered the most important 
antitrust case of our time. It is critically important to the future 
of antitrust that this case be decided--or settled--on the 
merits in a way that the public will perceive justice to have been 
achieved. All the more so when Microsoft has been found (after a 
full trial and by a unanimous landmark appellate opinion) to have 
abused a monopoly in an industry that all agree will have a profound 
impact on our future. With so many economic interests affected in 
cases like this, it is important that special efforts be made to 
keep antitrust settlements transparent so that the public will 
recognize them to be free of political taint or corruption.
    A. Especially Careful Review Is Warranted in a Fully Litigated 
Case
    The Tunney Act directs Courts to carefully scrutinize proposed 
antitrust Consent Orders.\13\ The Tunney Act mandates that the Court 
shall make an independent inquiry into whether the decrees, and it 
will assure that the courtroom rather than the backroom becomes the 
final arbiter in antitrust enforcement." The Antitrust 
Procedures and Penalties Act of 1974: Hearings on S. 782 and $. 1088 
Before the proposed consent order is in the "public 
interest," \14\ and authorizes the Court to take 
evidence and receive arguments to assure itself that the consent 
order serves the public interest.\15\ As noted in the landmark 
Tunney Act decision of United States v. AT&T, a degree of 
deference to the DOJ in the reviewing the consent order is 
appropriate--otherwise, parties would have no incentive to 
compromise and settle.\16\ The

[[Page 28929]]

AT&T court also noted, however, that the standard of review 
would vary depending on the circumstances.\17\ AT&T rejected the 
notion that courts must unquestioningly accept a proffered decree as 
long as it somehow, and however inadequately, deals with the 
antitrust and other public policy problems implicated in the 
lawsuit. To do so would be to revert to the "ber stamp, role 
which was at the crux of the congressional concerns when the Tunney 
Act became law." \18\
---------------------------------------------------------------------------

    \13\ The Tunney Act "will make our courts an 
independent force rather than a rubber stamp in reviewing consent 
Subcomm. on Antitrust and Monopoly of the Senate Comm. on the 
Judiciary, 93d Cong. 1 (1973). (opening remarks of Senator Tunney).
    \14\ 15 U.S.C. 16(e).
    \15\ 15 U.S.C. 16(0.
    \16\ See United States v. AT&T, 552 F. Supp. 131, 151 
(1982) ("If courts acting under the Tunney Act disapproved 
proposed consent decrees merely because they did not contain the 
exact relief which the court would have imposed after a finding of 
liability, 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. See S.Rep. No. 93-298, supra, at 6; H.R.Rep. 
No. 93-1463, supra, at 6.")
    \17\ "It follows that [where no evidence has been 
taken and no liability has been found] a lower standard of review 
must be applied in assessing proposed consent decrees than would be 
appropriate in other circumstances. H.R.Rep. No. 93-1463, 
supra, at 12. For these reasons, it has been said by some courts 
that a proposed decree must be approved even if it falls short of 
the remedy the court would impose on its own, as long as it falls 
within the range of acceptability or is "within the reaches of 
public interest." United States v. AT&T, 552 F. Supp. 131, 
151 (1982)
    \18\ United States v. AT&T, 552 F. Supp. 131,151 
(1982), aff'd sub nom. Maryland v. United States, 460 U.S. 1001 
(1983).
---------------------------------------------------------------------------

    The need for deference is important in cases where there has 
been no trial since the "public interest" must include 
consideration not only of an appropriate remedy but also whether and 
for what the defendant may be found liable at trial.\19\ More 
importantly, the court has little knowledge of the determinative 
facts. But once a trial has established the defendant's liability, 
the need for deference diminishes greatly. As the court in AT&T 
stated, the concern "that the courts would generally not be 
able to render sound judgments on settlements because they would not 
be aware of all the relevant facts ... is of relatively little 
relevance here, for this Court has already heard what probably 
amounts to well over ninety percent of the parties" evidence 
both quantitatively and qualitatively, as well as all of their legal 
arguments[, and the reviewing court] is thus in a far better 
position than are the courts in the usual consent decree cases to 
evaluate the specific details of the settlement." \20\ 
Once liability has survived appellate scrutiny, as in the case at 
bar, the need for deference to the DOJ's understanding of the public 
interest almost completely vanishes since the only consideration 
left in determining the public interest is whether the consent order 
does in fact remedy the defendant's violation of the law.
---------------------------------------------------------------------------

    \1\ At pretrial stage, "[r]emedies which appear less 
than vigorous may well reflect an underlying weakness in the 
government's case, and for the district judge to assume that the 
allegation in the complaint have been formally made out is quite 
unwarranted." United States v. Microsoft Corp., 56 F.3d 1448, 
1461 (DC Cir. 1995) ("Microsoft I").
    \20\ us v. A T & T, 552 F. Supp. 131,152 (D.DC 1982).
---------------------------------------------------------------------------

    The DOJ argues for a cursory review, limited to the allegations 
contained in the complaint.\21\ The DOJ's argument, however, relies 
on cases such as the 1995 Microsoft consent decree case 
("Microsoft/"),\22\ where the case settled prior to a 
trial. Microsoft I, however, was expressly concerned with the entry 
of a consent decree where "there are no findings that the 
defendant has actually engaged in illegal 
practices." \23\ While Microsoft I was correct in 
stating that it would be "inappropriate for the judge to 
measure the remedies in the [pretrial settlement] decree as if they 
were fashioned after trial," \24\ in the case at bar, 
there has in fact been a trial, a finding of liability and an 
affirmance of that finding on appeal. The DOJ also relies on 
selected passages from AT&T while ignoring the passages quoted 
here. Simply put, the law does not compel the court to ignore the 
record developed at trial and affirmed on appeal as the DOJ asserts.
---------------------------------------------------------------------------

    \21\ CIS, pp. 65-68.
    \22\ United States v. Microsoft Corp., 56 F.3d 1448 (DC 
Cir. 1995) ("Microsoft I").
    \23\ Id. at 1460-61.
    \24\ Id. at 1461.
---------------------------------------------------------------------------

    The Court in this case faces an unprecedented situation. 
Although almost all Tunney Act proceedings have involved cases where 
the litigation has not started, in this case the facts and law have 
been fully argued. There are findings of liability by both a 
District Court and Court of Appeals.\25\ The public has expended 
large amounts of money and time in establishing the facts and the 
specific nature of a substantial violation of the antitrust laws. 
The only thing remaining in this historic, massive and protracted 
case, before the PFJ was signed, was the remedy proceeding.
---------------------------------------------------------------------------

    \25\ United States v. Microsoft Corp., 87 F. Supp. 2d 30 
(D.DC 2000) ("Conclusions of Law"), United States v. 
Microsoft Corp., 253 F.3d 34, 117 (DC Cir. 2001) ("Microsoft 
III")
---------------------------------------------------------------------------

    We have not located another case in which the settlement 
occurred this late in a proceeding. In prior Tunney Act proceedings 
there were few, if any facts established through the legal process 
and the Court's knowledge of the facts was admittedly limited.\26\ 
Here, all of the trial court's Findings of Fact were affirmed by the 
Court of Appeals.\27\ It also agreed with Judge Jackson that 
Microsoft had violated the antitrust laws.\28\
---------------------------------------------------------------------------

    \26\ The closest example was the AT&T settlement, US 
v. A T & T, 552 F. Supp. 131 (D.DC 1982), aff'd sub nom. 
Maryland v. United States, 460 U.S. 1001 (1983). The Settlement was 
agreed upon during the trial, before the Court had issued its 
decision.
    \27\ United States v. Microsoft Corp., 253 F.3d 34, 117 
(DC Cir. 2001).
    \28\ Id., 60-80.
---------------------------------------------------------------------------

    These unique circumstances require that this Court should 
carefully follow the instructions of the Court of Appeals as to what 
constitutes an appropriate remedy.\29\ As was held by the Court of 
Appeals: the remedy must (a) restore competition to the illegally 
monopolized market,\30\ (b) deprive the violator of the 
"fruits" of its illegal acts,\31\ and (c) prevent the 
violator from engaging in similar behavior in the future.\32\
---------------------------------------------------------------------------

    \29\ See, Jonathan B. Baker and Andrew I. Gavil, Ill-
Gotten Gains, Toothless Settlement Lets Microsoft Keep Rewards of 
Monopolization, The Legal Times, Nov. 12, 2001, available at. http:/
/www.antitrustinstitute.org/recent/152.cfm. ("When the 
settlement follows trial and appeal, judicial concerns about 
encroaching on prosecutorial power to decide what charges to bring 
and congressional concerns about uninformed courts venturing into 
the realm of prosecutorial discretion--both of which underlie 
the narrow role allotted the District Court in the usual Tunney Act 
review--are mooted. Once the nature and scope of the violations 
have been determined, as they have here, all that is left is to set 
the appropriate remedy--a peculiarly judicial task, concerning 
which the executive branch may advise but not encroach")
    \30\ The Court of Appeals explained: "The Supreme 
Court has explained that a remedies decree in an antitrust case must 
seek to "unfetter a market from anticompetitive 
conduct," United States v. Microsoft Corp., 253 F.3d 34, 103 
(DC Cir. 2001).
    \31\ Quoting the Supreme Court, the goal is to 
"terminate the illegal monopoly, deny to the defendant the 
fruits of its statutory violation..." Id.
    \32\ "[E]nsure 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, 20 L. Ed. 2d 562, 88 S. 
Ct. 1496 (1968), quoted in United States v. Microsoft Corp., 253 
F.3d 34, 103 (DC Cir. 2001).
---------------------------------------------------------------------------

    In a case that has proceeded as far as this one, this Court 
should use its substantial discretion to see that the views of the 
Court of Appeals as to what constitutes appropriate relief is 
implemented. Accordingly, this Court is only under a limited 
obligation to give deference to the DOJ as to whether the Court of 
Appeals requirements have been satisfied. Indeed, at this stage of 
the proceedings, the very nature of this task is more of a judicial 
function than a prosecutorial function. Accordingly, a settlement at 
this stage will be in the "public interest" only if 
these three requirements of a remedy are strictly achieved. This 
Court has an obligation to the Court of Appeals to ensure that this 
occurs.
    B. Especially Careful Review Is Warranted By the Importance of 
this Case to the Economy
    All cases are of great importance to the litigants, but few 
cases have far reaching economic consequences on their own. From 
this point of view, it is no exaggeration to say that this Court is 
reviewing the most important consent order since the break up of 
AT&T a generation ago. The words of the court in A T& T 
apply with equal force to the case at bar: This is not an ordinary 
antitrust case. The American Telephone and Telegraph Company, with 
its various components and affiliates, is the largest corporation in 
the world by any reckoning, and the proposed decree, if approved, 
would have significant consequences for an unusually large number of 
ratepayers, shareholders, bondholders, creditors, employees, and 
competitors .... [the decree would have] a potential for substantial 
private advantage at the expense of the public interest. In view of 
these considerations, and of the potential impact of the proposed 
decree on a vast and crucial sector of the economy and on such 
general public interests as the cost and availability of local 
telephone service, the technological development of a vital part of 
the national economy, national defense, and foreign trade, the Court 
would be derelict in its duty if it adopted a narrow approach to its 
public interest review responsibilities.\33\
---------------------------------------------------------------------------

    \33\ United States v. A T & T, 552 F. Supp. 131,151 
(D.DC 1982) (emphasis added).
---------------------------------------------------------------------------

    Virtually the same thing could be said with respect to the 
position of Microsoft within

[[Page 28930]]

the personal computer and Internet industry. The personal computer 
industry and the Internet now reach into almost every facet of the 
economy. Consumers of personal computers, just like consumers of 
telecommunications services a generation ago, have an enormous stake 
in ending the monopoly and enjoying the choices of new technologies 
and other benefits from a newly competitive marketplace. With so 
much at stake, any court would be derelict in its duty under the 
Tunney Act if it did not carefully review the PFJ to ensure that its 
entry is in fact in the public interest.
    C. Especially Careful Review Is Warranted Because the PFJ Is 
Ambiguous, Difficult to Implement and Enforce, and Will Harm 
Consumers and Other Third parties
    Under the Tunney Act, even when courts review consent orders 
entered into before a trial, they are charged with providing an 
especially close review to those portions of the consent order that: 
(a) are ambiguous (i.e., the reviewing judge "should pay 
special attention to the decree's clarity" \34\ since it 
will be very difficult for the Court to administer unclear 
provisions); (b) relate to compliance mechanisms (if the judge 
"can foresee difficulties in implementation we would expect 
the court to insist that these matters be attended 
to") \35\ and (c) affect third parties detrimentally 
("certainly, if third parties contend that they would be 
positively injured by the decree, a district judge might well 
hesitate before assuming that the decree is 
appropriate.") \36\
---------------------------------------------------------------------------

    \34\ United States V. Microsoft Corp., 56 F.3d 1448, 1463 
(1995).
    \35\ Id. at 1462.
    \36\ Id.
---------------------------------------------------------------------------

    Every key provision in the PFJ is ambiguous and therefore 
unlikely to effectively achieve its desired result, will be 
extraordinarily difficult if not impossible effectively to 
implement, and will have direct and substantial detrimental effect 
on a number of third parties, including consumers.
    These are three additional reasons why this Court should 
scrutinize the PFJ especially closely. Section II of this Discussion 
also will show that this scrutiny will reveal to the Court that the 
PFJ is not in the "public interest." Section II of this 
discussion will demonstrate why this Court should reject the PFJ 
because: (a) key terms are so ambiguous or riddled with loopholes 
that they will not achieve any of the objectives of the relief 
portion of this litigation; and (b) difficulties in implementation, 
including the ineffective and cumbersome enforcement mechanism, will 
similarly serve to render the PFJ toothless. These two problems will 
exacerbate other features of the PFJ, which will cause significant 
injury to many third parties, including in particular consumers.
    D. Especially Close Review Is Warranted Because the PFJ Is a 
"Mockery of Judicial Power"
    Finally, under the Tunney Act a reviewing court should not 
"rubber stamp" a proposed Consent Order that makes a 
"mockery of judicial power." \37\ The PFJ does 
exactly this.
---------------------------------------------------------------------------

    \37\ United States v. ABA, 118 F.3d 776, 783 (DC Cir. 
1997) ("The district court must examine the decree in light of 
the violations charged in the complaint and should withhold approval 
only if any of the terms appear ambiguous, if the enforcement 
mechanism is inadequate, if third parties will be positively 
injured, or if the decree otherwise makes "a mockery of 
judicial power"); See also, United States v. Central Parking 
Corp., 2000 U.S. Dist. LEXIS 6226 (D. DC 2000) (It appears, upon 
examination in light of the violations charged in the complaint, 
that the terms of the decree are not ambiguous, that the proposed 
enforcement mechanism is adequate, that third parties will not be 
"positively injured," and that the decree does not make 
a mockery of judicial power);United States v. Microsoft Corp., 56 
F.3d 1448, 1462 (DC Cir. 1995).
---------------------------------------------------------------------------

    Although a prompt, certain and effective remedy is often better 
than a perfect remedy achieved after extended litigation, virtually 
any remedy that this Court would order after litigation would be 
better than the PFJ. Section II of this discussion will demonstrate 
that the PFJ is neither prompt, certain, nor effective.
    If the Court of Appeals" three requirements for an 
adequate remedy are not satisfied, the public's investment in this 
case will be wasted and the public interest will not be served. 
Worse, future monopolists will be sent a signal that they will not 
be made to account for their illegal behavior, and so many might 
conclude that the entire Microsoft proceeding has been a mockery of 
judicial power.
    E. The Court Should Not Make its Tunney Act Determination Until 
It Has Heard The Nonsettling States" Evidence As To Which 
Remedy Is In The Public Interest Not only is this case unique in 
that the consent order has been submitted after a finding of 
liability has been made and upheld on appeal, it is also unique in 
that the Court continues to have a responsibility to fashion a 
remedy independent of whether it accepts the PFJ in its current or 
in modified form. This is because nine of the Plaintiff states did 
not accept the terms of the PFJ.
    Clearly, these non-settling Plaintiff states in the Microsoft 
case believe that the PFJ is an unsatisfactory remedy for 
Microsoft's illegal conduct.\38\ They believe that only much more 
stringent remedies would constitute an effective remedy.\39\ They 
have asked for, and are entitled to, a hearing on their proposed 
remedy, and this remedy hearing is scheduled to start on March 
11.\40\
---------------------------------------------------------------------------

    \38\ These states filed their own proposal with the Court 
on December 7, 2001.
    \39\ Id.
    \40\ See Scheduling Order filed October 2, 2001.
---------------------------------------------------------------------------

    The peculiar situation of this "two track" 
proceeding requires that the Court hold off its decision under the 
Tunney Act until after it has heard the arguments to be presented by 
the nine non-settling States. These plaintiffs have a constitutional 
right to completion of the trial, and this includes the right to a 
Hearing before a Court that not only is unbiased, but also a Court 
that appears to be unbiased. However, if this Court rules under the 
Tunney Act that the PFJ is in the "public interest" 
prior to the completion of the non-settling States" hearing, 
this Court will appear to be biased. It will appear that, even 
before this Court has heard the evidence that the plaintiff states 
produce during the March 11 hearing, this Court already had 
determined the appropriate remedy in the Microsoft case.
    To avoid even the appearance that this Court has prejudged the 
plaintiff-states" case, this Court should receive and 
carefully review the public comments on the PFJ, and receive and 
carefully review the Justice Department's responses. But then this 
Court should hold off making a Tunney Act determination until the 
plaintiff-states" hearing is completed.
    This is especially true in light of the overall purpose of the 
Tunney Act. The Tunney Act granted authority to the Court to take 
additional evidence in order to ascertain whether the remedy is in 
the "public interest." It sets deadlines for the DO J, 
the defendant and the public, but it does not prevent this Court 
from waiting until the remaining parties have presented their 
evidence.
    Moreover, this delay will not cause any hardship to Microsoft, 
which has sought to delay the remedial proceedings in this case on 
numerous occasions. Since not postponing of the Court's Tunney Act 
determination would harm the remaining plaintiffs by depriving them 
of their right to a remedy determination that appears to be 
unbiased, and will not adversely affect Microsoft, a balancing of 
the equities (as would be done in a preliminary injunction 
proceeding) clearly suggests that the Court should not make a Tunney 
Act "public interest" determination until all of the 
evidence concerning the appropriate remedy is before this Court.
    It is important to stress the need for further evidence and 
argumentation with respect to the remedy in this complicated case. 
As commentators under the Tunney Act, we are asked to rely on the 
Competitive Impact Statement ("CIS") filed by the 
Department of Justice. The CIS mentions that the Department 
considered a variety of alternative remedies, but it fails utterly 
to analyze them, saying in less than one page, conclusorily and in 
disregard of its obligation to help the public comment on the case, 
that it has rejected all alternatives. Without the detailed 
explanation by the Government of why various alternatives (including 
many that were proposed by the American Antitrust Institute) were 
rejected, it is impossible for the public commentors to play their 
proper role under the Tunney Act in providing the Court with advice 
as to the implications of the PFJ. Because of this shortcoming, it 
is especially appropriate for the Court to hear the evidence in 
support of alternative remedies that will be promulgated by the non-
settling States before judging what is in the public interest.
    II. Substantive Failings of the Proposed Final Judgment
    As noted in the previous section, the Court is not to 
"rubber stamp" whatever settlement the DOJ puts forward. 
The degree of deference given the DOJ depends on the stage of the 
proceeding.
    Where, as here, the issues of liability been fully litigated and 
the remedial goals clearly established, the Court is obligated to 
ensure that any consent order fulfills those goals. Under this 
standard, the Court should reject the PFJ as a mockery of judicial 
power. But

[[Page 28931]]

even under the more deferential standards used to review pretrial 
consent orders, the Court should reject the PFJon grounds that it is 
ambiguous, unenforceable, injures consumers and other third parties.
    A. The PFJ Constitutes a Mockery of Judicial Power
    This case presents unique circumstances in that the issues of 
liability have been fully litigated and affirmed by the Court of 
Appeals in an unanimous en banc decision. Consequently, the Court 
must strictly follow the standard for a proper remedy established by 
the Court of Appeals: "a remedies decree in an antitrust case 
must seek to [1] "unfetter a market from anticompetitive 
conduct," [2] "terminate the illegal monopoly, deny to 
the defendant the fruits of its statutory violation, and [3] ensure 
that there remain no practices likely to result in monopolization in 
the future." \41\ The PFJ fails to prohibit the most 
pernicious anticompetitive conduct identified by the Court of 
Appeals and does nothing to inhibit Microsoft's power to continue to 
use these tactics to maintain its operating system 
("OS") monopoly or to expand that monopoly into other 
markets. Not only does the PFJ do absolutely nothing to deprive 
Microsoft of the fruits of its monopoly, the Competitive Impact 
Statement ("CIS") filed by the DOJ does not even mention 
this remedial goal mandated by the Court of Appeals. A proposal 
which completely ignores critical holdings of the Court of Appeals 
consitutes a mockery of judicial power.
---------------------------------------------------------------------------

    \41\ Microsoft III, 253 F.3d at 103 (citations omitted).
---------------------------------------------------------------------------

    1. Failure to Prohibit Anticompetitive Integration of Middleware 
and the Operating System
    The PFJ fails to restrict, let alone prohibit, the most 
egregious types of illegal activity identified by the Court of the 
Appeals, Microsoft's integration of its products into the Operating 
System. As with many of the deficiencies in the PFJ, Microsoft's 
continuing and unfettered ability to integrate products into the 
operating system transgresses all three remedial goals established 
by the Court, for it is not only the most important tool used by 
Microsoft to maintain its current monopoly and create new ones, the 
exclusive power to integrate software into the operating system is a 
fruit of Microsoft's illegally maintained monopoly.
    While the DOJ completely ignores the Court of Appeals mandate to 
deprive Microsoft of the fruits of illegal monopoly, the CIS 
concedes that appropriate relief should, among other things, 
"end the unlawful conduct." \42\ The Court of 
Appeals unanimously and squarely held that Microsoft's integration 
of the browser middleware and the operating system "constitute 
exclusionary conduct, in violation of  2" of the 
Sherman Act.\43\ More specifically, the Court of Appeals found that 
Microsoft violated the law by commingling software code and by 
failing to create a way to remove the commingled code from the 
operating system.\44\ Not only does the PFJ fail to end this 
unlawful conduct by requiring Microsoft either to stop the 
commingling or to provide a way to remove the commingled code, the 
PFJ actually endorses such anticompetitive integration by giving 
"Microsoft in its sole discretion" the right to 
determine the "the software code that compromises a Windows 
Operating System Product." \45\ It is hard to imagine 
anything that could more readily constitute a mockery of judicial 
power than to authorize the defendant to engage in conduct which the 
court has specifically found to be illegal. Yet that is precisely 
what the PFJ does.
---------------------------------------------------------------------------

    \42\ CIS, p. 24.
    \43\ United States v. Microsoft Corp., 253 F.3d 34, 67 (DC 
Cir. 2001); CIS, pp.3 and 7.
    \44\ Id. at 66-67
    \45\ PFJ, sec. VI.U.
---------------------------------------------------------------------------

    The importance of integration to Microsoft's ability to maintain 
and extend its monopoly can hardly be understated. It is Microsoft's 
weapon of mass destruction against competition. Network effects 
assure that middleware distributed with every new PC will dominate 
the market and drive out even superior products simply because the 
middleware is distributed with every new PC. In markets 
characterized by network effects, ubiquity beats quality. Microsoft 
can achieve this universal distribution without resort to threats of 
retaliation or contractual restrictions simply by commingling its 
middleware code with the operating system software code. As the 
Court of Appeals found, Microsoft can and has used this type of 
integration to snuff out middleware that threatened the applications 
barrier to entry which protects Microsoft's operating system 
monopoly. So important is this weapon to Microsoft that it sought a 
rehearing on this matter, despite the fact that the Court had 
unanimously found that the conduct violated Section 2 of the Sherman 
Act. Not surprisingly, the Court of Appeals refused to rehear the 
issue.\46\
---------------------------------------------------------------------------

    \46\ United States v. Microsoft 2001 U.S. App. LEXIS 17137 
(DC Cir.)
---------------------------------------------------------------------------

    The Court of Appeals identified two types of illegal 
integration, commingling the browser middleware code with the 
operating system and excluding the browser middleware code from the 
Add/Remove programs utility. Yet the PFJ neither prohibits 
commingling nor mandates a method of removing commingled code. 
Section III.H of the allows OEMs and end users to hide Microsoft 
middleware products, but Microsoft can force the OEMs to install 
Microsoft middleware products as part of the operating system. OEMs 
and consumers can remove the icons for Microsoft middleware 
products, but neither OEMs nor consumers remove the middleware 
product itself. It is simply untrue to say that OEMs will have 
"freedom to make middleware decisions" \47\ when 
Microsoft "in its sole discretion" can force OEMs to 
distribute and consumers to accept Microsoft's middleware product as 
part of the operating system.\48\
---------------------------------------------------------------------------

    \47\ CIS, p.3.
    \48\ 48 PFJ, sec. VIM.
---------------------------------------------------------------------------

    Similarly, OEMs and end users can change the settings so that, 
for example, the PC will launch RealPlayer instead of Microsoft's 
Windows Media Player middleware to play certain types of music, but 
neither the OEM nor the end user can really turn off the Windows 
Media Player. Windows Media Player will still play the music 
whenever "necessary for valid technical reasons to supply the 
end user with functionality consistent with a Windows Operating 
System Product." \49\
---------------------------------------------------------------------------

    \49\ PFJ, sec. III.H.
---------------------------------------------------------------------------

    Given the existence of network effects, this inability to turn 
off, let alone remove, Microsoft middleware will ensure that 
Microsoft defeat rivals offering cross platform alternatives. 
Consider the music example. RealPlayer does not play music streamed 
in Microsoft's proprietary format and Windows Media Player does not 
play music streamed in RealNetworks proprietary format.
    Consequently, whenever consumer wants to hear music streamed in 
Microsoft's format, the PC will automatically play the music using 
Windows Media Player even though the consumer or the OEM has 
installed RealPlayer. But the situation is not reciprocal. If the 
consumer or OEM has not installed RealPlayer and chosen it as the 
option to play music, when the consumer attempts to listen music 
streamed in RealNetwork's format the PC will not automatically 
invoke RealPlayer.
    Instead, the PC will display an error message, probably leading 
the consumer to believe that the content provider's products are 
defective. Now consider the position of content provider. She can 
stream her music in RealNetwork's format, which may provide superior 
features, but which can only be listened to on a subset of PCs. 
Alternatively, she can stream her music in Microsoft's format and 
have it play on all PCs, even PCs where the OEM or end user has 
attempted to disable Windows Media Player. Of course, she will 
choose to stream in Microsoft's format and as more and more content 
providers reach the same obvious conclusion, demand for RealPlayer 
will evaporate regardless of which format provides the better 
quality music or lower prices. (Note that price is an issue. Even if 
Microsoft does not charge a separate price for Windows Media Player, 
Microsoft does sell the server software, encoding tools, etc., to 
content providers.)
    Realistically, ISVs cannot avoid the implications of integration 
by purchasing installations from OEMs. The obstacles to successful 
implementation of such a strategy are overwhelming. First, network 
effects dictate that an ISV will have to purchase installation from 
every OEM or it will fail to achieve the universal distribution 
necessary to have a fighting chance against Microsoft.
    The price for universal distribution will not be cheap. Again, 
consider the plight of RealNetworks. Since an OEM cannot remove 
Windows Media Player, Real Networks would have to compensate the OEM 
for the additional testing, support and hardware costs of having two 
media players installed on the PC.\50\ OEMs will demand payment 
because the universal distribution needed by RealNetworks to survive 
will also mean that an OEM cannot achieve a competitive advantage 
over its rivals by installing RealPlayer, e.g., IBM cannot 
differentiate its PCs from Dell's by installing RealPlayer when Dell 
also installs RealPlayer, and if

[[Page 28932]]

RealPlayer is not installed on both IBM and Dell PCs, RealNetworks 
cannot reasonably hope to survive against Microsoft in this 
middleware market. The cost to RealNetworks is compounded by the 
fact that Microsoft not only does not have to compensate the OEM for 
the cost of installation, Microsoft also gets paid by the OEM for 
installation of Windows Media Player as part of the overall royalty 
for Windows. Consequently, every PC shipped would represent an 
expense to RealNetworks and income to Microsoft. In short, any ISV 
who seeks to challenge Microsoft in a middleware market will do so 
at an enormous and probably insurmountable cost disadvantage.
---------------------------------------------------------------------------

    \50\ Microsoft III, 253 F.3d at 64.
---------------------------------------------------------------------------

    The PFJ contains provisions which further discourage ISVs from 
challenging Microsoft's integrated middleware and diminish their 
chances of success if they do. For example, the PFJ gives Microsoft 
the right to have Windows automatically request the end user to 
change back to Microsoft middleware fourteen days after the PC's 
first use.\51\ Assume that RealNetworks convinces an OEM to install 
RealPlayer and to configure the PC to use RealPlayer instead of 
Windows Media Player for music. Two weeks after the consumer 
purchases her new PC, she may be confronted with a pop up window 
asking her to switch to Windows Media Player every time she tries to 
listen to music. Microsoft is free to make it impossible to turn off 
these incessant requests except by agreeing to turn off RealPlayer 
and turn on Windows Media Player. Just to get rid of the annoying 
message, at least some consumers will agree to switch to Windows 
Media Player. In other words, RealNetworks cannot really purchase 
more than fourteen days worth of installation on a PC. Microsoft, 
however, will Windows Media Player permanently installed as part of 
the operating system.
---------------------------------------------------------------------------

    \51\ PFJ, sec. III.H.3
---------------------------------------------------------------------------

    Microsoft also has an unrestricted right to automatically 
override the consumer's or OEM's configuration whenever the consumer 
installs "a new version of a Windows Operating System 
Product." \52\ There are no restrictions on Microsoft's 
power to issue "new versions" of Windows. Nor is there 
any restriction on Microsoft's ability to update a consumer's PC to 
these new versions automatically when the consumer connects to the 
Internet. Microsoft is free to issue automatic updates to new 
versions of Windows which do little more than sweep away the 
configuration. So even among consumers who refuse Microsoft's 
repeated requests to switch to Windows Media Player, the RealPlayer 
installation may last only until Microsoft issues its next operating 
system update.
---------------------------------------------------------------------------

    \52\ PFJ, sec. III.H.3.
---------------------------------------------------------------------------

    At best, therefore, all an ISV can purchase from an OEM will be 
a temporary presence on many PCs. Not only will this discourage ISVs 
from entering the market with competitive middleware products, those 
who do will find that a temporary presence creates the same problems 
as lack of universal distribution due to network effects. Why should 
someone stream audio, write applications, etc., for a non-Microsoft 
middleware product that is available on a hit or miss basis when 
Microsoft middleware is universally present on a permanent basis?
    There are two effective tools to deal with the issue of 
anticompetitive integration: (1) prohibit integration by Microsoft 
or (2) require Microsoft to include competitive middleware with the 
operating system. The PFJ contains neither tool. Given a unanimous 
en banc decision of the Court of Appeals holding that Microsoft 
illegally commingled middleware code with the operating system, the 
failure of the PFJ to provide either tool constitutes a mockery of 
judicial power.
    2. Microsoft Remains Free to Withhold Vital Information
    Without disclosure of the operating system's APIs and related 
information, IHVs, IAPs, ICPs, OEMs, and perhaps most importantly 
ISVs cannot develop functional products that will work on Windows. 
Microsoft used selective disclosure of this information as a reward/
retaliation mechanism in order to obtain compliance from third 
parties in its effort to eliminate competition from cross platform 
middleware products. Furthermore, by withholding information from 
ISVs that is available to Microsoft's own developers or by 
disclosing the information to ISVs later than the information is 
made available to Microsoft's own developers, Microsoft can retard 
an ISV's ability to develop competitive products, including 
middleware.
    In a competitive market for operating systems, Microsoft would 
fully disclose all APIs and related information in order to attract 
support from third parties and to make sure that their products 
worked as well as they possibly could with the Windows operating 
system. But Microsoft does not operate in a competitive marketplace, 
and Microsoft has an incentive to engage in selective, incomplete 
and delayed disclosures in order to prevent the development of cross 
platform middleware products.
    Rather than simply compel Microsoft to make the complete and 
timely disclosures that would ordinarily be required by a 
competitive marketplace, the PFJ puts into place a regime which 
seems designed to preserve Microsoft's unbridled ability to exploit 
its monopoly power through selective disclosure. For example, the 
PFJ does not require disclosure of all APIs but only the subset of 
"the APIs and related documentation that are used by Microsoft 
Middleware to interoperate with a Windows Operating System 
Product." \53\ There are a number of problems with this 
restricted set of mandatory disclosures. First, ISVs may want to use 
APIs in Windows that Microsoft does not happen to use for its own 
middleware. While a certain API or set of APIs may be the best way 
for Microsoft to implement its middleware on Windows, a different 
set of APIs may prove better for a competitor's middleware. Under 
the terms of the PFJ, however, Microsoft only has to disclose the 
APIs used by its own middleware. In other words, and contrary to the 
CIS, competitiors do not have access to the same APIs as Microsoft's 
own middleware developers. Rather, they have access only to those 
APIs used by Microsoft's middleware developers.
---------------------------------------------------------------------------

    \53\ PFJ, sec. III.D.
---------------------------------------------------------------------------

    Second, Microsoft has complete discretion over which APIs fall 
into this subset of mandatory disclosures. Under the PFJ, an API is 
limited to the 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." \54\ The PFJ also 
gives Microsoft complete control over what constitutes the 
"Windows Operating System Product." \55\ The 
repeated references to "Windows Operating System 
Product" in the definition of APIs make clear that Microsoft 
can refuse to disclose APIs simply by exercising its unfettered 
discretion under the PFJ to remove those APIs from the 
"Windows Operating System Product."
---------------------------------------------------------------------------

    \54\ PFJ, sec. VI.A.
    \55\ PFJ, sec. VI.U.
---------------------------------------------------------------------------

    Third, the APIs used by important Micorosoft Middleware Products 
such as Windows Media Player may not be subject to mandatory 
disclosure. The PFJ does not require disclosure of the APIs used by 
"Microsoft Middleware Products." Instead, the PFJ 
requires disclosure of the APIs used by "Microsoft 
Middleware." \56\ The definition of "Microsoft 
Middleware Products" expressly includes not only Windows Media 
Player, but also other important middleware such as Microsoft 
Internet Explorer.\57\ However, these products are not expressly 
included in the definition of "Microsoft 
Middleware." \58\ Not all software which provides 
"the same or substantially similar functionality as a 
Microsoft Middleware Product" \59\ falls within the 
definition of "Microsoft Middleware." It must also be 
"distribute[d] separately separately from a Windows Operating 
System Product to update that Windows Operating System 
Product." \60\ If, for example, Microsoft ceases to 
distribute Internet Explorer and Windows Media Player separately 
from Windows or if Microsoft no longer treats these separate 
distributions of Internet Explorer and Windows Media Player as 
Windows updates, then Internet Explorer no longer constitutes 
"Microsoft Middleware" and Microsoft no longer has an 
obligation to disclose the APIs used by Internet Explorer.\61\
---------------------------------------------------------------------------

    \56\ PFJ, sec. III.D and VI.A
    \57\ PFJ, sec. V.K
    \58\ PFJ, sec. VI.J
    \59\ PFJ, see. VI.J.3.
    \60\ PFJ, sec. VI.J. 1.
    \61\ Note that Microsoft's current distribution of these 
products for the Macintosh platform will not constitute the required 
separate distribution because the Macintosh versions cannot be 
updates to Windows.
---------------------------------------------------------------------------

    Whether a product falls within the definition of 
"Microsoft Middleware," and hence whether the APIs it 
uses must be disclosed, also depends on whether the product is 
trademarked.\62\ Under PFJ section VI.T, a product is 
"Trademarked" if Microsoft claims a trademark in the 
product, separate from its trademark claims for 
"Microsoft??" and "Windows??," by, for 
example, marking the name with the ??

[[Page 28933]]

character. But a product is not Trademarked if its name is 
"comprised of the Microsoft ?? or Windows?? trademarks 
together with descriptive or generic terms." In other words, 
Microsoft Internet Explorer?? and Windows Media Player?? would be 
Trademarked and the APIs used by those products would be subject to 
disclosure. But Microsoft?? Internet Explorer and Windows?? Media 
Player would not be Trademarked and the APIs used by those products 
would not be subject to any mandatory disclosure. Under PFJ Section 
VI.T, Microsoft "disclaims any trademark rights in such 
descriptive or generic terms."
---------------------------------------------------------------------------

    \62\ PFJ, sec. VI.J.2.
---------------------------------------------------------------------------

    Consequently, if the Court enters the PFJ, Microsoft Internet 
Explorer?? and Windows Media Player?? will automatically become 
Microsoft?? Internet Explorer and Windows?? Media Player and the 
APIs used by those products will fall outside the scope the PFJ's 
mandatory disclosure provisions.
    Fourth, the number of APIs subject to mandatory disclosure is 
further reduced by PFJ section III.J.1 (a) which allows Microsoft to 
refuse disclosure of APIs "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." The importance of the 
APIs for these functions can be seen from the fact that anyone who 
wishes to play music distributed by the PressPlay joint venture 
created by two of the five major record labels will need access to 
the digital rights management APIs. The CIS asserts that "the 
APIs ... for the Secure Audio Path digital rights management service 
... must be disclosed." \63\ Unfortunately, the CIS is 
wrong. Section III.J.1(a) of the PFJ states: "No provision of 
the Final Judgment shall ... [r]equire Microsoft to ... disclose ... 
portions of APIs ... which would compromise the security of a 
particular installation or group of installations of ... digital 
rights management." The CIS appears to assume that 
"installation" refers to an "end-user 
installation," \64\ when, in fact, the the term 
"end-user installation limitation" is not stated 
anywhere in Section III.J.1.a. Installation could just as easily 
mean Microsoft particular installation of this technology in Windows 
generally as it could an consumer's particular installation on his 
own PC. Indeed, the former interpretation is more probable, at least 
with respect to APIs, since it is hard to conceive of a Windows API 
installed only on the PC of one particular consumer.
---------------------------------------------------------------------------

    \63\ 63 CIS, p. 35.
    \64\ Page 51 of the CIS states that Section III.J.1.a is 
"limited to specific end-user implementations of security 
items."
---------------------------------------------------------------------------

    Fifth, not only are ISVs limited to an articificially and 
anticompetitively limited subset of the APIs, ISVs do not get access 
to those APIs until the "last major beta test release" 
of the Microsoft Middleware. In other words, ISVs can never hope to 
catch up with Microsoft's own developers. While Microsoft's 
developers presumably have access to new APIs as soon as they are 
created, ISVs do not get access to new APIs until Microsoft releases 
a beta version of the revised operating system to 150,000 or more 
beta testers.\65\ It is not clear that Microsoft has ever had 
150,000 beta testers in any of its beta testing programs.
---------------------------------------------------------------------------

    \65\ PFJ, sec.III.D and. VI.R.
---------------------------------------------------------------------------

    Sixth, the PFJ delays the initial disclosure of the APIs for a 
year.\66\ There is no need for this delay. Microsoft already 
discloses the APIs it wants to disclose through the Microsoft 
Developer Network mechanism utilized by the PFJ. The CIS restates 
the one year delay, but provides no justification for it. 
Consequently, it is a mockery of judicial power to allow Microsoft 
to continue this anticompetitive conduct for another year.
---------------------------------------------------------------------------

    \66\ More specifically, the PFJ section III.D states that 
the mandatory disclosures will begin "[s]tarting a the earlier 
of the release of Service Pack 1 for Windows XP or 12 months after 
submission of the [Proposed] Final Judgment for to the Court."
---------------------------------------------------------------------------

    Finally, PFJ section J.2 empowers Microsoft to exclude Open 
Source developers from access to many, if not all, APIs. The most 
important source of competition for Microsoft may well come not from 
commercial ISVs but the Open Source movement, i.e., the creators of 
Linux, Apache, etc. While the Open Source movement has significant 
potential for creating competition, the Open Source movement does 
not constitute a for profit business or even a traditional nonprofit 
business. Section III.J.2(b), however, gives Microsoft the right to 
condition access to many APIs on proof of "a reasonable 
business need for the API" and section III.J.2(c) allows 
Microsoft to limit access to those who meet "reasonable, 
objective standards established by Microsoft for certifying the 
authenticity and viability of its business." Participants in 
the Open Source movement will have difficulty establishing that they 
are a business with business needs under many tests, but it will 
certainly be impossible to meet the standards established by 
Microsoft given that Microsoft has already attacked the Open Source 
model as "unhealthy" and doomed to failure.\67\ Indeed, 
Microsoft has even branded all Open Source software as "a 
virus." \68\
---------------------------------------------------------------------------

    \67\ See, Prepared Text of Remarks by Craig Mundie, 
Microsoft Senior Vice President The Commercial Software Model The 
New York University Stern School of Business May 3, 2001 
    \68\ See, e.g., Stephen Shankland," Microsoft 
license spurns open source" CNet News.com, June 22, 2001 

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

    The CIS is simply wrong when it states that "Subsection 
III.J.2, by it explict terms, applies only to licenses for a small 
subset of the APIs and Communications Protocols that Microsoft will 
have to disclose." \69\ In reality, Section III.J.2, 
"by its explicit terms," covers APIs and other 
information "related to anti-piracy systems, anti-virus 
technologies, license enforcement mechanisms, authentication/
authorization security, [and] third party intellectual property 
protection mechanisms." Virtually all APIs fall into this 
category, depending on how one defines "related to" and 
Microsoft will have no incentive to define the phrase narrowly. But 
even under a narrow interpretation of section III.J.2, participants 
in the Open Source movement may still be excluded from disclosures 
of APIs and other critical information on grounds that they are not 
ISVs because they do not constitute an entity. Sec. Vii.
---------------------------------------------------------------------------

    \69\ 69 CIS, p. 53.
---------------------------------------------------------------------------

    The District Court found, and the Court of Appeals affirmed, 
that Microsoft illegally maintained its monopoly by engaging in 
selective and delayed disclosures of APIs. The PFJ allows this 
practice to continue virtually unabated. Consequently, the PFJ is a 
mockery of judicial power.
    3. Failure to Prohibit Anticompetitive Corruption of Cross-
Platform/Open Standards
    Microsoft's assault on middleware threats to its Operating 
System monopoly has not been limited to integration. Java 
represented a perhaps even greater threat to Microsoft's Operating 
System than Netscape's web browser, and unlike the Netscape web 
browser, Java continues to be a viable product. Created by Sun, Java 
is at its essence a technology that allows programmers to write 
applications that will run on any operating system with a Java 
Virtual Machine installed.
    Microsoft licensed Java from Sun and began to market programming 
tools for ISVs to use in writing Java applications. Microsoft also 
created its own version of the Java middleware for Windows. 
Microsoft, however, secretly altered its implementation of Java so 
that applications written using Microsoft's programming tools would 
not run correctly under any operating system other than Windows. The 
Court of Appeals condemned Microsoft's use of these tactics as part 
of an "embrace and extend" strategy--Microsoft 
embraced an open/cross-platform and then extended it with Windows-
only proprietary technology--as a violation section 2 of the 
Sherman Act. Use of the "embrace and extend" strategy, 
whether done openly or in secret, effectively renders any cross-
platform technology useless as a means of breaking down the 
applications barrier to entry.\70\
---------------------------------------------------------------------------

    \70\ Microsoft III, 253 F.3d at 74-78.
---------------------------------------------------------------------------

    While the PFJ does purport to contain language which 
restricts--but does not eliminate--Microsoft's use of 
exclusive dealing agreements and threats of retaliation for using 
competing middleware products, including, presumably, Sun's Java 
Virtual Machine, nothing in the PFJ restricts Microsoft's ability to 
subvert an open standard by engaging in a surreptitious embrace and 
extend strategy. If, as the CIS asserts, "[c]ompetition was in 
this case principally because Microsoft's illegal conduct maintained 
the applications barrier to entry into the personal computer 
operating system market by thwarting the success of middleware that 
would have assisted competing operating systems in gaining access to 
applications and other needed complement," then Microsoft must 
be prohibited from polluting the open standards on which cross-
platform middleware relies. The failure of the PFJ to do so 
constitutes a mockery of judicial power.

[[Page 28934]]

    4. Microsoft Remains Free to Retaliate Against Those Who Favor 
Competitive Products
    Section III.A of the PFJ initially purports to prohibit 
retaliation against OEMs who distribute competitive middleware 
products. Yet section III.A then renders this prohibition 
meaningless by giving Microsoft the right to provide 
"Consideration ....commensurate with the absolute level or 
amount of that OEM's development, distribution, promotion, or 
licensing of that Microsoft product or service." Consideration 
includes both "monetary payment" and "the 
provision of preferential licensing terms." \71\ So 
Microsoft may reward OEMs who distribute, promote or license 
Microsoft products to the exclusion of competitive middleware 
products. Of course, those OEMs who favor competitive middleware 
products will not receive "Consideration" from 
Microsoft. It does not matter that this use of Consideration is 
limited to "absolute" versus "relative" 
levels of distribution. The additional support costs of installing 
two products which provide the same functionality will deter most 
OEMs from installing competitive product when they are already 
installing the Microsoft product. By any reasonable standard, 
therefore, Microsoft's ability to give consideration to OEMs for the 
distributing, promoting and licensing of Microsoft's products 
amounts to an unrestricted right to retaliate against OEMs who 
distribute, promote or license non-Microsoft products.
---------------------------------------------------------------------------

    \71\ PFJ, sec. VI.C.
---------------------------------------------------------------------------

    Similarly, Section III.G.1 purports to prohibit Microsoft from 
offering "Consideration" to OEMs as well as IAPs, ICPs, 
ISVs, and IHVs in exchange for their distribution of Microsoft 
Platform software in a fixed percentage, but the section goes on to 
state Microsoft may enter such agreements whenever "Microsoft 
in good faith obtains a representation that is commercially 
practicable for the entity to provide equal or greater distribution, 
promotion, use or support for software that competes with Microsoft 
Platform Software." Note that the OEMs and others are not 
required to distribute any competitive product, only to represent 
that they could distribute competitive products. The CIS points out 
that Microsoft could grant an ISV preferential marketing, technical 
and other support "on the condition that the ISV ship the 
Windows Media Player along with 70% of the ISV's products" so 
long as "the ISV affirmatively states that it is commercially 
practicable for it also to ship competing media players with at 
least the same (or greater) number of shipments." \72\ 
Commercial practicability is not defined in the PFJ, and it is 
difficult to imagine that an ISV (or OEM, IAP, etc.) would refuse to 
make such a representation in exchange for preferential treatment 
from Microsoft. At the same time, it is difficult to believe that an 
ISV would distribute two products that perform the same function. As 
with OEMs, the additional distribution costs may be small, but the 
additional support costs to help consumers sort out which product to 
use are likely to be prohibitive.
---------------------------------------------------------------------------

    \72\ CIS, pp. 42-43.
---------------------------------------------------------------------------

    Section III.F.2 also purports to prohibit Microsoft from giving 
an ISV Consideration in exchange for the ISV's agreement to refrain 
from "developing, using, distributing, or promoting any 
software" that competes a Microsoft or runs on a competing 
platform. Yet the very same section gives Microsoft the right to 
enter into these exclusive agreements as part of a "bona fide 
contractual obligation of the ISV to use, distribute or promote any 
Microsoft software." All ISVs who write software for Windows 
must use Windows, even if only to test whether products will run 
under Windows. Consequently, Microsoft is relatively free to offer 
Consideration, including preferential developer support, to any ISV 
as part of the ISV's other contractual obligations with Microsoft. 
Section III.F.2 does, to be sure, require that the restrictions be 
connected to "bona fide contractual obligations" and 
limits the permissible restrictions to those that are "of 
reasonable scope and duration." But these are all undefined 
terms, so challenges to conduct under this section as unreasonable 
in scope or duration may require years of litigation. Since the 
Technical Committee ("TC") cannot issue binding 
decisions, nor can its members testify, nor can its work product be 
used in any enforcement proceeding, the TC will add a layer of delay 
rather than expedite resolution of these disputes.
    B. Consumers and Other Third Parties Will Be Injured
    Independently of whether the PFJ consitutes a mockery of 
judicial power, the Court can and should refuse to a consent order 
which poses a high risk of injury to consumers or other third 
parties. The PFJ contains provisions which will affirmatively make 
matters worse in at least four important ways. First, the PFJ 
contains language which Microsoft may be able use to require 
competitors to license their intellectual property to Microsoft. 
This would take away the rights of third parties to negotiate with 
Microsoft over whether and on what terms Microsoft may use their 
property. Second, the Court of Appeals modified the standard for 
tying from "illegal per se" to "rule of 
reason," but the PFJ purports to immunize Microsoft from tying 
claims altogether. This poses an unacceptable risk that the third 
party victims of Microsoft's tying may lose some or all their rights 
to challenge this conduct. Third, whereas Microsoft now makes it 
possible to remove certain middleware such as Windows Messenger from 
middleware, the PFJ will limit Original Equipment Manufacturers 
("OEMs") and consumers to deleting icons. Finally, the 
PFJ enables Microsoft to retaliate with legal immunity against OEMs 
and others in a variety of ways.
    1. The PFJ Requires Cross-Licensing of Third Party Intellectual 
Property to Microsoft.
    Currently, ISVs and other third parties are at least 
theoretically free to license their intellectual property to 
Microsoft or not as they see fit. The extent to which third parties 
actually have the power to exercise this legal right may remain in 
doubt due to Microsoft's monopoly power, but the PFJ, with no 
consideration for the possible anticompetitive effects of cross 
licensing with a monopolist in networked markets, appears to sweep 
away the intellectual property rights of third parties who deal with 
Microsoft.
    The loss of the legal right to refuse to cross license 
intellectual property with Microsoft is found in section III.I.5 
which provides:
    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 [Proposed] Final 
Judgment; the scope of such license shall be no broader than 
necessary to insure that Microsoft can provide such options or 
alternatives.
    The scope of this provision and its potential impact on third 
parties is astonishing. Assume, for example, that an OEM wishes to 
enable dual booting, i.e., to allow the end user to choose between 
using Linux (or some other OS) and Windows when she turns on her PC. 
Can Microsoft insist that it receive a license from the OEM for the 
software that makes the choice possible? The answer would seem to be 
yes. After all, the OEM would be attempting to take advantage of 
"options or alternatives provided" by the PFJ and 
Section III.I.5 does say that Microsoft may require the OEM to grant 
Microsoft "a license to any intellectual property rights it 
may have relating to the exercise of [its] options or 
alternatives." Expanding Microsoft's ability to insist on 
cross-licensing will likely have two types of negative effects. In 
some cases, it will raise the price of dealing with Microsoft too 
high for the other company, in which case the company will be 
disadvantaged in the marketplace. In other cases, the cross-
licensing will occur and Microsoft may gain important intellectual 
property that will give it a competitive advantage over its 
competitors. In either instance, the incentives for other companies 
to produce new intellectual property will be reduced and consumers 
will suffer.
    2. The PFJ May Immunize Microsoft From Tying Claims.
    One of the more remarkable phenomena in this case has been 
Microsoft's success at escaping liability for tying under Section 1 
of the Sherman Act. When the lawsuit began, Microsoft, like everyone 
else, was subject to the rule that tying is illegal per se. The 
Court of Appeals ignored at least a half century of Supreme Court 
precedent and held that the rule of reason analysis should apply to 
Section 1 claims of tying against Microsoft.\73\ (Note that the 
Court of Appeals already found that this conduct violated the rule 
of reason standard under Section 2 of the Sherman Act.) Section VI.U 
of the PFJ, however, dispenses with even the rule of reason analysis 
and tries to immunize Microsoft from tying claims altogether when it 
states that the "software code that comprises a Windows 
Operating System Product shall be determined by Microsoft in its 
sole discretion." Even the failed 1995 Consent Decree required 
Microsoft to offer at least a plausible procompetitive reason for 
its tying of software to the Operating System.\74\ It is

[[Page 28935]]

difficult even to conceive of a greater victory for a convicted 
abusive monopolist who is already in the process of tying new 
products to its core operating system monopoly. This provision of 
the PFJ alone makes a mockery of the entire case, but it also could 
mean that the victims of tying, whether it be consumers forced to 
purchase products they do not want or ISVs whose products are 
excluded from the OEM channel of distribution, may also be left 
without remedy. Clearly, the PFJ gives consumers and other third 
parties no legally enforceable rights.\75\ The PFJ also presents an 
unacceptably high risk of depriving them of their existing rights. 
Such a consent order is not in the public interest.
---------------------------------------------------------------------------

    \73\ Microsoft Ill, 253 F.3d at 89-95.
    \74\ See United States v. Microsoft Corp., 147 F.3d 935 
(DC Cir. 1998).
    \75\ PFJ, see. VIII.
---------------------------------------------------------------------------

    3. The PFJ Delays Changes in Microsoft's Conduct which Should 
Already Be in Place. Section III.H allows OEMs and consumers to hide 
certain Microsoft middleware by deleting the icons for the Microsoft 
products and replacing them with icons for competitive products 
beginning "at the earlier of the release of Service Pack 1 for 
Windows XP or 12 months after submission of this [Proposed] Final 
Judgment to the Court." In the rapidly changing middleware 
markets affected by this provision, a year may provide Microsoft 
more than enough time to eliminate viable competitors by excluding 
them from access to consumers, and there is no justification for 
giving Microsoft a year to implement this provision. On July 
11,2001, Microsoft issued a press release stating these changes 
would be incorporated into Windows XP when it shipped in October 
2001.\76\ If Microsoft could implement this flexibility in October 
2001, why must competition take a battering for another full 12 
months? The delay can only serve to entrench Microsoft's efforts to 
eliminate competition in the middleware markets covered by Section 
III.H of the PFJ.
---------------------------------------------------------------------------

    \76\ See Microsoft Press Release.
---------------------------------------------------------------------------

    4. The PFJ Enables Microsoft to Retaliate Against OEMs and 
Others. As noted in our comments on justice and ambiguity, Microsoft 
may in fact remain free to retaliate against OEMs, Independent 
Software Vendors ("ISVs") and others who do not favor 
Microsoft middleware products. While the other comments focus on 
Microsoft's ability to take advantage of loopholes and vague and 
ambiguous provisions within the PFJ, perhaps it is as important to 
note that the PFJ covers only a small number of Microsoft products. 
Programming tools and Application Programming Interfaces 
("APIs") not used by Microsoft are critically important 
to ISVs and others. Similarly, Microsoft Office's commanding market 
share makes it an indispensible product to OEMs. The Court of 
Appeals noted the willingness of Microsoft to use these products in 
its illegal efforts to maintain the Windows monopoly, yet the PFJ 
leaves Microsoft free to retaliate against ISVs, OEMs and others by 
discriminating on price and other terms of access to these products. 
Without realistic protections against retaliation, the record of 
this case indicates strongly that many remedial portions of the PFJ 
will be ineffective. C. The Proposed Final Judgment Is Ambiguous 
"A district judge pondering a proposed consent decree 
understandably would and should pay special attention to the 
decree's clarity." \77\ The PFJ fails to set forth 
specific and precise remedies for the antitrust concerns identified 
by the Court of Appeals. There are no clear prohibitions on 
Microsoft's conduct in the Proposed Final Judgment. Many of the 
putative restrictions on Microsoft are vague and all are riddled 
with exceptions and qualifications. As the experience over the 1995 
Consent Decree shows, Microsoft and the government may have enormous 
differences of opinion as to the meaning of the terms. This lack of 
clarity will almost certainly compound the delay already present in 
the Proposed Final Judgment since the inevitable differences of 
opinion cannot be resolved without extended litigation to determine 
the "intent" of the parties according to the rules of 
contract law.
---------------------------------------------------------------------------

    \77\ United States v. Microsoft, 56 F.3d 1448, 1461(DC 
Cir. 1995).
---------------------------------------------------------------------------

    1. Unclear Whether Microsoft Can Retaliate Against OEMs Who 
Favor Competitive Products A critical issue in Microsoft's illegal 
maintenance of its monopoly has been its ability to retaliate 
against those who stand in its way, especially OEMs. OEMs provide an 
extraordinarily important distribution channel for software, 
including any cross-platform middleware that could serve to break 
down the applications barrier to entry. Unlike Microsoft, OEMs face 
intense competition and operate on razor thin profit margins. 
Consequently, they are especially vulnerable to retaliation from 
Microsoft. Seemingly small differences in the price charged for 
Windows can account for the success of one OEM and the demise of 
another. Nor is retaliation limited to price differences for 
Windows. If Microsoft can retaliate through the prices it charges 
for other products, such as Microsoft Office, and through the level 
of support that Microsoft gives an OEM. Since OEMs currently have no 
viable alternative to Windows, they simply cannot afford incur 
Microsoft's disfavor.
    Section III.A. 1 appears to prohibit Microsoft retaliating 
against OEMs who favor rival products: 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 ... from that OEM, because it is known to Microsoft 
that the OEM is or is contemplating ... developing, distributing, 
promoting, using, selling, or licensing any software that competes 
with Microsoft Platform Software ...
    Now assume that an OEM wants to develop, distribute and promote 
a new type of software that will compete with JAVA as a tool for 
creating applications that will run on multiple Operating Systems. 
As such, this technology threatens to erode the Applications Barrier 
to Entry that protects Microsoft's monopoly. Can Microsoft retaliate 
against the OEM for doing this? No one can tell from the language of 
the PFJ. First, there is the question of whether this new technology 
competes with a "Microsoft Platform Product." Microsoft 
Middleware products are included within the PFJ's definition of a 
"Microsoft Platform Product." \78\ It is still 
unclear, however, whether this new OEM middleware would compete with 
"Microsoft Platform Software." The PFJ narrowly defines 
"Microsoft Middleware Products." \79\ Microsoft's 
"Java Virtual Machine" is included in the definition of 
Microsoft Middleware Products,\80\ but the OEM is not offering a 
different "Java Virtual Machine," The OEM is offering an 
alternative to using Java. True, this technology threatens 
Microsoft's monopoly in the same way as Java does, but it remains 
unclear whether this new technology competes with any Microsoft 
Middleware Products. Therefore, it remains unclear whether the new 
technology competes with Microsoft Platform Software. Therefore, it 
remains unclear whether Microsoft may retaliate against the OEM for 
offering this technology. Consider another example where an OEM 
seeks to distribute the Netscape web browser, and the OEM promotes 
its use of Netscape in advertising, etc. Presumably this presents a 
clearer case since the definition of Microsoft Middleware Products 
expressly includes the Internet Explorer web browser and, therefore, 
it would seem almost certain that the Netscape web browser competes 
with Microsoft Platform Software. May Microsoft retaliate against 
the OEM for distributing the Netscape web browser? Again, the answer 
is unclear. As previously noted, section III.A. 1 does state that 
Microsoft cannot condition any Consideration that it gives an OEM 
based on whether the OEM distributes or promotes software that 
competes with Microsoft Platform Software. But Section III.A also 
states that "[n]othing 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." In other words, Microsoft cannot withhold 
Consideration for promoting Netscape, but Microsoft can withhold 
Consideration for failing to promote Internet Explorer. OEMs have 
limited resources to devote to the distribution and promotion of 
software, and if an OEM devotes its marketing budget to Netscape, 
the OEM cannot also spend those funds distributing and promoting 
Internet Explorer. Consequently, the OEM's distribution and 
promotion of Netscape may mean that the OEM has not given the 
required level of distribution or promotion to Internet Explorer, 
thereby entitling Microsoft to withhold the Consideration that 
Microsoft gives to competing OEMs who do not distribute and promote 
Netscape. This contradiction recreates the same type of ambiguity 
found the 1995 Consent Decree which prohibited Microsoft from tying 
products to Windows, but expressly allowed Microsoft to integrate 
products into Windows.
---------------------------------------------------------------------------

    \78\ PFJ, sec. VI.L(ii).
    \79\ PFJ, sec. VI.K
    \80\ PFJ, Sec. VI.K.1
---------------------------------------------------------------------------

    2. Unclear Whether Non-Microsoft Middleware and Non-Microsoft 
MiddleWare Products as Defined by the PFJ Could Ever Exist

[[Page 28936]]

    Some of the most important provisions of the PFJ concern the 
rights of OEMs, consumers, and others to use Non-Microsoft 
Middleware and Non-Microsoft Middleware Products. Section III.H, for 
example, allows an OEM or end user to hide Microsoft Middleware 
Products and install Non-Microsoft Middleware Products as the 
default mechanism to perform the same functions. Thus, it would seem 
that an OEM could remove the icon for Internet Explorer and replace 
it with an icon for Netscape's web browser, but in reality this will 
depend on whether Netscape's web browser constitutes a Non-Microsoft 
Middleware Product. To constitute a Non-Microsoft Middleware 
Product, Netscape's web browser must, among other things, expose 
"a range of functionality to ISVs through published 
APIs." \81\ Generally speaking, APIs are the special 
codes that an application uses to communicate with Middleware or the 
Operating System. Indeed, Middleware constitutes a competitive 
threat to Microsoft's Operating System monopoly because Middleware 
contains its own set of APIs so that an application does not have to 
communicate directly with the Operating System. As long as the PC 
contains the appropriate Middleware, the application will run 
regardless of whether the PC uses Windows or some other Operating 
System. This is not to say that the Operating System APIs are 
irrelevant. The Middleware still uses the Operating System's APIs, 
but the applications use the Middleware APIs. Netscape's web browser 
does expose APIs as that term is commonly used.
---------------------------------------------------------------------------

    \81\ PFJ, see. VI.N.
---------------------------------------------------------------------------

    The PFJ, however, contains a much narrower definition of APIs 
than that commonly used. Under PFJ section VI.A, only "the 
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" constitute APIs. In other words, 
APIs that exist outside the Windows Operating System do not appear 
to constitute APIs at all. These APIs are, of course, Microsoft's 
intellectual property.
    So, for an OEM to have the right to install Netscape as the 
default web browser the question is not whether Netscape exposes 
Netscape APIs, but whether Netscape exposes Windows APIs. This makes 
no sense since it could easily mean that there is no such thing as 
Non-Microsoft Middleware Product, thereby rendering a significant 
portion of the PFJ meaningless. But this interpretation is more than 
plausible given the express language of the PFJ. Ultimately, the 
Court may reject this interpretation and refuse to use the PFJ's 
definition of APIs for purposes of determining what constitutes a 
Non-Microsoft Middleware Product. Then again, the Court might not. 
Either way, the PFJ is ambiguous on this fundamental point.
    3. Unclear Whether Microsoft May Retaliate Against ISVs Who 
Favor Competitive Products Just as Section III.A. 1 initially 
appeared to limit Microsoft's ability to retaliate against OEMs, so 
too Section III.F.1 provides that "Microsoft shall not 
retaliate 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" and Section III.F.2 states that "Microsoft 
shall not enter into any agreement relating to a Windows Operating 
System Product that conditions the grant of any Consideration on an 
ISVs 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." As with the prohibition against OEM 
retaliation, whatever clarity these provisions might otherwise have 
vanishes upon careful examination.
    Assume that an ISV plans to develop a game that will make use of 
some RealPlayer's multimedia functionalities. Does the PFJ allow 
Microsoft to punish the ISV for not using RealPlayer instead of 
Windows Media Player? Could Microsoft, for example, refuse to 
provide the ISV with technical support in retaliation? The answer is 
far from clear. RealPlayer competes with Windows Media Player, which 
is included in the definition of Microsoft Middleware Products and, 
therefore, within the definition of Microsoft Platform Product which 
would seem to invoke Section III.F's ban on retaliation. But Section 
III.F.2 contains an exception to the general rule against 
withholding Consideration in retaliation for the use of competing 
software: Microsoft may enter into agreements that place limitations 
on an ISV's development, use, distribution or promotion or 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 ... The PFJ does not define or give any guidance as to how 
to define what is "reasonably necessary," 
"reasonable scope and duration," or "a bona fide 
contractual obligation." If Microsoft wants to retaliate, 
Microsoft would simply argue that it offered Consideration only as 
part of a contract to promote Windows Media Player and that the ISV 
who uses RealPlayer either did not enter into such a contract or 
breached the contract by using RealPlayer. Such an interpretation of 
the exception would render the main prohibition meaningless and the 
Court might interpret the exception more narrowly, but then again 
the Court might accept the broad interpretation of the exception. 
Either way, the provisions that relating to retaliation against ISVs 
who favor non-Microsoft products are ambiguous.
    4. Unclear Whether Microsoft Must Make Any Disclosures to Third 
Parties.
    The PFJ contains language which standing on its own might 
require Microsoft to make certain disclosures of APIs, 
Communications Protocols, and related documentation that enable ISVs 
and others to write software capable of running on Windows. These 
comments have already pointed out that the loopholes contained in 
the API provisions allow Microsoft almost complete discretion to 
continue to withhold APIs. The ambiguities surrounding the mandatory 
disclosure provisions for Communications Protocols allow Microsoft 
to withhold critical information. PFJ section III.E states that 
"Microsoft shall make available for use by third parties ... 
any Communications Protocol that is ... (1) implemented in a Windows 
Operating System Product ... and (ii) used to interoperate natively 
... with a Microsoft server operating system product." There 
are three critical terms in determining what Microsoft must 
disclose: "Communications Protocol," "Windows 
Operating System Product," and "Microsoft operating 
system product." The PFJ defines "Communications 
Protocol" as:
    [T]he set of rules for information exchange to accomplish 
predefined tasks between a Windows Operating System Product and a 
server operating system 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.\82\
---------------------------------------------------------------------------

    \82\ PFJ, see. VI.B
---------------------------------------------------------------------------

    The incorporation of "Windows Operating System 
Product" and "server operating system" into the 
definition of "Communications Protocol" makes the 
definition of these terms especially important in understanding what 
Microsoft must disclose. The PFJ definition of "Windows 
Operating System Product" expressly allows Microsoft to 
include whatever it wants and by implication to exclude whatever it 
does not want from the "Windows Operating System 
Product." \83\
---------------------------------------------------------------------------

    \83\ PFJ, sec. VI.U
---------------------------------------------------------------------------

    The definition of "Windows Operating System Product" 
and its incorporation into the definition of "Communications 
Protocol" makes Microsoft's obligation to disclose 
"Communications Protocol" a moving target. But the third 
critical term, "server operating system product," is not 
defined at all. Nor does the PFJ define server operating system. The 
CIS, perhaps in belated recognition of this issue, purports to 
define the term,\84\ but there is no reason to believe that 
Microsoft agrees with the CIS definition. Thus, exactly what 
Microsoft must disclose as under the Communications Protocol 
provision remains ambigous.
---------------------------------------------------------------------------

    \84\ CIS, p. 37
---------------------------------------------------------------------------

    Microsoft's obligations to disclose Communications Protocols are 
also subject to the same exceptions in PFJ section III.J that apply 
to the API disclosure provisions. Just as PFJ section III.J. 1 
threatens to remove a broad set of APIs from disclosure, so too it 
may exempt many if not most of the Communications Protocols that 
Microsoft would otherwise have to disclose. Similarly, PJF section 
III.J.2 may well mean that Microsoft can deny disclosure of 
Communications Protocols to competitors, including the Open Source 
movement, just as it does for APIs.
    5. Unclear Whether Open Source Developers Are ISVs.
    The Open Source Movement presents one of the biggest threats to 
Microsoft. Linux is undoubtedly the most famous Open Source

[[Page 28937]]

project, but a wide variety of Open Source Projects are underway. 
Although some commercial enterprises bundle Open Source software 
with additional proprietary software, documentation or services, 
e.g., Red Hat, the Open Source software itself is distributed 
without charge. A number of references in the PFJ suggest that its 
protections may not apply to Open Source developers despite their 
unusual potential for creating competition against Microsoft.
    For example, section III.J.2(c) specifically states that 
Microsoft can refuse to license "any API, Documentation or 
Communcations Protocol related to anti-piracy systems, anti-virus 
technologies, license enforcement mechanisms, authentication/
authorization security, or third party intellectual property 
protection mechanism of any Microsoft product" to any one who 
fails to meet "reasonable, objective standards established by 
Microsoft for certifying the authenticity and viability of its 
business." Ambiguity exists on two levels here. First, 
Microsoft could argue that virtually all of its APIs, etc., are in 
some way "related to" this wide range of key 
technologies. Second, Microsoft would seem to have almost carte 
blanche to refuse access to anyone on grounds that they do not meet 
Microsoft's standards for "authenticity and viability." 
What constitutes "reasonable, objective standards" is 
anyone's guess, but even if this language sufficiently protects 
commercial enterprises, Microsoft may still be able to refuse to 
grant access to Open Source developers since, by definition, they do 
not even charge for their software, let alone make a profit.
    More fundamentally, the PFJ defines an ISV as "an entity 
other than Microsoft that is engaged in the development or marketing 
of software products." \85\ Much of the Open Source 
community remains a loose collection of individuals who post changes 
to software code on an ad hoc basis in a variety of sometimes 
shifting locations on the Internet. Whether these communites 
constitutes "entities" is unclear.
---------------------------------------------------------------------------

    \85\ PFJ, see. VI.I
---------------------------------------------------------------------------

    6. Additional Ambiguities
    Trying to pin down what Microsoft may or may not do is like 
trying to hold water in your hand. Virtually every provision raises 
questions. The preceding discussion identifies the most important 
ambiguities, but there are more. Fore example: When does an OEM 
installed "shortcut" for Non-Microsoft Middleware 
"impair the functionality of the user interface"?\86\ 
What constitutes "a user interface of similar size and shape 
to the user interface displayed by the corresponding Microsoft 
Middleware Product?\87\ What constitutes "commercially 
practicable"?\88\ . What constitutes a "bona fide joint 
venture" or a "joint development or joint services 
arrangement"?\89\ What constitutes "a reasonable 
technical requirement" or "valid technical 
reasons"? PFJ, sec. III.H. What constitutes a "bona fide 
join venture"?\90\ What constitutes "a reasonable period 
of time" ? \91\
---------------------------------------------------------------------------

    \86\ 86 PFJ, sec. III.C.2.
    \87\ PFJ, see. III.C.3.
    \88\ PFJ, sec. III.G.1
    \89\ PFJ, sec. III G.
    \90\ PFJ, sec. III.I.
    \91\ PFJ, sec. III.I.
---------------------------------------------------------------------------

    D. The Enforcement Mechanism Is Inadequate
    The PFJ cannot possibly achieve its purported goals without an 
enforcement mechanism adequate to deter violations by Microsoft or 
bring about compliance when violations occur. For this to occur, the 
line between permissible and impermissible conduct must be clearly 
drawn. Unfortunately, most of the "prohibitions" 
contained in Section III of the PFJ are riddled with exceptions and 
undefined terms. Consequently, even under the best of circumstances, 
fairly extensive litigation would be necessary to determine the 
exact parameters of permissible conduct. But the Microsoft case does 
not present the best of circumstances. The delay inevitably caused 
by disputes over the interpretation of vague language and complex 
exceptions inevitably play to Microsoft's advantage. The PFJ lasts 
at most seven years. PFJ, sec. V. Consider the issue of Microsoft's 
"integration" of middleware with the operating system. 
This issue appeared to be settled with the consent decree that 
Microsoft agreed to in 1994 and which the Court entered in 1995. 
Microsoft never accepted the government's interpretation of the 1995 
Consent Decree or the law on that issue. This dispute ultimately led 
to the current litigation. Microsoft eventually lost the dispute in 
2001 when the Court of Appeals held that Microsoft's integration of 
the browser middleware with the operating system violated Section 2 
of the Sherman Act (a decision which will effectively be reversed if 
the Court enters the PFJ in 2002). In the meantime, Microsoft has 
effectively eliminated all competition in the browser middleware 
market largely by integrating its browser into the operating system.
    The rapidly changing nature of the software markets compounds 
the necessity of a swift and certain enforcement mechanism. 
"By the time a court can assess liability, firms, products, 
and the marketplace are likely to have changed 
dramatically." \92\ Despite the pressing need of swift 
and sure enforcement, the PFJ seems designed to enable and to reward 
delay.
---------------------------------------------------------------------------

    \92\ Microsoft III, 253 F.3d at 49.
---------------------------------------------------------------------------

    1. The Enforcement Mechanism Lacks Appropriate Penalties.
    An effective enforcement mechanism must contain a penalty 
sufcient to deter misconduct by the defendant. Ideally, the 
enforcement mechanism would reward the defendant for extending 
itself to accomplish the remedial goals, but at the very least the 
mechanism should severely punish a pattern of willful misconduct. 
The PFJ, however, does neither. The PFJ provides no incentives for 
Microsoft to cooperate in the effort to break down its Operating 
System monopoly. Worse, the PFJ does not punish Microsoft for 
deliberate and repeated violations of the PFJ's restrictions. 
Microsoft's only stated penalty for "engag[ing] in a pattern 
of willful and systematic violations" of the restrictions is 
"a one-time extension of this [Proposed] Final Judgment of up 
to two years." PFJ, sec.V.B. The base period of the PFJ is 
five years. If Microsoft has repeatedly violated the PFJ for five 
years, why should it care if the PFJ is extended to seven years.'? 
If Microsoft can get away with ignoring the restrictions for five 
years, surely it will not pose any problem for Microsoft to ignore 
the restrictions for another two years.
    2. The Technical Committee Will Only Delay Enforcement.
    The Technical Committee can only serve to delay resolution of 
complaints about Microsoft's failure to comply with the restrictions 
contained in the PFJ. The Technical Committee cannot resolve 
disputes, but only "advise" Microsoft and the government 
of its conclusions. The Proposed Final Judgment's "gag 
orders" prohibiting both testimony from Committee members and 
use of their work product in enforcement proceedings will cause 
further delay since enforcement will always require the government 
to duplicate of the Committee's work in amassing evidence.
    Assume, for example, that Microsoft refuses to disclose an API 
to an ISV in retaliation for the ISV's use of RealPlayer technology. 
This denial immediately places the OEM at a significant disadvantage 
over ISVs who comply with Microsoft's wishes that they only use 
Windows Media Player. Assume further that the ISV immediately 
contacts the TC with its complaint alleging violations of sections 
III.D and F of the PFJ. The TC must then begin the investigation. 
While it is impossible to know how long such an investigation would 
take, the powers and duties of the TC outlined in section IV.B.8.b 
enable the TC to undertake a truly exhaustive investigation: 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.
    While such expansive investigatory powers are laudable in many 
respects, they do represent a tradeoff in favor of accuracy over 
speed. After such a thorough investigation, however, the TC may only 
conclude whether the "complaint is meritorious," and if 
so, "it shall advise Microsoft and the Plaintiffs of its 
conclusion and its proposal for cure." PFJ, sec. IV.D.4.c. 
Assuming that the TC finds merit in the ISV's complaint, it is not 
clear whether the TC may inform the ISV of its findings. PFJ section 
IV.B.8 states that "TC members may communicate with non-
parties

[[Page 28938]]

about how their complaints ... might be resolved with 
Microsoft," but whether communication "about how their 
complaints might be resolved" includes the TC's findings and 
recommendations remains unclear. PFJ section IV.D.4.c authorizes the 
TC to communicate its findings only to Microsoft and the Plaintiffs. 
PFJ section IV.B.9 provides that "any report and 
recommendations prepared by the TC ... shall not be disclosed to any 
person other than Microsoft and the Plaintiffs." It is 
certainly possible to construe these provisions as prohibiting the 
TC from informing the complaining ISV of anything other than a range 
of possible outcomes. What happens if, after extensive 
investigation, the TC finds merit in the ISV's claim and recommends 
that Microsoft disclose the APIs to the ISV? If Microsoft resists 
the decision, whether to proceed against Microsoft rests not with 
the OEM victim or the TC, but with the Plaintiffs. Section IV.A.1 of 
the PFJ gives the Plaintiffs "exclusive authority" to 
enforce the restrictions. Any one of the Plaintiff's may now take up 
the ISV's complaint, but if the Plaintiff who is willing to pursue 
the OEM's complaint is one of the settling states, it must first 
consult with "with the United States and with the plaintiff 
States" enforcement committee." PFJ, sec. IV.A.1. After 
consulting with the United States and the plaintiff States" 
enforcement committee, the enforcing state must then "afford 
Microsoft a reasonable opportunity to cure" the alleged 
violation. PFJ, sec. IV.A.4. Note that this is a second opportunity 
for Microsoft to cure the violation, since the first opportunity was 
given with the TC's decision. If the United States decides to take 
up the ISVs complaint, then it apparently avoids the delay of 
consulting with the enforcement committee, but the United States 
must still give Microsoft an opportunity to cure. The 
"consultation" and "reasonable opportunity to 
cure" delays are merely the tip of this iceberg. Although the 
TC has conducted an extensive investigation and gathered much, 
perhaps even all of the relevant evidence, neither an enforcing 
state nor the United States use the evidence accumulated by the TC 
and the TC members are prohibited from testifying. Section IV.D.4.d 
specifically provides:
    No work product, findings or recomendations 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 tribunal regarding any matter related to this 
[Proposed] Final Judgment.
    In other words, the United States or the enforcing state will 
needlessly duplicate the discovery work of the TC and the Court will 
have to conduct a de novo review of the evidence without the benefit 
of the TC's insights and expertise.
    3. The Court Will Be Denied Access to the Insights and Expertise 
of the Technical Committee. Despite the fact that the Technical 
Committee cannot render enforceable decisions, the TC will be in an 
excellent position to evaluate both Microsoft's overall conduct and 
the appropriateness of various alternative remedies for specific 
complaints and problems. The TC members will have expertise 
"in software design and programing." PFJ, see. IV.B.2. 
The TC will have considerable access to Microsoft documents and 
personnel. PFJ, sec. IV.B.8.b. In addition to its own experience 
with complaints, the TC will apparently receive reports from 
Microsoft advising the TC of the nature and disposition of 
complaints filed with Microsoft's compliance officer. PFJ, sec. 
IV.D.3.c. The TC, in short, has an exceptional vantage point from 
which to "monitor Microsoft's compliance with its obligations 
under [the Proposed] [F]inal [J]udgment." PFJ, sec. IV.B.8.a. 
Despite the exceptional value of the TC to the Court as both expert 
witnesses on technical issues and as eye witnesses to larger issues, 
including whether Microsoft "engaged in a pattern of willful 
and systematic violations," PFJ, sec. V.B, section IV.D.4.d 
expressly prohibits members of the TC from testifying "by 
deposition, in court or before any other tribunal." By denying 
the Court access to witnesses with critical information and 
expertise, the PFJ ensures that the Court will have to make rulings 
without regard to some of the most important evidence on the issues 
that will inevitability arise under the ambiguous provisions of the 
PFJ.
    Conclusion
    The acid test of the PFJ must be whether it would have protected 
Netscape as it tried to launch a middleware challenge to Microsoft's 
operating system monopoly in 1994. Sadly, even a cursory reading of 
the PFJ reveals that the answer is no. Since Microsoft did not have 
comparable middleware, there would, even under the most favorable 
interpretations of the API disclosure provisions in PFJ section 
III.D, have been nothing to prevent Microsoft from engaging in 
selective disclosures to Netscape. Microsoft would have been free to 
deny Netscape access to many, if not all, of the Communications 
Protocols necessary for any Internet middleware to work on Windows 
since the new, untested company would certainly have failed to meet 
Microsoft's test of a viable business under PFJ section III.J.2(c). 
Most importantly, nothing in the PFJ could change the economics of 
the OEM industry which make it unprofitable to install two web 
browsers and therefore, in what can only be called a mockery of 
judicial power, PFJ VI.U would expressly allow Microsoft to choke 
off Netscape's acess to the crucial OEM distribution channel by 
declaring Internet Explorer to be a part of the Windows Operating 
System Product. For the foregoing reasons, we urge the Court to 
reject the Proposed Final Judgment.
    Respectfully submitted on behalf of the American Antitrust 
Institute 
by:--------------------
-----------------------
-----------------------
-----------------------
------------------------
---
    Albert A. Foer?? President, American Antitrust 
Institute--------------------
-----------------------
-----------------------
------------------------
-------------------------
-------
    Robert H. Lande, University of Baltimore Law School, Secretary 
and Senior Research Scholar of the American Antitrust 
Institute-------------------
-----------------------
------------------------
------------------------
------------------------
-------
    Norman W. Hawker, Western Michigan University, Research Fellow 
of the American Antitrust 
Institute-------------------
-----------------------
------------------------
-----------------------
------------------------
-------
    Oded Pincas, Research Fellow of the American Antitrust Institute



MTC-00030601

    BEFORE THE UNITED STATES DEPARTMENT OF JUSTICE ANTITRUST 
DIVISION COMMENTS OF THE WASHINGTON LEGAL FOUNDATION SUPPORTING THE 
PROPOSED JUDGMENT IN UNITED STATES v. MICROSOFT
    Robert A. McTamaney, Daniel J. Popeo, Carter, Ledyard & 
Milburn, Paul D. Kamenar,
    2 Wall Street Washington Legal Foundation New York, New York 
10005 2009 Massachusetts Ave., NW (212) 238-8711 Washington, 
DC 20036 (202) 588-0302
    Date: January 25, 2002
    COMMENTS OF THE WASHINGTON LEGAL FOUNDATIONIN SUPPORT OF THE 
PROPOSED JUDGMENT IN UNITED STATES v. MICROSOFT
    Introduction and Summary. The Washington Legal Foundation (WLF), 
pursuant to the Tunney Act (Antitrust Procedures and Penalties Act, 
15 U.S.C.  16), hereby submits these comments in support 
of tee settlement reflected in the Revised Proposed Final Judgment 
dated November 6, 2001 in United States v. Microsoft Corp., Civil 
No. 98-1232.\1\
---------------------------------------------------------------------------

    \1\ The case is on remand from the Court of Appeals which 
vacated the Final Judgment, affirmed in part the market maintenance 
claims, ordered reconsideration of the Section 1 tying claim, 
reversed the browser market attempted monopolization claim, and 
ordered new remedy proceedings. U.S. v. Microsoft Corp., 253 F.3d 34 
(DC Cir. 2001).
---------------------------------------------------------------------------

    WLF is the nation's preeminent center for public interest law 
and policy, advocating free-enterprise principles, responsible 
government, property fights, a strong national security and defense, 
and a balanced civil and criminal justice system. WLF devotes 
substantial resources to these issues through litigation, by 
publishing through its Legal Studies Division, and by educating the 
public through its Civic Communications Program. With respect to 
antitrust law, and the Microsoft case m particular, WLF filed a 
brief in the United States Supreme Court supporting the petition for 
writ of certiorari filed by Microsoft to review the judgment of the 
court of appeals that left intact the district court's findings of 
fact and conclusions of law, despite the flagrant judicial 
misconduct of the trial court in giving interviews to the press 
expressing his bias and hostility to Microsoft and Bill Gates. 
Microsoft Corporation v. United States, 122 S.Ct. 350 (2001). WLF's 
Legal Studies Division has also published studies and other 
materials on antitrust issues and the Microsoft case. See Antonio F. 
Perez, U.S. v. Microsoft: DOJ's "New" Antitrust Paradigm

[[Page 28939]]

Resurrects Outdated Economics (WLF Legal Backgrounder, Feb. 4, 
2000); Robert A. McTamaney, Microsoft On Appeal: 
"Monopolies" In A Complex Society (WLF Working Paper 
Feb. 2001). WLF supports the Proposed Judgment (the result of 
intense negotiations with the assistance of two of the nation's top 
mediators) as a rational resolution to a case formally initiated in 
May 1998, but effectively tracing its roots to an FTC investigation 
begun more than a decade ago, therefore now rivaling in time and 
burden the IBM antitrust litigation of the 1980's. The matter is 
overly ripe for resolution, and the States which have declined to 
join the settlement should in our judgment be urged by the 
Department and the Court to reconsider and adopt it. The Standard 
for Entry. The Tunney Act contemplates that the Court will evaluate 
the relief set forth in the Proposed Judgment and enter the judgment 
if the settlement is within the reaches of the public interest and 
within the government's rather broad discretion, considering (1) the 
competitive impact and adequacy of the judgment and (2) the impact 
on the public generally, and on affected individuals, and the 
benefit, if any, of an eventual trial determination. The Court 
reviews the Proposed Judgment in light of the Complaint's 
allegations, and withholds approval only if there is ambiguity, art 
inadequate enforcement mechanism, if third parties would be 
positively injured, or if the decree somehow makes a 
'mockery" of judicial power.\2\ The belief that other 
remedies might be preferable does not warrant rejection of the 
Proposed Judgment; the Tunney Act does not authorize the imposition 
of different terms or permit de novo review of the settlement.\3\
---------------------------------------------------------------------------

    \2\ E.g., U,S. v. Microsoft Corp., 56 F.3d 1448 (DC Cir, 
1995)
    \3\ "The court should therefore reject the 
[judgment] only if 'it has exceptional confidence that adverse 
antitrust consequences will result..."' U.S. v. Enova 
Corp., 107 F. Supp. 10, 27 (D.DC 2000); accord, U.S. v. Central 
Parking Corp., 2000 U.S. Dist, Lexis 6226 (D.DC 2000). Applying 
these legal standards, the Proposed Judgment should be entered.
---------------------------------------------------------------------------

    The Complaint Versus the Proposed Judgment. Under the Tunney 
Act, whether the public interest is served by entry of the judgment 
is first tested by comparing the allegations of the Complaint with 
the Proposed Judgment. As will be demonstrated, the comparison is 
more than a favorable one.
    The Complaint is dated May 18, 1998. There are 141 numbered 
paragraphs in the Complaint, of which, read fairly, 128 paragraphs 
relate to Microsoft's browser technology, including its Interact 
Explorer (IE) in Windows 98, and the promotion and distribution of 
that technology to Windows 98 users. The principal responsible 
author of the Complaint described the case as an extremely limited, 
discrete, "surgical strike" directed solely against the 
Company's integration of browser technology with its operating 
system.\4\
---------------------------------------------------------------------------

    \4\ In its 1994 maintenance case against Microsoft, the 
Department did not contend that the company's obtaining of its 
market position was illegal, but rather that it was the fortuitous 
result of IBM's choice of Microsoft's MSDOS for IBM's PCs. In that 
ease the government's economic witness said that only artificial 
barriers such as restrictive license provisions should be prohibited 
since the company's market position was entirely natural and not the 
result of anticompetitive behavior. Id.
---------------------------------------------------------------------------

    On June 23, 1998, the U.S. Court of Appeals for the District of 
Columbia Circuit held that the IE Browser was not a product separate 
from Windows for purposes of the 1995 consent decree that had 
resolved the Department's 1994 case, and the related European 
Commission (EC) case, against Microsoft.\5\ While the Court reserved 
its position on any future market power allegations, most observers 
believed that the May 18 Complaint had been rendered moot, since any 
arguably illicit tie requires, by definition, two products.
---------------------------------------------------------------------------

    \5\ U.S. v. Microsoft Corp., 147 F. 3d 935 (DC Cir. 1998),
---------------------------------------------------------------------------

    The trial judge disagreed, and permitted the case to proceed, 
and premised his eventual breakup order, in effect, on the sparse 
references in the Complaint to the alleged market dominance of 
Windows in a narrowly-defined market of Intel-powered personal 
PCs.\6\ In its reversal and remand of the trial judge's conclusions 
and remedies, the Court of Appeals specifically reversed the 
conclusion that Microsoft attempted to monopolize a browser market, 
and remanded the issue of an illegal tie for reconsideration under 
the Rule of Reason.\7\ In recognition of the rigors of this test, 
and in light of the demonstrated insistence of consumers on a 
browser-operating system combination, the Department determined not 
to pursue this claim.
---------------------------------------------------------------------------

    \6\ Compare U.S. v. Microsoft, supra note 2 ("The 
government... urges us to flatly reject the district judge's efforts 
to reach beyond the complaint to evaluate claims that the government 
did not make ...").
    \7\ The Court of Appeals dismissed 4 of the 5 principal 
claims against Microsoft, and alas dismissed 23 of the 35 acts found 
wrong by the trial judge.
---------------------------------------------------------------------------

    To the extent therefore that the Tunney Act dictates measuring 
the judgment against the Complaint,\8\ the Proposed Judgment is a 
remarkable result. The judgment exacts dramatic conduct remedies and 
imposes massive costs on a defendant, when the essential allegations 
of the Complaint were first deflated by the Court of Appeals, then 
carefully either selected or avoided by the Department and the State 
plaintiffs, then momentarily revived by the trial judge, only to be 
excised again by the Court of Appeals, which set a standard for 
resolution that the Department itself has decided unilaterally could 
never be met.
---------------------------------------------------------------------------

    \8\ E.g., U.S. v. Alcoa, 152 F.Supp. 2d 37, 44 (D.DC 2001) 
("[T]he court is confined to the factors alleged in the 
government's complaint.").
---------------------------------------------------------------------------

    Certainty of the Proposed Judgment. The Tunney Act as 
interpreted next suggests that the Judgment should be examined for 
ambiguities. Ambiguity is measured by the trial judge interested in 
the reasonably manageable enforcement of the judgment, rather than 
by competitors who might parse every comma to suggest ambiguities 
where none fairly exist. And of course ambiguity is anathema to the 
defendant, since it is the party most at risk from an overly broad 
interpretation urged by its competitors or others. In that respect, 
the Proposed Judgment is a strikingly plain-worded document, 
difficult (for anyone versed or educated in the field) to 
misinterpret mad even more difficult, it would seem, to avoid. The 
Proposed Judgment is accompanied by a thorough and convincing 
Competitive Impact Statement that explains the theory underlying 
each section of the Proposed Judgment, how it addresses and cures 
the conduct found wanting by the Court of Appeals, and how it would 
operate in practice. The Competitive Impact Statement itself would 
surely assist in, if not dictate, the resolution of may arguable 
ambiguity.
    The Proposed Judgment broadly prohibits any retaliation against 
OEMs that distribute competitive middleware or operating systems 
(Section III.A), requires uniform licensing terms (which cannot 
include exclusive or percentage promotion of Microsoft middleware) 
to the significant universe of OEMs (Section III.B), and leaves most 
desktop decisions to the OEMs" discretion. (Section III.C). 
This all seems very plain. The Proposed Judgment permits OEMs to 
install icons or shortcuts to access products that provide 
particular types of functionality, even if they compete with 
Microsoft's own installed versions (Section III.C.1), so long as 
they do not impair the user interface. Basically, the Original 
Equipment Manufacturers (OEM) can add an icon to access, for 
example, a competing photo program, provided that shortcut works 
without unseating Windows itself. Surely there is little room for 
ambiguity here.
    Under the Proposed Judgment, Microsoft can override a competing 
product only if that product "fails to implement a reasonable 
technical requirement." Basically, Microsoft can provide the 
consumer with its own product if the competitor's doesn't work, and 
even then the failing product's proponent is given the right to 
remedy the problem. Competitors have objected to the use of the word 
'reasonable," which is obviously a standard the Courts 
have dealt with successfully since the outset of the common law. 
There is no ambiguity apparent here. Next, the Judgment requires 
Microsoft to disclose the Application Programming Interfaces (API) 
for new products to makers of interoperable products, whether they 
make hardware or software or are Internet carriers, unless the 
disclosure would compromise security or anti-privacy safeguards 
(Section III.D). No ambiguity exists here, and the burden would 
certainly be on Microsoft to demonstrate that the API disclosure 
would impair security or privacy, which should in any event be a 
primary goal of the competitor as well.\9\ And the API disclosure 
must be made timely and in good faith, again well-recognized 
standards in the courthouse. Microsoft also agrees not to 
automatically alter competitors" icons or shortcuts placed on 
the desktop by OEMs (Section III.H.3). It can offer its own 
alternatives to consumers, but they can accept or decline as they 
see fit,

[[Page 28940]]

and many a court has said in other contexts that there's no 
harm in asking.
---------------------------------------------------------------------------

    \9\ This has been a goal for Microsoft, which has just 
announced a company-wide suspension of development while security 
concerns are assessed and resolved. The New York Times, January 17, 
2002.
---------------------------------------------------------------------------

    Under the judgment, OEMs can even include a competing operating 
system as easy to access as Windows, arid even give it preference in 
the boot sequence. Again, this seems to be as clear as it reads.
    In short, the Proposed Judgment is plainly worded and devoid of 
apparent ambiguity. One competitor has suggested that Microsoft 
improperly seized on art ambiguity to avoid the 1995 Consent Decree 
to the extent that the decree prohibited the integration of the IE 
browser with Windows. This is an intriguing fallacy, but a fallacy 
nonetheless. Microsoft certainty did seek to integrate IE with 
Windows, but this was consistent in its judgment with the 1995 
Decree; and the Court of Appeals agreed that it was entirely legal 
for Microsoft to do so, under the plain wording of that document. 
Impact Upon Third Parties. The Proposed Judgment goes far beyond the 
prohibition of the handful of specific and isolated instances of 
conduct found wanting by the Court of Appeals, to generic relief 
which presumably will benefit all those to which it is directed and 
all others within its ambit. Will consumers be satisfied? Presumably 
they will vote with their pocketbooks. Will competitors be 
satisfied? Presumably never, but the correct test is whether the 
proposed decree would positively injure third parties, not whether 
some competitor claims that it could be better treated.\10\
---------------------------------------------------------------------------

    \10\ U.S. v. Microsoft, 56 P.3d 1448, 1461 n.9.
---------------------------------------------------------------------------

    For example, California and the other States dissenting thus far 
from the settlement have proposed instead that the Company 
completely redesign Windows (and then presumably maintain, update, 
and support it) to offer a version stripped even of the browser, 
then force open-source licensing of the browser, require Java (a 
competitive operating system of sons), to be included in Windows, 
and require licensing of the Office Suite to third parties like 
Apple (although Apple now already has it). A new 60-day version of 
Hart Scott Rodino Act would also be imposed on Microsoft 
acquisitions, another and entirely new commercial burden on a 
company never even accused of growth through acquisition. Conduct 
specifically upheld by the Court of Appeals would be specifically 
baited. We submit that this is a wish list for competitors, not 
consumers, and has nothing to do with fostering competition as 
anticipated by the U.S. antitrust laws.\11\ To the extent that 
alternative remedy proposals were put forward by all parties, 
including the competitors intent on imposing their own punitive 
schadenfreude on Microsoft, they were considered by the Department 
in formulating the Proposed Judgment, including specifically the 
very remedies now proposed again by the dissenting States.\12\ 
"The United States has ultimately concluded that the 
requirements and prohibitions set forth in the [Proposed Judgment] 
provided the most effective and certain relief in the most timely 
manner." \13\
---------------------------------------------------------------------------

    \11\ Netscape, the competitor whose objections set off the 
1998 case, has objected that it never would haw corn, into being if 
the Proposed Judgment had been in place when Netscape's own monopoly 
was created in 1994. Dow Jones Newswires Dec. 12, 2001. If this is 
to be believed, then presumably Netscape's multi-billion dollar 
combination with AOL also would have been avoided.
    \12\ Competitive Impact Statement, p. 35
    \13\ Id. at 36.
---------------------------------------------------------------------------

    The Enforcement Mechanism. The final substantive prong of the 
Tunney test is whether the Proposed Judgment is readily enforceable. 
In this respect, the Proposed Judgment contemplates contempt 
sanctions and other relief if violated. Microsoft has agreed to 
appoint an Internal Compliance Officer \14\ to supervise an 
internal compliance program, and has also agreed to the 
extraordinary remedy of an onsite, court-approved Technical 
Committee, experienced in software design and programming, with 
virtually unfettered access, for at least five years, to the 
Company's design and business planning and implementation, for the 
purpose of ongoing and constant oversight regarding the Company's 
compliance.\15\ In this respect, as well as in the breadth of the 
conduct remedies which will be supervised, the Proposed Judgment 
vastly exceeds the typical constraints imposed upon a settling 
defendant. Courts are most reluctant to impose sanctions which 
require the ongoing observations of a defendant's commercial 
activities. Here, to the contrary, the oversight established by the 
onsite observers will give the Court, and interested outsiders as 
well, more assurance than could reasonably be ever expected 
regarding the Company's ongoing good faith adherence.
---------------------------------------------------------------------------

    \14\ Microsoft on December 13, 2001 announced the 
appointment of its internal compliance officer as contemplated by 
the Proposed Judgment. He is a former enforcement lawyer with the 
Federal Trade Commission. The Public Interest. Overall, the Tunney 
Act contemplates an affirmative finding that the settlement is in 
the public interest, There are several other factors relevant to 
this consideration, beyond the specific traditional tenets of 
approval discussed above.
    \15\ By Stipulation, Microsoft began complying with the 
Proposed Judgment effective December 16, 2001.
---------------------------------------------------------------------------

    Adequacy of the Remedy. First, the Proposed Judgment should be 
considered in light of the remedies one might expect to have been 
imposed after further evidentiary hearings, briefs, arguments, 
conclusions, and the inevitable appeals. In this respect, one 
searches in vain for precedents as broad and inhibiting as the 
Proposed Judgment in a case where all claims except isolated, 
specific findings of market position maintenance have been dismissed 
or unilaterally discarded by the principal prosecutors. We submit 
that judicial remedies might well be expected to be far more 
'surgical" and conduct-specific than the broad and 
thoroughgoing conduct requirements imposed by the Proposed Judgment, 
not the least of which is the ongoing oversight to assure good faith 
compliance.
    Certainly office Remedy: Second, there is no assurance that an 
eventual judicial remedy would survive appeal, since the case is 
presently proceeding on remand on the basis of findings of fact and, 
in part, on conclusions of law \16\ expressed by a trial judge 
with deepseated, privately expressed, actively concealed, personal 
bias against the company and its president reflected by the drastic 
remedies ordered after the briefest of further proceedings.\17\ The 
Supreme Court has deferred consideration of this issue, and so 
observers in the meantime must accept the illogic of an appellate 
court finding that the District Judge had repeatedly violated law 
and the judicial canons, but nonetheless feeling constrained to 
accord his findings of tact and law the same presumptions of 
correctness usually reserved for judges with no appearance of 
impartiality.\18\
---------------------------------------------------------------------------

    \16\ U.S. v. Microsoft Corp., 84 F. Supp. 2d 9 (D.DC 
1999); U.S. v. Microsoft Corp., 87 F. Supp. 2d 30 (D.DC 2000).
    \17\ U.S. v. Microsoft Corp., 97 F. Supp. 2d 59 (D.DC 
2000).
    \18\ According to the Court of Appeals, the District 
Judge's violations of the Code of Conduct for United States 
Judges and Section 455(a) of the Judicial Code by speaking to 
reporters about the case while it was pending were 
"deliberate, repeated, egregious, and flagrant." 253 
F.3d 34, 107 (DC Cir. 2001). The judge's insistence to the reporters 
to embargo his comments until the trial was over implied full 
knowledge of the improprieties. This arrangement made it impossible 
for Microsoft to have objected sooner, an objection that the 
appellate court said would have succeeded by the removal of the 
trial judge from the case.
---------------------------------------------------------------------------

    If the case proceeds to judicial remedies, with the inevitable 
appeals, there is more than a fair likelihood that the Supreme Court 
would refuse to accept any of the former trial judge's findings 
under the circumstances; rather, the Court would likely remand the 
case to begin again before an unbiased jurist. The Proposed Judgment 
obviates that possibility to some extent, and would avoid it 
completely if it were joined by the thus far dissenting States, and 
thereby achieve a final resolution.
    The Remedy and Innovation. In 1998, when the then Assistant 
Attorney General made his often-quoted 'surgical strike" 
comments, his purpose was to allay concern in the computer industry 
that the Government was opening a broadside attack on Microsoft, 
which is, sadly, exactly what the ease then became. His purpose was 
to assure innovators that they could continue to innovate without 
governmental interruption or interference, provided that they stayed 
within the principal antitrust boundaries.
    Microsoft has been reported publicly as saying that innovation, 
at least its own, will not be impeded by the Proposed Judgment. We 
submit that is a critically important issue for the Court in 
considering the public interest overall.
    For example, Windows XP, Microsoft's latest rendition of 
the operating system, presents users, according to its reviewers, 
with improvements in reliability, performance, and system security, 
and also facilitates multi-use end user customization, workplace 
enhancements, and marked file improvements. It continues to 
integrate IE, and adds instant messaging (a favorite feature of 
AOL), digital photography and movie making, and other media features 
to the new design. Industry reaction has been fascinating. Some 
competitors have reportedly been encouraging the Department and 
certain of the States to resurrect the original IE integration ease, 
arguing that the Company should make the various components of its 
integrated design (some of which have been part of Windows for many

[[Page 28941]]

years) available separately. Others, notably Apple, have instead 
decided to compete where competition belongs--in the 
marketplace instead of the courthouse. Apple is scheduled to begin 
shipping the elegant and affordable "iMac," which will 
incorporate "iDVD," a DVD recording software, 
"iPhoto," a photo organizer and processor, 
"iTunes," a CD and internet music player and converter, 
and "iMovie," which enables easy home-movie production, 
and other features, all on a 15-inch fiat panel display connected to 
a computer half the size of a basketball at a very competitive 
price.
    Would Apple have created this incredible device had Microsoft 
not raised the bar with Windows XP? Perhaps, but far less likely. We 
submit therefore that an important component of the Court's Tunney 
Act determination is to ensure that any proposed judgment does not 
stifle the very innovation the antitrust laws were enacted to 
promote. Otherwise, such a judgment could surely serve the private 
interests of competitors rather than the public interest of 
competition and consumers, and thereby make a mockery of the very 
process which the Tunney legislation cautions against and condemns.
    Conclusion. The United States has said it best: "[T]he 
[Proposed Judgment], once implemented by the Court, will achieve the 
purposes of stopping Microsoft's unlawful conduct, preventing its 
reoccurrence, and restoring competitive conditions in the personal 
computer operating system market, while avoiding the time, expense 
and uncertainty of a litigated remedy." \19\ We support the 
Proposed Judgment. The matter is long overdue for resolution, and 
the States that have declined to join the settlement should, in our 
judgment, be urged by the Department and the Court to reconsider and 
adopt it.
---------------------------------------------------------------------------

    \19\ Competitive Impact Statement, p. 34.
---------------------------------------------------------------------------

    Respectfully submitted,
    Robert A. McTamaney, Daniel J. Popeo, Carter, Ledyard & 
Milburn, Paul D. Kamenar
    2 Wall Street Washington Legal Foundation
    New York, New York 10005 2009 Massachusetts Ave., NW
    (212) 238-8711 Washington, DC 20036
    (202) 588-0302
    Date: January 25, 2002



MTC-00030602

Fax Cover Sheet
To: Renata B. Hesse
Antitrust Division
U.S. Department of Justice
601 D Street NW
Suite 1200
Washington, DC 20530-0001
From: Rebecca Henderson
5 Kitson Park Drive
Lexington MA 02421
Re: Tunney Act Submission
Comments on the proposed United States v. Microsoft Settlement
Date: January 26, 2002
Tunney Act Submission United States v. Microsoft
Rebecca Henderson,
Eastman Kodak LFM Professor of Management
MIT Sloan School
January 2002
Introduction
    My name is Rebecca Henderson. I am the Eastman Kodak LFM 
Professor of Management at the MIT Sloan School of Management, where 
I have been teaching since 1988. I am also a Research Associate at 
the National Bureau of Economic Research. My C.V. is attached.\1\
---------------------------------------------------------------------------

    \1\ In 1999 1 was retained by the Department of Justice as 
an expert witness in connection with the remedies phase of the 
Microsoft trial. The declaration that I filed in the spring of 2000 
as a result of this work is available on the Department of Justice's 
web site. While I do not believe that anything in this document is 
inconsistent with the opinions that I would have expressed in court 
had I been called as a witness, the opinions expressed here are 
entirely my own. Nothing in this document draws in any way on 
confidential information to which I was given access in the course 
of my work with the Justice Department.
---------------------------------------------------------------------------

    I write to express my deep concern with the terms of the 
proposed settlement between the United States and the Microsoft 
Corporation. In my view it does almost nothing to remedy the harm 
caused by Microsoft's prior illegal conduct, and the provisions that 
it includes in an attempt to forestall future anticompetitive 
conduct fall short on a number of important dimensions, Moreover it 
creates incentives for Microsoft to engage in behavior that has the 
potential to create significant harm for consumers.
    1. A failure to remedy the harm caused by prior illegal conduct. 
As the Court found and the Appeals Court maintained, Microsoft 
engaged in a systematic pattern of illegal conduct in an attempt to 
undermine Netscape's position in the browser market. Microsoft came 
to believe that the Netscape Browser had the potential to develop 
into "cross-platform middleware," since it potentially 
enabled the development of full-featured PC applications on a range 
of platforms. Microsoft viewed this possibility as a potent threat 
to its monopoly and moved against Netscape with devastating effect. 
Microsoft's predatory conduct crushed the possibility that Netscape 
might emerge as a viable alternative platform for full-featured 
applications development.
    Microsoft's success in preventing the emergence of browser-based 
alternative platforms that would threaten the applications barrier 
to entry, along with its current overwhelming and increasing share 
of browser usage, puts the firm in an extraordinarily strong 
position to prevent the emergence of other threats to its desktop 
monopoly. The proposed settlement does almost nothing to attempt to 
redress this harm.
    A world in which Netscape had succeeded in building a dominant 
share of the browser market would have been one that was 
significantly more conducive to competition (and significantly more 
threatening to the Microsoft monopoly). A successful independent 
browser would not only have been potentially important cross 
platform middleware in its own right: it would also have been of 
enormous assistance to the further development of additional 
independent middleware. Both would have greatly increased the 
possibility that Microsoft's desktop monopoly would have faced 
significant competition. Had Netscape succeeded the world would 
probably be different in three important respects. First, the 
Netscape browser might have become an ideal platform for web-centric 
and network-centric applications cross-platform applications. 
Second, if there had been a widely-distributed browser outside 
Microsoft's control, new middleware initiatives such as Java, that 
involve software running on the client would certainly have been 
able to achieve widespread distribution without Microsoft's 
sufferance. Third, the existence of such a browser would have given 
Microsoft much less control over the evolution of important Internet 
interfaces, increasing the possibility that new types of middleware 
running on the server might emerge to facilitate challenges to the 
Windows monopoly.
    (i) The Netscape Browser might have become a platform for 
applications development An independent browser might have become an 
ideal platform for web-centric and network-centric cross-platform 
applications. An independent browser enables developers to write 
cross-platform applications without additional porting costs. As the 
Court found, "for at least the next few years, the 
overwhelming majority of consumers accessing server-based 
applications will do so using an Intel-compatible PC system and a 
browser," (FOF 27) and a "browser product is 
particularly well positioned to serve as a platform for network-
centric applications that run in association with Web pages." 
(FOF 69). Or as Microsoft's Ballmer expressed it: "the browser 
is as much a platform for what people will want to do in the 
Internet over the next several years as DOS was the platform for 
what people would want to do on personal computers." (RX 21, 
at 4). Microsoft's illegal actions ensured that Netscape did not 
have the opportunity to develop into this kind of cross platform 
middleware, and the proposed settlement does nothing to reverse 
this.
    (ii) A successful Netscape Browser would have developed into a 
distribution vehicle for additional non Microsoft cross platform 
middleware As both the Court and the Appeals Court found, one of the 
goals of Microsoft's illegal conduct was the suppression of platform 
independent Java. An independent, widely distributed Netscape 
Browser would have become an ideal vehicle for the distribution of 
this kind of platform independent middleware. Microsoft, in 
contrast, has very little incentive to distribute client based 
middleware that might facilitate the development of cross platform 
applications. Netscape's defeat in the browser war means not only 
that the browser itself is not available as a platform for 
applications development but also that the Java virtual machine, and 
other middleware technologies like it, are much less likely to be 
widely available on the PC. The proposed settlement attempts to make 
the distribution of alternative middleware possible, but its 
provisions are incomplete and are likely to be ineffective.
    (iii) Microsoft's control of the browser gives it enormous 
influence over the future

[[Page 28942]]

development of the Internet, allowing it to ensure that server based 
technologies that might lower the applications barrier to entry and 
facilitate threats to the OS monopoly are unlikely to emerge. Owning 
the dominant browser gives Microsoft great influence over the 
evolution of the Internet, and in particular over the evolution of 
important Internet interfaces. As Paul Maritz recognized, "By 
controlling the client, you also control the servers." GX 498, 
at MS980168614. This set of interfaces goes beyond the browser APIs 
to which developers can directly write applications, to include the 
set of interfaces that constitute the communications protocols 
between the browser and the network. For information to be received 
and viewed in Internet Explorer, the developer has to follow these 
interfaces, and so has to conform to Microsoft standards. The 
importance of browser interfaces is widely acknowledged. Ron 
Rasmussen, an executive with operating system supplier Santa Cruz 
Operation, testified: "if there is one person or one company 
who controlled the browser and its look and feel and how it 
presented applications, it could severely enhance or detract from 
the application functionality of ... the server." Rasmussen 
Dep., 12/15/98am, at 67:14--68:3. Similarly Brian Croll of Sun 
testified that "having a degree of control over the 
browser" is "critical" because the browser is 
"linked very closely to whether a server is useful or 
not." Because the "two sides need to talk to each 
other," Sun cannot sell servers if the browser "can't 
talk to the server." Croll Dep., 12/15/98pm, at 
60:22--61:16. Control over the browser thus gives Microsoft 
significant control over the software running on the server, and 
this in turn makes it significantly less likely that software 
running on servers will develop into potentially powerful 
"cross platform middleware", facilitating competition to 
the Microsoft Windows OS. Just as a platform independent browser 
might have become an attractive platform for cross platform 
applications development, so a server operating system that could be 
accessed through Microsoft independent standards by an independent 
browser might have become an attractive platform for applications 
development, greatly increasing the probability that serious 
competition to the Windows OS might emerge.
    Microsoft's control of the browser greatly reduces the 
probability that this will happen. Developers and content providers 
will generally choose to write to the interfaces that will enable 
them to reach the broadest possible audience (FOF 361). This led 
Microsoft, when it had a low market share in browsers, to pledge to 
write Internet Explorer to conform to some of the public interfaces 
promulgated by the World Wide Web Consortium (W3C). RX 15 (Microsoft 
Press Release, 7/8/97). In fact, Microsoft itself had difficulty 
when its market share was only 30% in convincing its own Office 
developers to take advantage of IE 4 features. GX 514, at MS7 
0075706.
    Given IE's dominant position today, web developers have an 
incentive to write to IE's interfaces first and foremost, and now 
that it has a dominant share, Microsoft has stated that it may not 
always choose to support public interfaces. RX 16 (MSDN Online 2/7/
00). To the extent that Microsoft is able to impose Microsoft-
specific interfaces on the Internet, the capabilities of users of 
non-Microsoft browsers to view content may be degraded or 
eliminated. Cf. FOF 322 (Microsoft contracts requiring that content 
providers offer content viewable only with IE or "with 
acceptable degradation when used with other browsers"), and 
the ability of server based software to develop into cross platform 
middleware will be severely curtailed. The ability to influence the 
development of web-based applications is a highly valuable tool for 
future anticompetitive campaigns should Microsoft choose to mount 
them. As web-based applications grow in importance, so does 
Microsoft's ability to steer them towards being IE-centric, and, 
given its control over the browser-to-operating system interface, 
Windows-centric as well. The proposed settlement does nothing to 
address this issue.
    (iv) Conclusion
    In summary, the proposed settlement does little or nothing to 
redress the harm caused by Microsoft's destruction of the browser 
threat. Microsoft's victory leaves it in control of all browser 
interfaces, without the need to accommodate an independent browser 
that might have served as an important platform for cross platform 
applications, and without any real threat that a Java virtual 
machine (or other comparable cross platform middleware) might be 
widely distributed.
    Prevention of Future Harm
    The proposed settlement instead attempts to ensure that 
Microsoft will not act against future middleware threats as it acted 
against Netscape. Unfortunately its provisions in this respect are 
insufficient to prevent the harm they seek to guard against.
    (i) The definition of Middleware
    Many of the most important provisions of the proposed settlement 
refer to actions that Microsoft must take in regard to 
"Middleware" products. For example, in section III D, 
Microsoft is required to "disclose to ISVs, IHVs etc... the 
APIs and related Documentation that are used by Microsoft Middleware 
to interoperate with a Windows Operating System Product." 
Similarly section III H requires that Microsoft allow end users and 
OEMs to make a number of choices with respect to the nature of the 
Middleware that is installed and invoked on the end user's PC. In 
both cases the definitions of "Middleware" are overly 
restrictive, and omit both current software that might well be 
considered "middleware" in the terms of the original 
case and new software that might emerge to take on the 
characteristics of middleware. In the case of section III D, 
Middleware is defined in section VI, point K as:
    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 browser, 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
    There are two problems with this definition. The first is that 
it omits a number of types of software that might reasonably be 
considered potentially platform independent middleware. For example 
it omits Handheld Computing Device synchronization software. 
Handheld computers are probably currently complements to the PC: 
their use encourages PC use and vice versa. But if the power and 
speed of these devices increases sufficiently, and if a significant 
number of important applications become available over the web via 
server hosting and other kinds of services, one can imagine a world 
in which the existence of Handheld Computing Devices might greatly 
facilitate the development of substitutes for Windows. Thus software 
that enables a PC to synchronize with a Handheld Computing Device is 
arguably "Middleware" in the sense of the case. Other 
types of software that might plausibly develop into 
"Middleware" in the sense of the case but that are 
omitted from the settlements definition include voice recognition 
software, and directory and directory service support software.
    The second problem with this definition is that it is inherently 
static. In focusing on a subset of current Middleware products it 
omits, by definition, any future middleware products that might 
emerge. The path of technological progress in an industry as dynamic 
as the computer industry is impossible to predict. In focusing on 
current Middleware products rather than on the more general question 
of which classes are software are likely to facilitate competition 
to the Windows monopoly, the settlement makes it unlikely that 
entirely new Middleware--the kinds of products that are perhaps 
most likely to facilitate challenges to Windows--will be 
covered by any of the provisions of the settlement.
    This static focus is particularly evident in the definition of 
"Middleware" in operation in the case of Section III H. 
Here "Middleware" is defined by the statement: 
Microsoft's obligations under this Section 111.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 Notice that this means that these obligations 
apply only to those Middleware Products for which Microsoft has 
produced a product of its own. They would not cover, for example, 
the first editions of the Netscape browser! More generally, if new 
forms of Middleware emerge, the settlement gives Microsoft strong 
incentives to bind them to the operating system immediately. If 
Microsoft never issue the Middleware as a

[[Page 28943]]

separate product, by the terms of this clause it is never 
"Middleware", and Microsoft never has to meet its 
obligations under Section III H. (ii) Giving Microsoft control over 
the pace and shape of technological development The agreement as 
currently written is also flawed in that much of the assistance it 
purports to offer to potentially important competitive Middleware is 
not only very slow, but is also technically limited in important 
ways.
    The provisions of Section III.D, for example, require Microsoft 
to release key information about the ways in which Middleware can 
interoperate with the Windows Operating system "no later than 
the last major beta release of that Microsoft Middleware." The 
timing of a beta release varies by product, but in most cases the 
availability of a beta release signals that the hard work of new 
product development has been done, and the product is more or less 
ready for sale. Delaying the release of key technical information to 
third party suppliers until the time of a beta release puts third 
party suppliers under a very significant handicap, since it forces 
them to enter the market significantly after Microsoft.
    In the case of Netscape, for example, denying them access to key 
interface information until after the beta release of Microsoft's 
first browser product would have forced them to delay their entry to 
the marketplace very significantly and would have deprived them of 
the early entry, "first mover" advantage that is often 
the one of the most advantages that third party suppliers can offer 
consumers. Competition thrives where new, innovative firms can enter 
a market quickly with dramatically new offerings. This provision 
would serve to slow competition to the speed at which Microsoft 
wishes to compete.
    The provisions of Section III.D. are also flawed in that they 
restrict the release of critical technical information to "the 
APIs and related Documentation that are used by Microsoft Middleware 
to interoperate with a Windows Operating System Product." This 
effectively forces potentially competitive Middleware to use the 
same interfaces as Microsoft's middleware. Clearly some information 
is better than none. But to the degree that the purpose of 
competition is precisely to encourage the generation of alternatives 
that do not mirror Microsoft's offerings, forcing competitive 
software to use the same kinds of interfaces as Microsoft's own 
offerings leaves tremendous control over the direction of 
technological development in Microsoft's hands. Those competitive 
offerings that wish to interoperate with the operating system in 
different ways will get no help from this provision.
    (iii) Who counts?
    Section J.2. of the proposed settlement allows Microsoft to 
condition the license of "any API, Documentation or 
Communication Protocol related to anti-piracy systems, antivirus 
technologies, license enforcement mechanisms, authentication/
authorization security..." to persons or entities that: 
"meets reasonable, objective standards established by 
Microsoft (my emphasis) for certifying the authenticity and 
viability of its business." I read this provision as 
suggesting that Microsoft can refuse to release key 
information--information that is increasingly critical to the 
development of any third party Middleware--to any firm that 
Microsoft deems "inauthentic" or "not 
viable." Would Microsoft have deemed Netscape viable, in its 
early days? Will the company believe that firms whose business model 
is based on the exploitation of Linux are viable? This provision 
allows Microsoft to deny critical information to precisely those 
kinds of firms that are most likely to provide significant 
competition in the marketplace--those firms that may be too 
small or too new or too unconventional to be "viable."
    (iv) Forced Licensing
    Section I. 5 provides that: "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 shah be no broader than is necessary to insure that 
Microsoft can provide such options or alternatives."
    I find this wording ambiguous and potentially troubling. First, 
I wonder why any third party should be required to license anything 
to Microsoft. Microsoft's obligations extend to the provision of 
technical information about interfaces and to offering to OEMs and 
to end consumers the ability to remove Microsoft supplied 
Middleware. It is not at all clear to me why Microsoft should need 
to know anything about third party software in order to meet these 
obligations. Second, I am troubled by a possible interpretation of 
this language. One interpretation is that it forces third parties to 
license their software to Microsoft in order that Microsoft should 
be able to offer the same options and alternatives as the third 
party supplier. Would this language not have forced Netscape to 
license their browser to Microsoft so that Microsoft could provide 
the Netscape browser as an alternative? If an OEM chooses to install 
Real Player as the default media player, does this language imply 
that Microsoft has the right to license Real Player so that 
Microsoft also has the option to offer Real Player as the default 
media player? Surely this kind of forced licensing can only suppress 
competition?
    (v) Second guessing consumer choice:
    Although the current agreement purports to make it much easier 
for OEMs to install alternative Middleware and thus to offer end 
users a real choice of systems, the agreement severely restricts 
this choice in two important respects. In the first place, Section 
C.3. allows for the installation of third party Middleware provided 
that "any such Non-Microsoft Middleware displays on the 
desktop no user interface or a user interface of a similar size and 
shape to the user interface displayed by the corresponding Microsoft 
Middleware Product."
    Just as section III.D. restricts the design of competitive 
Middleware by limiting competitive knowledge of key interfaces to 
knowledge of only those technical interfaces used by equivalent 
Microsoft authored Middleware, so this provision restricts the 
presentation of potentially competitive Middleware to a "look 
and feel" roughly similar to Microsoft Middleware. How can 
this restriction increase consumer welfare? If OEMs believe that end 
users would welcome Middleware that uses a very different kind of 
user interface for their alternative Middleware, should they not be 
allowed to install it?
    In the second place, Section H.3. permits Microsoft to offer end 
users the choice to install Microsoft middleware as default software 
14 days after the first boot of their system. While this provision 
may seem innocuous, its real effect will be to remove choice from 
the OEM. As the trial established, OEMs cannot afford the costs of 
widespread consumer confusion. Imagine a world in which consumers 
face every day--or every hour (!)--a screen saying 
something like "are you sure you want to use Product ABC? Why 
not use Microsoft XXX, a product designed to work seamlessly with 
the operating system?" Many consumers may be effectively 
forced into switching products in the face of what may well be 
perceived as an implicit threat. Real competition cannot thrive 
under such circumstances. OEMs should have the power to configure 
systems in the ways they wish. Competition in the market place can 
decide if these configurations create value for end users.
    Microsoft incentives from this agreement.
    Lastly, the agreement is flawed in that it creates incentives 
for Microsoft to take actions that may significantly reduce consumer 
choice. Framed as it is, the current agreement creates very strong 
incentives for Microsoft never to release another piece of separate 
"Middleware"! Releasing Middleware will incur 
obligations--Microsoft will need to release technical 
information and to permit OEMs to remove the Microsoft authored 
product. These obligations can be easily evaded by immediately 
bolting new applications to the operating system. This will create 
two kinds of harm. In the first place, it will lead inevitably to 
increasingly "bloated" code, Consumers that might have 
preferred to purchase a "slimmer" Operating System will 
be unable to do so. Indeed in the worst case Microsoft might 
actively invest in the generation of "spaghetti 
code"--systems in which the code necessary to provide the 
new functionality and the code necessary to run the operating system 
are deliberately commingled. Such commingling may significantly 
lower the overall performance of the operating system. In the second 
place, such immediate "bolting" will defeat the 
intention oft he settlement: potential third party suppliers of such 
Middleware will not have access to the key technical information 
that would enable them to seamlessly interoperate with the operating 
systems, nor will OEMs have the opportunity to install them in place 
of the Microsoft Middleware. It is possible, of course, that the 
fully integrated Microsoft solution that this agreement gives 
Microsoft strong incentives to provide may be a technologically 
superior solution. But this solution will be imposed on consumers 
without the process of competition that has historically proven to 
be such a source of consumer benefit.
    Conclusion
    The proposed settlement falls short in two critically important 
respects. Not only does it

[[Page 28944]]

do almost nothing to redress the harm caused by Microsoft's illegal 
conduct with respect to Netscape, leaving Microsoft with all the 
fruits of its illegal victory, but the provisions that it includes 
in an attempt to prevent a repetition of Microsoft's conduct in the 
browser case are limited and incomplete.
    Suppose a Middleware threat with the potential impact of the 
Netscape browser were to emerge next year, or two years from now. 
The terms of the proposed settlement do little to ensure that 
Microsoft could not engage in an anticompetitive campaign to 
successfully crush it. Unless Microsoft chooses to recognize it as 
"Middleware" by producing a competing product, as 
opposed to simply copying the functionality and immediately bolting 
it to the operating system, it would not be covered by the terms of 
this settlement. Even if Microsoft were to choose to recognize it 
(and they would have strong incentives to avoid so doing), the 
current settlement would allow Microsoft to decide that the firm 
producing it did not have a "viable" business: to delay 
releasing critical technical information until after the release of 
its own beta product; to insist that its user interface be of 
"similar size and shape" to Microsoft's own product and, 
14 days after first boot up, to bombard consumers with the option to 
switch to the Microsoft alternative.
    Microsoft's victory in the browser war leaves it in a 
significantly stronger position to protect its operating systems 
monopoly and to block threats from any competition that might emerge 
to challenge it. The settlement does very little to remedy this 
situation and is instead rife with the potential for significant 
consumer harm. Curriculum Vitae
Name: Rebecca Henderon Department: BPS, Sloan School
Birth Date: Oct 29, 1960 Place of Birth: London
Citizenship: US Citizen
Education
Harvard University Ph.D. 1983-1988
Doctorate in Business Economics. Thesis: The Failure of Established 
Firms in the Face of Technological Change: A Study of 
Photolithographic Alignment Equipment.
Massachusetts Institute of Technology S.B. 1978-1981
Mechanical Engineering.
    Academic Employment:
Eastman Kodak LFM Professor, MIT Sloan School, 1999-
Tenured Associate Professor, MIT Sloan School, 1995-1999
Research Associate, National Bureau of Economic Research, 1995-
Thomas Henry Carroll Foundation Visiting Professor of Management, 
Harvard Business School. 1996-1997
Robert Noyce Associate Professor, MIT Sloan School, 1993-1995
Research Fellow, National Bureau of Economic Research, 
1990-1995
Visiting Assistant Professor, Stanford Graduate School of Business, 
1992-1993.
Assistant Professor, MIT Sloan School, 1988-1992
    Non Academic Employment:
McKinsey and Company Summer associate. Summer 1986
Harvard University Research assistant, K Clark. Summer 1985
General Electric Analyst, strategic planning. Summer 1984
McKinsey and Company Analyst. 1981-1983
    Honors and Awards:
ASQ Awa??d for Scholarly Contribution 1996
Teacher of the Year 2001
Runner-up, Teacher of the Year 1990, 1991, 1992, 1993, 1995, 1996, 
1998, 1999
Dively Award for best thesis proposal, H.B.S 1988
Alumane Award, (outstanding female graduate) MIT. 1981
Elected to Phi Beta Kappa 1981
    Boards and Advisory Panels
Boards
The Whitehead Institute for Biomedical Research, Cambridge, MA. 
1999--
Linbeck Construction Corporation, Houston Texas. 2000--
The Ember Corporation, Cambridge MA 2001--
Advisory Panels
The Department of Social and Decision Sciences, Carneige Mellon 
1995--
ThePlatform, Inc 2000-
Anti-Trust Experience
Retained by the Department of Justice as an expert witness in 
connection with the remedies phase of the Microsoft trial. Summer 
1999--Spring 2000. Declaration available on line at: 
www.usdoj.gov/atr/cases/ms--remediespapers.htm
    Editorial Responsibilities
Department Head, Strategy, Management Science 1995--2000
    Member, Editorial Board:
Administrative Science Quarterly 1994--
The Strategic Management Journal 1994--
Economics of Innovation and New Technology 1995--
Research Policy 1998--
Management Science 2000--
    Publications
Journal Articles (Refereed).
    "Putting Patents in Context: Exploring Knowledge Transfer 
from MIT" Jointly with Ajay Agrawal, forthcoming in Management 
Science
    "Discontinuities and Senior Management: Assessing the Role 
of Recognition in Pharmaceutical Firm Response to 
Biotechnology" Jointly with with Sarah Kaplan, Fiona Murray, 
forthcoming in Industrial and Corporate Change.
    "Untangling the Origins of Competitive Advantage" 
Jointly with Iain Cockburn & Scott Stern. Strategic Management 
Journal, Fall 2000, Volume 21, 1123-1145 "Absorptive 
Capacity, Coauthoring Behavior, and the Organization of Research in 
Drug Discovery" Jointly with Iain Cockburn. Journal of 
Industrial Economics, June 1998, Volume XLVI, No. 2. 
pp157-182. "Universities as a Source of Commercial 
Technology: A Detailed Analysis of University Patenting, 
1965-1988" Jointly with Adam Jaffe and Manuel 
Trajtenberg. Review of Economics and Statistics, Vol. 80, No. 1, 
February 1998 pp 119-127. "The Perils of Excellence: 
Barriers to Effective Process Improvement in Product-Driven 
Firms" Jointly with Jesus del Alamo, Todd Becker, James 
Lawton, Peter Moran, Saul Shapiro and Dean Vlasak. Production and 
Operations Management, Vol. 7, No. 1, Spring 1998, pp 2-18. 
"University versus Corporate Patents: A Window on the 
Basicness of Invention" Jointly with Adam Jaffe and Manuel 
Trajtenberg. Economics of Innovation and New Technology, 1997, Vol 
5, No. 1, pp 19-50. "Scale, Scope and Spillovers: The 
Determinants of Research Productivity in Drug Discovery." 
Jointly with lain Cockburn. Rand Journal of Economics, Spring 1996, 
27(1), pp. 32-59. "Measuring Competence? Exploring firm 
effects in drug discovery." Jointly with Iain Cockburn. 
Strategic Management Journal, Volume 15, pp 63-84, Special 
issue Winter 1994. "The Evolution of Integrative Capability: 
Innovation in Cardiovascular Drug Discovery" Industrial and 
Corporate Change, Vol 3, No. 3, Winter 1994 pp 607630. "Racing 
to Invest? The Dynamics of Competition in Ethical Drug 
Discovery." Jointly with lain Cockburn. Journal of Economics 
and Business Strategy, Volume 3, No. 3, Fall 1994, 481-519. 
"Of Life Cycles Real and Imaginary: The Unexpectedly Long Old 
Age of Optical Lithography" Research Policy, 1995, Vol. 24, pp 
631-643. "Geographic Localization of Knowledge 
Spillovers as Evidenced by Patent Citations." Joint with Adam 
Jaffe and Manuel Trajtenberg. Quarterly Journal of Economics, August 
1993, Vol. 434, pp 578-598 "Underinvestment and 
Incompetence as Responses to Radical Innovation: Evidence from the 
Photolithographic Industry." Rand Journal of Economics. 
Vol.24, No.2, Summer 1993 "A Process Control Methodology 
Applied to Manufacturing GaAs MMICs. (Jointly with Peter Moran, 
Scott Elliott, Neil Wylie and Jesus del Alamo,) IEEE Transactions on 
Semiconductor Manufacturing, November 1991, Vol.4., No.4 
"Manufacturing Costs for Advanced Composites Aerospace 
Parts." With C. Shipp and T. Gutowski. SAMPE, (Society for the 
Advancement of Material and Process Engineering.) Vol. 27, No. 3, 
May/June 1991. "Architectural Innovation: The Reconfiguration 
of Existing Product Technologies and The Failure of Established 
Firms." With Kim Clark, March 1990, Administrative Science 
Quarterly, Vol 35, p9-30. Journal Articles (Non-refereed). 
"Drug Industry mergers Won't Necessarily Benefit 
R&D" Research Technology Management July -August 2000, Vol 
43 No 4. P 10--11. "The Interactions of Organizational 
and Competitive Influences on Strategy and Performance." With 
Will Mitchell, Summer 1997, Strategic Management Journal Vol 18, 
Summer special issue, pp5-14.
    "Managing Innovation in the Information Age" Harvard 
Business Review, January-February 1994, 100-106. Reprinted in 
Seeing Differently, J.S. Brown, Ed., Harvard Business School Press, 
Boston MA, 1997 and in The Product Development Challenge, Kim B. 
Clark and Steven C. Wheelwright, Eds, Harvard Business School Press, 
Boston MA, 1995.
    "Breaking the Chains of Embedded Knowledge: Architectural 
Innovation as a Source of Competitive Advantage." Design 
Management Journal, Vol.2, No.3, Summer 1991 Chapters in Edited 
Volumes.
    "Publicly funded science and the productivity of the 
pharmaceutical industry"

[[Page 28945]]

with Iain Cockburn, Chapter 1 in Innovation Policy and the Economy, 
Number 1, 2000, National Bureau of Economic Research, Adam Jaffe, 
Josh Lerner and Scott Stem, editors, The MIT Press, Cambridge MA.
    "Luck," "Leadership" and 
"Strategy". Economics Meets Sociology, Volume 17 in 
Advances in Strategic Management, Edited by Joel A.C. Baum and Frank 
Dobbin, pp 285-290, 2000 by Jai Press Inc, Stamford 
Connecticut
    "Measuring Competence? Exploring Firm Effects in Drug 
Discovery" Jointly with Iain Cockburn. Chapter 6 in The Nature 
and Dynamics of Organizational Capabilities, Edited by Giovanni 
Dosi, Richard R. Nelson and Sidney G. Winter, 2000 by Oxford 
University Press, Oxford, UK.
    "The Economics of Drug Discovery" Jointly with Iain 
Cockburn, Chapter 5 in Pharmaceutical Innovation, edited by Ralph 
Landau, Basil Achilladelis and Alexander Scriabine, Chemical 
Heritage Press, Philadelphia PA 1999, pp 308-331.
    APharmaceutical and Biotechnology @  Jointly 
with Iain Cockburn, Luigi Orsenigo and Gary Pisano. Chapter 13 in US 
Industry--in 2000: Studies in Competitive Performance. David 
Mowery, Editor. Board on Science, Technology and Economic Policy, 
National Research Council. National Academy Press. Washington, DC, 
1999.
    "The Pharmaceutical Industry and the Revolution in 
Molecular Biology: Interactions Among Scientific, Institutional and 
Organizational Change." Jointly with Luigi Orsenigo and Gary 
Pisano. Chapter 7 in The Sources of Industrial Leadership, Cambridge 
University Press, David Mowery and Richard Nelson, Editors, 
Cambridge University Press, 1999, pp 267-311.
    "On the Dynamics of Forecasting in Technologically Complex 
Environments: The Unexpectedly Long Old Age of Optical 
Lithography" In Technological Innovation: Oversights and 
Foresights, Raghu Garud, Pravenn Nayyar and Zur Shapira, Editors, 
Cambridge University Press, New York, 1997.
    "Trends in University Patenting 1965-1992," 
(Jointly with Adam Jaffe and Manuel Trajtenberg.) Forthcoming in the 
Center for Economic Policy Research conference volume: University 
Goals, Institutional Mechanisms and the "Industrial 
Transferability" of Research.
    "The Determinants of Research Productivity in Ethical Drug 
Discovery." (Jointly with Iain Cockburn) In The American 
Enterprise Institute Conference Volume: Competitive Strategies in 
the Pharmaceutical Industry, Robert B Helms, Ed. Washington DC, 
1996.
    "Maintaining Leadership across Product Generations: The 
Case of Canon in Photolithographic Alignment Equipment" in 
Managing Product Development, Toshihiro Nishiguchi, Ed. Oxford 
University Press, 1996. (This book was awarded the 1996 Shingo Prize 
for Excellence in Manufacturing research.)
    "Technological Change and The Management of Architectural 
Knowledge." In Transforming Organizations, Edited by T. Kochan 
and M. Useem. Oxford University Press, Oxford, U.K., 1992. Reprinted 
in Organizational Learning, edited by Michael D. Cohen and Lee S. 
Sproull, Sage Publications Inc, CA, 1996. Conference Proceedings.
    "Public-private interaction in pharmaceutical 
research" (Jointly with Iain Cockburn) in the Proceedings of 
the National Academy of Sciences 93/23 (November 12, 116) p. 
12725-12730
    "Controlling Variability of Sub-micron Gate Lithography in 
a GaAs MMIC Manufacturing Environment." (Jointly with Peter 
Moran, Jesus del Alamo, Nell Wylie and Scott Elliott.) Presented at 
the SEMI Advanced Semiconductor Manufacturing Conference, pp136a-g. 
September 1990, Danvers, MA.
    "Workload Regulating Wafer Release in a GaAs Fab 
Facility." International Semiconductor Manufacturing Science 
Symposium, May 1990, San Francisco, CA. (Jointly with James Lawton, 
Al Drake, Lawrence Wein, Ron Whitney, and Dick Zuanich) Working 
Papers.
    "A Behavioral Analysis of Learning Curve Strategy" 
With Eric Beinhocker, Lee Newman and John Sterman.
    "Balancing Incentives: The Tension between Basic and 
Applied Research" Jointly with Iain Cockburn and Scott Stern.



MTC-00030603

January 28, 2002
VIA FACSIMILE (202) 307-1454
The Honorable Charles James
Assistant Attorney General for Antitrust
c/o Renata Hesse, Antitrust Division
U.S. Department of Justice
601 D Street, N-W, Suite 1200
Washington, DC 20530-0001
    Dear Assistant Attorney General James: The proposed Final 
Judgment submitted in U.S. v. Microsoft Corporation, mad State of 
New York et al. v. Microsoft Corporation, triggers obligations by 
you under the Antitrust Procedures and Penalties Act (the 
"Tunney Act"), set forth at 15 U.S.C.  16. 
Under the Act, you are designated to "receive and consider any 
written comments relating to the proposal for [a] consent judgment 
submitted under... this section." i5 U.S.C. 
 16(d). On November 8, 2001, Judge Colleen Kollar-
Kotelly ordered "that members of the public may submit written 
comments concerning the proposed Final Judgment to [the Justice 
Department.]" This letter is sent to you pursuant to this 
statute and court order.
    As Chairman of the Subcommittee on Antitrust, Business Rights, 
and Competition of the Senate Committee on the Judiciary, I have 
studied the proposed settlement of the government's antitrust 
lawsuit against Microsoft very closely, and I write to express my 
concern about whether the settlement is in fact "in the public 
interest." 15 U.S.C.  16(e). Accordingly, I 
respectfully ask that you address the issues raised in this letter 
when you file with the district court your mandatory 
"response" to these comments. See 15 U.S.C. 
 16(d). This settlement affects vast and important 
segments of the U.S. economy, and thus, its significance cannot be 
overstated. As a result, I believe it should only be approved if it 
can truly be shown that the settlement is "is m the public 
interest," Such a determination will require the court to 
assess "the competitive impact of such judgment, including 
termination of alleged violations, provisions for enforcement and 
modification, duration of relief sought, [and] anticipated effects 
of alternative remedies actually considered." 15 U.S.C. 
 16(e)(1). These comments and questions are designed to 
inform this inquiry.
    (1) Does the proposed settlement contain significant loopholes 
that render it largely ineffective to cure the damage to competition 
caused by Microsoft's illegal behavior? The unanimous District of 
Columbia Circuit Court of Appeals held that Microsoft violated 
section 2 of the Sherman Act by illegal conduct designed to maintain 
its monopoly on personal computer operating systems. The proposed 
settlement is designed to "provide a prompt, certain and 
effective remedy for consumers" arid "halt continuance 
mad prevent recurrence of the violations of the Sherman Act by 
Microsoft... and restore competitive condition, s to the 
market." Competitive Impact Statement at 2.
    However, it appears that, in many respects, the Revised Proposed 
Final Judgment ("PFJ"), contains so many loopholes, 
exceptions, qualifications, and definitional limitations that 
Microsoft can easily avoid its requirements. I have serious concerns 
that these loopholes and qualifications in the proposed settlement 
render it inadequate to accomplish its task of remedying Microsoft's 
illegal conduct and restoring competition in the computer software 
market. I will list a few examples below, but this list is not 
exhaustive.
    (a) Million software copy limitation--Under the proposed 
consent decree, competitive access to the computer desktop has to be 
provided for certain types of firs.1 software application makers. 
More specifically, Microsoft must permit computer manufacturers and 
computer users to replace the icons, short-cuts, or menu entries for 
Microsoft Middleware Products on the desktop or start menu with Non-
Microsoft Middleware Products. See PFJ III.H.1. But the 
proposed consent decree contains a loophole in the definition of 
Non-Microsoft Middleware Products that denies that protection 
unless, in the prior year, "at least one million copies [of 
that rival software] were distributed m the United States." 
Id. VI.N. Thus, many start-up software companies with 
promising yet unproven technology in the pipe]me--precisely the 
companies most in need of protection from exercise of market power 
by a monopolist--will be left unprotected by the settlement. 
This could have a negative impact on the flow of venture capital and 
investment to technology start-ups--precisely the engine that 
drove the economic expansion of the late 1990s and a key to further 
expansion of our all-important technology sector. Requiring the 
distribution of a million copies in the United States in a year 
seems a very high threshhold. Why was this limitation written into 
the settlement? Why was the one million number chosen? In this era 
of internet downloads, how can a software maker prove that a million 
copies were distributed in the United States? What purpose does this 
limitation serve? Should the consent decree be modified to close 
that loophole and foster

[[Page 28946]]

new investments and growth by protecting those investments from 
monopoly practices?
    In answering this inquiry I would request that you conduct a 
survey of a representative sample of non-Microsoft middleware 
product manufacturers to determine how long it took them to 
distribute one million copies of their software in the United States 
(if in fact they have done so). For example, it would be fruitful to 
determine how long it took products such as Kodak photofinishing 
software or the Palm OS to reach this threshhold, even though they 
might not qualify as non-Microsoft middleware products under the 
decree.
    (b) Definitional limits on API disclosures--A cornerstone 
of the proposed settlement is the requirement that Microsoft 
disclose certain Application Programming Interfaces 
("APIs") that are used by Microsoft Middleware to 
interoperate with a Windows Operating System Product. See 
III.D. Yet the definition of Microsoft Middleware is limited 
in such a way that raises doubts about the true extent of the 
requirement of API disclosure. Microsoft Middleware must be 
distributed seperately from a Windows Operating System Product and 
must be trademarked. Id. VI.J. And any product comprised of 
the Microsoft or Windows trademark together with descriptive or 
generic terms are not considered to be trademarked. Id VI.T. 
It appears that these definitional limitations will make it easy for 
Microsoft to avoid having to disclose APIs. Why can Microsoft simply 
decide not to trademark software and thereby have it fall outside 
this definition? Why does the definition of trademark exclude 
products identified by the Microsoft or Windows trademark plus a 
generic term?
    In addition, Microsoft need not release any API to a software 
maker unless Microsoft determines that the software maker "has 
a reasonable business need for the API" and "meets 
reasonable, objective standards established by Microsoft for 
certifying the authenticity and viability of its business." 
Id. III.J. Many are concerned that permitting Microsoft to 
determine the "business need" and 
"viability" of potential competitors will be another way 
Microsoft can avoid the API disclosure requirements.
    Another limit on API disclosure applies to new versions of 
Windows Operating Systems Products. With respect to new versions, 
disclosures of APIs need only be made in a Timely Manner. Id. 
III.D. Timely Manner is defined to mean when Microsoft 
releases a test version of a Windows Operating System Product to 
150,000 beta testers. Id. VI.R. Microsoft could avoid this 
provision by simply having the new version--and the obligation 
to release APIs tested by less than 150,000 beta testers. What 
assurance is there that Microsoft will not avoid the API disclosure 
limitation in the future in this manner? There are many other 
definitional limits and qualifications found throughout the proposed 
consent decree. Beyond their specific provisions, these limitations 
raise the broader--and fundamental--question: is the 
proposed settlement is strong enough to make sure that Microsoft 
cannot use its monopoly power to squelch competition and innovation?
    (2) Is the scope of the settlement's protection of middleware 
adequate to promote competition ? Before even running the gauntlet 
of the decree's restrictions outlined above, software must qualify 
as non-Microsoft middleware under the restrictive definitions of 
middleware used in the decree, see PFJ VI.J, VI.K, VI.M, 
VI.N. The decree's protections are largely limited to competitors of 
"Microsoft Middleware Products." But the definition of 
what is (or is not) a Microsoft Middleware Product remains somewhat 
ambiguous. Windows Messenger is covered, but MSN Messenger does not 
appear to be. Internet Explorer is covered, but MSN Explorer seems 
to be missing. Popular products such as software for personal 
digital assistants and photofinishing are excluded. What accounts 
for these gaps? And why did the Department of Justice and Microsoft 
abandon the definition of middleware that had been employed by, the 
District Court and affirmed unanimously on appeal? These definitions 
lie at the core of the consent decree's potential effectiveness. The 
heart of the Court of Appeals" ruling was that Microsoft's 
acts of illegal monopoly maintenance blocked the ability of 
competitors to develop middleware which could effectively become an 
alternative platform to compete with the Windows operating system. 
The goal of the consent decree therefore must be to encourage and 
protect innovation in the middleware field. Yet the more restrictive 
and unclear the definitions are, the more they introduce uncertainty 
into this field and the more ineffective the consent decree will be. 
If potential innovators believe that Microsoft can avoid the ambit 
of the decree, then hopes for spurring innovation and competition 
among middleware products will be lost.
    (3) Why is Microsoft ever allowed to retaliate against the 
computer makers? The settlement rests on the computer makers" 
ability to promote competition on the desktop and in the industry 
generally. A key provision of the consent decree bans Microsoft from 
retaliating by agreement for a computer makers loading certain types 
of non-Microsoft software on its computers. See PFJ III.A. 
Yet, the ban on Microsoft retaliation against computer makers is 
limited: the decree only bans retaliation in commercial agreements 
(not other forms of retaliation); only bans retaliation for removing 
specifically named "Microsoft Middleware Products" (not 
other Microsoft products); and only bans retaliation, for promoting 
specific competitive products (and not other products that could 
challenge Microsoft's desktop dominance). Will these loopholes 
"swallow the rule" that Microsoft should be banned from 
retaliating against computer makers? Would it not be far simpler to 
ban all Microsoft retaliation against the computer makers?
    (4) Will Microsoft be able to accomplish through incentives what 
it could not accomplish by retaliation.? The ban on retaliation in 
no way prevents Microsoft from paying incentives to computer makers 
to strongly prefer--or install exclusively--Microsoft 
software products. Indeed, the proposed consent decree expressly 
provides that nothing "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 of that OEM's development, distribution, promotion, or 
licensing of that Microsoft product or service." PFJ 
III.A. Given Microsoft's market power and financial resources, 
what will prevent Microsoft from using its financial resources, what 
will prevent Microsoft from paying bounties to computer 
manufacturers to "voluntarily" exclusively install or at 
least to prefer, Microsoft products, thereby accomplishing through 
incentive payments what it could not achieve by retaliation?
    (5) Why does the settlement abandon the ban on commingling that 
the Court of Appeals found to be illegal? Nothing in the agreement 
prohibits Microsoft from commingling code or binding of its 
middleware to the Operating System (OS), even though the Court of 
Appeals specifically found Microsoft's commingling of browser and OS 
code to be anti-competitive and rejected a Microsoft petition for 
rehearing that centered on this issue. Computer manufacturers are 
likely to be discouraged from installing competing middleware 
products to those commingled with OS code, as these are likely to 
slow down the computer's speed and performance. Why should the 
proposed settlement permit this commingling to continue in the face 
of an explicit finding of illegality from the Court of Appeals?
    (6) Is the five year term of the settlement sufficient to 
restore competition? The proposed consent decree has a five year 
term (extendable for two years only if the Court finds Microsoft has 
engaged in willful and systematic violations of the decree). PFJ 
V. This is an unusually short time for an antitrust consent 
decree, which is typically ten years in length. Many wonder if this 
term is sufficient to remedy Microsoft's illegal conduct and restore 
competition. Why was the term of the decree limited to five years? 
How can we be sure that five years will be sufficient to restore 
competition?
    In addition, under the decree, Microsoft has up to a year after 
submission of the decree before implementing several of its 
provisions, including the crucial API disclosure requirements and 
the provisions granting computer manufacturers and users the right 
to modify the start-up menus and icons with competing products. See 
PFJ III.D, III.H. Thus the effective time that Microsoft 
must live under these restrictions is substantially shorter than the 
five year term of the agreement. And yet, this summer, when 
Microsoft made some very, minor changes to Windows to respond to the 
Court of Appeals ruling, it took just three weeks to make the 
changes. Given Microsoft's proven ability to make rapid changes, 
would it not be in the public interest to require Microsoft to live 
by the consent decree immediately and not wait another year?
    (7) Is the enforcement mechanism sufficient? The proposed Final 
Judgment does not set forth vigorous enforcement mechanisms to keep 
Microsoft within the framework of this settlement. The proposed 
consent decree requirements the appointment of a "Technical 
Committee" to

[[Page 28947]]

monitor compliance with the decree, but its findings are entirely 
advisory and not binding on Microsoft. PFJ IV.B. The only true 
enforcement mechanism would be for the Justice Department to go to 
Court in art enforcement action. In such an enforcement action, no 
work product findings or recommendations of the Technical Committee 
can be admitted as evidence in court. Id. IV.D.4.d. 
"While Microsoft is required to "be reasonable" in 
its conduct: violations of such "be reasonable" 
provisions can only be remedied through proceedings that will 
become, in essence, mini-retrials of U.S. v. Microsoft itself. Are 
these provisions sufficient to ensure that the settlement can be 
enforced properly? Without an iron-clad enforcement mechanism, how 
can the public take solace in the "promise" that 
Microsoft will "be reasonable" given the history of 
litigation in this case, and earlier antitrust lawsuits against 
Microsoft?
    (8) What will the settlement's effect be on Microsoft's future 
conduct? Microsoft is has dubbed its aggressive Internet strategy 
.NET or "Hailstorm"--a strategy to give consumers a 
one-stop shop on the Internet. How will the consent decree foster 
competition for these future "platforms?" If the purpose 
of this case was to check Microsoft's monopoly power, how will the 
Justice Department ensure that this monopoly dominance is not 
extended from the desktop to the Internet? And why are critical new 
technologies, such as digital rights management and identity-
authentication, exempted from the proposed settlement's disclosure 
provisions? In closing, we today stand on the threshold of writing 
the rules for competition in the digital age, and we have two 
choices. One option involves one dominant company controlling the 
computer desktop, facing minor restraints that expire in five years, 
but acting as a gatekeeper to 95% of all personal computer users. 
The other model is the flowering of innovation and new products that 
resulted from the ending of the AT&T telephone monopoly nearly 
twenty, years ago. From cell phones to faxes, from long distance 
price wars to the development of the Interact itself, the end of the 
telephone monopoly brought an explosion of new technologies and 
services that benefit millions of consumers every day. We should 
resist on nothing less from this proposed settlement. In sum, any 
settlement in this case should make the market for computer software 
at least as competitive as the market for computer hardware is 
today. We should insist on a settlement that has an immediate, 
substantial, and permanent impact on restoring competition in this 
industry. I recognize the extraordinary effort that the Justice 
Department has expended in the litigation of this case, and I thank 
you and your staff for the vigor with which you have pursued this 
challenging case. I believe that answers to the questions and issues 
posed above are essential for determining whether the proposed 
settlement is in the public interest. Thank you for your attention 
to this matter.
    Sincerely,
    HERB KOHL
    Chairman
    Subcommittee on Antitrust,
    Business Rights and Competition



MTC-00030604

BLUMENFELD & COHEN
--Technology Law Group--
1625 Massachusetts Avenue, NW
Suite 300
Washington, DC 20036
202-955-6300
202-955-6460 FAX
Facsimile Cover Sheet
FROM: Patrick O'Connor DATE: January 28, 2002
TO: Renata B. Hesse FAX: (202) 307-1454 TEL:
CC: Audrie Krause, NetAction (415) 673-3813
    Dear Ms. Hesse: The attached are the Comments of NetAction and 
Computer Professionals for Social Responsibility on the Proposed 
Final Judgment in United States v. Microsoft. A copy has already 
been provided to you via E-mail.
    Please feel free to contact me at 202-955-6300 with 
any questions or concerns.
    Regards,
    Patrick O'Connor
    Counsel to NetAction and Computer Professionals for Social 
Responsibility
    Comments of NetAction and Computer Professionals for Social 
Responsibility On the Proposed
    Final Judgment
    INTRODUCTION
    The Government's Competitive Impact Statement claims that 
"[t]he relief contained in the Proposed Final Judgment 
provides prompt, certain and effective remedies for 
consumers." \1\ However, any potential relief is far 
from "certain" or "effective" for the 
average (non-corporate) consumer, and relief certainly will not be 
"prompt" since it will arrive, if at all, only as 
Microsoft rolls out later versions of its Windows Operating System.
---------------------------------------------------------------------------

    \1\ Competitive Impact Statement  I
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    Unfortunately, the Proposed Final Judgment does not offer 
consumers any hope of relief in the market for the non-middleware 
software applications on which they rely, such as word processing 
and spreadsheets. Nor does the Proposed Final Judgment attempt to 
offer any hope of relief to consumers using Windows 95, Windows 98, 
Windows NT, or Windows 2000. By its terms, the Proposed Final 
Judgment only applies to Microsoft's dealings with third pasty 
developers for Windows 2000 Professional, Windows XP, and later 
Windows versions. Thus, to achieve even the uncertain benefits of 
the Proposed Final Judgment, consumers will have to pay a high price 
for new software and, as explained below, new hardware, including 
new computers. For these reasons, the Proposed Final Judgment is 
suspect in terms of both the public interest and the goals of 
antitrust relief described by the Government.\2\
---------------------------------------------------------------------------

    \2\ See 15 U.S.C.  16(e), Competitive Impact 
Statement  I
---------------------------------------------------------------------------

    Moreover, the Proposed Final Judgment must be rejected because 
the record does not permit the Court to determine, with any 
reasonable degree of comfort or certainty, exactly what relief the 
Proposed Final Judgment provides. The language of the Proposed Final 
Judgment, in combination with the numerous exceptions to its 
prescriptions, necessarily leaves the Court and the public at a loss 
to confidently predict what conduct is prohibited and what conduct 
is permitted. Indeed, in a number of specific instances, the 
exceptions provided for in the Proposed Final Judgment appear to 
enable Microsoft to escape large portions or even all of its 
obligations. As the Court is fully aware, the Government's current 
lawsuit-now approaching its fourth anniversary-was triggered by 
Microsoft conduct that the Government thought it had prohibited in a 
previous consent decree. Only when it attempted to enforce the 
decree against that conduct did the Government discover that the 
language of the decree-language perhaps inserted by Microsoft and 
"protecting" its rights to innovate-could be interpreted 
to permit Microsoft to require that customers purchase its browser 
as a component of Microsoft's Windows Operating System, the exact 
conduct that the earlier decree ostensibly would have prevented.\3\ 
The very. same sorts of ambiguity are evident in the Proposed Final 
Judgment. If it is approved, Microsoft and the Government will find 
themselves back in this Court yet again, arguing over 
interpretation, while non-corporate consumers are forced to endure 
yet another round of anticompetitive effects.
---------------------------------------------------------------------------

    \3\ See U.S. v. Microsoft, 56 F.3d 1448, 1461-62 
(DCCir. 1995); see infro.  II.A.
---------------------------------------------------------------------------

    Because the Court has no power under the Tunney Act to modify 
the terms proposed by the parties, the Court must either reject the 
Proposed Finn Judgment as inconsistent with the public interest, or 
order additional proceedings to clarify its terms.\4\ Such 
additional proceedings should provide the parties to the Proposed 
Final Judgment with an opportunity to prove that there has been an 
actual "meeting of the minds" with regard to the terms 
of the agreement. Only where that has occurred should the Court 
consider approving the Proposed Final Judgment; otherwise, rejection 
is the Court's only recourse.
---------------------------------------------------------------------------

    \4\ See 15 U.S.C. 16(b) et seq.
---------------------------------------------------------------------------

    DISCUSSION
    NetAction is a national nonprofit organization dedicated to 
promoting use of the Internet for effective grassroots citizen 
action campaigns, and to educating the public, policymakers, and the 
media about technology policy issues. Among other projects, 
NetAction manages the Consumer Choice Campaign to focus public 
attention on Microsoft's growing monopolization of the Internet.
    Computer Professionals for Social Responsibility 
("CPSR") is a public-interest alliance of computer 
scientists and other interested individuals concerned about the 
impact of computer technology on society. CPSR provides the public 
and policymakers with realistic assessments of the power, promise, 
and limitations of computer technology and directs public attention 
to critical choices concerning the applications of computing and how 
those choices affect society.
    I. A Large Segment of the Consumer Market Will Be Unable to 
Avail Themselves of the

[[Page 28948]]

Limited and Uncertain Benefits of the Proposed Final Judgment Unless 
They Invest Substantial Sums in Hardware and Software Upgrades
    A. The Proposed Final Judgment Would Do Nothing to Increase 
Competition for Software Applications
    Despite Microsoft's substantial dominance in the market for 
software applications-such as email, word processing, and 
spreadsheets-the Proposed Final Judgment limits its modest proposed 
remedies co the market for "middleware." The 
Government's loftiest description of its anemic proposed remedy 
promises only to "restore the competitive threat that 
middleware products posed prior to Microsoft's unlawful 
undertakings." \5\ The "bulleted" 
enumeration of those benefits offered by the Government further 
clarifies that only the market for middleware is targeted for 
relief.\6\
---------------------------------------------------------------------------

    \5\ Competitive Impact Statement  1 .
    \6\ Id.; see also Competitive Impact Statement 
 III, IV .
---------------------------------------------------------------------------

    It is certainly true, as the Government points out, that 
middleware poses-or perhaps more accurately "posed" when 
the case was filed nearly four years ago-a significant threat to the 
dominance of Microsoft's Windows Operating System. By exposing its 
own "APIs," middleware allows software developers to 
write applications that will run on multiple operating system 
platforms, thus decreasing the importance of any particular 
operating system.\7\ And the middleware category is particularly 
important as computing evolves towards a model in which users go 
outside their desktop/laptop hardware not only for their data-as 
Internet has taught them to do-but also for applications by which to 
interact with that data.
---------------------------------------------------------------------------

    \7\ This would be true so long as several conditions 
obtain: (1) those applications depend only on the middleware's APIs, 
and not on the APIs of the underlying operating system, (2) the 
middleware runs equally effectively on multiple operating system 
platforms, and (3) all of every user's applications run on 
middleware.
---------------------------------------------------------------------------

    While the Government certainly was correct to make middleware an 
important focus of its case, the Government certainly is not correct 
to make middleware the sole focus of its proposed remedy. It is one 
thing to say that the existence of a competitive market for 
middleware could undercut Microsoft's monopoly of operating system 
software if computing moves away from a desktop/server environment 
to a Net-based environment. It is quite another to say, as the 
Proposed Final Judgment does, that the public interest is satisfied 
when consumers can achieve some benefits of competition only if 
computing moves away from a desktop/server environment to a Net-
based environment.
    It is simply not in the public interest-certainly not in the 
non-corporate consumers" interest-to conclude what by now is 
nearly a decade of Government antitrust litigation by providing for 
some uncertain possibility of middleware competition while ignoring 
file monopoly position that Microsoft has built in the applications 
market over that same period.
    B. Consumers Will Be Forced to Buy Software and Expensive New 
Hardware To Get Any Benefits From the Proposed Final Judgment
    Even assuming that the Proposed Final Judgment has the 
potential, over time, to create a more competitive market in the 
narrow middleware product line which is its sole aim, consumers will 
have to buy a very expensive "admission ticket" to 
obtain any of those benefits.
    The Government acknowledges that relief should, at a minimum, 
end the unlawful conduct, prevent its recurrence, and "undo 
its anticompetitive consequences." \8\ Curiously, 
despite this acknowledgement, the Proposed Final Judgment is purely 
prospective: by its terms it would apply only to the conduct of 
Microsoft and the opportunities of third party software and hardware 
vendors in relation to Windows 2000 Professional, Windows XP, and 
later generations of Microsoft's Windows Operating System.\9\ While 
not evident on the face of the Proposed Final Judgment, this result 
flows from the interplay among the Proposed Final Judgment's 
operative provisions and definitions. All of Microsoft's proposed 
obligations would be limited to conduct relating to a "Windows 
Operating System Product" which is defined as the 
"software code ... distributed ... by Microsoft ... as Windows 
2000 Professional Windows XP Home, Windows XP Professional, and 
successors[.]" \10\
---------------------------------------------------------------------------

    \8\ Competitive Impact Statement  IV.B 
.
    \9\ Proposed Final Judgment  VI.U .
    \10\ Proposed Final Judgment 
 III.A-I VI.U ; Competitive Impact Statement 
 I (bullet points) .
---------------------------------------------------------------------------

    Thus, by its terms the Proposed Final Judgment would not even 
attempt to "undo [the] anticompetitive consequences" of 
Microsoft's conduct for consumers who continue to use earlier 
versions of Windows, including Windows 95, Windows 98, and even 
Windows Me. Perversely, consumers will have to fill Microsoft's 
coffers by purchasing upgraded operating system software in order to 
obtain relief. Under the Proposed Final Judgment, only those 
consumers who upgrade to Windows 2000 Professional or a later 
version of the Windows Operating System would see any of the 
benefits of increased competition in the range of software choices 
available to them.\11\
---------------------------------------------------------------------------

    \11\ A massive migration to later Windows operating system 
products carries additional problems for consumers, Indeed, another 
of the hidden costs to consumers of both Microsoft's anticompetitive 
conduct and the Proposed Final Judgment is the cost in network 
security. The continued dominance of the Windows Operating System 
and related applications means that Microsoft is a target for 
hackers and all those who would compromise the privacy and security 
of network systems. Elinor Mills Abreu, Hack this! Microsoft and its 
critics dispute software security issues, but users make the final 
call, InfoWorld (Sept. 27, 1999) . Thus, a breach 
of privacy or security in a given Microsoft product will be visited 
upon millions of consumers worldwide. Absent continued 
anticompetitive conduct, leading to continued dominance in operating 
system, browser and office applications, such costs would be 
significantly decreased as the risk of breach would be more 
dispersed among several operating systems. See Letter from the 
Electronic Privacy Information Center to United States Senator 
Patrick Leahy, Senate Judiciary Committee (Dec. 11, 2001), 
.
---------------------------------------------------------------------------

    And the cost of admission to the realm of greater choice is not 
just the price of the new software product. As anyone who has 
attempted a system upgrade on his or her own can attest, it is an 
endeavor best left to professionals. The process is enormously 
complex, takes hours of time, requires the user to make numerous 
decisions, often without adequate information, and is prone to 
crashing the computer, requiring professional help for recovery.\12\ 
Even the IS departments in corporate America are wary of upgrading 
their entire user community before they have thoroughly tested both 
the new operating system and the process of upgrading to it. And 
outside corporate America-that is, for the average (non-corporate) 
consumer-the task is so difficult that most consumers avoid it, 
continuing to use the operating system that came with their 
computers, and changing operating systems only if and when they buy 
a new computer.
---------------------------------------------------------------------------

    \12\ 12 See, e.g. Mark Hammond, Hidden upgrade woes found 
in Windows 98, eWEEK (June 25, 1998) http://zdnet.com.com/
2102-11-510242.html, A. Kandra, Consumer Watch: Avoiding 
the Upgrade From Hell, PC World (August 2001) .
---------------------------------------------------------------------------

    To compound the problem and increase the price of admission even 
further, each new generation of operating system is significantly 
more resource-intensive than the last, as clearly indicated by the 
"minimum system requirements" notice Microsoft includes 
on its packaging and on its web site. The "minimum system 
requirements" for random access memory (RAM) have doubled with 
each succeeding consumer version of Windows. Windows Me required 32 
megabytes (MB) of RAM; Windows 2000 Professional required a minimum 
of 64 MB; Windows XP recommends at least 128 MB.\13\ The 
"minimum" CPU and hard disk requirements have 
accelerated even more rapidly.\14\ And as every computer user knows, 
the "minimum" hardware requirements rarely provide 
adequate performance under the new operating system. So consumers 
are forced to buy enhancements to their existing computers, such as 
more memory and larger hard drives, to "catch up" with 
the demands of the new operating system. Even the consumer who 
upgrades her computer faces significant performance limitations 
stemming from the processor and bus architecture of existing 
systems. This history of Microsoft operating system evolution is 
that a

[[Page 28949]]

consumer will, as a practical matter, need to buy a new computer to 
make effective use of a new operating system.
---------------------------------------------------------------------------

    \13\ Compare  (Windows Me); 
 (Windows 2000 
Professional); and  (WindowsXP).
    \14\ 14 Id.
---------------------------------------------------------------------------

    The reality, then, is that even if the Proposed Final Judgment 
would allow the development of a more competitive market for 
middleware, consumers would have to purchase new software and new 
computers (or spend almost as much to upgrade their existing 
systems) to obtain any benefits. As a result, a large percentage of 
consumers would simply be unable to afford the price of admission in 
their homes, or in their schools, or in their libraries. No proposed 
antitrust remedy can be in the public interest when it excludes the 
most vulnerable members of the public from any potential benefits.
    II. Important Provisions of the Proposed Final Judgment Will Not 
Accomplish Their Intended Purposes
    The Proposed Final Judgment is vague or subject to evasion by 
Microsoft to such an extent that it is not in the public interest as 
it currently stands. In Tunney Act proceedings--particularly 
where the litigation was required by a failure of precision in a 
prior settlement decree--a court should insist on precision in 
the proposed decree, so that the task of enforcing the decree does 
not become unmanageable.\15\ As discussed below, however, the 
Proposed Final Judgment is fiddled with provisions that make its 
interpretation and enforceability highly problematic.
---------------------------------------------------------------------------

    \15\ 15 U.S. v. Microsoft, 56 F.3d 1448, 1461-62 
(DCCir. 1995).
---------------------------------------------------------------------------

    A. Microsoft I Illustrates the Importance of Eliminating 
Ambiguities and Loopholes from the Proposed Final Judgment
    In assessing the Proposed Final Judgment, there are important 
lessons to be learned from past dealings between the Government and 
Microsoft, in particular the unfortunate history of the first 
Microsoft consent decree. That decree provided, among other things, 
that Microsoft can not require OEMs, as a condition of a license to 
an operating system, to license another Microsoft product.\16\ Soon 
after that decree was approved, however, Microsoft integrated its 
web browser code into the Windows Operating System, causing the 
Government to seek an injunction. The decree, however, contained an 
exception that doomed its very object: it could not be 
"construed to prohibit Microsoft from developing integrated 
products." \17\ Because the appellate court found that 
the Government was unlikely to prevail on this question of 
integration, Microsoft was free to integrate its web browser into 
the operating system.\18\
---------------------------------------------------------------------------

    \16\ 16 U.S. v. Microsoft, 147 F.3d 935,939 (DCCir. 1998) 
("Microsoft I").
    \17\ 17 Id. at 939.
    \18\ 18 Id. at 955.
---------------------------------------------------------------------------

    It was only last year, after extensive litigation, that 
Microsoft's integration of the browser code into the Windows 
Operating System was finally found to be illegal as an improper 
effort to prevent entry by rival browsers.\19\ By that time, 
however, Netscape Navigator, the browser at which Microsoft had 
directed many of its tactics, was no longer a threat to Microsoft's 
monopoly. In a very real sense, the presence of a vague exception 
for "integration" in the first Microsoft decree, and 
Microsoft's ability to exploit that exception, made. possible the 
monopolistic behavior and anticompetitive distortion that was at 
issue in Microsoft II.\20\ It is crucial that that scenario not be 
repeated here, and that the Proposed Final Judgment be cleansed of 
similar opportunities for Microsoft to "design around" 
the decree's restrictions. Regrettably, there are many aspects of 
the Proposed Final Judgment that require such cleansing.
---------------------------------------------------------------------------

    \19\ U.S. v. Microsoft, 253 F.3d 34 (DCCir. 2001) 
("Microsoft II").
    \20\ 20 Id.
---------------------------------------------------------------------------

    B. The Proposed Final Judgment Will Allow Microsoft To 
"Design Around" Its Obligations Despite the fact that 
ambiguous language is exactly the reason this case was initiated, 
the Proposed Final Judgment suffers chronically from the same 
defect. Loose language and a plethora of exceptions would permit 
Microsoft to "design around" the restrictions that are 
currently being proposed by the Government:
    First, the Proposed Final Judgment would allow Microsoft alone 
to determine the definition of its Windows Operating System. 
Combined with loose language in the definition of Microsoft 
Middleware, this provision raises the possibility that Microsoft 
would be able to escape its API disclosure obligations by 
incorporating middleware products into future versions of its 
operating system. If such is the case, contrary to the intent of the 
Proposed Final Judgment, Microsoft could thereby prevent competition 
in middleware;
    Second, under the Proposed Final Judgment, Microsoft alone would 
be able to determine when its disclosure obligations arise, as it 
would determine what constitutes a "major version" 
release under the definition of Microsoft Middleware. By releasing 
updates, as opposed to "major versions," Microsoft could 
continue to advance the development of Microsoft Middleware, while 
precluding competition from other middleware producers;
    Third, when a major version is released by Microsoft, the terms 
of the Proposed Final Judgment regarding the release of information 
on APIs would permit Microsoft a perpetual advantage in the relevant 
markets: by the time Microsoft was obligated to release information 
on APIs, it would already have developed its next major version for 
release. Thus, under the terms of the Proposed Final Judgment, 
competitors will always remain at least one step behind Microsoft;
    Fourth, Microsoft would unilaterally control whether the user 
can designate a competitive middleware product by determining the 
technical compatibility of such products with the Windows Operating 
System. By continually establishing new (and potentially irrelevant) 
technical requirements, Microsoft can ensure that consumers are 
forced to use Microsoft products for an increasing number of 
applications;
    Fifth, and finally, Microsoft would be able to escape all of its 
disclosure obligations under the Proposed Final Judgment where it 
would be able to determine that a particular product threatens the 
"security" of any number of integrated systems. In the 
current environment where applications are increasingly tied to both 
the operating system and other programs, such claims are easy to 
make and difficult to disprove. By invoking this exception, 
Microsoft would be free to preclude competition altogether;
    Each of these shortcomings is discussed in further detail below. 
Given the ambiguities and exceptions, consumers have no reason to 
expect that the Proposed Final Judgment would effectively prevent 
the Microsoft monopoly from expanding beyond the operating system 
and browser markets into every facet of digital life. For these 
reasons, the Proposed Final Judgment should be rejected or 
additional proceedings ordered by this Court.
    Under Section VI.U of the Proposed Final Judgment, "It]he 
software code that comprises a Windows Operating System Product 
shall be determined by Microsoft in its sole discretion." This 
overarching provision would permit Microsoft to unilaterally alter 
one of the bedrock terms of the Proposed Final Judgment and, thus, 
to alter the terms of the agreement. As in 1995, the actual 
implications of this provision of the decree are unclear (except, 
perhaps, to Microsoft). Nevertheless, it is not difficult to imagine 
instances in which Microsoft would attempt to, for example, 
integrate potential Microsoft Middleware Products into its Windows 
Operating System in order to escape its disclosure obligations (a 
possibility discussed further below).\21\ The provision would also 
allow Microsoft to implement code designed to make competing 
middleware products incompatible with the Windows Operating System 
and thus prevent consumers from using that product as is ostensibly 
permitted under Section III.H. Indeed, the overarching problem with 
this provision for both competitors and consumers is its ambiguity 
and the uncertainty that is associated with it. At a minimum, 
definitional control of the Proposed Final Judgment should reside 
first with the agreement itself and, next, with the Court; it 
certainly should not reside with Microsoft. There is hardly any 
point in a decree that gives the defendant the right to determine 
its meaning.
---------------------------------------------------------------------------

    \21\ "A monopoly in operating system software is a 
platform for unprecedented control over the flow of information to 
consumers. Control over this software can be leveraged to near total 
control over the computer screen, Dominating the screen means 
controlling ... what [consumers] see and when they see it." 
The Project to Promote Competition & Innovation in the Digital 
Age. At the Crossroads of Choice, .
---------------------------------------------------------------------------

    Similarly, under Section III.D of the Proposed Final Judgment, 
Microsoft must disclose to competitors any and all APIs used by 
Microsoft Middleware to function effectively on the Windows 
Operating System. However, because the definition of Microsoft 
Middleware appears to be limited to "software code that 
Microsoft distributes separately from a Windows Operating System

[[Page 28950]]

Product," \22\ the possibility arises that Microsoft 
could avoid the required disclosure of its APIs simply by 
integrating potential Microsoft Middleware into the operating 
system.\23\ Integration would have the same effect upon potential 
competitors as nondisclosure; the applications barrier to entry 
would remain impenetrable and innovation by anyone other than 
Microsoft would be prevented. Moreover, further integration of 
middleware products would permit Microsoft to extend its monopoly 
power into adjacent markets." \24\
---------------------------------------------------------------------------

    \22\ Proposed Final Judgment  VI.J .
    \23\ Comments of Robert Litan, Roger Knoll and William 
Nordhaus on the Revised Proposed Final Judgment (filed Jan. 17, 
2002); see also Jonathan Krim, Wording of Microsoft Deal Too Loose, 
Analyses Say. The Washington Post, E1, E10 (Jan. 18, 2002).
    \24\ The list of markets into which Microsoft is 
attempting to expand its dominance is growing. Consumer Federation 
of America and Consumers Union recently published a report, which 
describes Microsoft's current bundling strategy, which includes 
integrating email, instant messaging, calendars and contact lists, 
audio and video media players, digital photography, digital rights 
management, and identity verification. Dr. Mark N. Cooper. Consumer 
Federation of America. and Christopher Murray, Consumers Union, 
Windows XP/.NET: Microsoft's Expanding Monopoly, How It Can Harm 
Consumers and What the Courts Must Do to Preserve Competition (Sept. 
26, 2001) .
---------------------------------------------------------------------------

    Moreover, assuming that Microsoft determines to release future 
Microsoft Middleware, Section VI.J would egregiously permit it to 
determine when or even if its API disclosure obligations are 
triggered. Specifically, this provision would allow Microsoft to 
unilaterally determine which releases are "updates" to 
existing Microsoft Middleware and which are "new major 
version[s]" of such.\25\ Microsoft would avoid disclosure 
(triggered by release of a new major version) simply by denominating 
the release anything other than "a whole number or ... a 
number with just a single digit to the right of the decimal 
point." \26\ The implications of this type of control on 
the part of Microsoft make the API disclosure provisions of the 
Proposed Final Judgment effectively meaningless.
---------------------------------------------------------------------------

    \25\ Proposed Final Judgment  IIT J .
    \26\ Id.
---------------------------------------------------------------------------

    Even where disclosure of APIs to competitors was to occur under 
Section III.D, it would not be required until "the last major 
beta test release" of the relevant Microsoft Middleware.\27\ 
Microsoft would thus have two incentives with regard to the release 
of the updated version: (1) to push the date of release of its last 
beta test as close as possible to the release of a commercial 
product, and (2) to use the interval until the last beta test to 
plan a subsequent and improved version of the same software to be 
released once competition with the updated version is threatened. 
After release, potential competitors would hurriedly attempt to 
implement the APIs to enable their products to interoperate with the 
Windows Operating System. Meanwhile, Microsoft's product would have 
been commercially re]eased and gaining market share. Thus, before 
competitors would have been able to convince consumers of the value 
of their products, Microsoft would have developed a subsequent and 
improved version of the product, effectively foreclosing 
competition. The timing of competitors" access to APIs is 
crucial for compettion to have any chance of developing. But the 
timing provided for in the Proposed Final Judgment does not 
accomplish its purpose.
---------------------------------------------------------------------------

    \27\ Proposed Final Judgment  III,D .
---------------------------------------------------------------------------

    Section III.H ostensibly "ensures that OEMs will be able 
to choose to offer and promote, and consumers will be able to choose 
to use, Non-Microsoft Middleware Products[.]" \28\ 
However, the same section would provide Microsoft with yet another 
exception that effectively swallows the obligation: Microsoft would 
be permitted explicitly to override a consumer's default choice of 
middleware product with its own Microsoft Middleware Product where 
the non-Microsoft product "fails to implement a reasonable 
technical requirement ... that is necessary for technical reasons to 
supply the end user with functionality consistent with a Windows 
Operating System Product[.]" \29\ Even a superior 
middleware product could be preempted where it did not conform to 
Windows Operating System Product code, over which Microsoft would 
have exclusive control (described above). It is not difficult to 
imagine Microsoft creating a series of "technical 
requirement" obstacles that would need to be navigated by 
competitors and consumers in order to permit them choice in 
middleware products. Granting Microsoft such control over this 
important provision would permit Microsoft to avoid its impact 
entirely, continuing the exact anticompetitive conduct this 
provision was ostensibly designed to prevent.
---------------------------------------------------------------------------

    \28\ Competitive Impact Statement  IV.B.8 
.
    \29\ Proposed Final Judgment  III.H .
---------------------------------------------------------------------------

    Finally, the Proposed Final Judgment would grant Microsoft an 
overarching exception to all of its disclosure obligations where, in 
Microsoft's determination, "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, 
including without limitation, keys, authorization tokens or 
enforcement criteria[.]" \30\ In an environment where 
each and every piece of software is increasingly integrated with 
both the underlying operating system and companion programs, each 
piece of software could be interpreted by the platform provider as a 
vehicle for potential interference with vital systems. This is a 
common argument of monopolists, for it is designed to delay or 
prevent competition in network services. Given this amount of 
discretion, Microsoft would be able to effectively prevent 
competitors from introducing products based upon Microsoft's 
"determination" that such products would be 
"dangerous" to the platform or other components.
---------------------------------------------------------------------------

    \30\ Proposed Final Judgment  III.J.I 
.
---------------------------------------------------------------------------

    The litany of ambiguities described in the preceding paragraphs 
are not a complete listing of the faults of the Proposed Final 
Judgment; rather, they are indicative of a systematic failure to 
consider the machinations of Microsoft and the extent to which even 
the smallest exception will undoubtedly be employed to preclude 
competition. Ultimately, consumers will suffer the most from these 
anticompetitive tactics because, with few alternative resources, 
they will be forced to buy what the incumbent has to offer, without 
the benefits of innovation and competition. For these reasons, the 
Court should reject the Proposed Final Judgment or order additional 
proceedings as described below.
    III. The Court Should Either Reject the Decree As It Currently 
Stands or Order Additional Proceedings to Eliminate Evident 
Ambiguities
    Unfortunately, under the Tunney Act, the Court has no power to 
modify the terms agreed to by the parties to the Proposed Final 
Judgment.\31\ This leaves the Court with the difficult decision of 
whether to accept or reject the Proposed Final Judgment in its 
entirety. NetAction and CPSR respectfully recommend that the Court 
not shy away from rejection of the Proposed Final Judgment where it 
is apparent that ambiguous provisions, described above, will not 
ameliorate the extant competitive situation for consumers. Such 
approval would not be in the public interest as required by 
statute.\32\ As an alternative to outright rejection, the Court 
should consider instituting additional proceedings to assure itself 
of a "meeting of the minds" among all parties to the 
agreement.
---------------------------------------------------------------------------

    \31\ 15 U.S.C.  16(b) et seq.
    \32\ 15 U.S.C.  16(e).
---------------------------------------------------------------------------

    Microsoft, the Government, and the state parties to the Proposed 
Final Judgment will undoubtedly argue that the expenditures in time 
and resources necessary to come to a workable agreement justify 
approval of the Proposed Final Judgment at this time. On the 
contrary, however, the time and energy spent upon formulating a 
solution to a competitive problem that has plagued competitors and 
consumers for the better part of a decade argues for, and not 
against, an agreement that is stable, workable and not subject to 
multiple interpretations. The Court should nor rush to approve an 
agreement that will return to its docket in the near future as a 
result of ambiguities.
    Instead, the Court must be careful to define the terms of the 
Proposed Final Judgment such that it neither inadvertently accepts 
an agreement that will not solve the problem nor rejects an 
agreement that would successfully ameliorate the problem and benefit 
consumers in the marketplace. Such terms have not yet been defined 
with respect to the Proposed Final Judgment. Fortunately, under the 
Tunney Act, the Court has broad powers to order further proceedings 
to ensure that the public interest is served.\33\ In aid of its 
enforcement authority, then, the Court should order additional 
proceedings in this

[[Page 28951]]

case to "pin down" the meaning of the various provisions 
of the Proposed Final Judgment that appear to be subject to dispute.
---------------------------------------------------------------------------

    \33\ 33 Id.
---------------------------------------------------------------------------

    In order to assure itself that Microsoft, the Government, and 
the state parties have reached an actual "meeting of the 
minds," the Court should permit participants to the Tunney Act 
process to submit written questions to each of the three parties to 
the Proposed Final Judgment. Such questions should only cover what 
is or what is not permissible under the provisions of the Proposed 
Final Judgment, Each of the three parties should answer separately, 
with no consultation among them, as to whether the action in 
question is permissible. In order to prevent any 
"backsliding" in interpretation, each party should be 
required to submit an affidavit agreeing to be bound by its answers 
in any additional proceedings. If the three separate answers are in 
agreement as to the questions posed, the Court should recognize that 
a "meeting of the minds" has occurred and approve the 
Proposed Final Judgment forthwith. If the answers are not in 
agreement, the Court should reject the Proposed Final Judgment until 
such a "meeting of the minds" is reached and 
conclusively proven.
    CONCLUSION
    The Proposed Final Judgment, as it currently stands, does not 
offer consumers any hope of relief in the market for non-middleware 
software applications. Nor does it attempt to offer any relief to 
consumers using Windows 95, Windows 98, Windows NT, or Windows 2000. 
To achieve even the uncertain benefits claimed by the Proposed Final 
Judgment, consumers will have to buy new software and hardware, 
including new computers.
    Moreover, the Proposed Final Judgment is disturbingly 
reminiscent of Microsoft I in its ambiguities. Indeed, it was an 
ambiguity in Microsoft I that led to this proceeding and forced 
consumers to endure five long years of legal wrangling over an issue 
that the Government thought had been decided between the parties. As 
it stands, the Proposed Final Judgment does not permit the Court to 
determine, with any reasonable degree of comfort or certainty, what 
relief in fact would be provided by the Proposed Final Judgment. 
Indeed, in a number of specific instances, the exceptions provided 
for in the Proposed Finn Judgment appear to permit Microsoft to 
escape large portions or even the entirety of its obligations.
    On the present record, the Proposed Final Judgment cannot be 
found to be in the public interest. The Court should either reject 
the Proposed Final Judgment outright, or order additional 
proceedings, as described herein, to definitively clarify its terms.
    Dated: January 28, 2002
    Respectfully submitted,
    Audrie Krause
    Executive Director
    NetAction
    601 Van Ness Avenue, #631
    San Francisco, CA 94102
    (415) 775-8674
    (415) 673-3813 fax
    [email protected]
    Coralee Whitcomb
    President
    Computer Professionals for Social Responsibility
    P.O. Box 717
    Palo Alto, CA 94302
    (650) 322-3778
    (650) 322-4748
    [email protected]
    /s/ Patrick O'Connor
    Jeffrey Blumenfeld
    Michael D. McNeely
    Patrick O'Connor
    Counsel for NetAction and Computer Professionals for Social 
Responsibility
    Blumenfeld & Cohen--Technology Law Group
    http://www.technologylaw.com
    1625 Massachusetts Avenue, NW
    Suite 300
    Washington, DC 20036
    (202) 955-6300
    (202) 955-6460 fax
    [email protected]
    cwhitcomb@ cpsr.orgmike@ technologylaw.
com
    [email protected]



MTC-00030605

DATE & TIME: TOTAL NUMBER OF PAGES:
Monday, January 28, 2002 6
TO FAX NUMBER: TELEPHONE NUMBER:
Renata B. Hesse, Esq.--202-307-1454
U.S. Department of Justice
FROM: RETURN FAX NUMBER: TELEPHONE NUMBER:
Gregg H. Vicinanza 202-383-5414 202-383-5235
MESSAGE
IF YOU DID NOT RECEIVE ALL PAGES, PLEASE CALL OUR FAX DEPARTMENT AT
202/383-5284.
FILE NO.: 600,000-003 RETURN ORIGINAL TO: Angela Holland
USER NO.: 12595 EXTENSION: 5396
RESPONSIBLE ATTY NAME: Gregg H. Vicinanza LOCATION:
SPECIAL INSTRUCTIONS:
    This document is intended for the exclusive use of the 
addressee. It may contain privileged, confidential, or nondislosable 
information. If you are not the addressee, or someone responsible 
for delivering this document to the addressee, you may not read, 
copy, or distribute it. If you have received this document by 
mistake, please call us promptly and securely dispose of it. Thank 
you.
OUR FILE NUMBER
600,000-3
WRITER'S DIRECT DIAL
202-383-5132
WAITER'S E-MAIL ADDRESS
[email protected]
January 28, 2002
VIA FACSIMILE 202-307-1454
Renata B. Hesse, Esq.
Antitrust Division
U.S. Department of Justice
601 D Street NW, Suite 1200
Washington, DC 20530-0001
Re: United States v. Microsoft Corp. & State of New York v. 
Microsoft Corp., United States District Court for the District o[ 
Columbia, Case Nos. 98-1232, 98-1233 Dear Ms. Hesse: On 
behalf of Sony Corporation ("Sony"), a Japan 
corporation, we offer the following comments pursuant to 15 U.S.C. 
ï¿½16(d) with regard to the Revised Proposed Final Judgment (the 
"Proposed Judgment") in the above captioned matter.
    Introduction and Summary
    As one of the world's leading technology and entertainment 
companies, Sony develops and manufactures a wide variety of audio, 
video, communications and information technology products. Sony is 
also an original equipment manufacturer ("OEM") of 
personal computers and a direct licensee of Microsoft Corporation 
("Microsoft").
    Microsoft maintains that certain provisions of the Proposed 
Judgment require it to impose "standard" licensing terms 
on Sony and other OEMs that could possibly erode protections for 
their intellectual property. Sony and other OEMs have made, and 
continue to make, significant investments in such intellectual 
property. These companies should be free to negotiate more favorable 
licensing provisions that restrict Microsoft's ability to leverage 
its market power to gain access to this intellectual property. 
Accordingly, Sony requests a clarification or modification of the 
Proposed Judgment to ensure that Sony and other similarly situated 
OEMs can negotiate appropriate protections for their intellectual 
property beyond those available in "standard" licensing 
terms and conditions.
    Background
    Like other OEMs, Sony has entered into a series of one-year Desk 
Top Operating System (DTOS) license agreements with Microsoft that 
contain terms relating to operating system products, royalties and 
payments. These license agreements incorporate other terms and 
conditions from longer term "Business Terms Documents" 
negotiated between Microsoft and its OEMs. Last year, Sony and 
Microsoft entered into the current Business Terms Document, which is 
effective for several years.
    The current Business Terms Document contains several provisions 
relating to intellectual property. These provisions include 
"non-assertion covenants" in which OEMs, under certain 
conditions, agree not to assert patent claims against Microsoft and 
Microsoft licensees. Sony and its various affiliates, however, have 
a significant history and patent portfolio in various areas, 
including audio, video, software applications and other 
technologies. To protect its rights to assert these patents, Sony 
negotiated with Microsoft important limitations on the scope of 
these non-assertion covenants. Sony believes these limitations are 
necessary to protect its investments in intellectual property.
    Section III.B of (he Proposed Judgment Under the terms of the 
Proposed Judgment, Sony is a "Covered OEM" because it is 
one of the 20 OEMs with the highest worldwide volume of licenses of 
Windows Operating System Products. (Revised Proposed Final Judgment, 
ï¿½ VI.D.) The Proposed Judgment would require Microsoft to offer 
Sony and other Covered OEMs licenses on "uniform terms and 
conditions." Section III.B of the Proposed Judgment provides:
    B. Microsoft's provision of Windows Operating System Products to 
Covered OEMs

[[Page 28952]]

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.
    (Revised Proposed Final Judgment ï¿½ III.B.)
    The Department of Justice has explained that Section III.B was 
included in the Proposed Judgment to prevent Microsoft from 
retaliating against OEMs that market or promote products from 
Microsoft's competitors. In its "Competitive Impact 
Statement," the Department of Justice stated:
    In order to ensure freedom for the 20 Covered OEMs from the 
threat of Microsoft retaliation or coercion, Section III.B requires 
that Microsoft's Windows Operating System Product licenses with such 
OEMs contain uniform terms and conditions, including uniform 
royalties. These royalties must be established by Microsoft in 
advance on a schedule that is available to Covered OEMs and the 
Plaintiffs.
    (Competitive Impact Statement at 27-28.)
    The Department of Justice also has argued that Section III.B 
will eliminate "any opportunity for Microsoft to set a 
particular OEM's royalty or license terms as a way of inducing that 
OEM to decline to promote non-Microsoft software or retaliating 
against that OEM for its choices to promote non-Microsoft 
software." (Id. at 28.) The Department concluded that Section 
III.B will "ensure that OEMs can make their own independent 
choices." (Id.) Microsoft's Proposed Uniform Terms and 
Conditions
    Microsoft has informed Sony that it intends to enter into a new 
DTOS license agreement with Sony embodying new "uniform terms 
and conditions" mandated by Section III.B. These 
"uniform terms and conditions" apparently represent an 
effort to create a standard set of terms and conditions from a 
variety of existing Business Terms Documents with various OEMs. 
Microsoft's efforts to comply with Section III.B, however, may have 
produced new "uniform terms and conditions" that weaken 
certain pro-competitive limitations on the non-assertion covenants.
    Microsoft has been adjuged to have illegally maintained its 
operating system monopoly in violation of the Sherman Act. United 
States v. Microsoft Corp., 253 F.3d 34, 54 (DC Cir. 2001), cert. 
denied, 122 S.Ct. 350 (2001). This raises the possibility that 
Microsoft will use its monopoly power to force its OEM licensees to 
give up intellectual property rights, thus affording Microsoft the 
opportunity to expand its power. In the current Business Terms 
Document, Sony has negotiated narrow non-assertion covenants to 
reduce this possibility,
    Microsoft maintains that Section III.B of the Proposed Judgment 
precludes it from accepting the non-assertion covenants in the 
Business Terms Document freely negotiated and signed last year with 
Sony. Microsoft insists that, in order to comply with Section III.B, 
Sony must agree to new "uniform" non-assertion covenants 
that may weaken previously negotiated protections for Sony's 
intellectual property. If Sony is forced to agree to these changes, 
1:he new license agreement would diminish Sony's ability to assert 
its patents, particularly in markets outside the operating system 
market, and thereby may enable Microsoft to expand its power into 
new areas. Proposed Clarification or Modification.
    Requiring Sony to accept new "uniform" provisions 
that may weaken Sony's existing intellectual property protections 
and allow Microsoft to leverage its power into other markets is 
contrary to the underlying principles of the Proposed Judgment. 
Forcing all OEMs to accept identical non-assertion covenants also 
fails to acknowledge or accommodate the important differences among 
companies regarding intellectual property portfolios and business 
activities in other markets.
    Sony or any other Covered OEM desiring additional intellectual 
property protection to enable it to compete with Microsoft or other 
licensees should be free to negotiate for such provisions outside 
any framework imposed by the Proposed Judgment. Accordingly, Sony 
respectfully requests that the Proposed Judgment be clarified or 
modified to provide that OEMs desiring protection for their 
particular intellectual property interests can negotiate for more 
favorable non-assertion covenants than those contained in the 
"uniform terms and conditions." As long as there is a 
baseline set of "uniform terms and conditions" available 
to all covered OEMs that would apply if the OEM is unsuccessful in 
its efforts to obtain more favorable terms, the OEM is protected 
from coercion or retaliation. If an OEM obtains different terms and 
conditions for non-assertion covenants, these new covenants could be 
made available to all Covered OEMs on a non-discriminatory basis to 
prevent Microsoft from withholding these provisions to coerce or 
retaliate against other Covered OEMs. The OEMs should be free to 
accept or decline the non-assertion covenants depending on their own 
interests and intellectual property portfolios.
    The courts have recognized the threat to competition posed by a 
monopolist that uses its power in one market to secure domination of 
other markets. See Spectrum Sports v. McQuillan, 506 U.S. 447 
(1993); Alaska Airlines v. United Airlines, 948 F.2d 536 (9th Cir. 
1991), cert. denied, 503 U.S. 977 (1992). An antitrust settlement 
should not enable a monopolist to erode the intellectual property 
barriers that would otherwise limit the monopolist's penetration of 
other markets. By including the clarifications or modifications 
described above, the Proposed Agreement would avoid this unfortunate 
consequence.
    Very truly yours,
    Debra A. Valentine
    of O'MELVENY & MYERS LLP



MTC-00030606

Date: 1/28/02 
To: U.S. Department of Justice
Fax:[1] 202-307-1454
From: The Progress & Freedom Foundation
Ms. Brooke Emmerick
Phone: 202-289-8928
Fax: 202-289-6079
Pages:32
Subject: Microsoft Settlement, Tunney Act Comments
    Note: this document has also been submitted via email.
    BEFORE THE UNITED STATES DEPARTMENT OF JUSTICE UNITED STATES OF 
AMERICA, Plaintiff, v. Civil Action No, 98-1232 (CKK)
    MICROSOFT CORPORATION, Defendant.
    STATE OF NEW YORK ex rel.
    Attorney General Eliot Spitzer, et al.,
    Plaintiffs, Civil Action No. 98-1233 (CKK)
    v.
    MICROSOFT CORPORATION Defendant.
    Comments of The Progress & Freedom Foundation on the Revised 
Proposed Final Judgment and the Competitive Impact Statement
    Jeffery A. Eisenach, Ph.D.
    President
    Thomas M. Lenard, Ph.D.
    Vice President for Research
    THE PROGRESS & FREEDOM FOUNDATION
    1301 K. St., NW
    Washington, DC 20005
    (202) 289-8928
    (202) 289-6079 Facsimile
    Table of Contents
    I. Introduction 1
    A. Authors 1
    B. Summary of Contents 2
    II. Background: The Facts, the Law and the Remedy 5
    A. The Illegal Conduct and its Effects 5
    B. The Appropriate Criteria for a Remedial Action 7
    III. The CIS and the PFJ: Flawed Analysis of a Flawed Remedy 9
    A. Major Provisions of the PFJ 9
    B. The Competitive Impact Statement 10
    C. The PFJ Will Not Have Its Claimed Effect, Nor Any Pro-
Competitive Effect 18
    IV. The Remedies Alternatives 23
    A. Alternative Structural Remedies 24
    B. The Litigating States Proposal 29
    V. Conclusion 31
    I. Introduction

[[Page 28953]]

    These comments on the Proposed Final Judgment\1\ 
("PFJ") and the Competitive Impact Statement\2\ 
("CIS") in the Microsoft ease are submitted to provide 
the Department of Justice ("DOJ") and the Court with 
information and analysis based on nearly five years of research by 
the authors on the legal, policy and economic implications of this 
landmark proceeding. Based on that research, it is our assessment 
that (a) the PFJ fails to address meaningfully the violations of law 
found by this court and upheld by the U.S. Court of Appeals and its 
entry by the court manifestly is not in the public interest; (b) the 
CIS fails to meet the standard of analysis demanded by the law mad 
occasioned by the magnitude of the issues involved; and (e) the 
public interest will best be served through imposition of a 
"hybrid" structural remedy or, if the court chooses not 
to impose a structural remedy, a conduct remedy modeled after the 
proposals of the remaining litigating states.
---------------------------------------------------------------------------

    \1\ United States v. Microsoft Corp., Stipulation and 
Revised Proposed Final Judgement (November 6, 2001) (hereafter 
"PFJ").
    \2\ United States v. Microsoft Corp., Competitive Impact 
Statement (November 15, 2001) (hereafter "CIS").
---------------------------------------------------------------------------

    A. The Authors
    Dr. Eisenach is President and Senior Fellow at The Progress 
& Freedom Foundation,\3\ a non-profit research and educational 
institution dedicated to analyzing the impact of the digital 
revolution and its implications for public policy, and an Adjunct 
Professor at George Mason University Law School. As a professional 
economist, he has been actively engaged in the analysis of 
competition and regulatory policy issues for more than 20 years, and 
has served in senior positions at the Office of Management and 
Budget mad the U.S. Federal Trade Commission and as a consultant to 
the U.S. Sentencing Commission on criminal sentencing guidelines for 
corporations. He has also served on the faculties of Harvard 
University's Kennedy School of Government, the University of 
Virginia and Virginia Polytechnic institute and State University.
---------------------------------------------------------------------------

    \3\ These comments reflect the views of the authors and do 
not represent the views of The Progress & Freedom Foundation, 
its officers or board of directors.
---------------------------------------------------------------------------

    Dr. Lenard is Vice President and Senior Fellow at The Progress 
& Freedom Foundation and a professional economist with 30 years 
of experience in academia, government, private consulting and the 
non-profit sector. He has worked on a wide range of regulatory and 
antitrust issues covering a broad span of industries, and has 
consulted on antitrust cases for both private firms and the Federal 
Trade Commission. In government, he has held senior economic 
positions at the Council on Wage and Price Stability, the Office of 
Management and Budget and the Federal Trade Commission. A principal 
focus of his research has been the benefits and costs of regulatory 
interventions into the economy and the analytical underpinnings 
needed to make informed decisions about government interventions. 
Both Drs. Eisenach and Lenard have done extensive work on the 
economics of high-tech markets in general, and the Microsoft case in 
particular. They are co-authors of the annual Digital Economy Fact 
Book.\4\ co-editors of Competition, Innovation and the Microsoft 
Monopoly: Antitrust in the Digital Marketplace and authors of 
numerous other papers on these and related topics.\5\
---------------------------------------------------------------------------

    \4\ See Jeffrey A. Eisenach, Thomas M. Lenard and Stephen 
McGonegal, The Digital Economy Fact Book 2001 (Washington: The 
Progress & Freedom Foundation, 2001).
    \5\ See Jeffrey A. Eisenach and Thomas M. Lenard, ads., 
Competition, Innovation and the Microsoft Monopoly. Antitrust in the 
Digital Marketplace, Kluwer Academic Publishers, 1999; Thomas M. 
Lenard, Creating Competition in the Market for Operating Systems: A 
Structural Remedy for Microsoft. (Washington: "rile Progress 
& Freedom Foundation, 2000), http://www.pff.org/remedies/htm; 
and Thomas M. Lenard, "Creating Competition in the Market for 
Operating Systems: Alternative Structural Remedies in the Microsoft 
Case," George Mason Law Review, Vol., 9, Spring 
2001,803-841.
---------------------------------------------------------------------------

    B. Summary of Comments
    The PFJ is intended to settle the government's antitrust case 
against Microsoft and was agreed to by the United States, 9 of the 
18 states that were also party to suit, and by Microsoft. The nine 
remaining states and the District of Columbia (the "Litigating 
States") have not agreed to the PFJ and are pursuing more 
stringent relief through a remedy hearing at the District Court.\6\ 
The DOJ is required by the Antitrust Procedures and Penalty Act 
("APPA")\7\ to prepare a CIS, which is intended to 
analyze the competitive implications of the PFJ and any alternatives 
to it.
---------------------------------------------------------------------------

    \6\ United States v. Microsoft Corp., Plaintiff Litigating 
States" Remedial Proposals, (December 7, 2001) (hereafter 
"LS Proposal").
    \7\ 15 USCS 16 (b-h)
---------------------------------------------------------------------------

    The PFJ does not serve the public interest mid will not achieve 
the government's objective that it "halt continuance and 
prevent recurrence of the violations of the Sherman Act by Microsoft 
that were upheld by the Court of Appeals and restore competitive 
conditions to the market."\8\ Indeed, much of the behavior 
found by the Court of Appeals to be anticompetitive would be 
permitted under the PFJ. Further, even if the PFJ did preclude such 
behavior it would fail to restore competitive conditions because it 
fails to affect the behavior of participants in the marketplace.
---------------------------------------------------------------------------

    \8\ CIS at 2.
---------------------------------------------------------------------------

    The CIS does not satisfy the government's obligation to provide 
the District Court with an analytical basis for determining whether 
the PFJ is hi the public interest. The APPA clearly requires, and 
good public policy demands, an "evaluation" of the 
proposed remedy and major alternatives to it. The C1S does not 
present such an evaluation. It does not explain why the PFJ will 
achieve the intended results, but merely asserts that it will do so. 
It also does not explain why the DOJ concluded that the PFJ will 
better serve the public interest than major alternatives, but merely 
states that "[t]he United States ultimately concluded that the 
requirements and prohibitions set forth in the Proposed Final 
Judgment provided the most effective and certain relief in the most 
timely manner."\9\ The DOJ has produced no real analysis of 
the relative merits of alternative forms of relief to guide the 
District Court in deciding whether to approve the PFJ. Indeed, the 
CIS fails by a wide margin to meet the standards required of 
analyses of regulatory proposals routinely promulgated by government 
agencies.
---------------------------------------------------------------------------

    \9\ CIS at 63.
---------------------------------------------------------------------------

    Accordingly, the District Court should not accept the PFJ, but 
should, instead, expand its hearing on the Litigating States 
Proposal ("LS Proposal") to include the full range of 
major alternatives. This would permit the District Court to gather 
the information needed to make an informed judgment concerning which 
of the remedy proposals will best serve the public interest.
    The alternatives that should be considered include:
    . The PFJ.
    . The proposals of the Litigating States.
    . Major structural remedies, including the vertical-divestiture 
remedy initially adopted by the District Court and the 
"hybrid" remedy proposed by Dr. Lenard and others.
    Among these remedies, the "hybrid" structural 
approach would best serve the public interest and maximize net 
economic benefits to consumers.
    In the sections that follow, we provide, first, a brief 
restatement of the facts and legal background in this case, 
including a brief discussion of what we believe to be the 
appropriate standards by which remedial action should he judged. 
Next we discuss the shortcomings in the PFJ and the CIS, explaining 
why the PFJ will not achieve the government's objectives or serve 
the public interest and demonstrating that the CIS falls far short 
of the analytical standard that should be demanded by the court. 
Finally, we turn to an evaluation of the remedial alternatives mad 
explain why we believe that (a) a "hybrid" structural 
remedy would best serve consumers and competition and (b) that if 
the court chooses not to impose a structural remedy, the LS Proposal 
is superior to the PFJ.
    II. Background: The Facts, the Law and the Remedy
    The U.S District Court\10\ found, and the U.S. Court of 
Appeals\11\ affirmed, a pattern of Sherman Act violations by 
Microsoft that had the effect of foreclosing competition in the 
market for personal computer operating systems. The District Court 
ordered a structural remedy, which was overturned by the Appeals 
Court, which remanded the remedy issue back to this court. The 
Appeals Court did not prescribe or prohibit adoption of any 
particular remedial actions by this court.
---------------------------------------------------------------------------

    \10\ United States v. Microsoft Corp., 84 F. Supp. 2d 9 
(DCCirc 1999) ("Findings of Fact"); United States v. 
Microsoft Corp., 87 F. Supp. 2d 30 (DC Circ. 2000) 
("Conclusions of Law").
    \11\ United States v. Microsoft Corp., 253 F 3d, at 6 (DC 
Circ. 2001).
---------------------------------------------------------------------------

    A. The Illegal Conduct and Its Effects The Appeals Court 
unanimously affirmed the core of the government's case against 
Microsoft, finding that the company had undertaken a broad array of 
anticompetitive practices to maintain its monopoly in personal 
computer operating systems, in violation of Section 2 of the Sherman 
Act. Microsoft's strategy was to use its monopoly

[[Page 28954]]

power to prevent the emergence of any new technology that might 
compete with Windows. Microsoft's anticompetitive activities were 
particularly directed against two products--the Netscape 
browser and Sun's Java programming language--that could support 
operating-system-neutral computing and thereby erode Microsoft's 
market position. In summary, the District Court found, and the 
Appeals Court affirmed, that:
    . Microsoft has monopoly power in the market for Intel-
compatible PC operating systems, with a market share of greater than 
95 percent. Microsoft's market is protected by a substantial barrier 
to entry--the "applications barrier to 
entry"--that discourages software developers from writing 
applications for operating systems that do not already have an 
established base of users.
    . Microsoft effectively excluded rival browsers from the two 
most efficient means of distribution--pre-installation by 
Original Equipment Manufacturers (OEMs) and distribution by Internet 
Access Providers (IAPs).
    . Microsoft imposed restrictions on its Windows licenses that 
effectively prevented OEMs from pre-installing any browser other 
than Interact Explorer (IE).
    . Microsoft's technological binding of IE to Windows deterred 
OEMs from pre-installing rival browsers and consumers from using 
them.
    . Microsoft's contracts with IAPs--for example, agreeing to 
give AOL preferential placement on the Windows desktop in exchange 
for AOL's agreement not to distribute any non-Microsoft browser to 
more than 15 percent of its subscribers and to do so only at the 
customer's explicit request--blocked the distribution of a 
rival browser.
    . Microsoft's deals with Independent Software Vendors 
(ISVs)--for example, giving preferential support to ISVs that 
used IE as the default browser in software they develop--and 
Apple-prohibiting Apple from pre-installing any non-Microsoft 
browser--were similarly exclusionary.
    . Microsoft's agreements with ISVs that made receipt of Windows 
technical information conditional on the ISVs" agreement to 
use Microsoft's version of the Java Virtual Machine (JVM) 
exclusively were anticompetitive. Microsoft also deceived Java 
developers into believing that its tools were not Windows-specific 
and were consistent with Sun's objective of developing cross-
platform applications.
    . Microsoft's pressuring of Intel to stop supporting cross-plat 
form Java--by threatening to support an Intel competitor's 
development efforts--was exclusionary.
    Microsoft was clearly successful in its efforts to eliminate 
threats to its desktop monopoly. Through its anticompetitive 
activities, Microsoft achieved dominance in the browser market and 
forestalled the development of such cross-platform technologies as 
the Netscape browser and Java that could have eroded the 
applications barrier to entry. The promise of operating-system-
neutral computing was that it would inject competition into the 
market for operating systems, which would foster innovation 
throughout the industry. By preventing the development of 
competition, Microsoft's illegal conduct thwarted innovation and 
harmed consumers.
    B. Appropriate Criteria for a Remedial Action
    The Supreme Court has stated that he purpose of remedial action 
in an antitrust case is to "terminate the illegal monopoly, 
deny to the defendant tile fruits of its statutory violation and 
ensure that there remain no practices likely to result in 
monopolization.\13\ In other words, a remedy must be effective in 
the present (terminating the monopoly), the past (expropriating ill-
gotten gains), and the future (preventing similar conduct going 
forward).
---------------------------------------------------------------------------

    \13\ 253 F 3d at 99-100, quoting (United States v. 
United Shoe Mach. Corp), 391 U.S. 244,250 (1968).
---------------------------------------------------------------------------

    As professional economists, we s??ggest it is especially 
important to look to the future, where economic actors will make 
decisions based on the incentives inherent in whatever remedy the 
court imposes. The remedy should not only address the illegal 
practices Microsoft already has employed to maintain its operating 
system monopoly, it should also--as the Supreme Court has 
said--address practices that Microsoft might employ in the 
future to erect barriers to operating system competition or to use 
anticompetitive practices to leverage its monopoly beyond the 
desktop into new phases of computing. In a business that moves as 
rapidly as the software marketplace (and other information 
technology and communications markets Microsoft is now entering or 
is likely to enter soot) it is particularly important that the 
remedy be forward looking.
    The DOJ claims that the PFJ meets these standards, and 
"will eliminate Microsoft's illegal practices, prevent 
recurrence of the same or similar practices, and restore the 
competitive threat that middleware products posed prior to 
Microsoft's unlawful undertakings."\14\ For reasons discussed 
at length below, we disagree. Here, we address two issues relating 
to the standard by which any remedy should be judged.
---------------------------------------------------------------------------

    \14\ CIS at 3.
---------------------------------------------------------------------------

    First, it is noteworthy that the DOJ does not claim the PFJ 
achieves the goal of denying Microsoft the fruits of its violations, 
and clearly it will not. Such restitution is important not only to 
"make whole" the victims of Microsoft's illegal activity 
(e.g., the United States), but also to establish appropriate 
incentives on a going forward basis. In general, allowing violators 
to retain the fruits of their illegal conduct deprive the antitrust 
laws of much of their force, because it sends a signal to violators 
that the returns to their behavior are positive--even when they 
are caught. With $42 billion in the bank, on wonders how Microsoft's 
senior management could read the proposed PFJ any other way.
    Second, and relatedly, DOJ's stated goal of restoring "the 
competitive threat that middleware products posed prior to 
Microsoft's unlawful undertakings" is not the appropriate 
objective, and certainly is not equivalent to the Supreme Court's 
standard of "terminat[ing] the illegal monopoly." The 
competitive threat posed by the Netscape browser and Java was 
quantitatively relatively small at the tin: that Microsoft's illegal 
campaign against them was undertaken. But it was clear, certainly to 
Microsoft, that their competitive potential in the dynamic software 
marketplace was very significant. Had Microsoft not engaged in 
illegal activities, the competitive significance o t" hose 
products would be much greater today than it was at the time.
    There is a useful analogy here to simple commercial damage 
cases. If, for example, an individual or a company incurs monetary 
damages from actions in the past, compensation is generally based on 
the present value of those damages, typically calculated by bringing 
the damage amount forward (from the time of the damage to the 
present) at a normal rate of return. That would be the only way for 
the damaged party to be made whole. Similarly, society has been 
damaged by Microsoft's actions. For society to be made whole, 
competition should, to the extent possible, be restored to what it 
would be today in the absence of Microsoft's illegal conduct.\15\ 
Equally important on a going forward basis, however, Microsoft 
should not be permitted to earn continuing returns based upon its 
illegally enhanced monopoly position. To do so would be to allow the 
company not only to retain the fruits of its illegal conduct in the 
past but to continue harvesting those fruits indefinitely.
---------------------------------------------------------------------------

    \15\ To truly be made whole, society would in addition 
need to be compensated for the benefits it lost due to the absence 
of competition in the intervening years, which is probably not 
possible.
---------------------------------------------------------------------------

    III. The CIS and the PFJ: Flawed Analysis of a Flawed Remedy
    DOJ and Microsoft prefer a PFJ which contains a number of 
restrictions on Microsoft's conduct on a going forward basis. The 
questions before the court are whether entry of the PFJ is 
consistent with the purpose and intent of the Sherman Act and, in 
addition, whether, under the APPA, it is consistent with the public 
into rest. To facilitate the court's deliberations on the latter 
issue, the APPA requires the DOJ to submit a CIS.\16\ However, the 
CIS submitted in this proceeding contains virtually no analysis of 
either the PFJ or alternative remedies. It represents nothing more 
than a set of unsupported assertions, and accordingly should be 
given little deference by the court.
---------------------------------------------------------------------------

    \16\ CIS at 3-4.
---------------------------------------------------------------------------

    In this section, we briefly describe the main provisions of the 
PFJ. Next, we explain why the CIS fails to meet a reasonable 
standard of substantive analysis. Third, we provide some examples of 
shortcomings in the PFJ which would have been obvious had DOJ 
performed a more complete analysis in the CIS.
    A. Major Provisions of the PFJ
    As described in the CIS, the proposed PFJ contains seven major 
provisions. In brief summary, they are:
    . OEMs would have the freedom to support and distribute non-
Microsoft middleware products or operating systems without fear of 
retaliation by Microsoft.
    . To help ensure against retaliation, Microsoft would be 
required to provide

[[Page 28955]]

uniform licensing terms to the 20 largest computer manufacturers.
    . Computer manufacturers would have the freedom to feature and 
promote non-Microsoft middleware and customize their computers to 
use non-Microsoft middleware as the default.
    . Microsoft would be required to disclose the interfaces and 
technical information that its own middleware uses, so that ISVs can 
develop competitive middleware products.
    . Microsoft would be required to disclose communications 
protocols necessary for server and Windows desktop operating system 
software to interoperate with each other.
    . Microsoft would be prohibited from retaliating against ISVs or 
IHVs that develop or distribute software that compeles with 
Microsoft middleware or operating system software.
    . Microsoft would be prohibited from entering into exclusive 
contracts concerning its middleware or operating system products.
    The CIS claims that these provisions, and the supporting 
provisions pertaining to enforcement, "will eliminate 
Microsoft" illegal practices, prevent recurrence of the same 
or similar practices, and restore the competitive threat that 
middleware products posed prior to Microsoft's unlawful 
undertakings." But the CIS presents virtually no analysis to 
support this claim.
    B. The Competitive Impact Statement
    The CIS does not meet the standards established by the APPA and 
does not provide sufficient analysis for this court to make an 
informed decision on whether the PFJ is in the public interest. 
Section 16(b)(3) of the APPA requires that the CIS include "an 
explanation of the proposal ... and the anticipated effects on 
competition of such relief" (Emphasis added.)
    Section 16(b)(6) further requires "a description and 
evaluation of alternatives to such proposal actually considered by 
the United States." (Emphasis added). Under Section 16(e), the 
District Court is required to determine that the consent judgment is 
in the public interest and in making that determination "may 
consider...anticipated effects of alternative remedies...." 
Taken together, these provisions make clear that the CIS was 
intended by Congress to serve as a guide to the court in evaluating 
the proposed relief relative to other alternatives which might 
better serve the public interest, not simply as a pro forma set of 
claims and assertions. Yet the CIS in this case fails even to fully 
"explain," and certainly cannot be said to 
"evaluate," either the likely effects of either the PFJ 
or the available alternatives. Such an analysis would seem 
especially important in a fully-litigated Tunney Act case such as 
this one, where a prior finding of liability suggests a lower degree 
of deference to the PFJ than would otherwise be appropriate, and 
thus a higher burden on the court to evaluate alternatives.
    How should the court evaluate the adequacy of the CIS? Three 
sets of criteria present themselves.
    First, does the CIS satisfy the plain language of the statute? 
Second, how does it compare with previous CIS's in similarly 
significant cases? Third, how does it compare with the standards of 
analysis that are required to be performed in similar situations, 
such as agency rulemakings? This CIS fails all three standards.
    First, does the CIS satisfy the plain language of the statute? 
It depends on how the words "explain," mad 
"evaluate" are defined. To defend successfully the 
plain-language adequacy of the CIS, the DOJ would have to adopt a 
very narrow interpretation of both words. Granted, the CIS devotes 
43 pages\17\ to reciting and, DOJ presumably would argue, 
"explaining" the provisions or the PFJ. What the CIS 
does not do at any point, however, is explain "the anticipated 
effects [of the PFJ] on competition."
---------------------------------------------------------------------------

    \17\ CIS, 17-60.
---------------------------------------------------------------------------

    The semantic sleight of hand upon which DOJ relies to avoid this 
obligation is found on page 24 of the CIS. There, DOJ reminds us 
that "Restoring competition is the 'key to the whole 
question of an antitrust remedy," du Pout, 366 U.S. at 
326." Then it continues with a clever subterfuge: 
"Competition was injured in this case principally because 
Microsoft's illegal conduct maintained the applications 
barrier to entry....Thus, the key to the proper remedy in this ease 
is to end Microsoft's restrictions on potentially threatening 
middleware...."\18\ (Emphasis added.)
---------------------------------------------------------------------------

    \18\ CIS at 24.
---------------------------------------------------------------------------

    There, in the word "thus," lies the sum and the 
entirety of the CIS's explanation of the connection between the PFJ 
and its anticipated effects on competition. For as explained in more 
detail below, it is hardly obvious, indeed, it is highly unlikely, 
that simply ending Microsoft's illegal restrictions on middleware 
would have any significant effect on competition on a going forward 
basis. Even in these semantically troubled times, we submit, the 
word "thus" cannot be taken as the 
"explanation" the law requires.
    But the CIS's discussion of the PFJ must be counted ,an 
analytical masterpiece when compared with its treatment of 
alternative remedies. In contrast to the lengthy, if failed, 
treatment accorded the PFJ, the CIS attempts its "evaluation 
of alternatives" in three pages. Not surprisingly, given its 
brevity, the analysis is limited in how much light it can shed on 
the DOJ's decisionmaking process or the relative merits of the 
alternatives before the court. With respect to structural remedies, 
for example, the evaluation consists of 49 words: "After 
remand to the District Court, the United States informed the court 
and Microsoft that it had decided, in light of the Court of Appeals 
opinion and the need to obtain prompt, certain and effective relief, 
that it would not further seek a breakup of Microsoft into two 
businesses."\19\ Receiving even less attention are six other 
remedy alternatives, which are summarily dismissed in a single 
paragraph, and an unknown number of "others received or 
conceived" which, in apparent direct violation of the APPA, 
are not even described.\20\ There simply is no semantic standard by 
which this treatment of the alternative remedies can possibly be 
considered "an evaluation."
---------------------------------------------------------------------------

    \19\ CIS at 61.
    \20\ CIS at 63.
---------------------------------------------------------------------------

    In summary, the CIS submitted by the DOJ in this case fails the 
first test the court should apply: It does not fulfill the plain 
language requirements or either Section 16(b)(3) or Section 16(b)(6) 
of the APPA.
    Any effort the DOJ may make to defend the CIS would be on firmer 
ground if it could argue it is simply following past practice. While 
we believe, as suggested above, that the CIS in this case should be 
held to a higher standard than in cases where the issues have not 
been fully litigated and a finding of liability has not been 
entered, at least the DOJ could claim it was adhering to precedent. 
Even by the standards of past cases, however, this CIS falls far 
short.
    Of course, Tunney Act cases vary in significance and complexity. 
The best standard for comparison for this case would appear to be 
the CIS filed in the AT&T case in 1982."\21\ In that case 
as in this one, DOJ was tasked with explaining and evaluating a 
Proposed Final Judgment aimed at resolving a continuing series of 
complex antitrust actions affecting one of the most important 
sectors, and companies, in the U.S. economy.
---------------------------------------------------------------------------

    \21\ United States v. Western Electric Company, Inc. and 
American Telephone & Telegraph Company, Competitive Impact 
Statement (February 17, 1982), 47 FR. 7170-01. (Hereafter 
AT&T CIS). Of course, unlike this case, the PFJ in the AT&T 
case was entered prior to any finding of liability.
---------------------------------------------------------------------------

    The AT&T CIS differs markedly from the CIS in this 
proceeding both in its explanation of the competitive effects and in 
its evaluation of alternative remedies. Section Ill of the AT&T 
CIS\22\ presents a comprehensive explanation of the proposed remedy 
and its anticipated effects on competition. Indeed, in stark 
contrast to the CIS in this case, the AT&T CIS contains, in 
Section III.E, an extensive discussion specifically detailing 
"The Competitive Impact of the Proposed Modification." 
The section is a lengthy one, explaining in detail how each 
provision of the proposed remedy is expected to affect competition 
on a going forward basis, beginning as follows:
---------------------------------------------------------------------------

    \22\ AT&T CIS at 7173-7180.
---------------------------------------------------------------------------

    Put in simplest terms, the functional divestiture contemplated 
by the proposed modification will remove from AT&T the power to 
employ local exchange services in ways that impede competition in 
interdependent markets, and will remove from the Bell Operating 
Companies ("BOCs"), which will retain such power, any 
incentive to exercise it. The United States believes, therefore, 
that the modification% divestiture requirement, and its 
complementary injunctive provisions, will substantially accelerate 
the development of competitive markets for interexchange services, 
customer premises equipment, and telecommunications equipment 
generally.\23\
---------------------------------------------------------------------------

    \23\ AT&T CIS at 7178.
---------------------------------------------------------------------------

    The ensuing pages present a careful analysis of why the 
government believes this to be the case and what the precise impacts 
on competition are likely to be. The proposed remedy will 
"accelerate the emergence of competition in interexchange 
services,"\24\ "prevent the reemergence of the ... 
incentive

[[Page 28956]]

and ability to leverage regulated monopoly power into the customer 
premises equipment market,"\25\ make AT&T "subject 
to competition in all of its services,"\26\ "remove the 
source of AT&T's monopoly power ,and its ability to leverage 
monopoly power into related markets,"\27\ and "prevent 
the creation anew of incentives and abilities in the BOCs to use 
their monopoly power to undercut rivals in competitive 
markets."\28\ There is every reason to believe that, divested 
of the BOCs, AT&T wilt be a procompetitive force in the markets 
that it enters. As a result of the modification, it is likely that 
AT&T will expand not only its product lines, but also the areas 
in which it sells telecommunications equipment."\29\
---------------------------------------------------------------------------

    \24\ AT&T CIS at 7178.
    \25\ AT&T CIS at 7179.
    \26\ AT&T CIS at 7179.
    \27\ AT&T CIS at 7179.
    \28\ AT&T CIS at 7179.
    \29\ AT&T CIS at 7179.
---------------------------------------------------------------------------

    The authors have searched in vain, as will the court, for any 
similar explanation in the Microsoft CIS. As a procedural matter, 
the absence of such explanations flies in the face of the APPA. As a 
substantive one, it strongly suggests such statements are lacking 
for the simple reason that they are not justified by the remedy 
Microsoft and the DOJ are asking the court to adopt.
    The AT&T CIS also differs from the one in this case in its 
treatment of" alternative remedies.\30\
---------------------------------------------------------------------------

    \30\ AT&T CIS at 7181.
---------------------------------------------------------------------------

    The AT&T CIS appears to meet the requirements of the APPA by 
describing in some detail the alternative remedies considered and 
evaluating their likely impacts" on competition relative to 
those expected from the one proposed. "The United States 
believes," it concludes, "that the [main alternative] 
did not approach even remotely the effectiveness of the proposed 
modification in achieving conditions that would assure full 
competition in the telecommunications industry."\31\ Again, 
such evaluative language is simply absent from the CIS in this case. 
And again, one cannot help but conclude that, had today's DOJ 
conducted the same careful analysis as that conducted 20 years ago, 
it might well have reached different conclusions in the current 
case.
---------------------------------------------------------------------------

    \31\ AT&T CIS at 7181.
---------------------------------------------------------------------------

    In summary, then, the CIS not only fails the satisfy the plain 
language of the APPA, but also fails to meet the standard 
established by DOJ for a CIS in the most directly analogous case. 
The third criteria by which the court should evaluate the 
sufficiency of the CIS is whether it meets the standards of analysis 
that are required to be performed in similar situations, the most 
obvious of which is agency rulemakings.
    For at least the last 20 years, agencies have been required to 
undertake a detailed regulatory impact analysis when they propose 
major regulatory actions. Under E.O. 12291 (in effect during the 
Reagan and Bush Administrations), and E.O. 12866 (issued by 
President Clinton and still in effect), government agencies have 
been expected to prepare a detailed analysis of the expected 
benefits and costs of major regulatory proposals and alternatives to 
them.\32\ While the PFJ is technically not a regulation that would 
fall under E.O. 12866, the magnitude of its impact far exceeds the 
$100 million threshold that defines a "major rule" and 
thus triggers the requirement for a detailed analysis.
---------------------------------------------------------------------------

    \32\ See E.O. 12291 (February 17, 1981) and E.O. 12866 
(September 30, 1993).
---------------------------------------------------------------------------

    The analysis of regulatory interventions in the economy, which 
is what the PFJ in this case is, is not a black art. Increasingly, 
and on the basis of more than two decades of performing such 
analyses of all major rules, regulatory analysis has become a 
scientific process comprised of distinct steps and containing 
specific elements. E.O. 12866, for example, lays out specific 
criteria such analyses should meet, including: "(i) An 
assessment, including the underlying analysis, of benefits 
anticipated from the regulatory action (such as, but not limited to, 
the promotion of the efficient functioning of the economy and 
private markets ....) together with, to the extent feasible, a 
quantification of those benefits; (ii) An assessment, including the 
underlying analysis, of costs anticipated from the regulatory action 
... together with, to the extent feasible, a quantification of those 
costs; and (iii) An assessment including the underlying analysis, of 
the costs and benefits of potentially effective and reasonably 
feasible alternatives to the planned regulation...."
    The specific analytical techniques to be used in such 
evaluations are further described in guidance from the Office of 
Management and Budget issued January 11, 1996,\33\ and reiterated 
most recently by OMB on June 19, 2001."\34\ These guidelines 
require agencies, before issuing any major regulation, to take into 
account such issues as whether more "performance 
oriented" approaches are possible, the impact of alternative 
levels of stringency mad effective dates, and alternative methods of 
ensuring compliance, and to perform evaluations that take into 
account "discounting," "risk and 
uncertainty," and "non-monetized benefits and 
costs." Each analysis, the guidance demands, must 
"provide information allowing decisionmakers to determine 
that: There is adequate information indicating the need for and 
consequences of the proposed action; The potential benefits to 
society justify the potential costs ...; The proposed action will 
maximize the net benefits to society...; [and] .... Agency decisions 
are based on the best reasonably available scientific, technical, 
economic, and other information."
---------------------------------------------------------------------------

    \33\ Office of Management and Budget, Economic Analysis of 
Federal Regulations Under Executive Order 12866 (January 11, 
1996)(available at www. whitehouse.gov/omb/inforeg/riaguide.html).
    \34\ Office of Management and Budget, Memorandum for the 
Beads of Executive Departments and Agencies: Improving Regulatory 
Impact Analyses (June 19, 2001)(available at www.whitehouse.gov.omb/
memoranda/m01-23.html)
---------------------------------------------------------------------------

    The requirements of the APPA with respect to Competitive Impact 
Statements are, of course, far less specific than those listed 
above. Bat the purpose of the APPA in requiring a CIS is presumably 
similar to the purpose of regulatory analyses: To allow 
decisionmakers, in this case the court, to understand the 
ramifications of their actions relative to alternative choices. By 
the standards of modern policy analysis, DOJ's CIS fails to perform 
this function at the level the court should expect, especially in a 
case of this magnitude.
    To repeat what we asserted at the outset of this section, the 
court might evaluate the CIS in this case by three standards: First, 
does the C1S satisfy the plain language of the statute? Second, how 
does it compare with previous CIS's in similarly significant cases? 
Third, how does it compare with the standards of analysis that are 
required to be performed in similar situations, such as agency 
rulemakings? This C1S Pails ale three standards.
    C. The PFJ Will Not Have Its Claimed Effect, Nor Any Pro-
Competitive Effect
    In fact, a close reading of the language of the PFJ indicates 
that it will not do what the DOJ claims. Moreover, even if DOJ's 
claims are taken at face value, the PFJ will not have its intended 
effect because of the realities of the marketplace. Indeed, this is 
the only conclusion that can be reached based upon a real analysis 
of the "competitive impact" of the PFJ, which is to say 
an analysis of how, if at all, the provisions of the PFJ will change 
the behavior of participants in the marketplace.
    Other commentators will undoubtedly thoroughly catalogue the 
loopholes in the PFJ, of which there are many, and it is not our 
intention to do so here. It is, however, illustrative of the defects 
of the PFJ to analyze it through the lens of the Netscape browser 
experience, since so much of Microsoft's liability concerns its 
actions toward the Netscape browser. Accordingly, much of the PFJ is 
directed at precluding the type of anticompetitive acts that 
Microsoft undertook against Netscape (even though the browser war is 
over and the industry has now moved on to a different stage). But, 
the PFJ does not even succeed in this minimal goal--of creating 
the conditions under which the Netscape browser could have competed 
without being subject to Microsoft's exclusionary practices. Indeed, 
the PFJ specifically permits many of the exclusionary practices in 
which Microsoft engaged:
    . Section III.A of the PFJ is supposed to protect OEMs from 
retaliation by Microsoft if they distribute non-Microsoft products. 
However, the language of Section III.A prohibits Microsoft from 
retaliating against an OEM for "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." 
(Emphasis added). (Microsoft Platform Software is defined as 
including (i) a Windows Operating System Product and/or (ii) a 
Microsoft Middleware Product,) While the Netscape browser was a 
potential competitor for the Microsoft operating system, it never 
became an actual competitor. Morcover, at the time Netscape 
introduced its browser, Microsoft did not have a comparable 
Middleware Product. Thus, the language of III.A would have permitted 
Microsoft to retaliate against OEMs

[[Page 28957]]

for distributing the Netscape browser at the time it was introduced.
    . Similarly, Section III.F.1 prohibits Microsoft from 
retaliating against any ISV or IHV for "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...." 
(Emphasis added). The prohibitions in Section III.F.2 on Microsoft's 
relations with ISVs are also triggered by software that 
"competes with Microsoft Platform Software", which the 
Netscape browser did not initially do.
    . Section III.G.2 is intended to prevent similar exclusionary 
behavior with respect to IAPs and ICPs, by prohibiting Microsoft 
from entering into any agreement with "any IAP or ICP that 
grants placement on the desktop or elsewhere ... on the condition 
that the IAP or ICP refrain from distributing, promoting or using 
any software that competes with Microsoft Middleware." 
(Emphasis added). Again, Netscape's browser was a new product that 
did not compete with any Microsoft product at the time it was 
introduced.
    . Section III.C is intended to prevent restrictive agreements 
with OEMs by, for example, preventing Microsoft from restricting the 
ability of its OEM licensees from "[l]aunching automatically 
...any Non-Microsoft Middleware if a Microsoft Middleware Product 
that provides similar functionality would otherwise be launched 
...." (See Section III.C.3, emphasis added). Under this 
language, Microsoft can preclude its OEM licensees from permitting 
the automatic launch of a new product if Microsoft does not have a 
similar product or if the Microsoft product does not have 
"similar functionality" (obviously, a term open to 
interpretation). Again, when the Netscape browser was launched, 
Microsoft did not have a similar product.
    . Section III.D is intended to preclude Microsoft from excluding 
rival products by denying them the technical information they need 
to interoperate with the Windows operating systems. It requires 
Microsoft to "disclose to ISVs, IHVs, IAPs, ICPs, and OEMs, 
for the sole purpose of interoperating with a Windows Operating 
System Product ... the APIs and related Documentation that arc used 
by Microsoft Middleware to interoperate with a Windows Operating 
System Product." (Emphasis added). If, however, Microsoft does 
not produce an analogous product, it might not use the APIs needed 
for a new application, such as the Netscape browser, to get started.
    . Section III H contains a variety of provisions designed to 
enable choice of Non-Microsoft Middleware Products on the part of 
users and OEMs. The PFJ explicitly states, however, that 
"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." At the time the Netscape browser was introduced, 
there was no comparable Microsoft Middleware Product.
    . Finally, Non-Microsoft Middleware Products arc defined to 
include products "of which at least one million copies were 
distributed in the United States within the previous year." 
(Section VI.N). Thus, regardless of any of the other provisions, the 
PFJ permits exclusionary behavior against new products that arc 
trying to get established.
    In sum, under the provisions of the PFJ Microsoft would have 
been permitted to engage in anticompetitive practices against the 
Netscape browser because the browser did not compete against the 
Windows operating system and because Microsoft did not at the outset 
have a comparable product. Moreover, at least in the early stages, 
the Netscape browser would not have been covered because a million 
copies had not been distributed in a single year. The DOJ obviously 
feels that the fabled entrepreneurs of Silicon Valley, working in 
their garages, are not worthy of protection against Microsoft under 
the PFJ. It is especially ironic that Microsoft, which has dedicated 
so much rhetoric to persuading the courts and the public that its 
monopoly could be overturned at any moment by the proverbial 
entrepreneur working out of her garage, should seek to preserve the 
right to squash precisely such competitive threats.
    More broadly, the requirement that Microsoft have a comparable 
product in order to trigger some of the PFJ's provisions creates 
perverse incentives. It may discourage Microsoft from introducing 
its own product, because to do so triggers provisions restricting 
its ability to exclude a potential competitor. The result could be 
that consumers would be deprived entirely of a useful middleware 
product that might potentially compete with the Windows operating 
system, because Microsoft is able to engage in exclusionary 
practices against another firm and does not find it in its interest 
to introduce its own product.
    But the PFJ is flawed at an even deeper level: Even if it did 
what DOJ and Microsoft say it would, its effect on firms that 
operate in Microsoft's markets and its ability to restore 
competition in those markets would be minimal at most. Most of the 
PFJ is intended to prevent Microsoft from retaliating against OEMs, 
ISVs, IAPs and others that distribute, develop or otherwise support 
software that competes with Microsoft middleware. Under the terms of 
the PFJ, however, these entities would have little incentive to 
promote competitive middleware. This is principally because, despite 
the Appeals Court ruling that Microsoft's integration of the browser 
and the operating system was anticompetitive, the PFJ would allow 
Microsoft to continue to bundle its middleware (and other) products 
with its operating system. Indeed, Microsoft's new XP software 
incorporates new functionality into the Windows operating system as 
never before. It includes, among other things, the IE browser, 
Microsoft's instant messaging and email software, Windows Media 
Player and the Microsoft Passport digital authentication software. 
All of these functions are bundled together and the combined package 
is sold at a fixed price.
    Thus, OEMs have virtually no incentive to customize their 
offerings with non-Microsoft software. To do so involves an 
additional cost for the non-Microsoft software when compariable 
functionality is provided by Microsoft at no additional cost. An OEM 
that did this would have to pass these added costs on to its 
customers and would likely lose sales to other OEMs. Obviously, if 
OEMs don't have the incentive to install non-Microsoft software, 
ISVs won't have the incentive to develop it and IAPs won't have the 
incentive to distribute it.
    As a result, the PFJ will not have any significant pro-
competitive impact in the markets for either middleware or PC 
operating systems. Nor, for the same reasons, is it likely to have 
any significant pro-competitive impact on newly emerging markets, 
such as voice-over-IP instant messaging, game boxes, e-commerce 
technologies (e.g., "Passport") or digital rights 
management technologies. Indeed, the inability to make any plausible 
claims for such pro-competitive effects is the most likely 
explanation for the fact that, in contrast to the AT&T CIS, the 
CIS in this case doesn't make any.
    IV. The Remedy Alternatives
    There are two general classes of remedies that can be employed 
to remedy Microsoft's antitrust violations--conduct remedies 
and structural remedies. Conduct remedies leave Microsoft intact and 
attempt to constrain its anticompetitive behavior by imposing a set 
of behavioral requirements-essentially, a regulatory regime tailor-
made for one firm. Microsoft's structure--and, importantly, its 
incentives--remain largely the same.\35\ The challenge is to 
develop rules that effectively deter anticompetitive behavior, given 
that such behavior might continue to be in Microsoft's interest. The 
PFJ, which relies on conduct remedies, will not be effective in 
deterring anticompetitive behavior on the part of Microsoft.
---------------------------------------------------------------------------

    \35\ Microsoft's incentives would be modified to the 
extent it faces legal penalties, but those penalties would have to 
be very large to have a significant effect on Microsoft's 
incentives.
---------------------------------------------------------------------------

    Structural relief takes a different approach. Structural relief, 
as the name implies, involves restructuring the firm so as. to 
change its incentives and ability to act anticompetitively. As DOJ 
explained eloquently in the AT&T CIS, if a restructuring is 
successful in achieving those goals, behavioral restrictions are 
largely unnecessary. The Appeals Court noted that structural relief 
is a common form of relief in ,antitrust cases and is "the 
most important of antitrust remedies."\36\
---------------------------------------------------------------------------

    \36\ 253 F 3d at 103, quoting United States v,. E.I. du 
Pont de Nemours & Co., 366 U,S. 316, 331 (1961).
---------------------------------------------------------------------------

    In this section, we describe the alternative structural remedies 
available to the court. Then we offer an evaluation of the proposals 
offered by the remaining litigating states.
    A. Alternative Structural Remedies
    At the government's urging, the District Court initially adopted 
a structural remedy, supplemented by interim conduct relief.\37\ The 
Appeals Court vacated the District Court's remedy, partly because it 
modified the District Court's liability finding and

[[Page 28958]]

partly because the District Court had failed to hold an evidentiary 
hearing.\38\ The Appeals Court did not, however, rule out a 
structural solution to this case. The Court directed that "the 
District Court also should consider whether plaintiffs have 
established a sufficient causal connection between Microsoft's 
anticompetitive conduct and its dominant position in the OS 
market."\39\ It continued, "[i]f the court on remand is 
unconvinced of the causal connection between Microsoft's 
exclusionary conduct and the company's position in the OS market, it 
may well conclude that divestiture is not an appropriate 
remedy."\40\ This is an issue that should be explored in an 
evidentiary hearing. While it is difficult to predict exactly how 
the industry would have developed in the absence of Microsoft's 
anticompetitive behavior, it is likely that an alternative to 
Microsoft's operating-system platform would have emerged and it is a 
virtual certainty that Microsoft's position would be far less 
dominant than it is today. Clearly, Microsoft thought that was a 
distinct possibility.
---------------------------------------------------------------------------

    \37\ United States v. Microsoft Corp., 97 F Supp-2d. 
(DCCirc. 2000) "Final Judgement".
    \38\ 253 F 3d at 6.
    \39\ 253 F 3d at 105.
    \40\ 253 F 3d at 105-6..
---------------------------------------------------------------------------

    The causation between Microsoft's anticompetitive practices and 
its operating system monopoly runs both ways. Without its monopoly, 
Microsoft would have been unable to engage in the exclusionary 
practices documented by the District Court and affirmed by the 
Appeals Court. Moreover, because of the wide array of business 
practices at issue and the complexity of the industry, it is very 
difficult to fashion a conduct relief regime that will be effective 
if Microsoft retains its dominant market position. This is why the 
Department of Justice (initially) and others (including ourselves) 
favor a structural solution. Two different forms of structural 
solution have been proposed, which we review in turn.
    The DOJ initially proposed, and the District Court initially 
ordered, a vertical divestiture, which would divide Microsoft along 
product tines, into an operating systems company and an applications 
company.\41\ The DOJ argued that this remedy would create two 
powerful companies that would have the incentive to compete with 
each other, diminishing the market power of both. According to 
Timothy Bresnahan, Chief Economist at the Antitrust Division at the 
time, "divestiture of the company into an applications and an 
operating system company restores competitive conditions very like 
those destroyed by the anticompetitive acts, Absent the 
anticompetitive acts, Microsoft would have lost the browser war, and 
other firms would have commercialized useful technologies now 
controlled by Microsoft. Divided technical leadership, which could 
be accomplished by having an independent browser company in the late 
1990s or an applications company now, lowers barriers to entry and 
competition in many markets. It was exactly this route to an 
increase in competition that Microsoft avoided by its 
anticompetitive acts. Second, ending Microsoft's unique position in 
the industry offers innovative new technologies the choice of two 
mass-market distribution partners, either Appsco [the applications 
company] or OSCo [the operating system company]. The divestiture 
will do much to reduce the motive to violate and also to reduce the 
effectiveness of future anticompetitive acts. It restores conditions 
for competitive innovation at a moment in technology history [i.e., 
when the Internet is starting to be commercialized] when having a 
single firm set the direction of innovation in PC and end-user 
oriented internet markets is most unwise,"\42\
---------------------------------------------------------------------------

    \41\ Final Judgement at 2.
    \42\ Timonthy F. Bresnahan, "The Right 
Remedy," at 1, (available at www.stanford.edu/tbres/microsoft/
The Right Remedy.pdf).
---------------------------------------------------------------------------

    Similarly, the Department of Justice, in initially proposing 
this remedy, argued that separating the operating system from the 
applications company would "reduce the entry barriers that 
Microsoft's illegal conduct erected and make it less likely that 
Microsoft [would] have the incentive or ability to increase them in 
the future."\43\ An independent applications company would 
have every incentive to support competitors to Windows rather than 
make decisions based on the level of threat those competitors pose 
to Microsoft.\44\ A separate applications company would have 
appropriate incentives to port its products to competing operating 
systems, such as Linux, thereby lowering the applications barrier to 
entry that potential competitors face. Currently, Microsoft has an 
incentive to strategically withhold applications from actual or 
potential competitors, even if providing them would otherwise be 
economically justified. In addition, the applications company would 
have the incentive to make its tools available to Independent 
Software Vendors (ISVs) that cooperate with competing operating 
system providers.
---------------------------------------------------------------------------

    \43\ Plantiffs" Memorandom in support of Proposed 
Final Judgement at 30-43, Microsoft (No. 98-1232), 
available at http://www.usdoj.gov/atr/cases/f4600/4640.htm.
    \44\ United States v. Microsoft Corp., 147 F 3d 935 
(DCCirc. 1998) Romer Declaration # 4, (hereafter Romer).
---------------------------------------------------------------------------

    Separate operating system and applications companies would make 
it possible for middleware technologies in the applications company 
to be competitive with Windows. When applications are written to 
middleware technologies, like the Netscape browser, which operate 
between the applications software and the operating system, they 
become operating system-neutral,\45\ reducing the applications 
barrier to entry and facilitating competition with Windows. There 
are several desktop applications, including Microsoft Office, that 
expose APIs and could become important middleware technologies.
---------------------------------------------------------------------------

    \45\ Romer at 13.
---------------------------------------------------------------------------

    Of course, a vertical divesture now would have a somewhat 
different effect than when it was first adopted by the District 
Court, because Microsoft has bundled many more applications into its 
new XP operating system. If the District Court again decided to 
adopt this remedy, it would also have to decide whether to require 
Microsoft to remove some applications functionality from its XP 
operating system or permit it to remain as is. If the XP operating 
system were allowed to remain as is, applications that would 
previously have been part of the applications company would be part 
of" the operating system company. However, significant 
applications--principally, Microsoft Office--still remain 
separate from the operating system.
    The alternative to a vertical approach is what we term a 
"hybrid" structural remedy, which combines both vertical 
and horizontal elements. A purely horizontal divestiture would 
divide Microsoft into several vertically integrated companies, each 
with full rights to Microsoft's intellectual property, creating 
several sellers of Windows as well as Microsoft's other software 
products. This remedy arguably goes beyond what is necessary or 
could be justified as matter of law, since it divides up products 
that were not the subject of the case.
    A number of commentators, including Dr. Lenard, have proposed a 
"hybrid" remedy, which has elements of both vertical and 
horizontal divestiture.\46\ It goes a step beyond the vertical 
divestiture remedy that the District Court adopted by first 
separating the operating systems company from the applications 
company and then creating three equivalent operating system 
companies.
---------------------------------------------------------------------------

    \46\ See Thomas M. Lenard, Creating Competition in the 
Market for Operating Systems." A Structural Remedy ]'or 
Microsoft, ( Washington: Progress & Freedom Foundation, 2000) 
http://www.pff.org/remedies/htm; Remedies Brief of Amici Curiae 
Robert E. Litan et al., 2000; Thomas M. Lenard, "Creating 
Competition in the Market for Operating Systems: Alternative 
Structural Remedies in the Microsoft Case," George Mason Law 
Review, Vol. 9., Spring 2001.
---------------------------------------------------------------------------

    Microsoft's bundling of more applications functionality into the 
new XP operating system strengthens the arguments for the hybrid 
remedy relative to other remedies. The PFJ (as discussed above) does 
not contain any restrictions on bundling, which will hinder its 
effectiveness dramatically, in addition, as more applications are 
moved into the operating system, the vertical divestiture becomes 
less able to restore the competitive balance, because the newly 
formed applications company would be a less powerful competitor.
    By creating competing Windows companies, the hybrid remedy 
directly addresses the monopoly problem, which is the source of 
Microsoft's anticompetitive behavior. As indicated above, without 
the monopoly, Microsoft would never have been able to exclude the 
Netscape browser from the most effective means of 
distribution--OEMs and IAPs. It would not, for example, have 
been able to get the OEMs to refrain from pre-installing the 
Netscape browser as a condition for receiving a Windows license. 
Similarly, Microsoft would not have been able to extinguish the 
market for a competing browser by bundling the Windows operating 
system with IE. Microsoft would not have been able to do these 
things--which are at the core of the Appeals Court's liability 
finding--because the OEMs and the IAPs would have had 
competitive alternatives to which they could turn.

[[Page 28959]]

    The hybrid remedy would eliminate the applications barrier to 
entry for the new Windows companies and deprive Microsoft of its 
ability to leverage its desktop monopoly into new markets. Because 
it really does restore competition, extensive behavioral 
restrictions are not required, making this the least regulatory of 
the available alternatives.
    The hybrid remedy is to a significant extent an 
"intellectual property" remedy, requiring Microsoft to 
grant full intellectual property rights to its Windows Operating 
System to two new companies. This type of remedy is particularly 
suited to "new-economy" companies like Microsoft, whose 
assets consist primarily of informational capital, which can easily 
be replicated. \47\ The rationale for going further and dividing up 
employees is that much of the intellectual property is embodied in 
the employees.\48\ In contrast to traditional "old-
economy" companies, however, there is very little physical 
capital to be divided up.
---------------------------------------------------------------------------

    \47\ Remedies Brief of Amici Curiae Robert E. Litan et 
al., 2000.
    \48\ Thomas M. Lenard, Creating Competition in the Market 
for Operating Systems: A Structural Remedy for Microsoft, 
(Washington,: Progress & Freedom Foundation, 2000) http://
www.pff.org/remedies/htm.
---------------------------------------------------------------------------

    This factor should alleviate some of the concerns expressed in 
the Appeals Court opinion about the use of a structural remedy in 
tile case of a "unitary company"--i.e., a company 
not formed by mergers and acquisitions.\49\ Such concerns bare more 
validity in the case of old-economy companies, because of the 
difficulty of dividing up physical capital. What is being proposed 
in the hybrid remedy is much closer to a reproduction than it is to 
a division of the company's assets. When those assets consist 
primarily of information, they can be reproduced at very low cost.
---------------------------------------------------------------------------

    \49\ 253 F 3d at 103.
---------------------------------------------------------------------------

    B. The Litigating States Proposal
    We believe a structural remedy continues to offer the best hope 
of deterring Microsoft's anticompetitive behavior in a way that is 
not overly regulatory. If, however, a structural remedy is off the 
table, the conduct remedy proposed by the Litigating States (LS) is 
far better than the PFJ. The LS Proposal does not contain the 
obvious loopholes and exceptions that are pervasive in the PFJ. 
Moreover, the LS Proposal includes a number of provisions that can 
partially restore competition to what it might have been absent the 
anticompetitive behavior. Because it will change the behavior of the 
participants in the market, the LS Proposal provides a serious 
remedy to Microsoft's offenses. Some of the attractive features of 
the LS proposal are as follows:
    . In contrast to the PFJ, the LS Proposal contains: prohibitions 
on exclusionary and retaliatory behavior that are clear and 
unambiguous and mean what they purport to mean. In general, they 
provide meaningful protection against retaliation for the 
development and distribution of non-Microsoft software.
    . The LS Proposal would require Microsoft to license an 
unbundled version of its software. As discussed above, the bundling 
of applications together with the monopoly operating system makes it 
uneconomic in most cases to develop and distribute software that 
competes with Microsoft. This requirement would address that problem 
and create an environment in which rival software can be developed.
    . The LS Proposal would require Microsoft to license its 
software to third parties (not just OEMs) who could produce a 
customized product that would enlarge the range of consumer choice 
and provide competition for Microsoft.
    . The proposal also would require Microsoft to continue to 
license predecessor versions of Windows. This would permit OEMs to 
expand the range of consumer choice by providing a lower-priced 
operating-system product that might be perfectly satisfactory for a 
large number of users. In addition, it would permit OEMs and third 
parties to continue to develop a differentiated product that might 
be competitive with Microsoft.
    . The LS Proposal would require Microsoft to make IE available 
on an open-source basis, and would require Microsoft to distribute 
Java, thereby partially reversing same of the effects of Microsoft's 
illegal activities
    . Finally, the LS Proposal would require Microsoft %0 auction to 
a third party the right to port Microsoft Office to competing 
operating systems." This would reduce the applications barrier 
to entry for a competing operating system, such as Linux. All of 
these aspects of the LS Proposal would add significantly to the 
probability that the remedy in this case would actually have the 
desired effect of increasing competition in one or more of the 
relevant product markets.
    V. Conclusion
    The PFJ is not an adequate remedy and its adoption is not in the 
public interest. It will not deter Microsoft from engaging in 
anticompetitive activities and it will not restore competition in 
this extremely important sector of the economy. Moreover, the CIS 
that the government has prepared does not provide the information 
necessary for the District Court to determine that the PFJ is in the 
public interest.
    In order to generate the necessary information for such a 
determination, the District Court should hold an evidentiary hearing 
in which the competitive impacts, benefits and costs of all the 
available remedies are closely evaluated. In addition to the PFJ, 
the Court should consider structural remedies--which appear to 
be justified under the criteria established by the Court or 
Appeals--as well as the LS Proposal. We believe that at the end 
of this process, the court will agree that the PFJ is not in the 
public interest and that the "hybrid" structural remedy 
we recommend best meets all the of the criteria governing the 
court's deliberations in this matter.



MTC-00030607

    IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA 
-----------------------
-----------------------
-----------------------
----------)
    UNITED STATES OF AMERICA, ) ) Plaintiff, ) )
    v. ) Civil Action No. 98-1232 (CKK) )
    MICROSOFT CORPORATION, ) )
    Defendant. ) ) ) 
----------------------
----------------------
----------------------
----------) 
-----------------------
----------------------
----------------------
---------
    STATE OF NEW YORK, et al., ) )
    Plaintiffs, ) )
    v. )Civil Action No. 98-1233 (CKK) )
    MICROSOFT CORPORATION, ) )
    Defendant. ) )
    PLAINTIFF LITIGATING STATES" REMEDIAL PROPOSALS
    Pursuant to this Court's Scheduling Order of September 28, 2001, 
Plaintiff States California, Connecticut, Florida, Iowa, Kansas, 
Massachusetts, Minnesota, Utah, West Virginia and the District of 
Columbia hereby submit their proposals for remedial relief in this 
matter.
    Introduction
    A unanimous en banc decision of the United States Court of 
Appeals for the District of Columbia Circuit affirmed the District 
Court's conclusion that Microsoft Corporation 
("Microsoft") unlawfully maintained its monopoly power 
by suppressing emerging technologies that threatened to undermine 
its monopoly control of the personal computer operating system 
market. See United States v. Microsoft Corp., 253 F.3d 34 (DC Cir.), 
cert denied, 122 S. Ct. 350 (2001). The key to Microsoft's monopoly 
maintenance was the use of its monopoly power to enhance and 
maintain what the Court of Appeals called the "applications 
barrier to entry." Computer operating systems can compete 
successfully only if they provide a platform for the software 
applications that consumers want their computers to perform; but 
software developers naturally prefer to write applications for 
operating systems that already have a substantial consumer base. The 
applications barrier to entry, coupled with Microsoft's 90% plus 
market share, gave Microsoft the power to protect its 
"dominant operating system irrespective of quality" and 
to "stave off even superior new rivals." Id. at 56.
    During the mid-1990s, Microsoft was confronted with a potential 
threat to the applications barrier to entry, and thus to its 
monopoly power, in the form of two new products, Netscape's Internet 
browser, known as Navigator, and Sun Microsystems" Java 
technologies. Recognizing the threat posed by these middleware 
products (i.e., software that can itself be a platform for 
applications development), Microsoft aggressively and unlawfully 
prevented these rivals from achieving the widespread distribution 
they needed to attract software development and ultimately make 
other platforms meaningful competitors with Microsoft's Windows 
operating system. The Court of Appeals catalogued an extensive list 
of anticompetitive, exclusionary acts by which Microsoft 
artificially bolstered the applications barrier to entry, including 
commingling the software code for its own middleware with that of 
its monopoly operating system, thereby eliminating distribution 
opportunities for competing middleware; threatening to withhold and 
withholding critical technical information from competing middleware 
providers, thereby allowing Microsoft middleware to

[[Page 28960]]

obtain significant advantages over its rivals; threatening to 
withhold porting of critical Microsoft software applications and 
financial benefits from those who even considered aiding its rivals; 
contractually precluding OEMs and ultimately end-users from the 
opportunity to choose competitive software; and even deceiving 
software developers to conceal the fact that the software they were 
writing would be compatible only with Microsoft's platform.
    "The proper disposition of antitrust cases is obviously of 
great public importance, and their remedial phase, more often than 
not, is crucial. For the suit has been a futile exercise if the 
Government proves a violation but fails to secure a remedy adequate 
to redress it." United States v. E.I. du Pont de Nemours & 
Co., 366 U.S. 316, 323 (1961). As the Court of Appeals held, 
"a remedies decree in an antitrust case must seek to 
'unfetter a market from anticompetitive conduct," 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."' Microsoft, 253 F.3d at 103 (quoting Ford Motor 
Co. v. United States, 405 U.S. 562, 577 (1972) and United States v. 
United Shoe Mach. Corp., 391 U.S. 244, 250 (1968)) (citation 
omitted).
    Consistent with these principles, any remedy must prevent 
Microsoft from continuing the practices it used to artificially 
enhance and protect the applications barrier to 
entry--prohibiting, for example, the types of deals with third 
parties that cut off the critical channels of distribution needed by 
Microsoft's middleware competitors. A meaningful remedy must do 
more, however, than merely prohibit a recurrence of Microsoft's past 
misdeeds: (1) it must also seek to restore the competitive balance 
so that competing middleware developers and those who write 
applications based on that middleware are not unfairly handicapped 
in that competition by Microsoft's past exclusionary acts, and (2) 
it must be forward-looking with respect to technological and 
marketplace developments, so that today's emerging competitive 
threats are protected from the very anticompetitive conduct that 
Microsoft has so consistently and effectively employed in the past. 
Only then can the applications barrier to entry be reduced and much-
needed competition be given a fair chance to emerge.
    Specific Remedial Proposals
    A. Unbinding Microsoft's Software
    As part of its illegal effort to suppress forms of middleware 
that threatened to offer a competitive platform for software 
development, Microsoft commingled the software code for Internet 
Explorer with the code for its monopoly operating system. See 
Microsoft, 253 F.3d at 66. The Court of Appeals affirmed the 
District Court's findings that (1) the commingling of Internet 
Explorer with the Windows Operating System deterred computer 
manufacturers ("OEMs") from installing a rival browser 
such as Netscape Navigator, (2) Microsoft offered no specific or 
substantiated evidence to justify such commingling, and (3) 
"such commingling ha[d] an anticompetitive effect." Id.
    To prevent further unlawful commingling of Internet Explorer 
with the Windows Operating System, and to prevent similar 
anticompetitive commingling of other rival middleware (such as 
multimedia viewing and/or listening software or electronic mail 
software), Microsoft must be required either to cease such 
commingling or to offer its operating system software on an 
unbundled basis:\1\
---------------------------------------------------------------------------

    \1\ The proposed text of the remedial order appears in 
italics throughout this document. The full text of the proposed 
remedial order is also attached at Exhibit A.
---------------------------------------------------------------------------

    1. Restriction on Binding Microsoft Middleware Products to 
Windows Operating System Products. Microsoft shall not, in any 
Windows Operating System Product (excluding Windows 98 and Windows 
98 SE) it distributes beginning six months after the date of entry 
of this Final Judgment, Bind any Microsoft Middleware Products to 
the Windows Operating System unless Microsoft also has available to 
license, upon the written request of each Covered OEM licensee or 
Third-Party Licensee that so specifies, and Microsoft supports both 
directly and indirectly, an otherwise identical version of the 
Windows Operating System Product that omits any combination of 
Microsoft Middleware Products as indicated by the licensee; further, 
Microsoft must take all necessary steps to ensure that such version 
operates effectively and without degradation absent the removed 
Microsoft Middleware Product(s). Microsoft shall not deny timely 
access to alpha and beta releases of Windows Operating System 
Products to any OEM or third party seeking to exercise any of the 
options or alternatives provided under this Final Judgment. 
Microsoft shall offer each version of the Windows Operating System 
Product that omits such Microsoft Middleware Product(s) at a reduced 
price (compared to the version that contains them). The reduction in 
price must equal the ratio of the development costs of each omitted 
Microsoft Middleware Product to the relative development costs of 
that version of the Windows Operating System Product (i.e., 
development costs incurred since the previous major release; and for 
the avoidance of doubt, the major release previous to Windows XP is 
Windows 2000), multiplied by the price of the version of the Windows 
Operating System Product that includes all such Microsoft Middleware 
Products. However, if any such Microsoft Middleware Product(s) is/
are sold separately from the Operating System, and the price of the 
license(s) for those omitted unbound Microsoft Middleware Product(s) 
is greater than the result of the formula in the preceding sentence, 
then the amount of the reduction shall be equal to or greater than 
the price of such separate licenses.
    B. Mandating Uniform and Non-Discriminatory Licensing
    The District Court concluded that Microsoft provided significant 
additional consideration to OEMs who promoted Internet Explorer or 
curtailed distribution or "promotion of Netscape Navigator. 
See United States v. Microsoft Corp., 84 F. Supp. 2d 9, 67 (D.DC 
1999). The Court of Appeals and the District Court both concluded 
that Microsoft also employed numerous restrictive license previsions 
to reduce distribution and usage of Netscape Navigator. 253 F.3d at 
61. This restrictive and discriminatory contractual treatment of 
Microsoft licensees was a critical means of preventing rival 
middleware from receiving effective distribution in the important 
OEM channel.
    Because Microsoft has monopoly power and thus typically licenses 
the overwhelming majority of the operating systems used by virtually 
every major OEM, Microsoft has the undeniable power to harm an OEM 
or any other third-party licensee, who wishes to distribute non-
Microsoft middleware, by providing more favorable licensing terms to 
the recalcitrant OEM's or third-party licensee's 
competitors--i.e., those who promote or distribute Microsoft 
middleware. In order for competing middleware to have a chance to 
obtain distribution through the important OEM channel (and thereby 
achieve a degree of usage that would erode the applications barrier 
to entry), Microsoft must be required, at a minimum, (1) to offer 
uniform and non-discriminatory license terms to OEMs and other 
third-party licensees, and (2) to permit such licensees to customize 
Windows (including earlier versions of Windows) to include whatever 
Microsoft middleware or competing middleware the licensee wishes to 
sell to consumers. Moreover, Microsoft's obligation to license 
should not be restricted just to OEMs, but rather should include 
other third parties who also could repackage some or all of Windows 
with competing middleware and thereby offer software packages that 
are differentiated from and competitive with Microsoft's Windows:
    2. Windows Operating System Licenses.
    a. Mandatory, Uniform Licensing for Windows Operating System 
Products. Microsoft shall license, to Covered OEMs and Third-Party 
Licensees, Windows Operating System Products, including those 
versions made available for license pursuant to Section 1, pursuant 
to uniform license agreements with uniform terms and conditions. 
Microsoft shall not employ Market Development Allowances or other 
discounts, including special discounts based on involvement in 
development or any joint development process. Without limiting the 
preceding sentence, Microsoft shall charge each licensee the 
applicable royalty for the licensed product as set forth on a 
schedule, to be established by Microsoft and published on a web site 
accessible to Plaintiffs and all licensees, that provides for 
uniform royalties for each such product (which royalties shall in 
any case be consistent with the requirements of Section 1), except 
that:
    i. the schedule may specify different royalties for different 
language versions; and
    ii. the schedule may specify reasonable, uniform volume 
discounts to be offered on a non-discriminatory basis based upon the 
independently determined actual volume of total shipments of the 
licensed products (aggregating all Windows Operating System 
Products, including any versions made available for license pursuant 
to Section 1).
    Microsoft shall not engage in any discriminatory enforcement of 
any license for

[[Page 28961]]

a licensed Windows Operating System Product (including those 
versions of the Windows Operating System Product offered and 
licensed pursuant to Section 1) and shall not terminate any such 
license without good cause and in any case without having first 
given the Covered OEM or other Third-Party Licensee written notice 
of the reason for the proposed termination and not less than sixty 
days" opportunity to cure. Microsoft shall not enforce any 
provision in any Agreement with a Covered OEM or other Third-Party 
Licensee (including without limitation any cross-license) that is 
inconsistent with this Final Judgment.
    Microsoft shall not, by contract or otherwise, restrict the 
right of a Third Party Licensee to resell licenses to Windows 
Operating System Products (including those versions of the Windows 
Operating System Product offered and licensed pursuant to Section 
1).
    b. Equal Access. Microsoft shall afford all Covered OEM 
licensees and Third-Party Licensees equal access to licensing terms; 
discounts; technical, marketing, and sales support; support calls; 
product information; technical information; information about future 
plans; developer tools or developer support; hardware certification; 
and permission to display trademarks or logos. Notwithstanding the 
preceding sentence, Microsoft need not provide equal access to 
technical information and information about future plans for any 
bona fide joint development effort between Microsoft and a Covered 
OEM with respect to confidential matters solely within the scope of 
that joint effort.
    c. OEM and Third-Party Licensee Flexibility in Product 
Configuration. Microsoft shall not restrict (by contract or 
otherwise, including but not limited to granting or withholding 
consideration) an OEM or Third-Party Licensee from modifying the 
BIOS, boot sequence, startup folder, smart folder (e.g., MyMusic or 
MyPhotos), links, internet connection wizard, desktop, preferences, 
favorites, start page, first screen, or other aspect of a Windows 
Operating System Product (including any aspect of any Middleware in 
that product). By way of example, and not limitation, an OEM or 
Third Party Licensee may:
    i. include a registration sequence to obtain subscription or 
other information from the user or to provide information to the 
user;
    ii. display and arrange icons or menu entries of, or short-cuts 
to, or otherwise feature, other products or services, regardless of 
the size or shape of such icons or features, or remove or modify the 
icons, folders, links, start menu entries, smart folder application 
or service menu entries, favorites, or other means of featuring 
Microsoft products or services;
    iii. display any non-Microsoft desktop, provided that an icon or 
other means of access that allows the user to access the Windows 
desktop is also displayed, or display any other user interface;
    iv. launch automatically any non-Microsoft Middleware, Operating 
System, application or service (including any security/
authentication service), offer a non-Microsoft IAP or other start-up 
sequence, or offer an option to make or make non-Microsoft 
Middleware the Default Middleware; or remove the means of End-User 
Access for Microsoft Middleware Products; or remove the code for 
Microsoft Middleware Products; or
    v. add non-Microsoft Middleware, applications or services.
    3. Continued Licensing of Predecessor Version.
    a. License and Support. Microsoft shall, when it makes a major 
Windows Operating System Product release (such as Windows 98, 
Windows 2000 Professional, Windows Me, Windows XP, 
"Longhorn," "Blackcomb," and all their 
successors), continue for five years after such release to license 
on the same terms and conditions and support both directly and 
indirectly the immediately previous Windows Operating System Product 
(including any unbound versions of that Operating System licensed 
under Section 1) to any OEM or Third-Party Licensee that desires 
such a license. In addition, Microsoft shall continue to license and 
support, both directly and indirectly, Windows 98 SE to any OEM or 
Third-Party Licensee that desires such a license, on the same terms 
and conditions as previously licensed, for three years from the date 
of entry of this Final Judgment.
    b. Royalty Rate. The net royalty rate for the immediately 
previous Windows Operating System Product shall be no more than the 
lowest royalty paid by the OEM or Third-Party Licensee for such 
product prior to the release of the new version. The net royalty 
rate for Windows 98 SE shall be no more than the lowest royalty 
offered to that OEM or Third-Party Licensee for Windows 98 SE prior 
to December 7, 2001.
    c. Marketing Freedom. The OEM or Third-Party Licensee shall be 
free to market Personal Computers in which it preinstalls such 
immediately previous Windows Operating System Product or Windows 98 
SE in the same manner in which it markets Personal Computers 
preinstalled with other Microsoft Platform Software.
    C. Mandatory Disclosure to Ensure Interoperability
    The District Court found that Microsoft threatened to delay and 
did delay disclosing critical technical information to Netscape that 
was necessary for the Navigator browser to interoperate with the 
Windows 95 Operating System. Microsoft, 84 F. Supp. 2d at 
32-33. This delay in turn substantially delayed the release of 
a version of the Navigator browser that was interoperable with 
Windows 95, causing Netscape to be excluded from most of the crucial 
holiday-selling season and giving Internet Explorer an unfair 
advantage in the market. Id. at 33. Moreover, the Court of Appeals 
upheld the District Court's finding that Microsoft illegally gave 
preferential treatment in terms of early release of technical 
information to Independent Software Vendors ("ISVs") 
that agreed to certain anticompetitive conditions, including using 
only Internet Explorer. Microsoft, 253 F.3d at 71.
    In order to prevent future incidents in which Microsoft 
middleware developers receive preferential disclosure of technical 
information over rival middleware developers, thereby stifling the 
competitive threat posed by rival middleware, Microsoft must provide 
timely access to the technical information needed to permit rival 
middleware to achieve interoperability with Microsoft software so 
that such middleware may compete fairly with Microsoft middleware. 
Moreover, because nascent threats to Microsoft's monopoly operating 
system currently exist beyond the middleware platform resident on 
the same computer, timely disclosure of technical information must 
apply to facilitate not only interoperability between middleware and 
the monopoly operating system on the same computer, but also 
interoperability with respect to other technologies that could 
provide a significant competitive platform, including network 
servers, web servers and hand-held devices:
    4. Disclosure of APIs, Communications Interfaces and Technical 
Information.
    a. Interoperability Disclosure. Microsoft shall disclose to 
ISVs, IHVs, IAPs, ICPs, OEMs and Third-Party Licensees on an ongoing 
basis and in a Timely Manner, in whatever media Microsoft 
customarily disseminates such information to its own personnel, all 
APIs, Technical Information and Communications Interfaces that 
Microsoft employs to enable:
    i. each Microsoft application to Interoperate with Microsoft 
Platform Software installed on the same Personal Computer;
    ii. each Microsoft Middleware Product to Interoperate with 
Microsoft Platform Software installed on the same Personal Computer;
    iii. each Microsoft software installed on one computer 
(including without limitation Personal Computers, servers, Handheld 
Computing Devices and set-top boxes) to Interoperate with Microsoft 
Platform Software installed on another computer (including without 
limitation Personal Computers, servers, Handheld Computing Devices 
and set-top boxes); and
    iv. each Microsoft Platform Software to Interoperate with 
hardware on which it is installed.
    b. Necessary Disclosure. Microsoft shall disclose to each OEM 
and Third-Party Licensee all APIs, Communications Interfaces and 
Technical Information necessary to permit them to fully exercise 
their rights under Section 2.c.
    c. Compliance. To facilitate compliance, and monitoring of 
compliance, with this Section 4, Microsoft shall create a secure 
facility where qualified representatives of OEMs, ISVs, IHVs, IAPs, 
ICPs, and Third-Party Licensees shall be permitted to study, 
interrogate and interact with the source code and any related 
documentation and testing suites of Microsoft Platform Software for 
the purpose of enabling their products to Interoperate effectively 
with Microsoft Platform Software (including exercising any of the 
options in Section 2.c).
    D. Prohibitions on Certain Licensing and Other Practices
    The Court of Appeals affirmed the District Court's conclusion 
that Microsoft's licensing practices and/or other dealings with 
various third parties, including Internet Access

[[Page 28962]]

Providers ("IAPs"), Independent Software Vendors 
("ISVs"), and rival operating system manufacturers, were 
similarly designed to stifle competition. Microsoft, 253 F.3d at 67. 
These dealings, when coupled with other Microsoft conduct designed 
to thwart or delay interoperability, confirm that Microsoft must 
also be prohibited from taking certain actions that could unfairly 
disadvantage its would-be competitors, whether by (a) knowingly 
interfering with the performance of their software with no advance 
warning, or (b) entering into certain types of contracts that could 
unreasonably foreclose competing middleware providers:
    5. Notification of Knowing Interference with Performance. 
Microsoft shall not take any action that it knows, or reasonably 
should know, will directly or indirectly, interfere with or degrade 
the performance or compatibility of any non-Microsoft Middleware 
when Interoperating with any Microsoft Platform Software other than 
for good cause. If Microsoft takes such action it must provide 
written notice to the ISV of such non-Microsoft software us soon as 
Microsoft has such knowledge but in no case less than 60 days in 
advance informing the ISV that Microsoft intends to take such 
action. The written notice shall state Microsoft's reasons for 
taking the action, and every way known to Microsoft for the ISV to 
avoid or reduce interference with, or the degrading of, the 
performance of the ISV's software.
    6. Ban on Exclusive Dealing. Microsoft shall not enter into or 
enforce any Agreement in which a third party agrees, or is offered 
or granted consideration, to:
    a. restrict its development, production, distribution, promotion 
or use of (including its freedom to set as a default), or payment 
for, any non-Microsoft product or service;
    b. restrict Microsoft redistributable code from use with non-
Microsoft Platform Software;
    c. distribute, promote or use any Microsoft product or service 
exclusively or in a minimum percentage;
    d. interfere with or degrade the performance of any non-
Microsoft product or service; or
    e. in the case of an agreement with an IAP or ICP, distribute, 
promote or use a Microsoft product or service in exchange for 
placement with respect to any aspect of a Microsoft Platform 
Product.
    7. Ban on Contractual Tying. Microsoft shall not condition the 
granting of a Windows Operating System Product license, or the terms 
(including without limitation price) or administration of such 
license (including any license granted pursuant to Section 1), on a 
licensee agreeing to license, promote, distribute, or provide an 
access point to, any Microsoft Middleware Product.
    E. Ban on Retaliation
    The Court of Appeals and the District Court catalogued a variety 
of conduct by Microsoft that was designed to reward those who 
acceded to Microsoft's anticompetitive aims and punish those who did 
not. An effective remedy therefore must prevent Microsoft from 
taking adverse or other retaliatory or discriminatory actions 
against OEMs, other third-party licensees, ISVs, and others, who in 
any way develop, distribute, support or promote competing products. 
Microsoft must also be barred from any acts of retaliation against 
any individual or any entity as a result of their participation in 
any capacity in any phase of this litigation:
    8. Ban on Adverse Actions for Supporting Competing Products. 
Microsoft shall not take or threaten any action that directly or 
indirectly adversely affects any IAP, ICP, IHV, ISV, OEM or Third-
Party Licensee (including but not limited to giving or withholding 
any consideration such as licensing terms; discounts; technical, 
marketing, and sales support; enabling and integration programs; 
product information; technical information; information about future 
plans; developer tools or developer support; hardware certification; 
ability to install Synchronization Drivers; and permission to 
display trademarks or logos) based directly or indirectly, in whole 
or in part, on any actual or contemplated action by that IAP, ICP, 
IHV, ISV, OEM or Third-Party Licensee to:
    a. use, distribute, promote, support, license, develop, set as a 
default, produce or sell any non-Microsoft product or service; or
    b. exercise any of the options or alternatives provided under 
this Final Judgment.
    9. Non-retaliation for Participation in Litigation. Microsoft 
shall not take or threaten to take any action adversely affecting 
any individual or entity that participated in any phase of the 
antitrust litigation initially styled as United States v. Microsoft, 
Civil Actions No. 98-1232 and State of New York v. Microsoft, 
Civil Action No. 98-1233, including but not limited to 
pretrial discovery and other proceedings before the liability trial, 
the liability trial, any of the remedy proceedings before this 
Court, any proceeding to enforce the Final Judgment or to 
investigate any alleged violation of the Final Judgment, and any 
proceeding to review or otherwise consider any settlement or 
resolution of this matter, based directly or indirectly, in whole or 
in part, on such individual or entity's participation as a fact 
witness, consultant or expert on behalf of any party, or on such 
individual or entity's cooperation in any form, whether by meeting, 
providing information or documents, or otherwise, with or to 
"any party in this litigation, or any counsel, expert or agent 
thereto or thereof.
    F. Respect for OEM and End-User Choices
    Microsoft engaged in various practices that were designed to 
coerce OEMs into setting Internet Explorer as the "default 
browser" on their computers. Microsoft, 84 F. Supp. 2d at 
67-68. If competing middleware is to have a fair opportunity 
to gain distribution sufficient to erode the applications barrier to 
entry, OEMs and other third-party licensees, as well as end-user 
consumers, should be accorded the freedom to select a default 
middleware product other than a Microsoft middleware product. If 
applications software developers perceive that Microsoft, through 
its control of the operating system, is unfairly tilting end users 
to Microsoft applications, then they will be less inclined to 
develop the applications necessary to erode the entry barrier that 
preserves Microsoft's monopoly:
    10. Respect for User, OEM and Third-Party Licensee Choices. 
Microsoft shall not, in any Windows Operating System Product 
distributed six or more months after the date of entry of this Final 
Judgment, make Microsoft Middleware the Default Middleware for any 
functionality unless the Windows Operating System Product (i) 
affords the OEM or Third-Party Licensee the ability to override 
Microsoft's choice of a Default Middleware and designate other 
Middleware the Default Middleware for that functionality, and (ii) 
affords the OEM, Third-Party Licensee or non-Microsoft Middleware 
the ability to allow the end user a reasonably accessible and 
neutrally presented choice to designate other Middleware as the 
Default Middleware in place of Microsoft Middleware. If the OEM, 
Third-Party Licensee, or end user has designated non-Microsoft 
Middleware as the Default Middleware for a functionality, the 
Windows Operating System Product (including updates thereto) or 
other Microsoft software or services shall not change the 
designation or prompt the user to change that designation (including 
by cautioning the end user against using the non-Microsoft 
Middleware). However, in the event that the end user has 
subsequently installed a Microsoft Middleware Product performing 
that functionality, the subsequently installed Microsoft Middleware 
Product may offer the end user a reasonably accessible and neutrally 
presented one-time choice to make that product the Default 
Middleware for that functionality.
    G. Prohibition on Agreements Not to Compete
    The Court of Appeals and the District Court found numerous 
instances in which Microsoft entered into agreements with OEMs, ISVs 
and others that stifled competition. In one particular instance, 
Microsoft proposed a "special relationship" with 
Netscape that, if consummated, would have effectively ended any 
potential competitive threat posed by the Navigator browser to the 
Windows Operating System. 84 F. Supp. 2d at 33. Given Microsoft's 
past conduct, a prohibition on offering or agreeing to limit 
competition with respect to Operating System Products or Middleware 
Products is necessary and appropriate:
    11. Agreements Limiting Competition. Microsoft shall not offer, 
agree to provide, or provide any consideration to any actual or 
potential Platform Software competitor in exchange for such 
competitors agreeing to refrain or refraining in whole or in part 
from developing, licensing, promoting or distributing any Operating 
System Product or Middleware product competitive with any Windows 
Operating System Product or Microsoft Middleware Product.
    H. Internet Browser Open-Source License
    Much of the evidence during the trial concerned Microsoft's 
relentless campaign to drive down usage of Netscape's Navigator and 
push people instead to its own browser, Internet Explorer. Indeed, a 
substantial percentage of the acts reviewed by the Court of Appeals 
involved tactics designed to "reduce[] the usage share of 
rival browsers not by making Microsoft's own browser more attractive 
to consumers but, rather, by

[[Page 28963]]

discouraging OEMs from distributing rival products." 253 F.3d 
34, 65.
    Eliminating Netscape and establishing Internet Explorer as the 
dominant browser was a critical component of Microsoft's monopoly 
maintenance strategy. Given that Microsoft's browser dominance was 
achieved to bolster the operating system monopoly, the remedial 
prescription must involve undoing that dominance to the extent it is 
still possible to do so. Accordingly, the appropriate solution is to 
mandate open source licensing for Internet Explorer, thereby 
ensuring at a minimum that others have full access to this critical 
platform and that Microsoft cannot benefit unduly from the browser 
dominance that it gained as part of its unlawful monopolization of 
the operating system market:
    12. Internet Browser Open-Source License. Beginning three months 
after the date of entry of this Final Judgment, Microsoft shall 
disclose and license all source code for all Browser products and 
Browser functionality. In addition, during the remaining term of 
this Final Judgment, Microsoft shall be required to disclose and 
make available for license, both at the time of and subsequent to 
the first beta release (and in no event later than one hundred 
eighty (180) days prior to its commercial distribution of any 
Browser product or Browser functionality embedded in another 
product), all source code for Browser products and Browser 
functionality. As part of this disclosure, Microsoft shall identify, 
provide reasonable explanation of, and disseminate publicly a 
complete specification of all APIs, Communications Interfaces and 
Technical Information relating to the Interoperation of such Browser 
product(s) and/or functionality and each Microsoft Platform Software 
product. The aforementioned license shall grant a royalty-free, non-
exclusive perpetual right on a non-discriminatory basis to make, 
use, modify and distribute without limitation products implementing 
or derived from Microsoft's source code, and a royalty-free, 
nonexclusive perpetual right on a non-discriminatory basis to use 
any Microsoft APIs, Communications Interfaces and Technical 
Information used or called by Microsoft's Browser products or 
Browser functionality not otherwise covered by this paragraph.
    I. Mandatory Distribution of Java
    Microsoft's destruction of the cross-platform threat posed by 
Sun's Java technology was a critical element of the unlawful 
monopoly maintenance violation affix-axed by the Court of Appeals. 
Microsoft continues to enjoy the benefits of its unlawful conduct, 
as Sun's Java technology does not provide the competitive threat 
today that it posed prior to Microsoft's campaign of anticompetitive 
conduct. Because an appropriate antitrust remedy decree should, 
among other things, attempt "to deny to the defendant the 
fruits of its statutory violation," Microsoft, 253 F.3d at 103 
(quoting United States v. United Shoe Mach. Corp., 391 U. S. 244, 
250 (1968)), Microsoft must be required to distribute Java with its 
platform soft-ware (i.e., its operating systems and Internet 
Explorer browser), thereby ensuring that Java receives the 
widespread distribution that it could have had absent Microsoft's 
unlawful behavior, and increasing the likelihood that Java can serve 
as a platform to reduce the applications barrier to entry:
    13. Java Distribution. For a period of 10 years from the date of 
entry of the Final Judgment, Microsoft shall distribute free of 
charge, in binary form, with all copies of its Windows Operating 
System Product and Internet Browser (including significant upgrades) 
a competitively performing Windows-compatible version of the Java 
runtime environment (including Java Virtual Machine and class 
libraries) compliant with the latest Sun Microsystems Technology 
Compatibility Kit as delivered to Microsoft at least 90 days prior 
to Microsoft's commercial release of any such Windows Operating 
System Product. Microsoft must publicly announce the commercial 
release of its Windows Operating System Products (including 
significant upgrades) at least 120 days in advance.
    J. Cross-Platform Porting of Office
    The applications barrier to entry can be eroded only when 
consumers can obtain significant software application functionality 
from their computers through means other than Microsoft's monopoly 
operating system. Cross-platform software, such as middleware, would 
have permitted the porting of numerous important applications to 
operating systems other than Microsoft's Windows. To begin to erode 
the applications barrier to entry that was enhanced by Microsoft's 
unlawful behavior, and thereby begin to "pry open to 
competition a market that has been closed by defendants" 
illegal restraints," International Salt Co. v. United States, 
332 U.S. 392, 401 (1947), Microsoft should be required to auction to 
a third party the right to port Microsoft Office to competing 
operating systems:
    14. Mandatory Continued Porting of Office to Macintosh and 
Mandatory Licensing of Office for the Purpose of Porting to Other 
Operating Systems.
    a. Continued Porting of Office to Macintosh. Microsoft shall 
port each new major release of Office to the Macintosh Operating 
System within 60 days of the date that such version becomes 
commercially available for use with a Windows Operating System 
Product, pursuant to the same terms and conditions under which it 
currently ports Office to Macintosh. The ported version shall 
operate at least as effectively as the previous ported version.
    b. Auction of Licenses To Port. Within 60 days of entry of this 
Final Judgment, Microsoft shall offer for sale, at an auction 
administered by an independent third party, licenses to sell Office 
for use on Operating Systems other than Windows, without further 
royalty beyond the auction price. In conjunction with these 
licenses, Microsoft shall supply to the winning bidders all 
information and tools required to port Office to other Operating 
Systems, including but not limited to all compatibility testing 
suites used by Microsoft to port Office to the Macintosh Operating 
System, the source code for Office for Windows and Office for 
Macintosh (to be used for the purpose of such porting only), all 
technical information required to port Office to other Operating 
Systems (including but not limited to file formats), and all parts 
of the source code of the Windows Operating System Product necessary 
for the porting. At such auction, Microsoft shall offer" to 
sell at least three such licenses, as described in this Section 
14.b, to three third parties not affiliated with either Microsoft or 
each other. The terms of such licenses shall become effective (and 
the relevant source code made available to the licensee) immediately 
upon their sale.
    c. Provision of Necessary Information. As soon as practicable, 
but in no case later than 60 days prior to the date each new version 
of Office becomes commercially available for use with a Windows 
Operating System Product, Microsoft shall provide, to holders of the 
licenses issued pursuant to Section 14.b, the compatibility testing 
suites and source code necessary to enable porting of the new 
version of Office to other Operating Systems. The terms of such 
licenses shall become effective (and the relevant source code made 
available to the licensee) no later than the date on which the new 
version of Office becomes commercially available.
    K. Intellectual Property Rights
    For many of the provisions of the remedy to be effective, 
including but not limited to the disclosure provisions contained in 
Section 4, various 0EMs, ISVs and others must necessarily acquire 
certain intellectual property rights from Microsoft. Accordingly, it 
is appropriate for Microsoft to license to such third parties those 
intellectual property rights that are necessary for the effective 
implementation of this remedy proposal:
    15. Necessary Intellectual Property License. Microsoft shall, 
within 20 days of request, license to IAPs, ICPs, IHV's, ISVs, OEMs 
and Third-Party Licensees all intellectual property rights owned or 
licensable by Microsoft that are required to exercise any of the 
options or alternatives provided or available to them under this 
Final Judgment (including without limitation enabling their 
product(s) to Interoperate effectively with Microsoft Platform 
Software), on the basis that:
    a. the license shall be on a royalty-free basis and all other 
terms shall be reasonable and non-discriminatory;
    b. the license shall not be conditional on the use of any 
Microsoft software, API, Communications Interface, Technical 
Information or service;
    c. the scope of any such license (and the intellectual property 
rights licensed thereunder) must be as broad as necessary to ensure 
that the licensee is able to exercise the options or alternatives 
provided under this Final Judgment but shall not provide any 
unnecessary rights (e.g., an IAP's, ICP's, IHV's, ISV'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); and
    d. the terms of any license granted under this section shall be 
in all respects consistent with the terms of this Final Judgment.
    L. Adherence to Industry Standards
    A common tactic in Microsoft's unlawful monopoly maintenance was 
the limitation on interoperability with potential competitors. This 
has been accomplished, on occasion, by

[[Page 28964]]

co-opting and/or undermining the industry standards for software 
developers. Microsoft also purposely deceived software developers 
into believing that the Microsoft Java programming tools had cross-
platform capability with Sun-based Java:
    16. Adherence to Industry Standards.
    a. Compliance With Standards. If Microsoft publicly claims that 
any of its products are compliant with any technical standard 
("Standard9 that has been approved by, or has been submitted 
to and is under consideration by, any organization or group that 
sets standards (a "Standard-Setting Body"), it shall 
comply with that Standard. If Microsoft chooses to extend or modify 
the implementation of that Standard, Microsoft shall continue fully 
to implement the Standard (as that Standard may be modified from 
time to time by the Standard-Setting Body). Microsoft shall continue 
to implement the Standard until: (i) Microsoft publicly disclaims 
that it implements that Standard; or (ii) the Standard expires or is 
rescinded by the standard-setting body. However, Microsoft shall not 
be permitted to require third parties to use or adopt Microsoft's 
version of the Standard. To the extent Microsoft develops a 
proprietary version of a Standard, Microsoft's Operating Systems 
must continue to support non-proprietary, industry versions of such 
Standard.
    b. Compliance With De Facto Standards. As to any Standard with 
which Microsoft is required to comply under the preceding paragraph, 
to the extent that industry custom and practice recognizes 
compliance with the Standard to include variations from the formal 
definition of that Standard (a "De Facto Standard"), 
Microsoft may discharge its obligations under this provision by 
complying with the de facto Standard provided that: (i) before doing 
so, Microsoft notifies Plaintiffs and the Special Master in writing 
of its intention to do so, and describes with reasonable 
particularity the variations included in the De Facto Standard; and 
(ii) Plaintiffs do not, within 30 days of receipt of such notice, 
object to Microsoft's intention to comply with the De Facto 
Standard.
    M. Internal Compliance
    Vigilant compliance is absolutely critical to any remedial 
program's effectiveness. The first prong of such compliance must be 
an active program of internal controls to ensure compliance, 
including the appointment of an internal January 28, 2002
Ms. Renata Hesse
Antitrust Division
U.S. Department of Justice
601 D Street, N. W., Suite 1200
Washington, D. C. 20530
Re: United States v. Microsoft Corporation, Civil Action No. 
98-1232 (CKK)
State of New York. ex tel. Attorney General Eliot Spitzer, et al. v. 
Microsoft Corporation, Civil
Action No. 98-1233 (CKK)
    Dear Ms. Hesse:
    I am writing on behalf of the states of California, Connecticut, 
Florida, Iowa, Kansas, Massachusetts, Minnesota, Utah, West Virginia 
and the District of Columbia. These jurisdictions continue to 
litigate against Microsoft Corporation to seek a remedies decree 
that will "'unfetter [the] market from anticompetitive 
conduct"; "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" U.S. v. Microsoft, 253 F.3d 34, 103 (DC Cir. 2001) 
(quoting Ford Motor Co. v. United States, 405 U.S. 562, 577 (1972) 
and United States v. United Shoe Mach. Corp., 391 U.S. 244,250 
(1968)). Although the litigating jurisdictions will have the 
opportunity to present evidence and argument directly to the. court 
concerning appropriate remedies in this case, we have produced or 
received three documents in the course of our litigation that we 
believe are especially pertinent to the record of the Tunney Act 
proceeding. Without waiving any rights to a hearing on our proposed 
decree, these documents arc:
    1. Excerpt from Plaintiff Litigating States" Answers to 
Interrogatories from Microsoft Corporation: Attached as Exhibit A 
it; the Litigating States" answer to an interogatory from 
defendant Microsoft Corporation detailing the principal inadequacies 
of the proposed consent decree. (Please note that further or 
additional problems may be revealed by discovery so this list should 
not be considered final.);
    2. Plaintiff Litigating States" Re??ial Proposals: 
Attached as Exhibit B is rite Litigating Stales" remedial 
proposal filed with the trial court on December 7, 2001. For the 
reasons stated in this document, the Litigating States conclude that 
their proposed remedy is necessary to address the illegal conduct of 
Microsoft Corporation; and
    3. Defendant-Microsoft's Responses to the Litigating States' 
Requests for Admissions: Attached as Exhibit C ate the responses of 
defendant Microsoft Corporation to the Litigating States' requests 
for admissions. In this document, Microsoft repeatedly refuses to 
admit or sidesteps characterizations by the Department of Justice of 
the proposed consent decree contained in the Competitive Impact 
Statement (CIS). Microsoft's objection that such admissions require 
a "legal conclusion" is troubling. While this could mean 
that there was never a meeting of the minds among the parties, it 
suggests, at a minimum, that the decree itself is ambiguous. As a 
result, enforcement will. in all likelihood. be delayed as the 
parties wrangle over the meaning of their agreement in an industry 
in which product cycles are extremely short and in which enforcement 
must be swirl in order to be effective.
    For the foregoing reasons, the litigating jurisdictions request 
that the Department of Justice withdraw its consent to the Revised 
Proposed Final Judgment because of its ambiguity and failure to 
adequately address the illegal conduct of Microsoft. If the 
Department chooses not to do this, the litigating jurisdictions 
request that the Revised Proposed Final Judgment be disapproved by 
the court because it fails to meet the standard in 15 U.S.C. section 
16(e).
    Respectfully submitted,
    Tom Greene
    Senior Assistant Attorney General
    California Department of Justice
FOR THE LITIGATING STATES
Exhibit A
SUPPLEMENTAL RESPONSES TO INTERROGATORIES
    1. State in the most specific and detailed manner possible each 
and every respect in which you claim that the Revised Proposed Final 
Judgment is deficient, and explain why. RESPONSE: The Plaintiff 
Litigating States object to this Interrogatory as a contention 
interrogatory that is premature and more appropriately answered at a 
later time, see Fed. R. Civ. P. 33(c), and therefore the Plaintiff 
Litigating States reserve the right to amend, supplement or modify 
the response to this Interrogatory to incorporate information gained 
through discovery. Subject to and without waiving this objection or 
the General Objections, the Plaintiff Litigating States respond 
that, as highlighted in Plaintiff Litigating States" Remedial 
Proposals filed on December 7, 2001, the Revised Proposed Final 
Judgment (the "RPFJ") is deficient in many respects, 
including without limitation the following:
    (1) the RPFJ does not require Microsoft to license an" 
unbundled version of Windows, even though (a) the Court of Appeals 
found that Microsoft's commingling of middleware code with its 
monopoly operating system was anticompetitive (see United States v. 
Microsoft Corp., 253 F.3d 34, 66 (DC Cir.) 
("Microsoft"), cert. denied, 122 S. Ct. 350 (2001), and 
(b) such a remedy would enable competing middleware developers to 
gain access to the OEM channel of distribution, recognized by 
Microsoft, and the District Court, as one of the two most important 
distribution channels (United States v. Microsoft Corp., 84 F. Supp. 
2d 9, 46 (D.DC 1999) ("Microsoft Findings of Fact'));
    (2) the RPFJ provides for overly broad exceptions to the OEM 
uniform licensing requirement, including without limitation (a) 
market development allowances, and (b) consideration tied to the 
level of an OEM's promotion or distribution of Microsoft's products 
or services, even though the Court of Appeals and District Court 
found Microsoft's discrimination between OEMs in its contractual 
relationships a critical lever in several types of anticompetitive 
conduct (see Microsoft, 253 F.3d at 59-64; Microsoft Findings 
of Fact, 84 F. Supp. 2d at 66-68);
    (3) the RPFJ does not adequately provide for timely and broad 
disclosure of interfaces and other technical information to third 
parties, despite the fact that (a) the Court of Appeals found that 
Microsoft illegally used the discriminatory disclosure of technical 
information to ISVs as an incentive to obtain their agreement to 
certain anticompetitive conditions, including curtailment of the use 
and promotion of Internet Explorer (see Microsoft, 253 F.3d at 
71-79.; see also Microsoft Findings of Fact, 84 F. Supp. 2d at 
93-94), and (b) the District Court found that Microsoft 
deliberately withheld technical information necessary to ensure the 
interoperation of a rival platform (Netscape's Navigator) and the 
Windows operating system (see Microsoft Findings of Fact, 84 F. 
Supp. 2d at 33-34) and thereby hampered the rise of this 
threat to Microsoft's monopoly;
    (4) the RPFJ limits the disclosure of interfaces and technical 
information to those that concern the interoperation of only

[[Page 28965]]

Microsoft middleware and its Windows operating system, even though 
(a) there are many other currently existing nascent threats to 
Microsoft's operating system monopoly such as alternative platforms 
like network servers, web servers, handheld computing devices and 
set-top boxes, (b) disclosure of information relating to 
interoperation between these products is as important as information 
relating to interoperation with Windows, and (c) an antitrust remedy 
must be forward looking to prevent a recurrence of analogous harm 
and not simply seek to remedy specific past misconduct (see Nat'l 
Soc'y of Pro??l Engineers v. United States, 435 U.S. 679, 697 
(1978));
    (5) the RPFJ mandates the disclosure of communications protocols 
only in the context of client-server interoperation, even though the 
disclosure of such protocols is necessary to permit third parties to 
develop other nascent threats to Microsoft's operating system 
monopoly that communicate with personal computers such as widely 
interoperable handheld devices and middleware installed thereon;
    (6) the RPFJ delays the impact of the disclosure provisions for 
up to nine months in the case of communications protocols that 
concern the interoperation of client personal computers and servers, 
and twelve months in the case of interfaces relating to the 
interoperation of middleware and operating systems--given the 
necessity of prompt disclosure in the light of the pace of change in 
the computer industry, such delays are simply unjustifiable;
    (7) the RPFJ delays the required disclosure of middleware/
operating system interoperability interfaces, in the case of new 
releases of Microsoft operating systems, until Microsoft releases a 
beta test version of the new release to 150,000 or more beta 
testers--this test is not only subject to manipulation to avoid 
timely disclosure but on its face means that disclosure will not be 
required until very close to the release date of the new product, 
thereby disadvantaging Microsoft's rivals;
    (8) the RPFJ does not require disclosure of the technical 
information required by third parties to make full use of the 
disclosed interfaces and protocols;
    (9) the RPFJ permits only members of a three person 
"Technical Committee" (one of whose members is appointed 
by Microsoft) to have access to Microsoft's source code, even though 
third parties wishing to make meaningful use of Microsoft's 
interoperability disclosures need direct access to source code 
through some means, such as a secure facility at which they can view 
and interrogate such code;
    (10) the RPFJ imposes unjustifiable qualifications in the 
provisions that appear to provide for flexibility in product 
configuration (e.g., (i) Microsoft can limit the addition of icons, 
shortcuts and menu entries for non-Microsoft products to only those 
places where Microsoft has decided to promote a Microsoft product 
with similar functionality (thus blocking such additions if 
Microsoft does not make that decision and/or does not offer a 
competing product), and (ii) the automatic launching of competing 
software may be prohibited if such software displays a user 
interface that is not of a similar size and shape to the interface 
displayed by the equivalent Microsoft software or a Microsoft 
product would not otherwise launch automatically);
    (11) the RPFJ does not adequately require Microsoft to respect 
OEM and end-user preferences for non-Microsoft software because the 
provisions which appear to have that aim are encumbered with 
unjustifiable qualifications (e.g., (i) the ability to designate a 
non-Microsoft middleware product to be invoked in place of a 
Microsoft middleware product is available only where the Microsoft 
middleware would be launched in a separate Window and would display 
all of the user interface elements or a trademark; and (ii) the 
restriction on Microsoft asking an end user to alter an OEM's 
product configuration lasts for only fourteen days and there is no 
restriction on the number of such requests Microsoft may make 
thereafter);
    (12) the RPFJ does not require Microsoft to license previous 
versions of Windows, even though (a) the guaranteed existence of 
previous versions of Windows encourages the creation of middleware 
threats to Microsoft's operating system monopoly by giving software 
developers confidence that the operating system with which their 
middleware would be designed to interact will be available to end 
users for a reasonable length of time, and (b) the District Court 
found that Microsoft used its control of information regarding a new 
release of Windows to thwart the growing popularity of a threat to 
its operating system monopoly (see Microsoft Findings of Fact, 84 F. 
Supp. 2d at 3334), and efforts to use such leverage would be less 
effective if the previous version were still to be available;
    (13) the RPFJ does not require Microsoft to notify third parties 
regarding its knowing interference with non-Microsoft middleware, 
despite the fact that (a) the Court of Appeals found that one aspect 
of Microsoft's anticompetitive conduct regarding the middleware 
threat of Sun's Java was to deceive software developers into writing 
programs using Microsoft Java development tools that did not 
interact with Sun's Virtual Java Machine (see Microsoft, 253 F.3d at 
76-77), (b) the District Court found that Microsoft made 
technical changes to Windows and Internet Explorer to ensure that 
the interoperation of Windows and a non-Microsoft browser was a 
"jolting experience" for users (see Microsoft Findings 
of Fact, 84 F. Supp. 2d at 50), and (c) the Distric Court found that 
Microsoft deliberately withheld from Netscape vital information 
required to ensure the interoperability of Navigator and a new 
version of Microsoft's Windows operating system (see Microsoft 
Findings of Fact, 84 F. Supp. 2d at 33-34)--in other 
words the remedy fails to curb Microsoft's anticompetitive tendency 
to hinder the interaction of non-Microsoft products with Microsoft-
sponsored products;
    (14) the RPFJ does not adequately restrict Microsoft's exclusive 
arrangements, despite the Court of Appeals condemnation of such 
practices as anticompetitive (see Microsoft, 253 F.3d at 
67--74), because, for example, the provisions that appear to be 
aimed at such practices are subject to overbroad and unjustifiable 
qualifications (e.g., (i) a joint venture exception that does not 
define with Any specificity the minimum criteria for the existence 
of such an arrangement and thus appears subject to manipulation; 
(ii) an exception where the third party represents that it could 
devote greater resources to non-Microsoft products than to Microsoft 
products, whether or not it actually does so; and (iii) an exception 
for any agreement under which Microsoft licenses intellectual 
property from a third party, no matter how anticompetitive the other 
terms of such agreement);
    (15) the RPFJ does not prohibit contractual tying of Microsoft 
middleware to Microsoft's Windows operating system, even though (a) 
such arrangements could unreasonably foreclose competing middleware 
providers, (b) such a remedy would help to prevent Microsoft's 
ability to further reap benefits from its illegally maintained 
operating system monopoly, and (c) the Court of Appeals found that 
Microsoft manipulated contractual relationships with various third 
parties to stifle middleware threats to its operating system 
monopoly (see Microsoft, 253 F.3d at 59-64, 69-72, 
75-76);
    (16) the RPFJ does not adequately protect against retaliation by 
Microsoft (e.g., the prohibition on retaliation against OEMs is 
limited to particular types of actions, instead of broadly banning 
any adverse action, and lists OEM activities only in connection with 
middleware and operating systems, instead of referring to any 
activities relating to products or services that compete with 
Microsoft);
    (17) the RPFJ does not effectively restrict agreements limiting 
competition, despite the Court of Appeals clear holding that such 
arrangements were anticompetitive (see Microsoft 253 F.3d at 
71-72), because, for example, (a) the provision apparently 
aimed at restricting such conduct is subject to an exception where 
an ISV has agreed to use, distribute or promote Microsoft software, 
even though such an exception could be construed as effectively 
nullifying the applicable restriction, (b) the restriction does not 
apply to agreements with any entity other than an ISV (i.e., 
presumably such agreements with an OEM, ICP, IAP, IHV or any other 
third party would not be prohibited), and (c) the restriction only 
applies to agreements relating to Windows operating system products 
(i.e., an exclusive dealing arrangement that related to other 
Microsoft platform software would not be prohibited);
    (18) the RPFJ does not address specifically the status of 
Microsoft's Internet browser, Internet Explorer, which benefited 
directly from much of Microsoft's anticompetitive conduct (see, 
e.g., Microsoft, 253 F.3d at 59-74);
    (19) the RPFJ does not address specifically Microsoft's 
anticompetitive conduct aimed at elimination of Sun's Java as a 
threat to its operating system monopoly (see, e.g., Microsoft, 9.53 
F.3d at 74-78);
    (20) the RPFJ does not require Microsoft to port its Office 
suite of applications to Apple's Macintosh, even though the Court of 
Appeals found that Microsoft's threat to terminate

[[Page 28966]]

such support for Office had been deliberately used as a 
"club" to force Apple to enter into an anticompetitive 
exclusive dealing arrangement (see Microsoft, 253 F.3d at 
72-74);
    (21) the RPFJ does not provide a mechanism to ensure that Office 
is ported to ether operating systems, despite the Court of Appeals' 
recognition of the importance of this suite of applications and 
acknowledgment that the absence of Office on a rival operating 
system, Mac OS, would eliminate such competition (see Microsoft, 253 
F.3d at 72-73), and the fact that ensuring the availability of 
Office on other platforms is likely to weaken the applications 
barrier to entry and enhance the potential of other platforms to 
compete with Microsoft's monopoly operating system;
    (22) the RPFJ requires licensees of required Microsoft 
intellectual property to pay for such license and to cross license 
their intellectual property to Microsoft, even though the premise of 
this remedy is that such intellectual property is required to allow 
third parties to exercise their rights under the final 
judgment--it is unjustifiable for Microsoft to be paid and 
benefit from cross-licensing rights simply, for ensuring the 
efficacy of remedies imposed as a result of its illegal conduct;
    (23) the RPFJ does not address Microsoft's undermining of 
industry standards, despite the Court of Appeals holding that 
Microsoft sabotaged the Java standard by deceiving software 
developers into believing that the Microsoft Java programming tools 
had cross-platform capability with Sun-based Java (see Microsoft, 
253 F.3d at 75-76);
    (24) the RPFJ does not require Microsoft to provide information 
about transactions that are not subject to the filing requirements 
of the Hart-Scott-Rodino Act, even though such transactions could be 
used by Microsoft to maintain its operating system monopoly;
    (25) the RPFJ does not protect from retaliation individuals and 
entities that participate in this litigation, despite the District 
Court and Court of Appeals findings that Microsoft is no stranger to 
retaliation and threats when it does not get its own way (e.g., (i) 
retaliation against IBM (see Microsoft Findings of Fact, 84 F. Supp. 
2d at 40); (ii) threats against Apple (see Microsoft, 253 F.3d at 
72-74); and (iii) threats against Intel (see Microsoft, 253 
F.3d at 77-78);
    (26) the RPFJ contains other unjustifiable exceptions and carve-
outs that hobble the provisions they qualify (e.g., (i) the 
restriction on retaliation against, and discriminatory treatment of, 
OEMs that promote non-Microsoft products is qualified by an 
exception that permits Microsoft to provide additional consideration 
to OEMs that, inter alia, promote Microsoft products; (ii) 
Microsoft's disclosure obligations may be construed as not extending 
to areas of activity that Microsoft has identified as important 
enough to its monopoly operating system to include in its latest 
Windows operating system release, such as authentication and 
security/encryption systems and digital rights management; and (iii) 
Microsoft's disclosure obligations relating to certain matters such 
as authentication systems are subject to Microsoft's subjective 
determination as to whether, inter alia, the recipient has a 
"reasonable" business need and a "viable" 
business);
    (27) the RPFJ contains ineffective compliance provisions (e.g., 
(i) there is no independent office or body such as a special master 
to assist the Court with compliance and enforcement; (ii) there is 
no annual compliance certification by Microsoft; (iii) there is no 
periodic reporting to the Court by an independent body regarding 
Microsoft's compliance; (iv) there is no mandatory document 
retention provision; (v) there is no mechanism for Microsoft 
employees to submit evidence of violations on a confidential basis 
to a third party; and (vi) no work product, findings or 
recommendations of the body empowered to consider complaints against 
Microsoft may be used in court, necessitating a duplication of 
effort if a complaint is not adequately dealt with on an extra-
judicial basis);
    (28) the RPFJ does not provide for a sanctions regime making 
clear the potential consequences to Microsoft of non-compliance and 
thus providing a strong incentive to comply;
    (29) the RPFJ's middleware definitions are drawn too narrowly, 
excluding from protection competitors of Microsoft in critical 
middleware markets and excluding from the restrictions of the 
judgment important Microsoft products--for example, (a). 
software cannot qualify as a "Non-Microsoft Middleware 
Product" unless at least one million copies were distributed 
in the U.S. in the previous year, meaning that by definition nascent 
or developing middleware threats receive no protection under the 
user configuration flexibility remedy, (b) certain important 
software categories such as web-based software and digital imaging 
software are not present in any of the middleware definitions, (c) 
software developed in the future by Microsoft that does not perform 
a pre-identified function (e.g., Internet browsing) but that does 
exhibit the characteristics of middleware, such as API exposure, 
would be excluded from the definition of "Microsoft Middleware 
Product" if it is not trademarked (e.g., Microsoft's photo 
editing software), had not been distributed by Microsoft separately 
from an operating system product (e.g., many of the new features on 
Windows XP) or was not similar to a competitor's product;
    (30) the RPFJ's definition of "Windows Operating System 
Product" leaves Microsoft to determine its scope, a freedom 
that could potentially eviscerate major portions of the judgment;
    (31) the RPFJ does not define certain key terms (e.g., 
"Interoperate," "Bind," "Web-Based 
Software") and narrowly defines other key terms (e.g., 
"Communications Protocol"); and
    (32) the RPFJ's term is limited initially to five 
years--given the scope of Microsoft's violations and the time 
needed to restore effective competition, this term is too short.
Exhibit B
COMPLIANCE OFFICER AND AN ANNUAL CERTIFICATION BY MICROSOFT THAT IT 
IS ADHERING TO THE REQUIREMENTS OF THE FINAL JUDGMENT:
    17. Internal Antitrust Compliance. This section shall remain in 
effect throughout the term of this Final Judgment.
    a. Compliance Committee. Within 30 days of entry of this Final 
Judgment, Microsoft shall establish a compliance committee (the 
"Compliance Committee9 of its Board of Directors, consisting 
of at least three members of the Board of Directors who are not 
present or former employees of Microsoft.
    b. Compliance Officer. The Compliance Committee shall hire a 
Compliance Officer, who shall report directly to the Compliance 
Committee and to the Chief Executive Officer of Microsoft. The 
Compliance Officer shall be responsible for development and 
supervision of Microsoft's internal programs to ensure compliance 
with the antitrust laws and this Final Judgment. Microsoft shall 
give the Compliance Officer all necessary authority and resources to 
discharge the responsibilities listed herein.
    c. Duties of Compliance Officer. The Compliance Officer shall:
    i. within 60 days after entry of this Final Judgment, arrange 
for delivery to each Microsoft officer, director, and Manager, and 
each platform software developer and employee involved in relations 
with OEMs, ISVs, IHVs, or Third-Party Licensees, a copy of this 
Final Judgment together with additional informational materials 
describing the conduct prohibited and required by this Final 
Judgment;
    ii. arrange for delivery in a timely manner of a copy of this 
Final Judgment and such additional informational materials to any 
person who succeeds to a position described in subsection c.i above;
    iii. ensure that those persons described in subsection c.i above 
are annually briefed on the meaning and requirements of this Final 
Judgment and the United States antitrust laws and advising them that 
Microsoft's legal advisors are available to confer with them 
regarding any question concerning compliance with this Final 
Judgment or under the United States antitrust laws;
    iv. obtain from each person described in subsection c.i above, 
within 30 days of entry of this Final Judgment and annually 
thereafter, and for each person thereafter succeeding to such a 
position within 5 days of such succession and annually thereafter, a 
written certification that he or she:
    (1) has read, understands, and agrees to abide by the terms of, 
and has to their knowledge not violated, this Final Judgment; and
    (2) has been advised and understands that his or her failure to 
comply with this Final Judgment may result in conviction for 
criminal contempt of court;
    v. maintain a record of persons to whom this Final Judgment has 
been distributed and from whom, pursuant to subsection c.iv above, 
such certifications have been obtained;
    vi. establish and maintain a means by which employees can report 
to the Special Master potential violations of this Final Judgment or 
the antitrust laws on a confidential basis;
    vii. on an annual basis, certify to the Plaintiffs and the 
Special Master that Microsoft is fully compliant with this Final 
Judgment; and

[[Page 28967]]

    viii. report immediately to the Plaintiffs and the Special 
Master any credible evidence of violation of this Final Judgment.
    d. Removal of Compliance Officer. The Compliance Officer may be 
removed only by the Chief Executive Officer with the concurrence of 
the Compliance-Committee.
    e. Retention of Communications and Relevant Documentation, 
Microsoft shall, with the supervision of the Compliance Officer, 
maintain for a period of at least four years (i) the e-mail, instant 
messages, and written correspondences of all Microsoft officers, 
directors and managers engaged in software development, marketing, 
sales, and developer relations related to Platform Software, and 
(ii) all documentation necessary or useful to facilitate compliance 
with this Final Judgment, including without limitation the 
calculation of development costs in Section 1.
    f. Compliance Inspection. For purposes of determining or 
securing implementation of or compliance with this Final Judgment, 
or determining whether this Final Judgment should be modified or 
vacated, and subject to any legally recognized privilege, from time 
to time:
    i. Duly authorized representatives of a Plaintiff, upon the 
written request of the Attorney General of such Plaintiff, and on 
reasonable notice to Microsoft made to its principal office, shall 
be permitted:
    (1) access during office hours to inspect and copy (or, at the 
option of the duly authorized representatives, to demand Microsoft 
provide copies of) all books, ledgers, accounts, correspondence, 
memoranda, source code, and other records and documents in the 
possession or under the control of Microsoft (which may have counsel 
present), relating to the matters contained in this Final Judgment; 
and
    (2) subject to the reasonable convenience of Microsoft and 
without restraint or interference from it, to interview, either 
informally or on the record, its officers, employees, and agents, 
who may have their individual counsel present, regarding any such 
matters.
    ii. Upon the written request of the Attorney General of a 
Plaintiff, made to Microsoft at its principal offices, Microsoft 
shall submit such written reports, under oath if requested, as may 
be requested with respect to any matter contained in this Final 
Judgment.
    iii. No information or documents obtained by the means provided 
in this section shall be divulged by a representative of a Plaintiff 
to any person other than a duly authorized representative of a 
Plaintiff, except in the course of legal proceedings to which the 
Plaintiff is a party (including grand jury proceedings), or for the 
purpose of securing compliance with this Final Judgment, of as 
otherwise required by law.
    iv. If at the time information or documents are furnished by 
Microsoft to a Plaintiff, Microsoft represents and identifies in 
writing the material in any such information or documents to which a 
claim of protection may be asserted under Rule 26(c)(7) of the 
Federal Rules of Civil Procedure, and Microsoft marks each pertinent 
page of such material, "Subject to claim of protection under 
Rule 26(c)(7) of the Federal Rules of Civil Procedure," then 
10 days notice shall be given by a Plaintiff to Microsoft prior to 
divulging such material in any legal proceeding (other than a grand 
jury proceeding) to which Microsoft is not a party.
    N. The Special Master
    In addition to internal oversight by Microsoft, effective 
implementation of this remedy also requires a Special Master 
empowered and equipped to conduct prompt investigations of any 
complaints and to propose resolutions within the short time frame 
necessary to be meaningful in such a fast-moving market. Such a 
Special Master can ensure timely resolution of any disputes and 
minimize any demand on judicial resources.
    18. Special Master. Pursuant to Rule 53 of the Federal Rules of 
Civil Procedure ("Rule 53") the Court will appoint a 
special master (the "Special Master") to monitor 
Microsoft's obligations under the Final Judgment and to aid the 
Court in enforcing the Final Judgment.
    a. Appointment. The Court will select a Special Master. Ten days 
after the Plaintiffs and Microsoft are notified of the selection, 
the Plaintiffs and Microsoft may file with the Court their written 
objections to the proposed Special Master. Any party who does not 
object within ten (10) days shall be deemed to have consented to the 
Court's selection. The terms of this subsection shall apply to any 
replacement Special Master chosen by the Court.
    b. Powers. The Special Master has and shall exercise the power 
and authority to monitor Microsoft's compliance with this Final 
Judgment, including taking all acts and measures he or she deems 
necessary or proper for the efficient performance of the Special 
Master's duties and responsibilities as set forth in this Final 
Judgment.
    c. Internal Compliance. The Special Master, and those acting 
under his or her authority, shall have access to all information, 
personnel, systems, equipment, premises and facilities the Special 
Master considers relevant to the performance of his or her duties. 
Microsoft shall develop such financial or other information as the 
Special Master may request and shall cooperate with the Special 
Master and facilitate the Special Master's ability to perform his or 
her responsibilities and to monitor Microsoft's compliance with this 
Final Judgment. To facilitate Microsoft's compliance, Microsoft will 
create a full-time position entitled "Special Master Liaison 
Officer" with primary responsibility for ensuring full 
cooperation with the Special Master, including without limitation 
arranging for timely access to personnel, information and 
facilities. The Special Master Liaison Officer shall be a senior 
Microsoft executive and shall report directly to the Chief Executive 
Officer of Microsoft. Microsoft shall give the Special Master 
Liaison Officer all necessary authority and resources to discharge 
his or her responsibilities under this subsection. If the Special 
Master determines that Microsoft is inhibiting the Special Master in 
any of its Rule 53 functions, the Special Master may file with the 
Court, sua sponte, a report of non-compliance.
    d. Advisory Committee; Staff and Expenses. The Court, with the 
assistance of the Special Master, shall appoint an advisory 
committee of 3 individuals (the "Advisory Committee9 to assist 
the Special Master on technical, economic, business and/or other 
areas of expertise. Objections to the Court's selection shall be 
lodged in the manner noted in Section 18.a. Microsoft shall 
indemnify each Advisory Committee 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 Advisory Committee's functions, except to the extent that such 
liabilities, losses, damages, claims, or expenses result from gross 
negligence or willful acts by an Advisory Committee member.
    The Special Master, upon approval from the Court, may hire such 
additional individuals as a permanent staff or on an advisory basis 
to assist the Special Master. The Special Master shall submit to the 
Court a monthly accounting of the Special Master, his or her staff 
and the Advisory Committee's services and expenses. Upon approval 
from the Court, Microsoft will remit payment to the Special Master.
    e. Periodic Reports. The Special Master shall apprise the Court, 
in writing (with copies to the Plaintiffs), whether Microsoft is in 
compliance with this Final Judgment thirty (30) days after the date 
of his or her appointment and every one hundred eighty (180) days 
thereafter until the Final Judgment terminates.
    f. Actions and Proceedings.
    i. Any person who has reason to believe that Microsoft is not 
complying with the Final Judgment may submit a complaint to the 
Special Master. The Special Master shall promptly provide a copy of 
the complaint to a State chosen by the Plaintiffs to serve as the 
recipient of such complaints.
    ii. To facilitate the communication of complaints by third 
parties, the Special Master Liaison Officer shall place on 
Microsoft's Internet website, in a manner acceptable to the Special 
Master, the procedures for submitting complaints.
    iii. The Special Master may preserve the anonymity of any third 
party complainant where he or she deems it appropriate to do so upon 
the request of the Plaintiffs or the third party, or in his or her 
discretion.
    iv. Within fourteen (14) days of the receipt of the complaint, 
the Special Master shall determine if an investigation is warranted. 
In making this decision, the Special Master may use any of its Rule 
53 powers. If the Special Master determines that an investigation is 
not warranted, the Special Master will issue a statement noting his 
or her decision to the complainant, Microsoft and each Plaintiff.
    v. If the Special Master decides to pursue a formal 
investigation, the Special Master must notify Microsoft, each 
Plaintiff and the complainant of" (i) its decision to 
investigate; (ii) the conduct underlying the potential violation; 
and (iii) the provision of the Final Judgment at issue. The Special 
Master will furnish a copy of this notice to the Court.
    vi. Within fourteen (14) days of receiving the notice of the 
Special Master's investigation, Microsoft and the complainant shall 
file with the Special Master, and copy to the Plaintiffs, a 
response, including any

[[Page 28968]]

documentation they wish the Special Master to consider.
    vii. Upon receipt of the responses, the Special Master shall 
schedule a hearing within twenty-one (21) days. The Special Master 
may exercise all powers available under Rule 53 (including without 
limitation requiring the production of documents and examining 
witnesses). The Plaintiffs shall have standing to participate in 
each such hearing.
    viii. Within fifteen (15) days from the conclusion of the 
hearing, the Special Master will file with the Court a report 
containing its factual findings and a proposed order pursuant to 
Rule 53(e)(1).
    ix. Pursuant to the requirements of Rule 53(e)(2), Microsoft and 
the complainant may object to the Special Master's report.
    g. Power Retained by Court. In addition to acting on the 
recommendations of the Special Master, the Court may institute its 
own proceedings and modify or amend the Final Judgment as necessary 
either sua sponte or at the request of the Plaintiffs.
    h. Admissibility in Subsequent Proceedings. (i) Any findings or 
recommendations by the Special Master and work product of the 
Special Master and the Advisory Committee are not prohibited 
hereunder from submission or admission in any subsequent action or 
proceeding whether before this Court or elsewhere regarding this 
Final Judgment, and [ii) the Special Master and any person who 
provided assistance thereto (including without limitation any member 
of the Special Master Advisory Committee) is not prohibited 
hereunder from testifying in any such action or proceeding.
    O. Consequences of a Pattern of Non-Compliance. In a market in 
which timing is so important, it is all too likely that delaying 
one's rivals by begrudging compliance with the obligations of the 
Final Judgment punctuated by occasional acts of outright non-
compliance--could well be profit-maximizing behavior. One 
prudent and potentially highly effective means of avoiding this 
situation is to make clear in advance that a pattern of significant, 
material non-compliance will lead to serious consequences, and 
thereby reduce the likelihood that such non-compliance will ever be 
an issue:
    19. Orders and Sanctions.
    a. Orders. The Court may act at any time to issue orders or 
directions for the construction or carrying out of this Final 
Judgment, for the enforcement of compliance therewith, and for the 
punishment of any violation thereof.
    b. Jurisdiction. Jurisdiction is retained by this Court for the 
purpose of enabling any of the parties to this Final Judgment to 
apply to this Court at any time for such further orders or 
directions as may be necessary or appropriate for the construction 
or carrying out of this Final Judgment, for the modification of any 
of the provisions hereof, for the enforcement of compliance 
herewith, and for the punishment of any violation hereof.
    c. Knowing Act of Material Non-Compliance. Upon recommendation 
of the Special Master or the Plaintiffs, or sua sponte, the Court 
shall review evidence pertaining to Microsoft's Material Non-
Compliance with the terms of this Order. If the Court determines 
that Microsoft has knowingly committed an act of Material Non-
Compliance, the Court may, in addition to any other action, convene 
a hearing to consider an order requiring Microsoft to license its 
source code for the Microsoft software that is implicated by the act 
of Material Non-Compliance to anyone requesting such a license for 
the purpose of facilitating interoperability between the relevant 
Microsoft product and any non-Microsoft product or, in the case of 
an act of Material Non-Compliance that does not implicate particular 
Microsoft software, to order such other sanctions as the Court deems 
just and appropriate given the nature of Microsoft's actions and the 
likely deterrent effect of the sanction.
    d. Pattern or Practice of Material Non-Compliance. If the Court 
finds that Microsoft has knowingly engaged in a pattern or practice 
of Material Non-Compliance with the terms of this Order, the Court 
may, in addition to any other action, (i) convene a hearing to 
consider an order requiring Microsoft to pay such civil penalties as 
the Court deems just and appropriate, given the nature of the 
violation and the likely deterrent effect of the sanction, and/or 
(ii) request proposals from the Plaintiffs and/or the Special Master 
for appropriate further conduct remedies and impose those or other 
conduct remedies the Court deems just and appropriate, given the 
nature of the violation and the likely deterrent effect of the 
sanction.
    e. Meaning of Material Non-Compliance. For purposes of this 
Section, "Material Non-Compliance" shall include any:
    i. violation of the disclosure requirements relating to APIs, 
Communications Interfaces, and Technical Information that has any 
significant effect on the ability of ISVs to develop Software 
Products or Web-Based Software that Interoperate as effectively with 
Microsoft Platform Software as Microsoft's own Software Products or 
Web-Based Software do;
    ii. violation of any anti-retaliation or non-discrimination 
provision included in this Order;
    iii. violation of the provision of this Final Judgment 
pertaining to interference with the performance of non-Microsoft 
applications, Middleware, or Web-Based Software; or
    iv. other action or omission that the Court determines has the 
effect of undermining a substantial purpose of this Order.
    f. Intellectual Property Infringement Claims. Upon 
recommendation of the Special Master or the representative of the 
Plaintiffs, or sua sponte, the Court shall review evidence that 
Microsoft has brought or has threatened to bring a groundless claim 
of Intellectual Property infringement for the purpose of preventing, 
hindering, impairing, or inhibiting any non-Microsoft software, 
Middleware, or Web-Based Software from Interoperating with a 
Microsoft Operating System Product or Microsoft Middleware Product. 
If the Court determines that Microsoft has undertaken such action, 
it shall issue an order enjoining Microsoft from asserting or 
enforcing any intellectual property rights in related APIs, 
Communications Interfaces, or Technical Information.
    P. Reporting of Software and Related Transactions
    Microsoft can use acquisitions as a weapon to maintain its 
operating system monopoly. Many of these deals are structured in 
such a way, or relate to such relatively small businesses, that they 
are not captured by the disclosure regime under the Hart-Scott-
Rodino Act. To ensure governmental oversight over these 
transactions, the remedy should provide for limited disclosures to 
the plaintiffs in connection with such transactions.
    20. Reporting of Certain Transactions.
    a. Notice. For any direct or indirect acquisition (which term 
includes an acquisition of securities or of assets) or investment by 
Microsoft or any of its Subsidiaries and for any exclusive license 
of technology or other intellectual property to Microsoft or any of 
its Subsidiaries, Microsoft must provide the Plaintiffs with sixty 
(60) days" prior written notice of the consummation of such 
acquisition, investment or license transaction where such 
transaction involves (either as a direct or indirect 
"acquiree, investee or licensor) a person (other than 
Microsoft or any of its Subsidiaries) whose business (or any part 
thereof) has been or could reasonably be classified under (or any of 
whose Subsidiary's businesses, or any part thereof, has been or 
could reasonably be classified under) any of the following North 
American Industry Classification System codes, and Microsoft did not 
own 33% or more of the securities of such person prior to December 
1, 2001:
    i. 334 (computer and electronic product manufacturing);
    ii. 42143 (computer and computer peripheral equipment and 
software wholesalers);
    iii. 5133 (telecommunications);
    iv. 5132 (cable networks and program distribution);
    v. 52 (finance and insurance); or
    vi. 5415 (computer systems design and related services).
    b. Information. Accompanying such written notice shall be the 
same information that would be reported if the Hart-Scott-Rodino 
Antitrust Improvements Act of 1976 (the "HSR Act9 were 
applicable to such transaction. Such information shall be treated as 
confidential to the extent that it would be so treated under the HSR 
Act.
    21. Effective Date, Term, Broad Interpretation, Costs and Fees.
    a. Effective Date. This Final Judgment shall take effect 30 days 
after the date on which it is entered.
    b. Term. This Final Judgment shall expire at the end often years 
from the date on which it takes effect.
    c. Broad Interpretation. All of the provisions of this Final 
Judgment, whether substantive, regulatory or procedural, will be 
interpreted broadly consistent with its remedial purpose of 
restoring the prospect of competition to the operating systems 
market.
    d. Costs and Fees. Plaintiffs shall be awarded reasonable costs 
and fees. The Plaintiffs shall submit a motion for costs and

[[Page 28969]]

fees, with supporting documents as necessary, no later than forty-
five (45) days after the entry of this Final Judgment.
    22. Definitions.
    a. "Advisory Committee" has the meaning given in 
Section 18.d.
    b. "Agreement" means any agreement, understanding, 
joint venture, arrangement or alliance, whether written or oral.
    c. "APIs" or application programming interfaces mean 
the interfaces, service provider interfaces, file formats, data 
structures, Component Object Model specifications and interfaces, 
registry settings, global unique identifiers ("GUIDs") 
and protocols that enable a hardware device or an application, 
Middleware, server Operating System or network Operating System to 
efficiently obtain services from (or provide services in response to 
requests from) and fully Interoperate with Platform Software and to 
use, benefit from, and rely on all the resources, facilities, and 
capabilities of such Platform Software. APIs include all interfaces, 
methods, routines and protocols that enable any Microsoft Operating 
System or Middleware Product installed on a Personal Computer to (a) 
execute fully and properly applications or Middleware designed to 
run in whole or in part on any Microsoft Platform Software installed 
on that or any other device (including servers, telephones and 
devices), (b) fully Interoperate with Microsoft Platform Software, 
applications or directories installed on the same computer or on any 
other computer or device, and (c) perform network security protocols 
such as authentication, authorization, access control, encryption / 
decryption and compression/decompression.
    d. "Bind" means to include software or a link to 
Web-Based Software in an Operating System Product in such a way that 
either an OEM or an end user cannot readily remove or uninstall the 
binary code of that software or link without degrading the 
performance or impairing the functionality of such software or the 
Operating System.
    e. "Browser" means software that, in whole or in 
part, provides the functionality present in any version of Internet 
Explorer or MSN Explorer offered on either Macintosh or Windows, 
including without limitation utilizing, storing or communicating in 
any way with or via HTTP, HTML, URLs, XML, Javascript or any broadly 
compatible or competitive standards, products, systems, protocols, 
or functionalities.
    f. "Communications Interfaces" means the interfaces 
and protocols that enable software, directories, networks, Operating 
Systems, network Operating Systems or Web-Based Software installed 
on one computer (including Personal Computers, servers and Handheld 
Computing Devices) to Interoperate with the Microsoft Platform 
Software on another computer including without limitation 
communications designed to ensure security, authentication or 
privacy.
    g. "Covered OEM" means one of the 20 Personal 
Computer OEMs having obtained the highest volume of licenses of 
Windows Operating System Products from Microsoft in the calendar 
year preceding the effective date of the Final Judgment. Starting on 
January 1, 2003, Microsoft shall annually determine and publish 
within 30 days the list of OEMs that shall be treated as covered 
OEMs for the new calendar year, based on the independently 
determined volume of licenses during the preceding calendar year.
    h. "De Facto Standard" has the meaning given in 
Section 16.b.
    i. "Default Middleware" means Middleware configured 
to launch automatically (that is, "by default") to 
provide particular functionality in the event that the user has not 
selected specific Middleware for this purpose. For example, a 
default Web browser is Middleware configured to launch automatically 
to display Web pages in the event that the user has not selected 
other software for this purpose.
    j. "End-User Access" means the invocation of 
Middleware directly or indirectly by an end user of a computer, or 
the end user's ability to invoke Middleware. "End-User 
Access" includes invocation of Middleware that the Operating 
System Product's design requires the end user to accept.
    k. "Handheld Computing Device" means any RAM-based 
electronic computing device (including without limitation a cellular 
telephone, personal digital assistant and Pocket PC) that is small 
enough to be used while held in the user's hand, that may or may not 
be capable of networked operation, including Internet access, that 
contains a computer microprocessor, and that can run software 
applications or Web-Based Software.
    l. "HSR Act" has the meaning given in Section 20.b.
    m. "IAP" means an Internet access provider that 
provides consumers with a connection to the Internet, with or 
without its own proprietary content.
    n. "ICP" means an Internet content provider that 
provides content to users of the Internet by maintaining Web sites 
or Web servers.
    o. "IHV" means an independent hardware vendor that 
develops hardware to be included in or used with a computer.
    p. "Intellectual Property" means copyrights, 
patents, trademarks or trade secrets that Microsoft uses or licenses 
to third parties.
    q. "Interoperate means the ability of two products to 
effectively access, utilize and/or support the full features and 
functionality of one another.
    r. "ISV" means any entity other than Microsoft (or 
any subsidiary, division, or other operating unit of any such other 
entity) that is engaged in the development and licensing (or other 
marketing) of software products or Web-Based Software (including 
without limitation products or services designed for Personal 
Computers, servers or Handheld Computing Devices).
    s. "Manager" means a Microsoft employee who is 
responsible for the direct or indirect supervision of more than 100 
other employees.
    t. "Market Development Allowance" means any 
marketing development allowance, agreement, program, rebate, credit 
or discount, whereby an OEM or Third-Party Licensee is provided a 
monetary discount in the applicable royalty for a licensed product 
(other than the discount specifically described in Section 2.a.ii of 
this Judgment) in exchange for the OEM or Third-Party Licensee 
agreeing to some additional licensing term. For example, Microsoft 
has previously referred to Marketing Development Allowances as 
marketing development agreements, or MDAs, and marketing development 
programs, or MDPs.
    u. "Material Non-Compliance" has the meaning given 
in Section 19.e.
    v. "Microsoft" means Microsoft Corporation, its 
successors and assigns (including any transferee or assignee of any 
ownership rights to, control of, or ability to license the 
Intellectual Property referred to in this Final Judgment), their 
subsidiaries, affiliates, directors, officers, managers, agents, and 
employees, and 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.
    w. "Middleware" means software, whether provided in 
the form of files installed on a computer or in the form of Web-
Based Software, that operates directly or through other software 
within an Operating System or between an Operating System (whether 
or not on the same computer) and other software (whether or not on 
the same computer) by offering services via APIs or Communications 
Interfaces to such other software, and could, if ported to or made 
Interoperable with multiple Operating Systems, enable software 
products written for that Middleware to be run on multiple Operating 
System Products. Examples of Middleware within the meaning of this 
Final Judgment include without limitation Internet browsers, network 
operating systems, e-mail client software, media creation, delivery 
and playback software, instant messaging software, voice recognition 
software, digital imaging software, the Java Virtual Machine, 
calendaring * systems, Handheld Computing Device sychronization 
software, directories, and directory services and management 
software. Examples of software that are not Middleware within the 
meaning of this Final Judgment are disk compression and memory 
management software.
    z. "Microsoft Middleware Product" means
    i. Internet browsers, e-mail client software, media creation, 
delivery and playback software, instant messaging software, voice 
recognition software, digital imaging software, directories, 
Exchange, calendaring systems, systems and enterprise management 
software, Office, Handheld Computing Device synchronization 
software, directory services and management software, the Common 
Language Runtime component of the Net framework, and Compact 
Framework, whether provided in the form of files installed on a 
computer or in the form of Web-Based Software, or
    ii. Middleware distributed by Microsoft that-
    (1) is, or in the three years preceding this Judgment has been, 
distributed separately from an Operating System Product, any 
successors thereto, or
    (2) provides functionality similar to that provided by 
Middleware offered by a Microsoft competitor.
    y. "Microsoft Platform Software" means a Windows 
Operating System Product or

[[Page 28970]]

Microsoft Middleware Product or any combination of a Windows 
Operating System Product and a Microsoft Middleware Product.
    z. "OEM" means the manufacturer or assembler of a 
computer (including without limitation servers and Handheld 
Computing Devices), regardless of whether such manufacturer or 
assembler applies its trademark to the final product.
    aa. "Office" means all software developed and 
distributed by Microsoft incorporating the brand name 
"Microsoft Office" and its successors, including at 
least the individual Microsoft Middleware Products Word, Excel, 
Outlook, Power Point, and Access.
    bb. "Operating System" means the software that 
controls the allocation and usage of hardware resources (such as 
memory, central processing unit time, disk space, and peripheral 
devices) of a computer (including without limitation Personal 
Computers, servers and Handheld Computing Devices) or network, 
providing a "platform" by exposing APIs that 
applications use to "call upon" the Operating System's 
underlying software routines in order to perform functions.
    cc. "Operating System Product" means an Operating 
System and additional software shipped with the Operating System, 
whether or not such additional software is sold separately. An 
Operating System Product includes Operating System Product upgrades 
that may be distributed separately from the Operating System Product 
and any version of any Operating System Product created pursuant to 
the terms and requirements of this Final Judgment.
    dd. "Personal Computer" means any computer 
configured so that its primary purpose is to be used by one person 
at a time, that uses a video display and keyboard (whether or not 
the video display and keyboard are actually included), and that 
contains an Intel x86, successor, or competitive microprocessor, and 
computers that are commercial substitutes for such computers.
    ee. "Plaintiff" means any of the following 
plaintiffs in this action: the States of California, Connecticut, 
Florida, Iowa, Kansas, Massachusetts, Minnesota, Utah and West 
Virginia and the District of Columbia.
    ff. "Platform Software" means an Operating System or 
Middleware or any combination of an Operating System and Middleware.
    gg. "Rule 53" has the meaning given in Section 18.
    hh. "Special Master" has the meaning given in 
Section 18.
    ii. "Special Master Liaison Officer" has the meaning 
given in Section 18.c.
    jj. "Standard" has the meaning given in Section 16. 
a above.
    kk. "Standard-Setting Body" has the meaning given in 
Section 16.a above.
    ll. "Subsidiary" of a person means an affiliate 
controlled by such person directly, or indirectly through one or 
more intermediaries.
    mm. "Synchronization Drivers" means software that 
facilitates or enables the synchronization of information on any two 
computers (including without limitation Personal Computers, servers 
and Handheld Computing Devices).
    nn. "Technical Information" means all information 
regarding the identification and means of using and/or implementing 
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 computer. Technical information includes but is not limited to 
reference implementations, communications protocols, file formats, 
data formats, syntaxes and grammars, data structure definitions and 
layouts, error codes, memory allocation and deallocation 
conventions, threading and synchronization conventions, functional 
specifications and descriptions, encryption algorithms and key 
exchange mechanisms for data translation, reformatting, registry 
settings and field contents.
    oo. "hird-Party Licensee" means any person offering 
to purchase from Microsoft at least 10,000 licenses of a product or 
products offered and licensed under Section 1, including without 
limitation ISVs, systems integrators and value-added resellers.
    pp. "Timely Manner": Disclosure of APIs, Technical 
Information and Communications Interfaces in a Timely Manner means, 
at a minimum, publication on a Web site accessible to ISVs, IHVs, 
OEMs and Third-Party Licensees at the earliest of the time that such 
APIs, Technical Information, or Communications Interfaces are (i) 
disclosed to Microsoft's applications developers, or (ii) used by 
Microsoft's own Platform Software developers in software released by 
Microsoft in alpha, beta, release candidate, final or other form, or 
(iii) disclosed to any third party, or (iv) within 90 days of a 
final release of a Windows Operating System Product, no less than 5 
days after a material change is made between the most recent beta or 
release candidate version and the final release.
    qq. "Web-Based Software" means software code that 
resides, in whole or in part, on a computer connected to a network 
and whose functionality (whether or not described as or labeled a 
service), includes without limitation database, directory and/or 
security functionality, accessed via a different computer via the 
Internet.
    rr. "Windows Operating System Product" means 
software code (including source code and binary code, and any other 
form in which Microsoft distributes its Windows Operating Systems 
for Personal Computers) of Windows 95, Windows 98, Windows 2000 
Professional, Windows Me, Windows XP and their successors (including 
the Windows Operating Systems for Personal Computers codenamed 
"Longhorn," and "Blackcomb," and their 
successors), as distributed by Microsoft to any licensee, whether or 
not such product includes software code of any one or more Microsoft 
Middleware Products.
The Importance of this Remedy Litigation
    Plaintiff Litigating States" proposed remedies, taken 
together, redress Microsoft's anticompetitive behavior in a manner 
that fully comports with the principles and spirit of the Court of 
Appeals" decision. These proposed remedies are intended to 
prohibit the recurrence of, and remedy the harm done by, the 
Microsoft practices that were held to be unlawful by the Court of 
Appeals.
    They are framed in terms of the specific anticompetitive conduct 
in which Microsoft engaged, such as commingling middleware and 
operating system software code; discriminatory licensing; failure to 
make timely disclosure of the interfaces necessary to enable its 
rivals to market software compatible with Windows; actual and 
threatened retaliation against customers and rivals to discourage 
their development and use of competing software; refusal to give 
OEMs and consumers the freedom to choose software based solely on 
its merits; the pollution of cross-platform technologies like Java; 
and the abuse of important applications like Office to deter the 
emergence of alternative software platforms.
    These remedies are also intended to minimize the enforcement 
burden on the Court by giving Microsoft incentives to comply and by 
appointing a Special Master with substantial authority. Unlike the 
previously announced settlement between the Department of Justice 
("DOJ") and Microsoft, these remedies create a real 
prospect of achieving what the DOJ said it intended to accomplish: 
"stop Microsoft from engaging in unlawful conduct, prevent any 
recurrence of that conduct in the future, and restore competition in 
the software market..." Assistant Attorney General Charles 
James, DOJ Press Release, Nov. 2, 2001, at page 1.
    To implement a meaningful remedy faithful to the Court of 
Appeals decision, the Plaintiffs" proposals must and do differ 
substantially from the DOJ settlement. By the terms of the Final 
Judgment, Plaintiffs propose that, unlike the DOJ settlement, 
Microsoft be required, inter alia: (1) to license an unbundled 
version of Windows (i.e., in which code for Microsoft's middleware 
and its monopoly operating system is not commingled); (2) to provide 
early and broad disclosure of interfaces so that rival software 
companies have a fair opportunity to bring their products to market 
at the same time as Microsoft; (3) to disclose technical information 
so that rival handheld devices, servers and networks can 
interoperate with Microsoft's dominant Windows operating system; (4) 
to respect OEM and end-user preferences for non-Microsoft software, 
so that consumers have real freedom of choice unbiased by Microsoft; 
(5) to make Internet Explorer, the browser that benefited from so 
many of Microsoft's anticompetitive acts, available on an open 
source basis; (6) to carry Java, which Microsoft also labored 
mightily to destroy, along with its own operating system; and (7) to 
pert Office to work on other operating systems. These remedies also 
differ from the DOJ settlement in that they recognize that: (1) 
carefully crafted carve-outs and exceptions must be avoided, because 
of their tendency to render potentially useful provisions impotent, 
and (2) effective compliance requires strict requirements for 
internal compliance, strong incentives, and an enforcement mechanism 
(the Special Master) that promises prompt resolution of differences 
and minimal burden on the Court's resources. Accepting the 
determinations and directives from the Court of Appeals, both in its 
liability determination

[[Page 28971]]

and in its guidance on remedy, the Plaintiff Litigating 
States" Remedy Proposals maximize the prospect for truly 
meaningful platform competition, and all of the benefits to 
consumers that such competition would yield.
    Respectfully submitted,
    By: /s/ Brendan V. Sullivan, Jr.
    Brendan V. Sullivan, Jr. (Bar No. 12757)
    By: /s/ Steven R. Kuney
    Steven R. Kuney (Bar No. 253286)
    WILLIAMS & CONNOLLY LLP
    725 Twelfth. Street, NW
    Washington, DC 20005
    Tel: (202) 434-5000
    Fax: (202) 434-5029
    Counsel for the Plaintiff Litigating States
    California, Connecticut, Florida, Iowa,
    Kansas, Massachusetts, Minnesota,
    Utah and the District of Columbia
    By: /s/Thomas Greene
    Thomas Greene
    Office of the Attorney General of the State of California
    455 Golden Gate Avenue, Suite 11000
    San Francisco, California 94102
    Tel: (415) 703-5555
    For the Plaintiff Litigating States
    By: /s/Douglas L. Davis
    Douglas L. Davis
    Assistant Attorney General for the State of West Virginia
    Consumer Protection/Antitrust Division
    P.O. Box 1789
    Charleston, West Virginia 25326-1789
    Tel: (304) 558-8986
    Counsel for the Plaintiff Litigating State
    West Virginia
Exhibit C
IN THE UNITED STATES DISTRICT COURT FOR THE D1STRICT OF COLUMBIA 
-----------------------
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-----------------------
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STATE OF NEW YORK ex. rel.
Attorney General ELIOT SPITZER, et at.,
Plaintiffs, Civil Action No. 98-1233 (CKK)
v.
    Next Court Deadline: March 4, 2002
MICROSOFT CORPORATION, Status Conference
Defendant. 
-----------------------
-----------------------
-----------------------
-------------
MICROSOFT CORPORATION'S RESPONSE TO PLAINTIFF LITIGATING 
STATES" FIRST JOINT REQUESTS FOR ADMISSION IN REMEDY 
PROCEEDINGS
    Pursuant to Rule 36 of the Federal Rules of Civil Procedure, 
Local Rule 26.2, and the Scheduling Order entered by the Court on 
September 28, 2001, defendant Microsoft Corporation 
("Microsoft") hereby objects and responds as follows to 
the Plaintiff Litigating States" First Joint Requests for 
Admission in Remedy Proceedings (the "Requests").
GENERAL OBJECTIONS
    The following General Objections apply to each of the Requests 
and shall have the same force and effect as if set forth in full in 
response to each individually numbered request.
    A. To the Requests Generally
    1. Microsoft objects to each of the Requests to the extent that 
they seek information protected from discovery by file attorney-
client privilege, the attorney work product doctrine or any other 
applicable privilege, protection, immunity, law or rule. Any 
disclosure??of information protected from discovery by the attorney-
client privilege, the attorney work product doctrine or any other 
applicable privilege, protection, immunity, law or rule is 
inadvertent and should not be construed to constitute a waiver.
    2. Microsoft objects to each of the Requests (and their 
accompanying Instructions) to the extent that they seek to impose 
burdens and obligations on Microsoft that exceed those imposed by 
the Federal Rules of Civil Procedure or the Local Rules of the 
United States District Court for the District of Columbia.
    3. Microsoft objects to each of the Requests to the extent they 
are overly broad and unduly burdensome and seek information that is 
not relevant to any remaining claim or defense in this action.
    4. Microsoft objects generally to the Requests to the extent 
they are vague and ambiguous and do not pose simple and direct 
questions that cab. be readily admitted or denied.
    5. Microsoft objects generally to the Requests to the extent 
they seek to elicit information concerning issues in dispute between 
the parties that is more appropriately sought through other 
discovery devices.
    6. Microsoft objects generally to the Requests to the extent 
they call for legal conclusions or seek ratification of the legal 
significance plaintiffs ascribe to disputed issues of fact.
    7. Microsoft objects generally to the Requests 1o the extent 
they are argumentative or reflect plaintiffs" subjective 
interpretation of factual issues.
    8. By agreeing to respond to the Requests, Microsoft does not 
concede that the Requests seek information that is relevant to any 
remaining claim or defense in this action. Similarly, Microsoft does 
not concede that the Requests seek information that is reasonably 
calculated to lead to the discovery of admissible evidence. 
Microsoft instead expressly reserves all further objections as to 
the relevance and admissibility of the information provided, as well 
as the fight to object to further discovery relating to the subject 
matter of any information provided.
    9. Microsoft objects to the Requests to the extent they purport 
to require that the response be made "under oath." Rule 
36 of the Federal Rules of Civil Procedure provides that a written 
answer "signed by the party or the party's attorney" is 
a fully sufficient response to requests for admission.
    B. To the Instructions
    1. Microsoft objects to Instruction No. 1 to the extent that it 
purports to impose burdens and obligations on Microsoft that arc 
different from or greater than those imposed by Rule 36 of the 
Federal Rules of Civil Procedure.
    2. Microsoft objects to Instruction No. 2 to the extent that it 
purports to impose burdens and obligations on Microsoft that are 
different from or greater than those imposed by Rule 36 of the 
Federal Rules of Civil Procedure.
    3. Microsoft objects to Instruction No. 3 to the extent that it 
purports to impose burdens and obligations on Microsoft that are 
different from or greater than those imposed by Rule 26(e) of the 
Federal Rules of Civil Procedure.
RESPONSES TO SPECIFIC REQUESTS FOR ADMISSION
REQUEST NO. 1
    Admit that Microsoft has violated the antitrust laws of the 
United States of America, and in particular Section 2 of the Sherman 
Act, 15 U.S.C.  2. Response: Objection. This request 
improperly calls for a legal conclusion. Notwithstanding this 
objection, Microsoft admits that the United States Court of Appeals 
for the District of Columbia affirmed in part a conclusion that 
Microsoft had violated Section 2 of the Sherman Act and avers that, 
pending resolution of all proceedings in this Court, Microsoft 
retains the ability to challenge that conclusion in the United 
States Supreme Court.
REQUEST NO. 2
    Admit that "the key 1o 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." Plaintiff United States Department of 
Justice Competitive Impact Statement ("CIS") at 24. 
Response: Admit that the quoted statement appears in the CIS 
prepared by the A?? Division of the U.S. Department of Justice. 
("DOJ") but deny that Microsoft shares the opinion 
expressed.
REQUEST NO. 3
    Admit that "OEMs are a crucial channel for distribution 
and ultimate usage of Non-Microsoft Middleware Products such as 
browsers." CIS at 25. Response: Admit that the quoted 
statement appears in the CIS prepared by the DOJ but deny that 
Microsoft shares the opinion expressed. There are numerous other 
distribution channels for software products, including electronic 
downloading from the Interact, and those channels have, if anything, 
become more effective in garnering usage since the original trial of 
this action ended.
REQUEST NO. 4
    Admit that in order for a remedy in this proceeding to be 
effective, "it is critical that the OEMs ... are free to 
choose to distribute and promote middleware without interference 
from Microsoft." CIS at 23.
    Response: Admit that the quoted statement appears in the CIS 
prepared by the DOJ but deny that Microsoft shares the opinion 
expressed, particularly to the extent it suggests that OEMs were 
appreciably restrained from promoting non-Microsoft middleware in 
the past. OEMs have always been free to install non-Microsoft 
software products on their personal computers and to promote such 
software products through placement of icons on the Windows desktop 
and in the Start menu and otherwise.
REQUEST NO. 5
    Admit that in determining whether Microsoft has violated Section 
III.A. of the Revised Proposed Final Judgment filed on November 6, 
2001 (hereafter "RPFJ"), "It]he existing 
Microsoft-OEM relationship provides a baseline against which any 
changes Microsoft makes in its treatment of that OEM for prohibited 
reasons can be detected and assessed." CIS at 25.

[[Page 28972]]

    Response: Admit that the quoted statement appears in the CIS 
prepared by the DOJ but deny knowledge or information sufficient to 
form a belief as to how the DOJ intends to ascertain whether a 
violation of Section III.A of the RPFJ has occurred.
REQUEST NO. 6
    Admit that under the RPFJ, Microsoft can compensate (both 
monetarily and non-monetarily) an OEM in return for an agreement to 
include a Microsoft product or service with personal computers 
shipped to customers.
    Response: Objection. The proper interpretation of the RPFJ calls 
for a legal conclusion. Microsoft refers plaintiffs to Section III.A 
of the RPFJ for a complete end accurate statement of its terms.
REQUEST NO. 7
    Admit that under the RPFJ, Microsoft can withhold Consideration 
from an OEM if an OEM chooses not to support, promote or carry any 
Microsoft product or service.
    Response: Objection. The proper interpretation of the RPFJ calls 
for a legal conclusion. Microsoft refers plaintiffs to Section III.A 
of the RPFJ for a complete and accurate statement of its terms.
REQUEST NO. 8
    Admit that under the RPFJ, if an OEM chooses to remove user 
access to any Microsoft Middleware Product, Microsoft can compensate 
(both monetarily and non-monetarily) that OEM less than an OEM that 
chooses not to remove user access to any Microsoft Middleware 
Product.
    Response: Objection. The proper interpretation of the RPFJ calls 
for a legal conclusion. Microsoft refers plaintiffs to Sections 
III.A and III.B of the RPFJ for a complete and accurate statement of 
their terms.
REQUEST NO. 9
    Admit that the majority of Covered OEMs were at one or more 
times during the calendar years 2000 and 2001 in violation of the 
terms of their license agreements with Microsoft.
    Response: Denied.
REQUEST NO. 10
    Admit that "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." CIS at 28.
    Response: Admit that the quoted statement appears in the CIS 
prepared by the DOJ but deny that Microsoft shares the opinion 
expressed.
REQUEST NO. 11
    Admit that under the RPFJ, Microsoft is free to enforce its 
license, s with OEMs for Windows Operating System Products in a non-
uniform manner.
    Response: Objection. The nature of Microsoft's rights and 
obligations under the RPFJ calls for a legal conclusion. Microsoft 
refers plaintiffs to the RPFJ for a complete and accurate statement 
of its terms.
REQUEST NO. 12
    Admit that under the RPFJ, if an OEM "promote[s] or 
install[s] third party offers for Interact access, subscription on-
line music services, or Web-based applications that use or support 
Non-Microsoft Middleware such as an alternate browser, audio/video 
client software, or Java Virtual Machine," CIS at 30, 
Microsoft may offer that OEM less Consideration than an OEM that 
agrees to promote or install Microsoft software applications, 
services and/or Middleware Products.
    Response: Objection. The proper interpretation of the RPFJ calls 
for a legal conclusion. Microsoft refers plaintiffs to Sections 
III.A and III.C of the RPFJ for a complete and accurate statement of 
their terms.
REQUEST NO. 13
    Admit that under the RPFJ, if Microsoft designs a Windows 
Operating System Product to "reserve a particular list for 
multimedia players, [Microsoft] cannot specify either that the 
listed player be its own Windows Media Player or that, whatever 
multimedia player an OEM chooses to list in that entry, it be 
capable of supporting a particular proprietary Microsoft data 
format." CIS at 30-31.
    Response: Objection. The proper interpretation of the RPFJ calls 
for a legal conclusion. Microsoft refers plaintiffs to Section 
III.C.1 of the RPFJ for a complete and accurate statement of its 
terms.
REQUEST NO. 14
    Admit that under the RPFJ, Microsoft can prevent an OEM from 
installing a list of Middleware Products or other software products 
on a Windows Operating System Product.
    Response: Objection. This request is vague and ambiguous in its 
use of the phrase "installing a list of Middleware Products or 
other software products." Moreover, the proper interpretation 
of the RPFJ calls for a legal conclusion. Microsoft refers 
plaintiffs to Section III.C.1 of the RPFJ for a complete and 
accurate statement of its terms.
REQUEST NO. 15
    Admit that under the RPFJ, Microsoft can prohibit an OEM from 
launching automatically, at the conclusion of the initial boot 
sequence or upon connection or disconnection from the Internet, any 
non-Microsoft Middleware Product so long as a Microsoft Middleware 
Product with similar functionality would not otherwise launch 
automatically.
    Response: Objection The proper interpretation of the RPFJ calls 
for a legal conclusion Microsoft refers plaintiffs to Section 
III.C.3 of the RPFJ for a complete and accurate statement of its 
terms.
REQUEST NO. 16
    Admit that under the ??PFJ, Microsoft can prevent an OEM from 
configuring its products to launch non-Microsoft Middleware 
automatically, other than when Microsoft Middleware Products launch 
automatically at the conclusion of the first boot sequence or 
subsequent boot sequences or upon connection to or disconnection 
from the Internet.
    Response: Objection. The proper interpretation of the RPFJ calls 
for a legal conclusion. Microsoft refers plaintiffs to Section 
III.C.3 of die RPFJ fur a complete and accurate statement of its 
terms.
REQUEST NO. 17
    Admit that under the RPFJ, Microsoft can offer an OEM 
Consideration in return for that OEM configuring its products to 
launch Microsoft Middleware Products at any time, including at the 
conclusion of the first boot sequence* or subsequent boot sequences 
or upon connection to or disconnection from the Internet.
    Response: Objection. The nature of Microsoft's rights and 
obligations under the RPFJ calls for a legal conclusion. Microsoft 
refers plaintiffs to the RPFJ for a complete and accurate statement 
of its terms.
REQUEST NO. 18
    Admit that under the RPFJ, Microsoft can impose currently 
unspecified "technical specifications" in connection 
with any IAP offer presented during the initial boot sequence.
    Response: Objection. The proper interpretation of the RPFJ calls 
for a legal conclusion. Microsoft refers plaintiffs to Section 
III.C.5 of the RPFJ for a complete and accurate statement of its 
terms.
REQUEST NO. 19
    Admit that under the RPFJ, Microsoft can restrict by agreement 
an OEM from promoting any non-Microsoft Middleware or any other ISV 
product or service during the initial boot sequence.
    Response: Objection. The nature of Microsoft's rights and 
obligations under the RPFJ calls for a legal conclusion. Microsoft 
refers plaintiffs 1o the RPFJ for a complete and accurate statement 
of its terms.
REQUEST NO. 20
    Admit that under the RPFJ, Microsoft can offer an OEM 
Consideration in return for aa agreement to promote only Microsoft 
products or services, including Microsoft Middleware Products, 
during the initial boot sequence.
    Response: Objection. The nature of Microsoft's fights and 
obligations under the RPFJ calls for a legal conclusion. Microsoft 
refers plaintiffs to the RPFJ for a complete and accurate statement 
of its terms.
REQUEST NO. 21
    Admit that under the RPFJ, Microsoft does not have to disclose 
to ISVs, IHVs, IAPs, ICPs, and OEMs all of the APIs and related 
technical information relating to Microsoft Platform Software that 
are disclosed to developers of Microsoft Middleware Products.
    Response: Objection. The proper interpretation of the RPFJ calls 
for a legal conclusion. Microsoft refers plaintiffs to Section III.D 
of the RPFJ for a complete and accurate statement of its terms.
REQUEST NO. 22
    Admit that since January 1, 2000 developers of Microsoft 
Middleware Products have studied, interrogated and/or interacted 
with the source code and any related documentation of Microsoft 
Platform Software.
    Response: Objection. This request is circular #yen that 
Microsoft Platform Software is defined in Section VIA. of the RPFJ 
to include the Microsoft Middleware Products defined in Section VI.K 
of the RPFJ.
REQUEST NO. 23
    Admit that the APIs that must be disclosed under the RPFJ 
include, "broadly, any interface, protocol or other method of 
information exchange between Microsoft Middleware and a Windows 
Operating System Product." CIS at 33-34.

[[Page 28973]]

    Response: Objection. The proper interpretation of the RPFJ calls 
for a legal conclusion. Microsoft refers plaintiffs to Section III.D 
of the RPFJ for a complete* and accurate statement of its terms.
REQUEST NO. 24
    Admit that under the RPFJ, Microsoft's obligation to disclose 
"documentation" only requires Microsoft to disclose the 
sort of information that Microsoft already provides to ISVs and 
others through the Microsoft Developer's Network 
("MSDN").
    Response: Objection. The proper interpretation of the RPFJ calls 
"for a legal conclusion. Microsoft refers plaintiffs to 
Section III.D of the RPFJ and the definition of Documentation in 
Section VI.E of the RPFJ for a complete and accurate statement of 
their terms.
REQUEST NO. 25
    Admit that developers of Microsoft Middleware have access to 
APIs and/or related technical information and documentation relating 
to Microsoft Platform Software that are not disclosed by Microsoft 
through the MSDN.
    Response: Objection. This request is circular given that 
Microsoft Platform Software is defined in Section VI.L of the RPFJ 
to include the Microsoft Middleware* Products defined in Section 
VI.K of the RPFJ, and the developers of such Microsoft Middleware 
Products are also the developers of the Microsoft Middleware defined 
in Section VI.J of" the RPFJ.
REQUEST NO. 26
    Admit that under the RPFJ, developers of Microsoft Middleware 
are permitted access to APIs and/or related technical information 
relating to Microsoft Platform Software that arc not made available 
to ISVs, IHVs, IAPs, ICPs and OEMs.
    Response: Objection. This request is circular given that 
Microsoft Platform Software is defined in Section VI.L of the RPFJ 
to include the Microsoft Middleware Products defined in Section VI.K 
of the RPFJ, and the developers of such Microsoft Middleware 
Products are also the developers of the Microsoft Middleware defined 
in Section VI.J of the RPFJ.
REQUEST NO. 27
    Admit that under the RPFJ, Microsoft Middleware developers may 
have access to APIs and/or related technical information relating to 
Microsoft Platform Software before such information is made 
available to ISVs, IHVs, IAPs, ICPs and OEMs.
    Response: Objection. This request is circular given that 
Microsoft Platform Software is defined in Section VI.L of the RPFJ 
to include the Microsoft Middleware Products defined in Section VI.K 
of the RPFJ, and the developers of such Microsoft Middleware 
Products arc also the developers of the Microsoft Middleware defined 
in Section VI.J of the RPFJ.
REQUEST NO. 28
    Admit that under the RPFJ, Microsoft is not obliged to release 
the last major beta version of any Windows Operating System Product 
"well in advance of the actual commercial release" of 
that Windows Operating System Product. CIS at 35.
    Response: Objection. The proper interpretation of the RPFJ calls 
for a legal conclusion. Microsoft refers plaintiffs to Section III.D 
of the RPFJ for a complete and accurate statement of its terms.
REQUEST NO. 29
    Admit that under the RPFJ, Microsoft is not obliged to release 
the last major beta version of any Microsoft Middleware "well 
in advance of the actual commercial release" of that 
Middleware. CIS at 35.
    Response: Objection. The proper interpretation of the RPFJ calls 
for a legal conclusion. Microsoft refers plaintiffs to Section III.D 
of the RPFJ for a complete and accurate, statement of its terms.
REQUEST NO. 30
    Admit that under the RPFJ, developers of Microsoft Middleware* 
"will not have access to any ... features of Windows Operating 
System Products that might allow it to operate more 
effectively" that are not also made available to ISVs, IHVs, 
IAPs, ICPs and OEMs. CIS at 35.
    Response: Objection. This request misquotes the CIS by (i) 
referring to developers of Microsoft Middleware rather than to the 
Microsoft Middleware itself and (ii) replacing the words 
"hidden or proprietary" with an ellipsis. Moreover, the 
proper interpretation of the RPFJ calls for a legal conclusion. 
Microsoft refers plaintiffs to Section III.D of the RPFJ for a 
complete and accurate statement of its terms.
REQUEST NO. 31
    Admit that under the RPFJ, all APIs and related technical 
information, including all documentation, "for the Secure 
Audio Path digital fights management service that is part of Windows 
XP must be disclosed and mad* available for use by competing media 
players in interoperating with Windows XP." CIS at 35.
    Response: Objection. The proper interpretation of the RPFJ calls 
for a legal conclusion. Microsoft refers plaintiffs to Section III.D 
of the RPFJ for a complete and accurate statement of its terms.
REQUEST NO. 32
    Admit that the "competitive significance" of non-
Microsoft Middleware is "highly dependent on content, data and 
applications residing on servers and passing over networks such as 
the Internet or corporate networks ...." CIS at 36.
    Response: Admit that the quoted statement appears in the CIS 
prepared by the DOJ but deny that Microsoft shares the opinion 
expressed.
REQUEST NO. 33
    Admit that under tile RPFJ, Microsoft is not obliged to license 
to third parties all APIs, technical information and Communications 
Protocols relating to Windows Operating System Products that 
Microsoft makes available to Microsoft developers of server 
software.
    Response: Objection. This request is vague and ambiguous in its 
use of the term "technical information" and 
"server software." Moreover, the proper interpretation 
of the RPFJ calls for a legal conclusion. Microsoft refers 
plaintiffs to Section III.E of the RPFJ for a complete and accurate 
statement of its terms.
REQUEST NO. 34
    Admit that under the RPFJ, third party licensees "will 
have full access to and be able to use, the protocols that arc 
necessary for software located on a server computer to interoperate 
with, and fully take advantage of, the functionality provided by a 
Windows Operating System Product." CIS at 36.
    Response: Objection. This request is vague and ambiguous in its 
use of the phrases "software located on a server" and 
"fully take advantage of." Moreover, the proper 
interpretation of the RPFJ calls for a legal conclusion. Microsoft 
refers plaintiffs to Section III.E of the RPFJ for a complete and 
accurate statement of its terms.
REQUEST NO. 35
    Admit that notwithstanding the fact that the term "server 
operating system products" is not defined in the RPFJ, it 
"include, but is not limited to, the entire Windows 2000 
Server product families and any successors...as well as a number of 
server software products and functionality, including the Interact 
Information Services ... and Active Directory." CIS at 37.
    Response: Objection. This request misquotes the CIS by (i) 
adding an ellipsis at the end of the first sentence of the first 
paragraph on page 37, wrongly suggesting that the words following 
the ellipsis are part of the same sentence; (ii) adding the words 
"as well as" without placing them in square brackets, 
wrongly suggesting that those words are part of the original text; 
and (iii) quoting only a portion &the third sentence of the 
paragraph and concluding the quotation with a period rather than an 
ellipsis, wrongly suggesting that the sentence ends with the words 
"Active Directory." In fact, Internet Information 
Services and Active Directory are features of the Windows 2000 
Server family of products. Microsoft admits that Windows 2000 
Server, Windows 2000 Advanced Server and Windows 2000 Datacenter 
Server and their successors are server operating system products as 
that term is used in the RPFJ.
REQUEST NO. 36
    Admit that under the RPFJ, Microsoft is not required to license 
Communications Protocols implemented in any Windows Operating System 
Product that are used by a Microsoft server operating system product 
to interoperate with that Windows Operating System Product with the 
addition of other software to the client computer.
    Response: Objection. The proper interpretation of the 
RPFJ" calls for a legal conclusion. Microsoft refers 
plaintiffs to Section III.E of the RPFJ for a complete and accurate 
statement of its terms.
REQUEST NO. 37
    Admit that under the RPFJ, there is no time period within which 
Microsoft must make available for license to third parties the 
Communications Protocols referenced in Section III.E. of the RPFJ.
    Response: Objection. The proper interpretation of the RPFJ calls 
for a legal conclusion. Microsoft refers plaintiffs to Section III.E 
of the RPFJ for a complete and accurate statement of its terms.
REQUEST NO. 38
    Admit that under the RPFJ, Microsoft is not obliged to license 
any Communications Protocols distributed only with a Microsoft 
server or otherwise separately from a Windows Operating System 
Product.

[[Page 28974]]

    Response: Objection. The proper interpretation of the RPFJ calls 
for a legal conclusion. Microsoft refers plaintiffs to Section III.E 
of the RPFJ for a complete and accurate statement of its terms.
REQUEST NO. 39
    Admit that one of the purposes* of Section III.E. of the RPFJ is 
to "??nsur[e] that competing, non-Microsoft server products 
... will have the same access to and ability to interoperate with 
Windows Operating System Products as do Microsoft's server operating 
systems." CIS at 38.
    Response: Objection. This request is vague and ambiguous in its 
use of the term "non-Microsoft server products." 
Moreover, Microsoft denies knowledge or information sufficient to 
form a belief as to what the DOJ thinks are the 
"purposes" of Section III.E of the RPFJ. The proper 
interpretation of the RPF3 calls for a legal conclusion. Microsoft 
refers plaintiffs to Section III.E of the RPFJ for a complete and 
accurate statement of its terms.
REQUEST NO. 40
    Admit that one of the purposes of Section III.E. of the RPFJ is 
to "permit seamless interoperability between Windows Operating 
System Products and non-Microsoft servers on a network." CIS 
at 38.
    Response: Objection. This request is vague and ambiguous in its 
use of the term "seamless interoperability." Moreover, 
Microsoft denies knowledge or information sufficient to form a 
belief as to what the DOJ thinks arc the "purposes" of 
Section III.E of the RPFJ. The proper interpretation of the RPFJ 
calls for a legal conclusion. Microsoft refers plaintiffs to Section 
III.E of the RPFJ for a complete and accurate statement of its 
terms.
REQUEST NO. 41
    Admit that Section III.E. of the RPFJ "requires the 
licensing of all Communications Protocols necessary for non-
Microsoft servers to interoperate with the Windows Operating System 
Products" implementation of the Kerberos security standard in 
the same manner as do Microsoft servers, including the exchange of 
Privilege Access Certificates." CIS at 38.
    Response: Objection. This request is vague and ambiguous in its 
use of the phrase "the Windows Operating System 
Products" implementation of the Kerberos security 
standard." Moreover, the proper interpretation of the RPFJ 
calls for a legal conclusion. Microsoft refers plaintiffs to Section 
III.E of the RPFJ for a complete and accurate statement of its 
terms.
REQUEST NO. 42
    Admit that Section III.E. of the RPFJ requires Microsoft to 
"license for use by non-Microsoft server operating system 
products the Communications Protocols that Windows Operating System 
Products use to enable network services through mechanisms such as 
Windows server message block protocol/common Internet file system 
protocol communications, as well as Microsoft remote procedure calls 
between the client and server operating systems." CIS at 39.
    Response: Objection. This request is vague and ambiguous in its 
use of the terms "network services" and "Microsoft 
remote procedure calls." Moreover, the proper interpretation 
of the RPFJ calls for a legal conclusion. Microsoft refers 
plaintiffs to Section III.E of the RPFJ for a complete and accurate 
statement of its terms.
REQUEST NO. 43
    Admit that Section III.E. of the RPFJ requires Microsoft to 
license to third parties "Communications Protocols that permit 
a runtime environment (e.g., a Java Virtual Machine and associated 
class libraries or competing functionality such as the Common 
Language Runtime) to receive and execute code from a server ... if 
those protocols are implemented in a Windows Operating System 
Product." C1S at 39.
    Response: Objection. This request is vague and ambiguous in its 
use of the term "runtime environment." Moreover, the 
proper interpretation of the RPFJ calls for a legal conclusion. 
Microsoft refers plaintiffs to Section III.E of the RPFJ for a 
complete and accurate statement of its terms.
REQUEST NO. 44
    Admit that Section III.J.1.a. of the RPFJ exempts from 
disclosure under Section III.E. only "specific end-user 
implementations of security items such as actual keys, authorization 
tokens or enforcement criteria, the disclosure of which would 
compromise the security of a particular installation or group of 
installations of the listed security features." CIS at 39 
(quoting RPFJ III.J.1.a.).
    Response: Objection. The proper interpretation of the RPFJ calls 
for a legal conclusion. Microsoft refers plaintiffs to Sections 
III.E and III.J.1.a of the RPFJ for a complete and accurate 
statement of their terms.
REQUEST NO. 45
    Admit that Section III.J.1.a, of the RPFJ "permits 
Microsoft to withhold limited information necessary to protect 
particular installations of the Kerberos and Secure Audio Path 
features of its product5 (e.g., keys and tokens parti?? to a given 
installation) but does not permit it to withhold any capabilities 
that are inherent in the Kerberos and Secure Audio Path features as 
they are implemented in a Windows Operating System Products." 
CIS at 39.
    Response: Objection. This request is vague and ambiguous in its 
use of the phrase "capabilities that arc inherent in the 
Kerberos and Secure Audio Path features as they arc implemented in a 
Windows Operating System Product" Moreover, the proper 
interpretation of the RPFJ calls for a legal conclusion. Microsoft 
refers plaintiffs to Section III.J.1.a of the RPFJ for a complete 
and accurate statement of its terms.
REQUEST NO. 46
    Admit that under the RPFJ, Microsoft may contractually prevent 
an ISV from developing, using, distributing or promoting any 
software that competes with Microsoft Platform Software or runs on 
any software that competes with Microsoft Platform Software so long 
as it is part of an agreement to use, distribute or promote any 
Microsoft software or to develop software for, or in conjunction 
with, Microsoft.
    Response: Objection. The proper interpretation of the RPFJ calls 
for a legal conclusion. Microsoft refers plaintiff?? to Sections 
III.F and III.G of the RPFJ for a complete and accurate statement of 
their terms.
REQUEST NO. 47
    Admit that under the RPFJ, Microsoft may cater into an agreement 
with an ISV in which Microsoft pays the ISV to make Internet 
Explorer the default browser for software developed by the ISV.
    Response: Objection. The proper interpretation of the RPFJ calls 
for a legal conclusion. Microsoft refers plaintiffs to Sections 
III.F and III.G of the RPFJ for a complete and accurate statement of 
their terms.
REQUEST NO. 48
    Admit that under the RPFJ, Microsoft may enter into an agreement 
with an ISV or ICP in which Microsoft pays the ISV or ICP to make 
Windows Media Player the default media player for software or 
Interact content developed by the ISV or ICP.
    Response: Objection. The proper interpretation of the RPFJ calls 
for a legal conclusion. Microsoft refers plaintiffs to Sections 
III.F and III.G of the RPFJ for a complete and accurate statement of 
their terms.
REQUEST NO. 49
    Admit that under Section III.G.1. of the RPFJ, Microsoft could 
not make the "commercially practicable" representation a 
standard part of its agreements with IAPs, ICPs, ISVs, IHVs or OEMs. 
Respond: Objection. The proper interpretation of the RPFJ calls for 
a legal conclusion. Microsoft refers plaintiffs to Sections III.G.1 
of the RPFJ for a complete and accurate statement of its terms.
REQUEST NO. 50
    Admit that under the RPFJ, Microsoft is free to take action it 
knows or reasonably should know will directly or indirectly 
interfere with or degrade the performance or compatibility of non-
Microsoft Middleware when interoperating with Microsoft Platform 
Software, without providing notice to the ISV of such non-Microsoft 
Middleware prior to taking the action.
    Response: Admit the subject matter of this request is not 
addressed in the RPFJ, but deny that (i) Microsoft has ever taken 
such action or (it) such action is expressly or impliedly permitted 
under the RPFJ.
REQUEST NO. 51
    Admit that Microsoft currently restricts its redistributable 
code from use with some non-Microsoft Platform Software.
    Response: Objection. This request is vague and ambiguous in its 
use of the terms "redistributable code" and "non-
Microsoft Platform Software," neither of which is defined in 
the RPFJ or the
    Requests.
    Dated: Washington, DC
    January 11,2002
    William H. Neukom
    Thomas W. Butt
    David A. Heiner Jr.
    Diane D'Arcangelo
    Christopher J. Meyers
    MICROSOFT CORPORATION
    One Microsoft Way
    Redmond, Washington 98052
    (425) 936-8080
    Dan K. Webb
    Bruce R. Braun
    WINSTON & STRAWN
    35 West Wacker Drive

[[Page 28975]]

    Chicago, Illinois 60601
    (312) 558-5600
    Charles F. Rule (Bar No. 370818)
    FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
    1001 Pennsylvania Avenue, NW Suite 800
    Washington, DC 20004
    (202) 639-7300
    John L. Warden (Bar No. 222083)
    Richard J. 1 Urowsky
    Steven L. Holley
    Michael Lacovara
    Richard C. Pepperman, II
    Stephanie G. Wheeler
    Ronald J. Colombo
    SULLIVAN & CROMWELL
    125 Broad Street
    New York, New York 10004
    (212) 558-4000
    Bradley P. Smith (Bar No. 468060)
    SULLIVAN & CROMWELL
    1701 Pennsylvania Avenue, NW
    Washington, DC 2f)006
    (202) 956-7500
    Counsel for Defendant Microsoft Corporation
    CERTIFICATE OF SERVICE
    I hereby certify that on this 11th day of January, 2002, I 
caused a true and correct copy of the foregoing Microsoft 
Corporation's Response to Plaintiff Litigating States" First 
Joint Requests for Admission in Remedy Proceedings to be served by 
facsimile and overnight courier upon:
    Philip S. Beck
    Bartlit Beck Herman Palenchar & Scott
    Courthouse Place, Suite 300
    54 West Hubbard Street
    Chicago, Illinois 60610
    Tel: (312) 494-4411
    Fax: (312) 494-4440
    Renata B. Hesse
U.S. Department o f Justice
    Antitrust Division
    601 D Street, NW, Suite 1200
    Washington, DC 20530
    Tel: (202) 514-8276
    Fax: (202) 30/-1454
    Brendan V. Sullivan, Jr.
    Williams & Connolly LLP
    725 Twelfth Street, NW
    Washington, DC 20005
    Tel: (202) 434-5000
    Fax: (202) 434-5029
    Kevin J. O'Connor
    Wisconsin Attorney General's Office
    P.O. Box 7857
    123 West Washington Avenue
    Madison, Wisconsin 53703-7857
    Tel: (608) 266-1221
    Fax: (608) 267-2223
    Blake Harrop
    Illinois Attorney General's Office
    100 West Randolph Street, I2th Floor
    Chicago, Illinois 60601
    Tel: (312) 814-2503
    Fax: (312) 814-2549
    Jay L. Himes
    Assistant Attorney General
    New York State Attorney General's Office
    120 Broadway, Suite 2601
    New York, New York 10271
    Tel: (212) 416-8282
    Fax: (212) 416-6015



MTC-00030608

PROJECT TO PROMOTE COMPETITION & INNOVATION IN THE DIGITAL AGE
2001 K STREET, NW . SUITE 800 . WASHINGTON, DC 20006
January 28, 2002
Ms. Renata Hesse
Trial Attorney
Suite 1200
Antitrust Division
Department of Justice
601 D. Street, NW
Washington, DC 20530
RE: Comments to the Proposed Final Judgment In United States v. 
Microsoft Corporation, No. 98-1232 State of New York, et al v. 
Microsoft Corporation, No. 98-1233
    Dear Ms. Hesse,
    Enclosed please find ten (10) copies of the comments of the 
Project to Promote Competition and Innovation in the Digital Age 
("ProComp"), submitted pursuant to the Tunney Act, 15 
U.S.C. 16, with respect to the Proposed Final Judgment in the 
above-captioned matters.
    Please also note that this filing is accompanied by an affidavit 
prepared and submitted by Professor Kenneth J. Arrow, the original 
signed copy of which is attached hereto.
    Sincerely yours,
    Mitchell S. Pettit
    President
    ProComp
    Comments to the Proposed Final Judgment In United States v. 
Microsoft Corporation, No. 98-1232 State of New York, et al. 
I,. Microsoft Corporation, No. 98-1233
    Submitted By
    Project to Promote Competition & Innovation in the Digital 
Age ("ProComp")
    Pursuant to the Tunney Act, 15 U.S.C.  16
    January 28, 2002
    Kenneth W. Starr
    Thomas D. Yannucci
    Mark L. Kovner
    Kirkland & Ellis
    Robert H. Bork
    1150 17th Street, NW
    Washington, DC 20036
    Counsel for ProComp
    655 15th Street, NW, Suite 1200
    Washington, DC 20005 (20
    2) 879-5000
    Counsel for ProComp
    Kevin J. Arquit
    Michael C. Naughton
    Arman Y. Oruc
    Clifford Chance Rogers & Wells LLP
    200 Park Avenue
    New York, N.Y. 10166
    (212) 878-8000
    Counsel for ProComp
    Mitchell S. Pettit, President
    ProComp
    2001 K Street, NW, Suite 800
    Washington, DC 20006
    (202) 912-7140
    Glenn B. Manishin
    Stephanie A. Joyce
    Kelley Drye & Warren LLP
    1200 19th Street, NW, Suite 500
    Washington, DC 20036
    (202) 955-9600
    Counsel for ProComp

                            TABLE OF CONTENTS
 
                              Page;
 
I. INTRODUCTION..................................................      1
  A. Standard of Tunney Act Review...............................      1
  B. Failure to Satisfy Settled Monopolization Remedies Law......      4
  C. Failure to Redress Core Violations..........................      6
  D. The PFJ Does Not Achieve its Purported Goals................      8
I. The API Disclosure Requirements...............................      9
  3. OEM Desktop Flexibility.....................................      9
  E. The PFJ Fails to Address Competitive Issues that Will            10
   Determine the Future of the Software Industry.................
II. THE COURT SHOULD DEFER DECISION ON THE PROPOSED DECREE UNTIL      11
 AFTER THE LITIGATING STATES" REMEDIES HEARING AND SHOULD
 APPLY THE SETTLED ANTITRUST REMEDY STANDARD EXPRESSLY REAFFIRMED
 IN THIS CASE BY THE COURT OF APPEALS............................
  A. Approving the Proposed Decree Before Completion of the           12
   Remedy Hearings Would Be Wholly Unprecedented and Highly
   Prejudicial...................................................
    1. Waiting to Rule on the Proposed Decree Until After the         12
     Remedies Trial Avoids Pre-Judging the Remedies Case and the
     Prospect of Inconsistent Rulings............................
    2. Deferring Ruling on the Proposed Decree Promotes the           15
     Tunney Act's Express Goal of Conserving Judicial Resources..
  B. The Applicable Legal Standard for Reviewing the Proposed         15
   Decree is the Ford/United Shoe Test Specifically Mandated by
   the Court of Appeals..........................................
  C. The Court Owes No Tunney Act Deference To the Department in      20
   this Unprecedented Post-Trial, Post-Appeal Settlement.........

[[Page 28976]]

 
  D. The AT&T Model is Instructive by Conducting a Searching      23
   Inquiry into the Scope, Adequacy and Effectiveness of the
   Proposed Decree...............................................
III. THE PROPOSED FINAL JUDGMENT IS INSUFFICIENT UNDER ANTITRUST      25
 REMEDIES LAW AND DOES NOT MEET THE STANDARD ARTICULATED BY THE
 DEPARTMENT......................................................
  A. The Decree Does Not "Undo" the Competitive Harm      26
   Resulting from Microsoft's Anticompetitive Practices..........
  B. The Proposed Settlement Fails to Deny Microsoft the Ill-         29
   gotten Fruits as Required by Established Antitrust Law........
  C. The Decree Does Not Terminate or Redress Numerous Practices      31
   that the Court of Appeals Found to Violate the Sherman Act....
    1. Integration of Windows and Middleware.....................     31
    2. Coercion and Market Allocation............................     33
    3. Deception and Product Sabotage............................     35
IV. THE API DISCLOSURE AND OEM FLEXIBILITY PROVISIONS OF THE          36
 PROPOSED DECREE WILL NOT CREATE THE OPPORTUNITY FOR MIDDLEWARE
 COMPETITION.....................................................
  A. The Proposed Decree's Provisions for Information Disclosure      37
   Do Not Assure that Future Middleware Competitors Will Have
   Access to Necessary Interoperability Information..............
    1. The API Provision's Scope is Far Too Narrow...............     38
    2. The API Provision of the PFJ Constructs an Illusive            39
     Framework for Disclosure of Interoperability Information....
      a. Defined Terms Within the API Disclosure Provision Leave      42
       All Material Disclosure Determinations to Microsoft.......
    3. The API Disclosure Provision Also Leaves Critical Terms        47
     Undefined...................................................
    4. Under Provision III.D, APIs Will Never be disclosed in a       48
     Timely Manner...............................................
    5. The Exceptions from and Preconditions to API Disclosure        49
     Further Narrow the Scope of an Already Unworkable Disclosure
     Provision...................................................
    6. Cross-Licensing of Middleware APIs........................     51
    7. Timing of API Disclosure Obligation.......................     51
  B. The Communications Protocol Provisions of the Decree Do Not      52
   Require Release of any Server APIs and are Based on Terms the
   Department Failed to Include in the Settlement................
  C. The Proposed Decree's Provisions for OEM Flexibility Do Not      55
   Open the PC Manufacturing Channel to Future Middleware
   Competitors...................................................
    1. The OEM Provisions Place Sole Responsibility for               56
     Introducing Middleware Competition on PC Manufacturers......
    2. The Provisions Allowing OEM Flexibility Do Not Address the     61
     Key Issue of Microsoft's Ubiquitous Middleware Development
     Platform....................................................
    3. The OEM Provisions Do Not Create a Level Playing Field for     62
     Middleware Desktop Competition..............................
    4. Additional OEM Provisions Further Undermine the Crucial        63
     Ability of ISVs to Differentiate Competing Middleware
     Products....................................................
    5. The OEM Provisions Contain Other Superfluous Terms that        65
     Substantially Limit Any Potential Market Impact.............
    6. The OEM Provisions Have No Impact on Java.................     66
    7. The OEM Provisions Largely Codify Microsoft's Existing         66
     Business Practices..........................................
  D. The Proposed Decree Does Not Effectively Preclude                67
   Microsoft's Exclusive Dealings................................
  E. Current Market and Economic Realities Demonstrate that the       68
   PFJ is Incapable of Having Any Substantial Procompetitive
   Impact........................................................
    1. New Monopolies Enable Microsoft to Protect its Operating       68
     System Monopoly Despite the PFJ.............................
    2. The Proposed Settlement Ignores the Likely Tactics             69
     Microsoft Will Use to Eliminate the Next Significant Threat
     to its Monopoly Position....................................
  F. The Decree Increases Microsoft's Market Dominance and            72
   Actually Worsens Competitive Conditions in the Relevant
   Software Markets..............................................
  G. The Settlement Would Not Have Prevented Microsoft's Unlawful     73
   Campaign Against Netscape and Java............................
V. THE PROPOSED DECREE IS HOPELESSLY VAGUE AND INHERENTLY             74
 UNENFORCEABLE...................................................
VI. DIVESTITURE REMAINS THE PREFERABLE AND MOST EFFECTIVE REMEDY      77
 FOR MICROSOFT'S SECTION 2 VIOLATIONS............................
VII. THE COURT SHOULD CONDUCT A RIGOROUS TUNNEY ACT EXAMINATION       78
 OF THE DECREE, THE COMPETITIVE IMPACT STATEMENT AND THE
 DEPARTMENT'S UNSUBSTANTIATED PROJECTIONS OF FUTURE COMPETITIVE
 EFFECT..........................................................
  A. The Complexity and Substantial National Importance of this       78
   Case, the Government's Flat Reversal of Position and its
   Disregard of Clear Tunney Act Obligations All Dictate the
   Necessity of Critical Judicial Oversight in this Landmark
   Proceeding....................................................
    1. This Complex, Controversial, Nationally Important              79
     Antitrust Prosecution Demands Serious Judicial Oversight....
    2. Heightened Scrutiny is Needed Because Neither the              80
     Department Nor Microsoft Complied With their Respective
     Tunney Act Obligations......................................
    3. The Court Should Closely Examine the Government's Reversal     83
     of Position on Relief.......................................
  B. Live Evidence is Needed on the Technical and Economic            84
   Complexities of the Software Industry and the Profound
   Failings of, and Harms Caused by, the PFJ.....................
VIII. CONCLUSION.................................................     86
 

    I. INTRODUCTION
    This proposed decree is so ineffective that it would not have 
prevented Microsoft from destroying Netscape and Java, the very acts 
that gave rise to this lawsuit. It is so ineffective in controlling 
Microsoft that it might as well have been written by Microsoft 
itself.
    A. Standard of Tunney Act Review
    The "public interest" standard of the Tunney Act, 15 
U.S.C.  16(e), is determined in this case by the 
unanimous legal ruling of the Court of Appeals for the District of 
Columbia Circuit sitting en bane. That Court held that Microsoft has 
maintained its monopoly in personal computer operating systems in 
clear violation of Section 2 of the Sherman Act. No decree that 
fails to cure that illegality and prevent its recurrence can 
conceivably serve the public interest. The Proposed Final Judgment 
("PFJ" or "proposed decree") accomplishes 
neither of those mandatory purposes.
    For that reason, the proposed decree should be rejected by the 
District Court.
    This case is entirely different from any settlement since the 
adoption of the Tunney Act in 1974.
    All other settlements were entered into prior to the conclusion 
of any trial, usually before any trial had even commenced. Cases 
holding that a Tunney Act court must accept a lesser remedy than 
might (or might not) be obtained after trial are utterly irrelevant. 
The Competitive Impact Statement's ("CIS") reliance upon 
such cases is misguided. United States v. Microsoft Corp., Revised 
Proposed Final Judgment and Competitive Impact Statement, 66 Fed. 
Reg. 59,452 (2001). Here, the District Court and the Court of 
Appeals, including a total of eight judges, have decided that in 
violating the Sherman

[[Page 28977]]

Act, Microsoft's behavior is directly contrary to the public 
interest. The Tunney Act does not empower the District Court to 
enter a remedy that excuses past violations and permits future 
conduct of the same nature. The proposed decree does precisely that. 
It is no more binding on the District Court than would be a 
Department of Justice statement that henceforth a named company 
would be immune from antitrust prosecution.
    In particular, the proposed settlement takes no steps to remedy 
Microsoft's foreclosure of middleware threats from competing 
Internet browsers and cross-platform Java technology, Microsoft's 
related efforts to illegally increase the applications barrier to 
entry protecting its Windows monopoly, or Microsoft's illegal 
commingling of browser and other middleware code with Windows. 
Further, the proposed settlement does not assure that future 
middleware competitors will have access to the necessary technical 
information to interoperate properly with Windows, and does not open 
up the critical Original Equipment Manufacturer ("OEM") 
distribution channel to these future competitors. Finally, the PFJ 
ignores the competitive threat to Microsoft's monopoly presented by 
server-based distributed applications, and thus fails to address 
Microsoft's practice of protecting its monopoly by controlling 
proprietary interfaces and communications protocols.
    More significantly, the only suggestion in the CIS as to any 
basis for a very limited and deferential scope of judicial review is 
simply wrong. The Department insists that such a standard is 
"particularly" appropriate "where, as here, 
court's review of the decree is informed not merely by the 
allegations contained in the Complaint, but also by the extensive 
factual and legal record resulting from the district and appellate 
court proceedings." CIS, 66 Fed. Reg. at 59476. Exactly the 
opposite is the case. In routine Tunney Act cases, the law is clear 
that respect is to be accorded to the Department's antitrust 
enforcement judgments--its "perceptions of the market 
structure and its view of the nature of the 
case"--precisely because there is no factual or legal 
record before the court. United States v. Microsoft Corp., 56 F.3d 
1448, 1448 (DC Cir. 1995) ("Microsoft l") (emphasis 
added). When a Sherman Act case has been litigated and affirmed on 
appeal, however, the district court is fully capable of assessing 
the proposed remedy in light of those rulings and its 
"familiarity with the market involved." Id. at 1461.
    The closest parallel to this Court's review of the PFJ is the 
AT&T monopolization settlement presented by the Department and 
decided by this Court (Harold Greene, J.) under the Tunney Act. 
United States v. AT&T, 552 F. Supp. 131 (D.DC 1982), aff'd mere. 
sub nora., Maryland v. United States, 460 U.S. 1001 (1983). In the 
AT&Tease, Judge Greene had heard the vast majority of the 
evidence--on all issues except remedy--and more than a 
year earlier bad denied AT&T's motion to dismiss on the merits 
after the close of the government's case-in-chief.
    Following a wide-ranging Tunney Act process that included 
evidentiary hearings, third-party submissions and several days of 
oral argument, Judge Greene refused to approve the consent decree as 
proposed, even though it mandated divestiture of major components of 
the Bell System. He concluded that the decree was in certain 
respects substantively inadequate, precluded the Court from 
effective oversight and enforcement, and posed a risk of harming 
third-parties (despite the presence of complementary regulatory 
jurisdiction to accomplish similar goals). Judge Greene therefore 
insisted upon substantial modifications to the proposed decree 
before he would enter the settlement under the Tunney Act's public 
interest standard.
    Recognizing the intense public concern over a possible 
"rubber stamp" of the settlement by the Court, Judge 
Greene concluded that it was his responsibility to ensure that the 
decree protected consumers, opened the relevant markets to effective 
competition in a timely manna-, and was readily enforceable. 
Significantly, Judge Green found that "unlike ordinary pre-
trial antitrust settlements, the Court would "be able to 
render sound judgments" because it "ha[d] already heard 
what probably amounts to well over ninety percent of the 
parties" evidence both quantitatively and qualitatively, as 
well as all of their legal arguments." Id. at 152 (citations 
omitted). For this reason, Judge Greene held that "it does not 
follow that [the Court] must unquestionably accept a consent decree 
as long as it somehow, and, however inadequately, deals with the 
antitrust problems implicated in the lawsuit." Id.
    The purpose of judicial review under the Tunney Act is to ensure 
that a consent decree follows "the public interest as 
expressed in the antitrust laws." S. REP. NO. 93--298 
(1973) ("SENATE REPORT") (emphasis added). Here, the 
Court of Appeals held specifically that "a remedies decree in 
an antitrust case must seek to "unfetter a market from 
anticompetitive conduct," 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. 
Microsoft Corp., 253 F.3d 34, 103 (DC Cir. 2001) ("Microsoft 
III") (quoting Ford Motor Co. v. United States, 405 U.S. 562, 
577 (1972), and United States 1,. United Shoe Mach. Corp., 391 U.S. 
244, 250 (1968)). The Department itself earlier emphasized to this 
Court on remand that "both the applicable remedial legal 
standard and the liability determination of the Court of Appeals are 
clear." Joint Status Report, United States v. Microsoft Corp., 
at 24 (D.DC filed Sept. 20, 2001). The Court of Appeals has spoken 
and its holding is binding on this Court as well as the litigants. 
Consequently, in the unique procedural posture of this case, the 
"public interest as expressed in the antitrust laws" is 
the Court of Appeals" mandate itself. SENATE REPORT, supra, at 
5.
    B. Failure to Satisfy Settled Monopolization Remedies Law
    The CIS does not even cite, let alone argue, that the PFJ meets 
the DC Circuit's remedial standard, quoted above, to terminate the 
monopoly, deny the defendant of its ill-gotten fruits, and ensure 
that monopoly practices cannot arise in the future.
    As that standard recognizes, there is no difference between the 
remedies called for when a defendant has unlawfully gained a 
monopoly or unlawfully maintained a monopoly. The offense of 
monopolization under Section 2 of the Sherman Act occurs when a finn 
has either "acquired or maintained" monopoly power by 
anticompetitive means. United States 1,. Grinnell Corp., 384 U.S. 
563, 570-71 (1966); Microsoft III, 253 F.3d at 50. There is no 
legal basis to distinguish between the methods of monopolization 
either for liability or relief purposes, and neither DOJ nor 
Microsoft has cited a case making such a distinction. All arc 
equally unlawful and all arc equally harmful to consumers. Here, for 
example, even assuming that Microsoft achieved its monopoly power 
through legitimate business means, it has been found to have 
maintained such monopoly power through a series of anticompetitive 
conduct designed to illegally preserve its monopoly position by 
foreclosing rivals. But for this illegal maintenance, Microsoft's 
monopoly power would probably have dissipated, and competitors and 
consumers would have enjoyed the benefits of free and fair 
competition. Microsoft's internal communications demonstrate that 
Microsoft thought that would be the likely outcome.
    For these reasons, courts apply broad relief even where a firm 
has been found to possess monopoly power that was legally acquired 
but illegally maintained. See, e.g., United Shoe, 391 U.S. at 250 
(in context of a legally attained monopoly position that was 
illegally maintained, the Court held it has a duty to 
"prescribe relief which will 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"). And courts have never 
distinguished between illegal attainment and illegal maintenance 
when determining remedies for a Sherman Act Section 2 monopolization 
claim. See, e.g., Schine Chain Theatres, Inc. v. United States, 334 
U.S. 110, 128 (1948) (holding conduct injunctions against future 
violations not adequate to protect public interest in monopolization 
cases since defendant thus maintains the full benefit of the 
monopoly; instead broad remedies, including divestiture, are 
necessary to undo the harm to the market); see also 3 PHILLIP E. 
AREEDA AND HERBERT HOVENCAMP, ANTITRUST LAW 653i (2002) 
(quoting United Shoe, 391 U.S. at 250-52, for the proposition 
that a "monopoly that has been created or maintained by 
plainly exclusionary conduct is unlawful and that it is the duty of 
the court to assure its "complete extirpation." 
(emphasis added)). In short, an appropriate set of remedies to 
restore competition needs to be sufficient to pry open the market to 
competition, stop the bad acts, undo the effects of the bad acts, 
and preclude future alternative anticompetitive tactics.
    The DC Circuit was well aware that this case involves monopoly 
maintenance--that the achievement by Microsoft of a Windows 
monopoly in the first instance was not alleged to be 
unlawful--but nonetheless specifically adopted the Ford/United 
Shoe

[[Page 28978]]

remedy standard, including its command to "terminate" 
the defendant's monopoly power. That is the law of this case and the 
law in all Sherman Act monopolization cases.
    C. Failure to Redress Core Violations
    By agreeing to the proposed settlement, the Department and the 
Settling States have "won a lawsuit and lost a cause." 
International Salt Co. v. United States, 332 U.S. 392, 401 (1947). 
By excluding consideration of terminating the Windows monopoly from 
their remedy calculations, Plaintiffs have ignored the central 
meaning of Section 2. They would have the Court sanction Microsoft's 
unlawful conduct allowing its monopoly to remain intact. The Court 
of Appeals" use of the traditional Ford/United Shoe standard 
clearly holds that that is not a proper remedy. The CIS explains 
that the applications barrier to entry protecting Microsoft's 
monopoly was directly threatened by "two incarnations of 
middleware that, working together, had the potential to weaken the 
applications barrier severely without the assistance of any other 
middleware"--Netscape and Java. CIS, 66 Fed. Reg. at 
59464-65. Nonetheless, the PFJ inexplicably contains no 
provision addressing Internet browsers or cross-platform Java 
runtime technology, let alone any other provisions that erode the 
applications barrier to entry. Moreover, the proposed decree simply 
ignores a number of other significant ways in which the Court of 
Appeals held that Microsoft's practices violated the Sherman Act. 
Consequently, the PFJ does not "unfetter [the] market from 
anticompetitive conduct" or "ensure that there remain no 
practices likely to result in monopolization in the future." 
Microsoft III, 253 F.3d at 103.
    Nothing in the settlement prohibits Microsoft from commingling 
code or binding its middleware to the operating system. This was a 
major issue in this litigation, and the Court of Appeals 
specifically found Microsoft's commingling of browser and operating 
system code to be anticompetitive. The danger is reinforced by the 
definition of "Windows Operating System Product" in 
Section VI.U, which states that what code comprises Windows 
"shall be determined by Microsoft in its sole 
discretion." PFJ, 66 Fed. Reg. at 59459. Thus, Microsoft can 
render the protections for middleware, meaningless by binding and 
commingling code and redefining the operating system to include the 
bound/commingled applications.
    ProComp strongly disagrees with the notion that it is impossible 
to move the market forward to approximate where it would have been 
absent Microsoft's violations. The applications barrier to entry is 
not an immutable condition. There are remedial alternatives 
available to restore Internet browsers and cross-platform runtime 
technology to the position they would have achieved--ubiquitous 
distribution without any "lock-in" to the Windows 
operating system m in the absence of Microsoft's violations. The 
open source Internet Explorer ("IE") licensing 
requirement proposed by the Litigating States does just that. More 
specifically, a remedy that acts directly to undermine the 
applications barrier to entry, for instance by requiring 
"porting" of the Office suite to other operating systems 
platforms, could potentially do precisely what Netscape and Java 
were poised to accomplish in 
1995-98--"commoditize" the operating systems 
and thus allow operating systems competition to occur on the basis 
of efficiency and consumer demand, rather than hardware lock-in. In 
any event, by ignoring the economic importance of the competition 
destroyed by Microsoft's wide range of exclusionary practices, the 
PFJ fails to address the central lesson of this litigation. It does 
not redress the core Sherman Act violations on which liability was 
unanimously affirmed by the en bane Court of Appeals.
    The relief proposed by the Litigating States acts directly to 
deny Microsoft the fruits of the violation (Interact Explorer 
licensing), pry open the operating systems market to competition 
(Java must carry) and erode the barrier to entry protecting 
Microsoft's monopoly power (applications porting). It is precisely 
these omissions m consequences of the Department's current, 
erroneously truncated remedy analysis m that fatally undermine the 
legal sufficiency of the PFJ. The Department's proposed remedy 
flatly contradicts the Court of Appeals" directives and thus 
"the public interest as expressed in the antitrust 
laws." SENATE REPORT, supra, at 5.
    D. The PFJ Does Not Achieve its Purported Goals
    The PFJ purports to provide applications developers with the 
tools to create competing platforms, but the proposed decree fails 
to achieve even the narrow goals it sets out to accomplish. The PFJ 
neither creates the conditions under which new middleware 
competition can flourish nor provides OEMs with the freedom to 
support such middleware in the event these technologies avoid the 
predatory acts of Microsoft.
    Most predatory conduct fails to achieve or maintain 
monopolization because the aggressor must incur greater costs than 
its prey in order to keep or drive competitors from the market. What 
this litigation has shown is that Microsoft has numerous weapons in 
its arsenal to impose far greater damage on its competitors than the 
loss Microsoft suffers by using such weapons. Controlling the 
disclosure of the Application Program Interfaces ("API") 
and the related technical information, imposing conditions on OEM 
licenses, "commingling" or bolting of software code and 
products are all examples of weapons Microsoft employed in its 
predatory attack on Netscape's Navigator and Java technologies. The 
PFJ does nothing to protect Microsoft from using the same tactics 
against any future middleware threats.
    1. The API Disclosure Requirements
    The PFJ purports only to make public those APIs between the 
operating system and Microsoft middleware that run on top of the 
operating system. It does not accomplish even that narrow result. To 
name a few, the convoluted definitions and exemptions to the API 
disclosure obligation allow Microsoft itself to decide which APIs 
will be subject to the disclosure requirement and when those APIs 
will be released. The decree also permits Microsoft to design and 
bundle its products in different ways to evade the disclosure 
requirements, for instance by permitting Microsoft in "its 
sole discretion" to decide what software comprises a 
"Windows Operating System Product." PFJ, 66 Fed. Reg. at 
59459. With some simple packaging decisions, Microsoft can 
unilaterally dictate whether middleware competitors will receive the 
interoperability information necessary to innovate. In short, as 
explained in detail below, the API disclosure provisions are riddled 
with numerous deficiencies that render them ineffective in promoting 
competition.
    These are not loopholes, but triumphal arches that allow 
Microsoft to proceed uninhibited by the antitrust laws. The PFJ 
expressly allows Microsoft to play a game of form over substance by 
categorizing pieces of code into different defined terms. The 
operation of the disclosure requirements is devoid of any notion of 
technological or economic efficiency.
    2. OEM Desktop Flexibility
    The PFJ relies almost exclusively on OEMs to restore 
competition, a naive hope at best. OEMs do not have the resources or 
the economic incentive to create competition for Microsoft. In any 
event, the provisions regarding OEM flexibility to distribute 
competing middleware products ignore the economic realities of the 
software industry. Most importantly, the decree fails to provide 
OEMs and consumers with the flexibility to support competing 
middleware or other new technologies that Microsoft may deem as a 
threat to its monopoly position. The add/remove provisions in the 
proposed decree only allow for removal of end user access, i.e., the 
icon for Microsoft middleware, not the middleware itself. As 
discussed in the accompanying Declaration of Kenneth Arrow 
(Attachment A), Nobel laureate and the Department's own expert in 
Microsoft 1, this perpetuates the applications barrier to entry that 
is at the heart of this litigation. Thus, the OEM provisions enhance 
rather than erode Microsoft's operating system monopoly power.
    E. The PFJ Fails to Address Competitive Issues that Will 
Determine the Future of the Software Industry
    Even if these serious deficiencies in the structure, scope and 
language of the proposed decree were corrected, the settlement would 
still not create the conditions for a competitive operating systems 
market. The proposed decree hardly deals at all with Microsoft's 
likely future anticompetitive conduct. Microsoft's prodigious market 
power is now directed at the next threat to the Windows 
platform--applications and services provided via the Internet 
and other networks m not the Netscape/Java threat of 1995-99. 
Microsoft has destroyed those revolutionary technologies that are a 
source of operating systems competition and has moved on to other 
areas that the proposed decree all but ignores.
    The PFJ fails to serve the public interest and to achieve the 
settled goals of monopolization relief reaffirmed in the Court of 
Appeals" decision. It ignores the changing market realities, 
and the core violations upheld by the DC Circuit. The proposed

[[Page 28979]]

settlement exhibits an unjustifiable deference to a convicted 
monopolist in designing its products and determining the scope of 
the remedy. In doing so, it renounces its purported goal of creating 
the conditions for new middleware threats to flourish. Additionally, 
it clearly fails to deny Microsoft the "fruits" of its 
violations and "terminate" its monopoly power. It is 
precisely these flaws that fatally undermine the legal sufficiency 
of the PFJ. In contrast, the relief proposal by the Litigating 
States includes provisions, such as Interact Explorer licensing, 
Java must carry, applications porting, sufficient and timely 
disclosure of information, and the freedom to license unbundled 
Microsoft products, just to name a few, which deny Microsoft the 
fruits of the violation, pry open the OS market to competition and 
erode the barrier to entry protecting Microsoft's monopoly power. As 
a matter of law, the Department's settlement proposal cannot be said 
to be consistent with "the public interest as expressed in the 
antitrust laws," SENATE REPORT, supra, at 5, where it has 
proposed a remedy without reference to those laws as reiterated by 
the Court of Appeals m this very case.
    11. THE COURT SHOULD DEFER DECISION ON THE PROPOSED DECREE UNTIL 
AFTER THE LITIGATING STATES" REMEDIES HEARING AND SHOULD APPLY 
THE SETTLED ANTITRUST REMEDY STANDARD EXPRESSLY REAFFIRMED IN THIS 
CASE BY THE COURT OF APPEALS
    This is the only substantial Government Section 2 case in more 
than 30 years litigated through trial to judgment, appeal and dual 
opportunities for Supreme Court review. \1\ A "rush to 
judgment" is simply not the appropriate course of judicial 
review under the Tunney Act, or otherwise. A decision on the 
adequacy of the proposed decree should therefore be deferred until 
after the conclusion of the evidentiary heating on the remaining 
Plaintiffs" ("Litigating States") relief 
proposals. Moreover, the normal Tunney Act flexibility accorded to 
the Government in offering a proposed pretrial antitrust settlement 
cannot hold in the unique circumstances of this case, in which the 
Court is obligated to conduct a searching, independent inquiry into 
the proposed decree, with no deference accorded to the government.
---------------------------------------------------------------------------

    \1\ Microsoft Corp. v. United States, 530 U.S. 1301 (2000) 
(denying appeal); Microsoft Corp. v. United States, 122 S. Ct. 350 
(2001) (denying certiorari).
---------------------------------------------------------------------------

    A. Approving the Proposed Decree Before Completion of the Remedy 
Hearings Would Be Wholly Unprecedented and Highly Prejudicial
    No court has ever approved an antitrust settlement where, as 
here, there are remaining plaintiffs in the very same consolidated 
action that are about to begin a full remedies hearing based on 
adjudicated Sherman Act liability that has been affirmed on appeal. 
In this unprecedented case, \2\it is essential that the Court 
evaluate all available evidence bearing on the "public 
interest" of the Department's proposed settlement.
---------------------------------------------------------------------------

    \2\ Like AT&T, "It]his is not an ordinary 
case." 552 F. Supp. at 151
---------------------------------------------------------------------------

    1. Waiting to Rule on the Proposed Decree Until After the 
Remedies Trial Avoids PreJudging the Remedies Case and the Prospect 
of Inconsistent Rulings
    The Tunney Act sets no deadlines. Neither the Act nor its 
legislative history in any way encourages "fast-track" 
review. Instead, the Act expressly allows the Court to set its own 
schedule and to tailor its judicial review process to the facts and 
circumstances of each antitrust case. 15 U.S.C. 16(1) 
\3\ As the Senate sponsor of the Tunney Act explained:
---------------------------------------------------------------------------

    \3\ A Tunney Act court is authorized to "take 
testimony of Government officials," appoint a "special 
master and such outside consultants or expert witnesses as the court 
may deem appropriate," hear evidence and argument from other 
interested persons and organizations, and "take such other 
action in the public interest as the court may deem 
appropriate." 15 U.S.C.  16(f). These procedures 
are so important to a careful assessment of the public interest that 
courts routinely employ them, even in pretrial Tunney Act cases. 
See, e.g.. United States v. Bechtel Corp., 1979-1 Trade Cas. 
(CCH) 62,430 (N.D. Cal. 1979), aff'd 648 F.2d 660 (9th Cir. 
1981); Dillard v. City of Foley, 166 F.R.D. 503 (M.D. Ala. 1996); 
United States v. Westinghouse Elec. Corp., 1988-1 Trade Cas. 
(CCH) 68,012 (D.DC 1988); United States v. ARA Serves., 
1979-2 Trade Cas. (CCH) 62,861 (E.D. Mo. 1979); United 
States v. Mid-America Dairymen, Inc., 1977-1 Trade Cas. (CCH) 
61,508 (W.D. Mo. 1977).
---------------------------------------------------------------------------

    The decision to make [Tunney Act] procedures discretionary is 
dictated by a desire to avoid needlessly complicating the consent 
decree process. There are some cases in which none of these 
procedures may be needed. On the other hand, there have been and 
will continue to be cases where the use of many or even all of them 
may be necessary. In fact, in a very few complex cases, failures to 
use some of the procedures might give rise to a, indication that the 
district court had failed to exercise its discretion properly.
    119 Cong. Rec. 3453 (statement of Sen. Tunney) (emphasis added).
    This highly complex case demands that the Court utilize all 
available procedures for evaluating the adequacy of the proposed 
decree and the evidentiary basis of the economic projections that 
underly the Department's remedial scheme. Deferring decision on the 
proposed decree is the only sensible approach. The Court's 
consideration of testimonial and other evidence on the failings of 
the decree will avoid unfair pre-judgment of the remedies remand and 
the entry of potentially conflicting relief. It also offers the most 
efficient means of ensuring that the many issues raised by the 
proposed decree and the Court of Appeals" decision receive a 
thorough hearing on the merits. Deferring judgment will not harm any 
party or inconvenience the Court, given that the Litigating 
States" upcoming remedies trial is scheduled to begin just 
thirteen days after the completion of the Tunney Act comment 
process. \4\Indeed, neither the Justice Department nor Microsoft can 
claim to be prejudiced by a short deferment in judgment on the PFJ, 
because Microsoft represents that it is already complying with the 
terms of the proposed decree.
---------------------------------------------------------------------------

    \4\ Based on the deadlines set forth in the Court's 
November 8, 2001 Order and Section 16(b) of the Tunney Act, comments 
on the PFJ and the Department's responses to those comments are not 
due until February 26, 2002. Thus, the remedy trial, scheduled to 
begin on March I 1, 2002, will start only two weeks after the 
Justice Department is scheduled to submit its Response-to-Comments 
on the PFJ. Even if the Justice Department files its Response-to-
Comments early, deferring judgment on the PFJ will cause little if 
any delay, no prejudice, and great benefits to the parties and the 
Court.
---------------------------------------------------------------------------

    Deferral would also avoid the highly undesirable result of 
inconsistent judgments. The Litigating States" remedy proposal 
differs markedly from the proposed settlement in breadth, scope and 
approach. A premature ruling on the PFJ would force the Litigating 
States either to (1) pursue their relief proposal in full, knowing 
there may be inconsistent remedy orders issued by this Court that 
would make compliance difficult, if not impossible, or (2) stunt 
their case by limiting their proposed remedies to those that can be 
implemented in a manner consistent with the PFJ, even though they 
have already rejected that settlement as inadequate.
    The Court faces a similar, untenable choice if it seeks to issue 
an early ruling on the proposed decree. The Court would have to 
limit its ultimate remedy order to the terms already required by its 
ruling on the Department's settlement, or order new remedies but 
vacate those portions of the PFJ that are inconsistent with the 
subsequent decree. This dilemma is easily avoided, however, by 
waiting to resolve the issues raised by the Tunney Act comments 
until after the Litigating States and Microsoft have had a full and 
fair opportunity to present evidence supporting their respective 
remedy proposals.
    Avoiding conflicting remedial orders alone is reason enough to 
defer judgment on the decree. Inconsistent judgments are to be 
avoided in antitrust as in all complex litigation. See In re Transit 
Co. Tire Antitrust Litigation, 67 F.R.D. 59, 65 (W.D. Mo. 1975) 
(separate relief hearings "would result in duplication of 
effort [and] possible inconsistent judgments"). It is well-
established that "[t]he avoidance of logically inconsistent 
judgments in the same action" is a "just reason for 
delay[ing]" entry of final judgment in multi-party civil 
actions. \5\
---------------------------------------------------------------------------

    \5\ Phoenix Renovation Corp. v. Gulf Coast Software, 
F.R.D. 580, 582 (E.D. Va. 2000) (quoting Fed. R. Civ. P. 54(b)); see 
also Dana Corp. v. Celotex Asbestos Settlement Trust, 251 F.3d 1107, 
1120 (6 th Cir. 2001) (affirming the district court's condemnation 
of a reorganization plan provision that unnecessarily 
"raise[d] a likelihood of inconsistent judgments").
---------------------------------------------------------------------------

    The Court should give particular weight to considerations of 
uniformity in this case, because of the great need to ensure that 
all in the software industry--suppliers, customers and 
competitors --face a fair and even playing field. As the 
Supreme Court has held, antitrust violations should be remedied 
"with as little injury as possible to the interest of the 
general public." United States v. American Tobacco Co., 221 
U.S. 106 (1911). Thus, "the Court would be justified in 
rejecting the proposed decree or requiring its modification if it 
concluded that the decree unnecessarily conflicts with important 
public policies other than the

[[Page 28980]]

policy embodied in the Sherman Act." AT&T, 552 F. Supp. at 
151. In this case, such an important public policy is the uniform 
application of antitrust law to the national software market.
    2. Deferring Ruling on the Proposed Decree Promotes the Tunney 
Act's Express Goal of Conserving Judicial Resources
    Deferring judgment on the proposed decree will also conserve 
judicial resources by allowing the Court to determine which 
questions raised by the PFJ can be resolved by the testimony and 
other evidence offered in the remedy trial. The Court may then limit 
or avoid duplicative evidence that must be adduced to assess whether 
the decree meets the applicable substantive standard for Tunney Act 
judicial review.
    Consent decrees subject to Tunney Act review are generally used 
to obviate trial--to avoid "extended proceedings" 
and provide a "prompt and less costly" means of 
resolving antitrust suits pre-litigation. CIS, 66 Fed. Reg. at 59476 
(quoting 119 Cong. Rec. 24598 (1973)). Even the Department of 
Justice, in discussing the negotiation of antitrust settlements in 
its Practice Manual, identifies the consent decree as the best way 
to obtain relief "without taking the case to trial." 
Antitrust Division Manual, Ch. IV,  E, at 50 (3 rd ed. 
1998) (emphasis added). Here, however, a liabilities trial has 
already occurred, and a remedies trial must occur regardless of when 
or whether the proposed Department settlement is approved. There is 
little or no court action to avoid. As a result, judicial resources 
are best conserved and most efficiently allocated by holding the 
remedies trial before ruling on the PFJ.
    B. The Applicable Legal Standard for Reviewing the Proposed 
Decree is the Ford/United Shoe Test Specifically Mandated by the 
Court of Appeals
    In no reported case since adoption of the Tunney Act in 1974 has 
the Department sought to settle a monopolization action after 
prevailing at trial and on appeal. The CIS nonetheless suggests that 
in assessing the adequacy of the proposed decree under the Act, this 
Court must approve a settlement that is less than the remedy the 
Court would otherwise impose of its own accord. CIS, 66 Fed. Reg. at 
59476 (citations omitted). In the unprecedented procedural posture 
of this case, it cannot.
    The Court of Appeals agreed that relief in this case must seek 
to "terminate" Microsoft's operating system monopoly, to 
"unfetter" barriers to competition to the operating 
systems market, to "deny" Microsoft the 
"fruits" of its statutory violations, and to 
"ensure" there are no practices "likely to result 
in monopolization in the future " \6\ That mandate is 
binding on this Court as well as the litigants. The Supreme Court 
has "consistently held that an inferior court has no power or 
authority to deviate from the mandate issued by an appellate 
court." Briggs v. Pennsylvania R. Co., 334 U.S. 304, 306 
(1948). Indeed, even prior to the Tunney Act the Supreme Court 
emphasized that in antitrust cases, "[t]he Department of 
Justice ... by stipulation or otherwise has no authority to 
circumscribe the power of the courts to see that [their] mandate is 
carried out." Cascade Natural Gas Corp. v. El Paso Natural Gas 
Co., 386 U.S. 129, 136 (1967).\7\Consequently, in the unique 
procedural posture of this case, the "public interest as 
expressed in the antitrust laws," SENATE REPORT, supra, at 5, 
is the Court of Appeals" mandate itself. \7\ "[A] 
remedies decree in an antitrust case must seek to "unfetter a 
market from anticompetitive conduct," 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." Microsoft III, 253 
F.3d at 103 (citations omitted). 7 The legislative history of the 
Tunney Act indicates that Congress was clearly aware of Cascade and 
intended the Act's public interest standard to codify that rule of 
antitrust remedies. Judge L Skelly Wright, former Chief Judge for 
the DC Circuit, discussed the Cascade problem at length in his 
Senate appearance, explaining that "the Supreme Court felt 
compelled to say that--and I am quoting--"The United 
States knuckled under to El Paso and settled this 
litigation"--close quote, rather than fully protecting 
the public interest by getting a decree which fully insured future 
competition." SENATE REPORT, supra, at 147.
    The DC Circuit did not establish a new legal standard for 
monopolization relief, but rather adopted the traditional test 
developed by the Supreme Court decades ago. See Microsoft. III, 253 
F.3d at 103 (quoting Ford Motor Co. v United States, 405 U.S. 562, 
577 (1972), and United States v. United Shoe Mach. Corp., 391 U.S. 
244, 250 (1968)). Notably, however, the CIS does not even cite, let 
alone argue, that the PFJ meets the DC Circuit's remedial standard. 
The Department instead offers its own view that "[a]ppropriate 
injunctive relief in an antitrust case should: (1) [e]nd the 
unlawful conduct; (2) avoid a recurrence of the violation and others 
like it; and (3) undo its anticompetitive consequences." CIS, 
66 Fed. Reg. at 59465 (citations omitted). This lesser standard is 
invalid because it ignores the Supreme Court's directives to 
"terminate" the monopoly and to eradicate the 
"fruits" enjoyed by the unlawful monopolist.
    To the extent that DOJ may contend this case is different 
because the acquisition of Microsoft's monopoly was not challenged, 
rather the unlawful maintenance of that monopoly, it would be 
incorrect. There is no legal basis to distinguish between the 
methods of monopolizalion either for liability or relief purposes, 
and neither DOJ nor Microsoft has ever cited a case making such a 
distinction. The adverse consumer welfare and economic efficiency 
consequences of monopoly power are the same whether a monopoly was 
illegally acquired, illegally maintained or both. Indeed, the DC 
Circuit was well aware that the achievement by Microsoft of a 
Windows monopoly in the first instance was not alleged to he 
unlawful, \8\ but nonetheless specifically adopted the traditional 
Ford/United Shoe remedy standard.
---------------------------------------------------------------------------

    \8\ See Microsoft L 56 F.3d at 1452 (no claim that 
"Microsoft obtained its alleged monopoly in violation of the 
antitrust laws") (emphasis in original); Microsoft III, 253 
F.3d at 58 (Microsoft "violated  2 by engaging in 
a variety of exclusionary acts ... to maintain its monopoly").
---------------------------------------------------------------------------

    The Court of Appeals" carefully crafted and detailed 
opinion can hardly be deemed to have applied this standard by 
accident. Accordingly, notwithstanding Microsoft's claim, it is 
simply not true that "contrary to the critics" 
overheated rhetoric, there is no basis for relief designed to 
terminate an 'illegal monopoly."' \9\ The fact 
that a monopoly was acquired lawfully does not provide any defense, 
because the monopolist forfeits its right to continue to hold even a 
lawfully acquired monopoly when it violates the Sherman Act in its 
preservation.\10\
---------------------------------------------------------------------------

    \9\ Statement of Charles F. (Rick) Rule, Fried Frank Hams 
Shriver & Jacobson, Prepared for the Committee on the Judiciary, 
United States Senate, at 5 (Dec. 12, 2001) ("Rule Senate 
Testimony"). 10 This self-evident proposition becomes even 
more clear when the relief in this case is compared with that 
adopted by the Department, approved by this Court under the Tunney 
Act and affirmed on the merits by the Supreme Court in the AT&T 
antitrust case. United States v. AT&T, 552 F. Supp. 131. There, 
like here, the Section 2 claim was monopoly maintenance, not 
unlawful acquisition of monopoly power. Furthermore, unlike 
Microsoft, AT&T's monopoly was in part a de jure consequence of 
regulatory and legal protections. Id. at 135-41. Had there in 
fact been a difference for antitrust remedy purposes between 
monopoly maintenance and monopoly acquisition, use of the ultimate 
relief of divestiture in A T& T would have been impermissible. 
Thus, only by ignoring the largest antitrust settlement of the 
generation preceding Microsoft can the settling litigants here 
escape the conclusion that termination of a defendant's monopoly 
power is the principal remedial objective of Section 2 monopoly 
maintenance cases.
---------------------------------------------------------------------------

    The Department and Microsoft may argue that the Court of 
Appeals" "drastic" modification of liability is of 
crucial significance in evaluating the scope of a remedy. See 
Microsoft III, 253 F.3d at 105. What this contention ignores is that 
the Court of Appeals reversed or remanded separate, distinguishable 
legal theories for Sherman Act liability that all arose from the 
same set of operative facts. As the government explained to the 
Supreme Court: The court of appeals affirmed the district court's 
central ruling that Microsoft violated Section 2 of the Sherman Act 
by engaging in an unlawful course of conduct to maintain its 
monopoly of the market for Intel-compatible PC operating systems. 
With minor exceptions, the court agreed with the district court's 
findings and conclusions that Microsoft's restrictions on original 
equipment manufacturers; its bundling of Internet Explorer into 
Windows; its dealings with internet access providers, independent 
software vendors, and Apple Computers; and its efforts to contain 
and to subvert Java technologies that threatened Microsoft's 
operating system monopoly, all served unlawfully to maintain the 
Windows monopoly.
    Brief for the United States in Opposition [To Certiorari], 
Microsoft Corp. v. United States, No. 01-236, at 5 (S. Ct. 
filed Aug. 2001) (emphasis added; citations omitted). And the Court 
of Appeals added the explicit, highly unusual caution that 
"[n]othing in the Court's opinion is intended to preclude the 
District Court's consideration of remedy

[[Page 28981]]

issues." \11\ That the lesser included offenses of attempted 
monopolization and tying were not upheld does nothing to subtract 
from the seriousness of the widespread Section 2 violations affirmed 
by the Court of Appeals or the Court's explicit reaffirmation of the 
Ford/United Shoe standard for antitrust relief.
---------------------------------------------------------------------------

    \11\ United States v. Microsoft Corp., No. 00-5212, 
Order (Aug. 2, 2001) (per curiam).
---------------------------------------------------------------------------

    CIS" lengthy recitation of cases indicating that a Tunney 
Act court must accept a lesser remedy than might be obtained after 
trial is irrelevant. CIS, 66 Fed. Reg. at 59475-76. None of 
these cases arose in the context of a post-trial settlement of a 
Section 2 monopolization claim and thus none resolved whether the 
remedial standard adopted by the federal courts in a fully litigated 
antitrust case must be jettisoned if the government subsequently 
agrees to a consensual decree. \12\ More importantly, the Department 
has not offered any statutory or policy basis 1o justify its wooden 
invocation of Tunney Act dicta to this case. By failing to 
articulate any legitimate justification for the deference it insists 
upon, the Department's position suggests that it is designed to 
shield the merits of the decree from critique by the Court and to 
mask the weakness of the proposed settlement, rather than to satisfy 
any compelling institutional or constitutional policy.
---------------------------------------------------------------------------

    \12\ The Department's reliance on United States I,. BNS, 
Inc., 858 F.2d 456 (9 th Cir. 1988), is especially problematic. CIS, 
66 Fed. Reg. at 59476. In BNS, a merger case, the public interest 
"could be harmed irreparably by permitting a merger to become 
a fait accompli" while the district court deliberated on the 
adequacy of the decree's provisions. 858 F.2d at 462. The proposed 
Microsoft settlement could not be more different. This is not a 
merger proceeding. Indeed, the public interest would be harmed 
profoundly if the Court accepts a relief proposal, like the PFJ, 
that is plainly inadequate to restore competition or eliminate the 
widespread anticompetitive practices whose illegality was squarely 
affirmed by the Court of Appeals. Accordingly, the Department's 
citation to BNS for the proposition that this Court cannot 
"engage in an unrestricted evaluation of what relief would 
best serve the public," id., is both highly misleading and 
inapplicable.
---------------------------------------------------------------------------

    The only suggestion in the CIS as to any basis for a limited 
scope of judicial review is just wrong. The Department insists that 
a different relief standard is "particularly" 
appropriate "where, as here, court's review of the decree is 
informed not merely by the allegations contained in the Complaint, 
but also by the extensive factual and legal record resulting from 
the district and appellate court proceedings." CIS, 66 Fed. 
Reg. at 59476. That has things backwards. In normal Tunney Act 
cases, the law is clear that respect is to be accorded to the 
Department's antitrust enforcement judgments w its 
"perceptions of the market structure and its view of the 
nature of the case"--precisely because there is no 
factual or legal record before the court. Microsoft I, 56 F.3d at 
1448. When a Sherman Act case has been litigated and affirmed on 
appeal, however, the district court is fully capable of assessing 
the proposed remedy against that record and its "familiarity 
with the market involved." Id. at 1461. \13\ In short, the 
Court of Appeals" mandate, and its application of traditional 
monopolization remedy law, is the applicable standard against which 
to measure the scope and efficacy of the PFJ.
---------------------------------------------------------------------------

    \13\ The Court of Appeals admonished and reversed the 
prior District Judge in this case, in part, for entering a decree 
based largely on the relief proposed by the government. Although the 
Justice Department's officers "are by reason of office obliged 
and expected to consider w and to act--in the public 
interest," Microsoft 111. 253 F.3d at 34 (quoting Judge 
Jackson), that did not excuse the District Court from its 
independent obligation to consider and explain how the relief 
proposed would meet the sealed objectives of antitrust remedies. 
Microsoft I!!. 253 F.3d at 34. Nothing less is warranted now.
---------------------------------------------------------------------------

    C. The Court Owes No Tunney Act Deference To the Department in 
this Unprecedented Post-Trial, Post-Appeal Settlement The language, 
legislative history and purpose of the Tunney Act all indicate that 
the relatively deferential attitude ordinarily adopted by courts to 
antitrust settlements should not constrain this Court's inquiry into 
the legal sufficiency and acceptability of the remedy proposed by 
Microsoft, the Department and the Settling States.
    The leading authority on Tunney Act deference is not at all to 
the contrary. In Microsoft I, the DC Circuit reversed the district 
judge for "construet[ing] his own hypothetical case and then 
evaluat[ing] the decree against that case." 56 F.3d at 1459. 
Here, no one is asking the Court to consider claims the government 
chose not to pursue. Quite to the contrary. ProComp asks the Court 
to grant effective relief for those claims that the Department 
actually brought and on which it has already prevailed.
    The difference in judicial deference owed to the Executive 
Branch is easily understood against this backdrop. The Tunney Act 
was created as a "check on prosecutorial discretion," In 
re IBM, 687 F.2d 591,595 (2d Cir. 1982), that is, "a check.., 
on the government's expertise m or at the least, its exercise of 
it--even on its good faith." United States v. Gillette 
Co., 406 F. Supp. 713, 715 (D. Mass. 1975). The concern of Congress 
was the predominance of pretrial antitrust settlements that 
otherwise would never reach a courtroom, \14\ For these reasons, the 
Microsoft I decision cautions that a district court's Tunney Act 
obligation to avoid delving too deeply into the substantive merits 
of antitrust settlements arises because "there are no findings 
that the defendant has actually engaged in illegal practices." 
Microsoft I, 56 F.3d at 1460 (emphasis in original). .
---------------------------------------------------------------------------

    \14\ H.R. REP. NO. 93-1463 (1974) ("HOUSE 
REPORT"). Note, The ITT Dividend: Reform of Department of 
Justice Consent Decree Procedures, 73 colum. L. Rev. 594 (1973).
---------------------------------------------------------------------------

    That is obviously not the case here. Microsoft's liability for a 
wide variety of exclusionary practices violative of Section 2 of the 
Sherman Act has been adjudicated and affirmed on appeal. In 
contrast, it is clear that the Tunney Act was predicated on the 
assumption that proposed consent decrees would be presented in the 
context of pretrial settlements over which the courts had yet to 
engage in an exercise of judicial power. See 15 U.S.C. 
 16(e)(1) (district court must "evaluate the 
competitive impact of... termination of alleged violations 
....");  16(e)(2) (court must consider "the 
public benefit, if any, to be derived from a determination of the 
issues at trial"). Unlike the ordinary Tunney Act situation, 
in this case it is indisputably not correct to conclude that 
"[r]emedies which appear less than vigorous may well reflect 
an underlying weakness in the government's case." Microsoft I, 
56 F.3d at 1461.
    The Tunney Act's underlying principles of judicial restraint 
applicable to the exercise of prosecutorial discretion--deeply 
rooted in separation of powers--simply do not apply here. \15\ 
In the typical Tunney Act case, courts have made "no judicial 
finding of relevant markets, closed or otherwise, to be opened or of 
anticompetitive activity to be prevented," is by definition 
not present in a post-appeal antitrust settlement. Maryland v. 
United States, 460 U.S. 1001, 1004 (1983) (per curiam) (Rehnquist, 
J., dissenting). The separation of powers concerns in a post-trial 
settlement are actually reversed. \16\ The source of Tunney Act 
deference is that "the court's authority to review a decree 
depends entirely on the government's exercising its prosecutorial 
discretion by bringing a case in the first instance." 
Microsoft I, 56 F.3d at 1459-60 (emphasis added). In contrast, 
deferential review of a post-trial settlement in a fully litigated, 
finally appealed antitrust prosecution would directly contradict the 
"mandate rule" of Cascade Natural Gas and would be 
inconsistent with this Court's Article III obligations.
---------------------------------------------------------------------------

    \15\ The purposes of the Tunney Act are not implicated in 
a proposed post-trial settlement of a Government. Section 2 
prosecution that has already been affirmed on appeal. There is no 
risk of excessive secrecy, because the remedy phase of a litigated 
antitrust case necessarily takes place in an open judicial process 
dining which, based on the trial record and l/ability findings, the 
district determines whether the government's requested relief 
adequately remedies the defendant's violations of the antitrust 
laws. Nor is there any risk that judicial review of a proposed post-
appeal consent decree will discourage government antitrust 
settlements, as the Department retains the power--which it 
exercised long ago in this case -whether to initiate an antitrust 
prosecution or settle.
    \16\ The courts have therefore distinguished between a 
court's involvement in "the executive branch's decision to 
abandon litigation," which "might impinge upon the 
doctrine of separation of powers," and "[j]udicial 
approval of consent decrees under the [Tunney] Act," which is 
"an entirely distinct proposition because the decree is 
entered as the court's judgment." In re IBM Corp., 687 F.2d 
591,602 (2d Cir. 1982).
---------------------------------------------------------------------------

    The Court of Appeals has explained that because there are 
"constitutional difficulties that inhere in this 
statute," it is "inappropriate for the [district] judge 
to measure the remedies in the decree as if they were fashioned 
after trial." Microsoft I, 56 F.3d at 1461. The converse is 
true when a remedy is in fact fashioned after trial. In that 
situation, the court has already made the factual and legal findings 
that do not exist in the ordinary consent decree situation, and 
therefore is not required to "give due respect to the Justice 
Department's perception of the market structure and its view of the 
nature of the case." Id. at 1461.

[[Page 28982]]

    In light of these serious constitutional concerns, this Court 
should not and cannot accept a proposed decree that falls short of 
the remedy that the Court would impose based on its own, independent 
assessment of the record and the Court of Appeals" remand 
mandate. The Court is undoubtedly aware of the long-standing maxim 
that constitutional questions are to be avoided if a statute can be 
interpreted so as not to raise them. E.g., Richmond Screw Anchor 
Co., 275 U.S. 331, 346 (1928). In the context of this unprecedented 
Tunney Act case, simple prudence dictates that the Court should 
construe the Act to dispense with deference to the government where 
liability has been adjudicated and affirmed on appeal, and thus 
avoid any possibility of a constitutional challenge to its remand 
decision on remedies.
    D. Tile AT&T. Model is Instructive by Conducting a Searching 
Inquiry into the Scope, Adequacy and Effectiveness of the Proposed 
Decree Before turning to a substantive critique of the PFJ, it is 
appropriate to discuss the close parallels between Microsoft and the 
last major monopolization settlement presented by the Department and 
decided by this Court (Harold Greene, J.) under the Tunney Act. 
United States v. AT&T, 552 F. Supp. at 151.
    Before the AT&T settlement was proposed, Judge Greene had 
heard the vast majority of the evidence--on all issues except 
remedy--and had denied AT&T's motion to dismiss on the 
merits after the close of the government's case-in-chief. United 
States v. AT&T, 524 F. Supp. 1336, 1380 (D.DC 1981). Following a 
wide-ranging Tunney Act process that included evidentiary hearings, 
third-party submissions, and several days of oral augment, Judge 
Greene declined to approve the decree as proposed--even though 
it required divestiture of the Bell system--because he 
concluded that it was substantively inadequate, precluded the Court 
from effective oversight and enforcement, and posed a risk of 
harming third parties.
    The Judge insisted upon substantial modifications to the 
proposed decree before he would enter the settlement under the 
Tunney Act's public interest standard. In doing so, Judge Greene 
explained that ,47&T was "not an ordinary antitrust 
case." 552 F. Supp. at 151. Instead, in that case as in this 
one, the proposed decree was an "enormous undertaking" 
having "significant consequences for an unusually large number 
of ratepayers [i.e., consumers], shareholders... and 
competitors." 552 F. Supp. at 152. In addition, and also like 
in this case, the Court would "be able to render sound 
judgments" because it "ha[d] already heard what probably 
amounts to well over ninety percent of the parties" evidence 
both quantitatively and qualitatively, as well as all of their legal 
arguments." Id. For these reasons, Judge Greene concluded that 
"it does not follow that [the Court] must unquestionably 
accept a consent decree as long as it somehow, and, however 
inadequately, deals with the antitrust problems implicated in the 
lawsuit." Id. Instead, Judge Greene reasoned it was his 
responsibility to ensure the decree protected consumers, opened the 
relevant markets to effective competition in a timely manner, and 
would be readily enforceable. The Supreme Court affirmed. Maryland 
v. United States, 460 U.S. 1001 (1983) (per curiam); California v. 
United States, 464 U.S. 1013 (1983)(per curiam).
    Like AT&T, this has been a long, exceedingly complex and 
very hard-fought case. Unlike AT&T, however, in this litigation 
the proposed settlement comes after the trial was completed and 
after the courts finally adjudicated the defendant's liability. 
Also" unlike AT&T, moreover, here the government has not 
succeeded in obtaining via settlement anything close to the relief 
it sought on the merits from this Court. We have submitted our view 
that deference to the Department of Justice is inappropriate in this 
unique case. The A T&7 model provides a benchmark for the scope 
of Tunney Act judicial review which, if anything, should be exceeded 
given the far more advanced procedural posture here. This Court 
cannot err by following an expanded AT&T-like procedure. The 
converse may not be true.
    In sum, the Litigating States must be allowed to proceed free 
from the interference that early Court approval of the proposed 
decree would entail. When the Court does assess and rule on the 
decree, it must undertake a thorough, independent analysis of 
whether the settlement protects the public interest and satisfies 
the DC Circuit's mandate for effective relief. Delegating this core 
judicial responsibility to the Department would violate the Tunney 
Act, raise serious separation-of-powers concerns and leave the 
public without effective redress against a proven monopolist.
    III. THE PROPOSED FINAL JUDGMENT IS INSUFFICIENT UNDER ANTITRUST 
REMEDIES LAW AND DOES NOT MEET THE STANDARD ARTICULATED BY THE 
DEPARTMENT
    The proposed settlement does not meet the DC Circuit's remedial 
standard, quoted above, to terminate the monopoly, deny the 
defendant its ill-gotten fruits, and ensure that monopoly practices 
cannot arise in the future. The CIS does not even cite, let alone 
argue that the PFJ meets the DC Circuit's remedial standard. Indeed, 
the PFJ does not even meet the lesser standard, articulated in the 
CIS, to "(1) end the unlawful conduct; (2) "avoid a 
recurrence of the violation" and others like it; and (3) undo 
its anticompetitive consequences." CIS, 66 Fed. Reg. at 59465 
(citations omitted).
    In fact, the proposed settlement fails to undo the competitive 
harm from the core antitrust violations affirmed by the Court of 
Appeals, and does not even address a series of additional violations 
of the Sherman Act upheld by the Court of Appeals.
    A. The Decree Does Not "Undo" the Competitive Harm 
Resulting from Microsoft's Anticompetitive Practices
    Netscape's browser and Sun's Java were revolutionary middleware 
technologies which allowed Independent Software Vendors 
CISVs") to write programs that would run on any operating 
system, thus potentially making hardware platforms--and 
correspondingly, operating systems--a matter of competitive and 
technological indifference. Microsoft both recognized and feared 
that this new model for software development would be an inflection 
point in the computer industry, \17\ and accordingly launched a 
multi-faceted campaign to destroy the economic and technological 
viability of these forms of competing middleware.
---------------------------------------------------------------------------

    \17\ Microsoft accepts the concept of inflection points in 
technology markets, and unsuccessfully argued to the DC Circuit that 
the possibility of inflection points meant that it did not enjoy 
monopoly power in the operating systems market. Brief of Appellant 
Microsoft Corporation, United States v. Microsoft Corp., at 16 (DC 
Cir. filed Nov. 27, 2000) ("Microsoft DC Circuit Brief').
---------------------------------------------------------------------------

    In this case, Microsoft early on recognized middleware as the 
Trojan horse that, once having, in effect, infiltrated the 
applications barrier to entry, could enable rival operating systems 
to compete .... Alerted to this threat, Microsoft strove over a 
period of approximately four years to prevent middleware 
technologies from fostering the development of enough full-feature, 
cross-platform applications to erode the applications barrier to 
entry. United States v. Microsoft Corp., 87 F. Supp.2d 30, 
38-39 (D.DC 2000) (Conclusions of Law), affirmed in part, 253 
F.3d 34 (DC Cir.), cert. denied, 530 U.S. 1301 (2000).
    The Court of Appeals affirmed the illegality of Microsoft's 
campaign to destroy the competitive threat of Internet browsers and 
cross-platform Java technology. Further, as the Court of Appeals 
explained, Sun's distribution arrangement with Netscape was key to 
.,"achiev[ing] the necessary ubiquity on Windows" 
required for Java to serve "as the ubiquitous platform for 
software development." Microsoft HI, 253 F.3d at 74, 75. By 
foreclosing Netscape from the market, Microsoft thus eliminated the 
ability of the Java runtime environment to develop into a 
ubiquitous, competitive alternative to Windows for applications 
development. \18\ Today, the anticonsumer effects are even more 
clear because Microsoft has integrated its own Internet browsing and 
Java-like runtime technologies into Windows.
---------------------------------------------------------------------------

    \18\ The CIS agrees that distribution of Java by Netscape 
"creat[ed] the possibility that Sun's Java implementation 
would achieve the necessary ubiquity on Windows to pose a threat to 
the applications barrier to entry." CIS at 16, 66 Fed. Reg. at 
59463
---------------------------------------------------------------------------

    No other middleware technologies introduced since Netscape and 
Java have evolved to the point where they could directly challenge, 
and substitute for, Windows. While a variety of middleware is 
available today, most if not all presently lack the capability to 
serve as major platforms for software development. As Professor 
Arrow explains, no middleware entrant currently exists that offers 
the user base, head start and technological capability to supplant 
Windows, characteristics enjoyed by both Netscape and Java before 
Microsoft eliminated them as serious competitive threats. Arrow 
Decl. 25-30. Middleware is more often a short-run 
complement to the operating system rather than a substitute. It is 
only when particularly "disruptive technologies" can 
achieve the distribution scale and scope of exposed APIs to permit 
substitution among operating systems--the 
"commoditized" operating systems feared by

[[Page 28983]]

Microsoft--that middleware becomes a long-run competitive 
substitute for the operating systems. Id. 16-17, 
33-34. Powerful middleware substitutes for Microsoft's 
operating systems monopoly just do not come along every week. Id. 
18 ("Technological disruptions such as the middleware 
threat of the mid-1990s do not occur continually.")
    Microsoft's anticompetitive practices destroyed the prospect 
that middleware could effect such a fundamental change (sometimes 
called a "paradigm shift') in the operating system market and, 
thus, have substantially entrenched its monopoly power. 
"Microsoft's significantly enhanced ability to stem potential 
middleware threats is the result, in very substantial part, of its 
past anticompetitive campaign against Netscape." \19\ As 
Professor Arrow explains, "[a]t times of technological 
disruption, the forces of dynamic competition play an especially 
important role." Id. 18. See Findings of Fact 377 
("Microsoft "successfully denied" Netscape status 
of "the standard software for browsing the Web"). \20\It 
will be "exceedingly difficult now, even with the best of 
remedies, to re-establish middleware fully as the kind of 
competitive threat to Microsoft's monopoly power that it posed in 
the mid-1990s." Arrow Decl. 5, 18, 71. Thus, as Professor 
Arrow concludes, it is "highly unlikely" that 
"market forces alone will lead to the development of 
innovative middleware that creates the same competitive risk to 
Microsoft that it faced from Navigator and Java in 1995." Id. 
30.
---------------------------------------------------------------------------

    \19\ Henderson Decl., supra, 73.
    \20\ "Microsoft's campaign succeeded in 
preventing--for several years, and perhaps 
permanently--Navigator and Java from fulfilling their potential 
to open the market for Intel-compatible PC operating systems to 
competition on the merits." United States I,. Microsoft Corp., 
87 F.Supp.2d 30, 38 (2000) (Conclusions of Law).
---------------------------------------------------------------------------

    Despite these compelling facts, the Department and the Settling 
States have proposed middleware provisions that ignore the core 
Internet browser and Java runtime technologies in favor of 
undefined, future middleware that may or may not present the same 
viable cross-platform capabilities. The Department's remedy ratifies 
the illegal acts that Microsoft committed, instead of moving the 
market forward to where it would be today had Netscape and Java been 
permitted to grow without illegal Section 2 constraint. \21\ The 
Supreme Court, however, has squarely rejected the proposition that 
"antitrust violators may not be required to do more than 
return the market to the status quo ante." Ford, 405 U.S. at 
573 n.8.
---------------------------------------------------------------------------

    \21\ The Competitive Impact Statement explains that the 
objective of the proposed decree is "to restore the 
competitive threat that middleware products posed prior to 
Microsoft's unlawful conduct." CIS, 66 Fed. Reg. at 
59463-64.
---------------------------------------------------------------------------

    Assistant Attorney General James explains that the settlement is 
designed "to recreate the potential for the emergence of 
competitive alternatives to Microsoft's operating system monopoly 
through middleware innovations." \22\ But without identifying 
any comparable middleware products today or predicting that truly 
competitive middleware will be introduced in the near-term future 
that could become substitutes for Windows, the Department does not 
have a verifiable basis to project that such a remedy will have any 
impact on competition. The Department's proposed settlement posits 
only hypothetical future entry to counteract the very real monopoly 
power of Windows today.
---------------------------------------------------------------------------

    \22\ James Senate Testimony, supra, at 10.
---------------------------------------------------------------------------

    In addition, Microsoft's integration of Internet browsing and 
runtime environment technology into Windows allows Microsoft today 
to prevent any competing middleware technology from achieving 
ubiquity, thus preserving the applications barrier to entry.\23\ 
Unlike the Netscape and Java technologies that Microsoft's unlawful 
practices eliminated as serious competitive threats, however, 
Microsoft middleware is not cross-platform. Consequently, by 
sanctioning Microsoft's integration of middleware into Windows and 
by failing to redress its illegal campaign against Netscape and 
Java, the proposed decree enhances, rather than reduces, Microsoft's 
operating systems monopoly power. In short, the PFJ does not undo 
the competitive harm resulting from Microsoft's unlawful assault on 
Netscape and Java, and therefore, fails to meet the requirements of 
established antitrust law and the lesser standard the Department has 
set.
---------------------------------------------------------------------------

    \23\ See Findings of Fact 397 ("By bundling 
its version of the Windows JVM with every copy of Internet Explorer 
and expending some of its surplus monopoly power to maximize the 
usage of Interact Explorer at Navigator's expense, Microsoft endowed 
its Java runtime environment with the unique attribute of 
guaranteed, enduring ubiquity across the enormous Windows installed 
base.").
---------------------------------------------------------------------------

    B. The Proposed Settlement Fails to Deny Microsoft the Ill-
gotten Fruits as Required by Established Antitrust Law
    Equally importantly, in clear denial of the standards under 
established antitrust remedies law, the decree permits Microsoft to 
retain the fruits of its statutory violations. See United Shoe, 391 
U.S. at 252. It "would be inimical to the purpose of the 
Sherman Act to allow monopolists free rein to squash nascent, albeit 
unproven, competitors at will--particularly in industries 
marked by rapid technological advance and frequent paradigm 
shifts." Microsoft III, 253 F.3d at 79. Consequently, because 
the PFJ fails to "deny to [Microsoft] the fruits of its 
statutory violation," id. at 103, it cannot be approved by 
this Court.
    There are remedial alternatives available to restore Internet 
browsers and cross-platform runtime technology to the position they 
would have achieved--ubiquitous distribution without any 
"lock-in" to the Windows operating systems D in the 
absence of Microsoft's violations. The open source Internet Explorer 
licensing requirement proposed by the Litigating States does 
precisely that. A remedy that acts directly to undermine the 
applications barrier to entry, for instance by requiring 
"porting" of the Office suite to other operating system 
platforms, would act to commoditize the operating system and thus 
allow operating systems competition to occur on the basis of 
efficiency, technology and consumer demand.\24\ See Arrow Decl. 
46-49.\25\
---------------------------------------------------------------------------

    \24\ Assistant Attorney General James has suggested that 
such relief would be improper because no "essential 
facilities" claim was made by the government. James Senate 
Testimony, supra, at 10 (emphasis added). But a monopoly maintenance 
"must cant" remedy designed to redress artificial 
applications barriers to entry does not need to be supported by an 
essential facilities claim. To the contrary, in its 1998 Complaint 
to this Court, the government expressly sought as one form of 
injunctive relief that Microsoft be required to "include with 
[the Windows] operating system the most current version of the 
Netscape Internet browser." Complaint,  VII.2.e.1 
(Prayer for Relief). Thus, the very "must-carry" 
obligations that the Department now opposes were the precise relief 
it initially sought.
    \25\ Professor Rebecca Henderson of the MIT Sloan School 
of Management, a remedies expert for the government, testified by 
affidavit in 2000 that "[t]he availability of the world's most 
popular office productivity suite on alternative platforms would 
serve to reduce the barriers to entry protecting Microsoft's 
monopoly, which will, in turn, increase the potential for 
competition in the PC operating systems market." Declaration 
of Rebecca M. Henderson, United States v. Microsoft Corp., No. 
98-1232 (TPJ), at 22 (D.DC filed April, 28, 2000).
---------------------------------------------------------------------------

    In sharp contrast, the proposed decree is described in the CIS 
as encouraging the development of future technologies that 
"over time could help lower the applications barrier to 
entry." CIS, 66 Fed. Reg. at 59467 (emphasis added). As no 
significant platform innovations with the characteristics necessary 
to substitute for Windows have developed since Microsoft's multi-
faceted predatory campaign was launched, there is simply no reason 
to believe that new Netscape and Java-like middleware competition 
could flourish today, especially under the decree, which not only 
does not lower the applications barrier to entry--it actually 
preserves and strengthens. Therefore, the remedy fails to meet the 
standard set by established antitrust remedies law by refusing to 
deny Microsoft the fruits of its unlawful acts, or providing any 
viable alternative mechanism.
    C. The Decree Does Not Terminate or Redress Numerous Practices 
that the Court of Appeals Found to Violate the Sherman Act
    The decree now proposed by the government improperly permits 
Microsoft to continue some of the very exclusionary practices that 
the Court of Appeals explicitly held were illegal. Both established 
antitrust remedies law and the lesser standard articulated by the 
Department require that the settlement terminate and redress the 
unlawful conduct affirmed by the Court of Appeals. The settlement 
does not.
    1. Integration of Windows and Middleware
    The PFJ does not preclude Microsoft from integrating middleware 
software, or any other technology that could erode the applications 
barrier to entry, into its operating system products. Hence, the 
proposed decree not only does not end Microsoft's practice of 
binding competing technologies to Windows, but allows middleware 
integration to continue unabated in the future. This failure is 
impossible to square with the Court of Appeals" decision. 
First, the Court specifically held that "Microsoft's decision 
to bind IE to Windows 98" by "commingling of

[[Page 28984]]

code" was an unlawfully "exclusionary" practice. 
Microsoft III, 253 F.3d at 64-67. The Court of Appeals" 
discussion is worthy of close attention became it sheds light on the 
magnitude of the PFJ's failure with respect to product integration. 
The Court explained that "[t]echnologically binding IE to 
Windows ... both prevented OEMs from pre-installing other browsers 
and deterred consumers from using them," Microsoft III, 253 
F.3d at 64 (citing Findings of Fact 159), and thus that 
"Microsoft's... commingling of browser and operating system 
code constitute[s] exclusionary conduct, in violation of 
2." Id. at 67. Moreover, the Court of Appeals emphasized 
that its Section 2 holding rebuffed Microsoft's arguments "not 
only that its integration of IE into Windows is innovative and 
beneficial, but also that it requires non-removal of IE." Id. 
at 89. Second, the Court summarily denied Microsoft's rehearing 
petition challenging both the factual basis and the legal 
sufficiency of the code commingling holding.\26\ The Court denied 
without opinion Microsoft's rehearing petition, in which the 
defendant Microsoft argued that "'commingling of 
code" is not "per se pernicious or even 
suspicious"' and urged the DC Circuit to (1) reverse the 
applicable findings of fact, and (2) limit its liability holding 
with respect to bundling of Internet Explorer to Microsoft's refusal 
to permit "[r]emoval of end-user access by OEMs." \27\
---------------------------------------------------------------------------

    \26\ United States v. Microsoft Corp., No. 00-5212, 
Order (Aug. 2, 2001) (per curiam).
    \27\ Microsoft Corporation's Petition for Rehearing, 
United State v. Microsoft Corp., Nos. 00-5212, 5213, at 2, 4 
(DC Cir. filed July 18, 2001) (quoting United States v. Microsoft 
Corp., 147 F.3d 935, 958 (DC Cir. 1998) (Wald, J., concurring in 
part and dissenting in part)) ("Microsoft DC Cir. Rehearing 
Petition").
---------------------------------------------------------------------------

    In spite of these repeated holdings, the PFJ reverses course and 
adopts the position for which Microsoft argued on rehearing. The 
proposed settlement allows OF. Ms to remove "access to" 
middleware--that is, icons w from the desktop and related areas 
of the Windows user interface. Conversely, it permits Microsoft to 
commingle any code and prohibits OEMs from deleting Microsoft 
middleware code from the operating system software. Thus, although 
the Court of Appeals expressly reiterated that technological 
integration of Interact Explorer violated Section 2, the PFJ fails 
to impose any limits whatsoever on current or future bundling of 
middleware and operating systems software.
    Assistant Attorney General James has testified that "[t]he 
court of appeals ruled that, albeit with some limits, Microsoft 
could lawfully integrate new functions into the operating 
system."\28\ This is a mischaracterization. The DC Circuit 
remanded the tying claim for rule of reason analysis, Microsoft III, 
253 F.3d at 84-95, but did not conclude that any product 
integration litigated at trial was "lawful." The only 
general statement the Court made was that the "integration of 
additional software functionality into an operating systems" 
is not a per se unlawful Section 1 offense.\29\
---------------------------------------------------------------------------

    \28\ James Senate Testimony, supra, at 14 (emphasis 
added).
    \29\ For Section I purposes, the DC Circuit ruled that 
technological innovation is subject to an efficiency-harm balancing 
test under the rule of reason. Microsoft II1, 253 F.3d at 90, 93. 
Given the lack of an efficiency justification by Microsoft for 
having commingled the browser with the operating system, it is 
highly likely that the Government would have prevailed on the 
Section I claim under the "rule of reason" test. See/d. 
at 66 (Microsoft does not "argue that either excluding IE from 
the Add/Remove Programs utility of commingling code achieves any 
integrative benefit").
---------------------------------------------------------------------------

    2. Coercion and Market Allocation
    The DC Circuit affirmed that Microsoft's coercion of Apple, by 
threatening to withhold porting of Office to the Macintosh operating 
systems platform, was unlawful. The District Court likewise found 
that Microsoft attempted (this time without success) to coerce Apple 
into abandoning development of its QuickTime software, in order to 
limit "the development of multimedia content that would run 
cross-platform." Findings of Fact 110.
    Microsoft also coerced Intel--Microsoft's partner in the 
IBM-compatible PC market m into abandoning its work on creation of 
Java-compatible multimedia software.\30\ Microsoft III, 253 F.3d at 
77. In fact, the Court specifically ruled that "Microsoft's 
threats to Intel were exclusionary, in violation of  2 
of the Sherman Act." Id. at 78 (emphasis added). And the 
District Court, again without objection by the Court of Appeals, 
also found that Microsoft pressured Intel to cease development of 
"Native Signal Processing ('NSP') software, [which] would 
endow Intel microprocessors with substantially enhanced video and 
graphics performance,"\31\ as well as "using revenues 
from its microprocessor business to fund the development and 
distribution of free platform-level software," \32\ in 
order to "halt the development of software that presented 
developers with a set of operating-system-independent 
interfaces." \33\
---------------------------------------------------------------------------

    \30\ See also Findings of Fact 388 ("Gates 
told Intel's CEO in June 1996 that he did not want the Inter 
Architecture Labs cooperating with Sun to develop methods for 
calling upon multimedia interfaces in Windows."); Id. 
404 ("Microsoft used threats to withhold Windows 
operating-system support from Intel's microprocessors and often to 
include Intel technology in Windows in order to induce Intel to stop 
aiding Sun in the development of Java classes that would support 
innovative multimedia functionality.").
    \31\ Findings of Fact 95.
    \32\ Findings of Fact 102.
    \33\ Findings of Fact 94.
---------------------------------------------------------------------------

    The proposed decree does not constrain Microsoft's ability to 
engage in this sort of coercive conduct to impede competition from 
potential middleware or other software rivals. Section III.F of the 
PFJ precludes Microsoft only from "retaliating" against 
ISVs and IHVs that develop or use competing platform software and 
from entering into exclusive dealings with ISVs (but curiously not 
IHVs) for platform software. It does not, however, deal with the use 
of threats and coercion to compel adherence to Microsoft's 
objectives short of an actual agreement.\34\ As both a legal and 
practical matter, the PFJ fails to redress the Court of 
Appeals" holding that Microsoft's "threats" to its 
competitors and partners violated Section 2.
---------------------------------------------------------------------------

    \34\ Under the antitrust laws, a firm has not as a matter 
of law entered into an "agreement" with a distributor or 
other party where it unilaterally declares its position and by 
virtue of its economic power compels distributors to adhere to those 
conditions. See Monsanto Co. v. Spray-Rite Svc. Corp., 465 U.S. 752, 
764 n.9 (1984).
---------------------------------------------------------------------------

    3. Deception and Product Sabotage
    The Department recognizes that among the practices the DC 
Circuit ruled unlawful was Microsoft's "attempt[s] to mislead 
and threaten software developers in order to contain and subvert 
Java middleware technologies that threatened Microsoft's operating 
system monopoly." \35\ Yet the PFJ does not prohibit 
Microsoft from misleading developers or, as it did with Java, 
creating supposedly "open" software development tools 
that, in reality, are compatible only with Windows. See Microsoft 
III, 253 F.3d at 77. These sorts of practices are added in the 
Litigating States remedy proposal.\36\ By preventing Microsoft from 
intentionally sabotaging competing applications or middleware 
products, and by requiring that if Microsoft implements open 
industry standards it not "pollute" those standards with 
proprietary, Windows-specific protocols and features, such relief 
would constrain the exclusionary conduct held unlawful by the DC 
Circuit. The Department's proposed settlement does not.
---------------------------------------------------------------------------

    \35\ CIS, 66 Fed. Reg. at 59460. In related private 
antitrust litigation, courts similarly have found that Microsoft 
"create[d] the illusion that [a competing product] was 
incompatible with Windows by inserting error messages conveying to 
the user that either [the competing product] was incompatible with 
Windows that [Microsoft's product] was the only environment in which 
Windows could properly function." Caldera, Inc. v. Microsoft 
Corp.. 72 F. Supp. 2d 1295, 1314 (D. Utah 1999).
    \36\ Litigating States" Remedy Proposal, supra, at 
12.
---------------------------------------------------------------------------

    The Department's claim that the decree "ends" 
Microsoft's unlawful practices is incorrect. It is also wrong as a 
matter of remedies jurisprudence. Antitrust courts must "start 
from the premise that an injunction against future violations is not 
adequate to protect the public interest." \37\ In order 
to prevent "a recurrence of the violation" found, 
antitrust courts are not limited to imposing "a simple 
proscription against the precise conduct [the violator] previously 
pursued." \38\
---------------------------------------------------------------------------

    \37\ Schine Chain Theatres, Inc. v. United States, 334 
U.S. 110, 128 (1948).
    \38\ National Soc'y of Prof. Eng'rs v. United States, 435 
U.S. 679, 698 (1978).
---------------------------------------------------------------------------

    Yet Assistant Attorney General James recently testified that the 
government's remedy proposal is "focused on the specific 
practices that the court [of appeals] had ruled 
unlawful." \39\ This focus on specific practices does 
not eliminate those practices. In any event, it is settled that 
antitrust relief may prohibit even otherwise lawful conduct if it 
"represents a reasonable method of eliminating the 
consequences of the illegal conduct" or preventing its 
resumption.\40\
---------------------------------------------------------------------------

    \39\ James Senate Testimony, supra, at 6.
    \40\ National Soc'y of Prof Eng'rs, 435 U.S. at 698; 
United States v. U.S. Gypsum Co., 340 U.S. 76, 90 (1950) (Section 2 
relief may "go beyond the narrow limits of the proven 
violation"). Accord International Salt, 334 U.S. at 400; 
DuPont. 366 U.S. at 327.

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

[[Page 28985]]

    IV. THE API DISCLOSURE AND OEM FLEXIBILITY PROVISIONS OF THE 
PROPOSED DECREE WILL NOT CREATE THE OPPORTUNITY FOR MIDDLEWARE 
COMPETITION
    The proposed decree neither provides future middleware 
competitors with the API information needed to develop interoperable 
products nor opens the OEM distribution channel to effective 
competition from any such new entrants. To a surprisingly large 
degree, the PFJ's provisions simply memorialize Microsoft's current 
business practices. Indeed, the PFJ would not have thwarted 
Microsoft's 1995-98 unlawful campaign against Net. scape and 
Java had the decree been in place at that time.
    As a consequence, the PFJ will discourage, rather than 
encourage, investment and innovation in new middleware technology. 
Future middleware competitors, faced with the very real prospect 
that they may not be able to obtain necessary API information from 
Microsoft or access to the OEM distribution channel, will have 
virtually no incentive to invest in time development of new and 
innovative middleware technology. Moreover, even if the PFJ actually 
did "creat[e] the opportunity for software developers and 
other computer industry participants to develop new middleware 
products that compete directly with Microsoft," as the CIS 
states, the five-year term of the proposed decree is far too short 
to promote innovation and investment in middleware technology. In 
short, under the PFJ the status quo that prompted the Department of 
Justice and State Attorneys General to bring these actions against 
Microsoft will perpetuate.
    As the Supreme Court emphasized in its landmark ruling in the 
DuPont antitrust case, "It]he proper disposition of antitrust 
cases is obviously of great public importance, and their remedial 
phase, more often than not, is crucial. For the suit has been a 
futile exercise if the Government proves a violation but fails to 
secure a remedy adequate to redress it." United States v. E.I. 
du Pont de Nemours & Co., 366 U.S. 316, 323 (1961). Under any 
appropriate standard for judging the effectiveness of antitrust 
remedies, the key portions of the PFJ are just such an exercise in 
futility.
    A. The Proposed Decree's Provisions for Information Disclosure 
Do Not Assure that Future Middleware Competitors Will Have Access to 
Necessary Interoperability Information The Department proclaims that 
the API disclosure provisions of the proposed decree will create 
middleware competition by requiring Microsoft to disclose all of the 
interfaces and related technical information that Microsoft's 
middleware uses to intemperate with the Windows operating 
system." CIS, 66 Fed. Reg. at 59460.\41\ That is simply not 
accomplished by a literal reading of the proposed decree's API 
provisions. The proposed decree does not provide middleware 
competitors with the information needed to intemperate, but rather 
allows Microsoft itself to decide whether, when and which APIs to 
release to potential competitors.
---------------------------------------------------------------------------

    \41\ See also CIS, 66 Fed. Reg. at 59468 (decree 
"requires Microsoft to disclose to ISV, IHVs, LAPs, ICPs and 
OEMs all of the interfaces and related technical information that 
Microsoft Middleware uses to intemperate with any Windows Operating 
System Product").
---------------------------------------------------------------------------

    There are four provisions of the proposed decree that seek to 
address the issues of information disclosure for the purposes of 
enabling interoperability. Section III.D addresses the disclosure of 
APIs and Section III.E addresses the disclosure of communications 
protocols with server operating systems products. These provisions 
need to be read in concert with Section HI J, which substantially 
narrows the scope of required disclosures, and Section HI.L5, which 
potentially undermines the information disclosure regime by granting 
to Microsoft rights to insist on cross licenses to intellectual 
property developed through the use of Microsoft's APIs. Lastly, 
these provisions are dependent on a multitude of definitions which 
include Sections VI.A "APIs"; VI.B "Communications 
Protocol"; VI.E "Documentation"; VI.J 
"Microsoft Middleware"; VI.R "Timely 
Manner"; VI.T "Trademarked"; and VI.U 
"Windows Operating System Product." To understand the 
impact of the PFJ on information disclosure, all these provisions 
must be read together, along with their subordinate definitions and 
exceptions.
    1. The API Provision's Scope is Far Too Narrow.
    The PFJ falls short of requiting the disclosure of APIs that 
innovative middleware technologies might need. Section III.D 
requires only that Microsoft disclose: "the APIs and related 
Documentation that are used by Microsoft Middleware to intemperate 
with a Windows Operating System Product." PFJ, 66 Fed. Reg. at 
59454 (emphasis added). This obligation is plainly too narrow to 
support real middleware competition. If a potential competitor 
creates a new form of middleware that provides innovative 
functionalities, it will not be entitled to the necessary APIs, if 
those APIs are not "used by Microsoft Middleware to 
interoperate with a Windows Operating System Product" within 
the scope of Section III.D. This necessarily limits future 
innovation to the parameters set by the breadth of Microsoft's 
Middleware functionality, it creates a regime where competitors must 
always follow, as opposed to lead, middleware innovations. For 
example, when Netscape was attempting to achieve full 38 
interoperability with the Windows operating system in 1995, Netscape 
required the APIs for Windows, not merely the APIs between Windows 
and Microsoft's browser, which was just in the process of 
development.\42\
---------------------------------------------------------------------------

    \42\ The district court's "Internet Order" did 
not suffer from this problem because Section 3.b of its API 
disclosure provisions broadly required the release of APIs that 
Microsoft employs to enable (i) Microsoft applications to 
interoperate with Microsoft Platform Software (defined as both 
operating systems and middleware), (ii) Microsoft middleware to 
interoperate with a Microsoft operating systems product (or 
Microsoft middleware distributed with a Microsoft operating systems 
product, and (iii)any Microsoft software installed on one computer 
to interoperate with a Microsoft operating systems or middleware 
product installed on another computer. The proposed decree's use of 
"Microsoft Platform Software" is confined to Sections 
III.A and III.F.I (retaliation) and Section III.F.2 and III.G.I 
(exclusivity), but has no application to API disclosure. United 
States v. Microsoft, Final Judgment (D.DC 2000) ("Interim 
Order").
---------------------------------------------------------------------------

    Further, under Section III.D, Microsoft must disclose "for 
the sole purpose of interoperating with a Windows Operating Systems 
Product... APIs and related documentation that are used by Microsoft 
Middleware to interoperate with a Windows Operating System 
Product." PFJ, 66 Fed. Reg. at 59454. Windows Operating 
Systems Products are defined in Section VI.U to include Windows 2000 
Professional and Windows XP for the PC. Thus, Microsoft does not 
have to disclose APIs its middleware uses to interoperate with 
Microsoft operating systems on servers or handhelds. And for those 
APIs that Microsoft does disclose, Microsoft is permitted to limit 
their use by third parties "solely for the purpose of 
interoperating with a Windows Operating System Product." Id. 
at 59454. Thus, Microsoft can distribute middleware products that 
interoperate with all of its client and server operating systems 
along with its applications such as Office, while competitors" 
middleware products will be limited to using any disclosed APIs to 
intemperate only with PC versions of Windows. This limitation 
certainly does not provide a level playing field for competitive 
middleware.
    2. The API Provision of the PFJ Constructs an Illusive Framework 
for Disclosure of Interoperability Information
    Close review of the plain language of the API disclosure 
provision and its subordinate definitions reveals that the provision 
is quite illusory. A careful examination of these complex provisions 
of the proposed decree--represented graphically in Figure 1 on 
the next page reveals that, despite their length, they are 
nonetheless circular and illusory. ??
    Section III.D sets forth the basic obligation that Microsoft 
must disclose to competitors "the APIs and related 
Documentation that are used by Microsoft Middleware to interoperate 
with a Windows Operating System Product." The PFJ therefore 
establishes a regime where Microsoft must disclose the 
"APIs," a defined tern, that are used by 
"Microsoft Middleware," a defined term, to intemperate 
with a "Windows Operating System Product," a defined 
term.
    a. Defined Terms Within the API Disclosure Provision Leave All 
Material Disclosure Determinations to Microsoft.
    The defined terms within Section III.D reveal that the PFJ's API 
disclosure obligations are without substance. As stated, the 
provision calls for the disclosure of "APIs" between 
"Microsoft Middleware" and the "Windows Operating 
System Product." Taking those definitions in reverse order 
demonstrates that the Department cannot possibly predict precisely 
what information is required to be disclosed under Section III.D 
because most of the definitions are left to Microsoft.
    First, Section VI.U provides the definition of a "Windows 
Operating System Product."

[[Page 28986]]

A Windows Operating System Product is defined as: 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. (emphasis added)
    The CIS explains that, pursuant to the proviso in the final 
sentence, this definition means that "the software code that 
comprises a Windows Operating System Product is determined by 
Microsoft's packaging decisions (i.e., by what it chooses to ship as 
"Windows')." CIS, 66 Fed. Reg. At 59459. Under this 
approach, therefore, Microsoft retains the unilateral discretion to 
determine what constitutes Windows for purposes of its API 
disclosure obligations. If middleware software is included with 
Windows, it is thus part of a Windows Operating System Product for 
the purposes of this definition. It follows that if Microsoft 
chooses "at its sole discretion" to include middleware 
as part of Windows it escapes the disclosure requirements of
    Section III.D.
    The other "bookend" of Microsoft's information 
disclosure requirement rests on definition VI.J, "Microsoft 
Middleware." First, it is critical to understand that 
provision III.D does not invoke definition VI.K "Microsoft 
Middleware Product," which clearly sets forth that 
"Internet Explorer, Microsoft's Java Virtual Machine, Windows 
Media Player, Windows Messenger, Outlook Express and their 
successors" are "Microsoft Middleware Products." 
Id. Rather, the provision rests on the far more ambiguous definition 
of "Microsoft Middleware." Under definition 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;
    3. Provides the same or substantially similar functionality as a 
Microsoft Middleware Product; and
    4. Includes at least the software code that controls most or all 
of the user interface elements of that Microsoft Middleware.
    Software code described as part of, and distributed separately 
to update, a Microsoft Middleware Product shall not be deemed 
Microsoft Middleware unless identified as a new major version of 
that Microsoft Middleware Product. A major version shall be 
identified by a whole number or by a number with just a single digit 
to the right of the decimal point.
    The weakness of this definition is immediately apparent. The 
first prong of the definition requires Microsoft middleware to be 
distributed "separately from a Windows Operating System 
Product." Therefore, if Microsoft decides to include 
middleware as part of Windows as it is entitled to do "in its 
sole discretion" it cannot possibly be Microsoft Middleware 
because it will not be "distributed separately." 
Alternatively, because middleware is "Microsoft 
Middleware" only if it is distributed "to update" 
Windows, Microsoft can as easily avoid any API disclosure 
obligations by distributing middleware as a separate application 
rather than as a Windows update.\43\
---------------------------------------------------------------------------

    \43\ The Competitive Impact Statement flatly 
mischaracterizes this section in contending that the definition of 
Microsoft Middleware captures what it calls 
"'redistributable[s]" associated with Microsoft 
Middleware Products." CIS, 66 Fed. Reg. at 59464. The 
Department claims that "[i]f such a redistributable exists, as 
they currently do for most Microsoft Middleware Products, then the 
redistributable is Microsoft Middleware" because it is 
"distributed separately" from Windows. Id. This 
explanation, however, ignores the clause specifying that separate 
distribution must be "to update" Windows under Section 
VI.J.
---------------------------------------------------------------------------

    Second, in order to qualify as Microsoft Middleware, the 
middleware must also be "Trademarked." Section VI.T of 
the PFJ defines "'Trademarked" in two ways. The 
first clause of the definition states:
    "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 Unites States in a demand letter or 
lawsuit.
    PFJ, 66 Fed. Reg. 59459.
    We cannot fathom the rationale for resting the definition of 
Middleware on whether or not a particular technology is trademarked. 
The Department contends that the definition is "designed to 
ensure that the Microsoft Middleware ... that Microsoft distributes 
(either for free or for sale) to the market as commercial products 
are covered by the Proposed Final Judgment." CIS, 66 Fed. Reg. 
at 59465. Yet, again it appears that exactly the opposite is true 
based on the second part of the "Trademarked" 
definition, which states:
    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 fights in such descriptive or generic terms apart from the 
Microsoft?? or Windows?? trademarks and hereby abandons any such 
rights it may acquire in the future. PFJ, 66 Fed. Reg. at 59459 
(emphasis added).
    Under this definition, if the product is distributed as 
"Windows?? Media Player" as opposed to "Windows 
Media?? Player" it would not be covered. That is because the 
formulation of the name "Windows?? Media Player" would 
be "comprised of the ... [Windows??] trademarks together with 
a descriptive or generic term [Media Player]."
    An analysis of each of Microsoft's Middleware Products 
demonstrates the problem. "Microsoft Internet Explorer" 
could easily be distributed as Microsoft?? plus the generic or 
descriptive term "Internet Explorer" or "Windows 
Messenger" as Windows?? plus the generic or descriptive term 
"Messenger." As a factual matter, "Microsoft 
Internet Explorer," "Microsoft Java Virtual 
Machine," "Windows Media Player" and. 
"Windows Messenger" are not currently distributed under 
either ?? or m nor are they registered with the United States Patent 
and Trademark Office.\44\ Thus, in stark contrast to its purported 
effect, Section VI.T either currently excludes or provides a roadmap 
to exclude each of Microsoft's major Middleware Products from the 
disclosure requirements of III.D.
---------------------------------------------------------------------------

    \44\ A complete list of Microsoft trademarks is posted on 
the Web at http://www.microsoft.com/trademarks/docs/mstmark.rtf. The 
description in the test is taken from the document at that location 
titled "Microsoft Corporate Trademarks," dated December 
2001. That document advises that other companies should "not 
use any trademark symbols ... for those products that are not listed 
above as trademarks, such as 'Microsoft?? Excel," 
'Microsoft?? Internet Explorer."'
---------------------------------------------------------------------------

    When the "Trademarked" provision is taken in 
conjunction with the additional requirement that the Middleware must 
be "distributed separately from a Windows Operating System 
Product to update that Windows Operating System Product," it 
is apparent that Microsoft can completely escape coverage under 
Definition VI.J by either altering its distribution or the 
nomenclature of its products. In sum, the set of "Microsoft 
Middleware" that interoperates with "Windows Operating 
System Products" appears to be a null set.
    The final definition implicated by Provision III.D is that of 
"Application Programming Interfaces." "APIs" 
are defined in Definition VI.A as follows: 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. PFJ, 66 Fed. Reg. at 
59458. (emphasis added). Thus, "interfaces" means 
"interfaces" because the basic API definition rests once 
on the Microsoft Middleware definition (described above) and three 
times on the definition of Windows Operating System Product, which 
is defined by Microsoft in its "sole discretion." The 
Department has proclaimed the API disclosure remedies to be the 
centerpiece of the PFJ. That the definition of "API" 
will be exclusively determined by Microsoft highlights the seriously 
flawed nature of the entire proposed device.
    In sum, we do not believe it is possible for the Department of 
Justice, Microsoft or any party to know with any degree of certainty 
exactly what must be disclosed under Provision III.D. But there is 
no question that these definitional issues will be before the Court 
in numerous enforcement actions and dominate this Court's docket for 
the next five years.
    3. The API Disclosure Provision Also Leaves Critical Terms 
Undefined. Focusing on the terms of Provision III.D that are not 
defined yields some striking conclusions.

[[Page 28987]]

First, the critical term "interoperate" is left 
undefined by the PFJ. Moreover, despite the Department's claim in 
the CIS that the decree's API provisions require the release of all 
"interfaces and related technical 
information," \45\ these terms are neither defined nor 
employed in the language of Section III.D. In fact, the phrase 
"technical information" does not even appear in the 
proposed decree. In contrast, the Interim Order included a detailed 
definition of "Technical Information" (Section 7.dd) 
that the Department and Microsoft have without explanation 
eliminated from the proposed decree.\46\ Inexplicably the PFJ has 
lowered the standard of interoperability supported by disclosed APIs 
in the Interim Order from information that software developers 
"require" to "interoperate effectively" with 
Windows to information "used by Microsoft" to 
"interoperate."
---------------------------------------------------------------------------

    \45\ CIS, 66 Fed. Reg. at 59460, 59468.
    \46\ The Interim Order defined "Technical 
Information" as "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. Technical 
information includes but is not limited to reference 
implementations, communications protocols, file formats, data 
formats, syntaxes and grammars, data structure definitions and 
layouts, error codes, memory allocation and deallocation 
conventions, threading and synchronization conventions, functional 
specifications and descriptions, algorithms for data translation or 
reformatting (including compression/decompression algorithms and 
encryption/decryption algorithms), registry settings, and field 
contents." In contrast, the PFJ requires only disclosure of 
related "Documentation," defined in Section VI.E as 
"information" that is "of the sort and to the 
level of specificity, precision and detail that Microsoft 
customarily provides for APIs it documents in the [MSDN]." 
PFJ, 66 Fed. Reg. at 59459.
---------------------------------------------------------------------------

    These terms are not peripheral. They go to the core meaning of 
the API disclosure provisions of the proposed decree. An injunction 
designed to require Microsoft to disclose interoperability 
information to rivals cannot possibly be effective where the scope 
of the information to be released is not defined with specificity. 
The elimination of the definition of Technical Information is thus 
particularly revealing, because it illustrates that the Department 
has crafted a remedy that is, at best, a subset of the Interim Order 
on which the Department claims it relied. It also demonstrates that 
the Department affirmatively made a determination not to define a 
term which was clearly central to the disclosures mandated by the 
Interim Order.
    4. Under Provision III.D, APIs Will Never be disclosed in a 
Timely Manner
    Finally, Section III.D does not ensure simultaneous API access 
for Microsoft and its competitors.
    While the Interim Order required disclosure of APIs at the same 
time they were made available to Microsoft applications developers, 
the PFJ does not. Instead, the proposed decree uses the very 
ambiguous standard that, for a "new major version" of 
Microsoft middleware, API disclosure "shall occur no later 
than the last major beta test release." PFJ, 66 Fed. Reg. at 
59454. Yet "last major beta test release" is not 
defined, and the provision in any case begs the question of how to 
decide which beta release is the "last."
    No less problematic are the requirements for timely disclosure 
of APIs exposed by new versions of Windows. Here, the proposed 
decree provides in Section III.D that for "a new version of a 
Windows Operating System Product," disclosure "shall 
occur in a Timely Manner." Here the definition of 
"Timely Manner" provides little, if any, protection for 
ISVs. Definition VI.R provides that Timely Manner is "the time 
Microsoft first releases a beta test version of a Windows Operating 
System Product that is distributed to 150,000 or more beta 
testers." We do not believe that Microsoft has ever had 
150,000 "beta testers" as opposed to 150,000 "beta 
copies" of its new product. Regardless, all Microsoft has to 
do is limit distribution to 149,000 beta testers in order to 
frustrate the timeliness of the required disclosures.
    5. The Exceptions from and Preconditions to API Disclosure 
Further Narrow the Scope of an Already Unworkable Disclosure 
Provision
    The proposed decree also contains several broad exemptions from 
and preconditions to API disclosure by Microsoft. These provisions 
undermine whatever strength, if any, remains in Section III.D in 
light of the scope and definitional failings addressed above. 
Section III.J of the PFJ exempts Microsoft from disclosing 
"portion of APIs or Documentation" related interface 
information "which would compromise the. security" of a 
"particular installation or group of installations" of 
any "anti-piracy, anti-virus, software licensing, digital 
rights management, encryption or authentication systems." 66 
Fed. Reg. at 59455. These exceptions to API disclosure are extremely 
broad.
    First, the scope of this provision implicates nearly all of 
Microsoft's Middleware products. For example, digital rights 
management is encompassed in all multimedia applications (e.g., 
Windows Media Player). Authentication is a function embedded in 
Windows software (e.g., Outlook Express and Microsoft Passport) and 
is required for access to Windows server operating systems. 
Encryption likewise is a technology that is used by Internet 
browsers (e.g., Internet Explorer) for e-commerce and by instant 
messaging middleware (e.g., Windows Messenger). Second, because the 
Department acknowledges that this provision permits Microsoft to 
withhold from disclosure certain APIs, CIS, 66 Fed. Reg. at 59472, 
it must also acknowledge that this provision both narrows an already 
limited scope of disclosures and ensures that an alternative 
middleware product will never be fully interoperable in the same way 
as Microsoft's middleware.\47\
---------------------------------------------------------------------------

    \47\ The CIS appears to limit the extent of Microsoft's 
ability to withhold APIs under Section 1113 of the PFJ. But the CIS 
description is either unclear or inconsistent with the terms of 
Section III.J. At a minimum, the Department should reconcile these 
two documents in order to mitigate the risk of future 
anticompetitive conduct and litigation over the interpretation of 
this section. There is no reason to believe that Microsoft will 
endorse the CIF interpretation, and no doubt Microsoft will argue in 
any future action that where these two documents conflict, the plain 
language of the PFJ controls.
---------------------------------------------------------------------------

    Third, the CIS either misstates the implications of the 
provision or the Department does not understand what was agreed to 
in the PFJ. For example, there is no such thing as an API that is 
relevant to a "particular installation [PC] or group of 
installations [network of PCs]." APIs are standard across all 
Windows installations. Moreover, the provision does not refer to 
"keys and tokens particular to a given installation" as 
stated in the CIS, 66 Fed. Reg. at 59472, but rather states that 
Microsoft may withhold "APIs ... the disclosure of which would 
compromise the security of a particular installation or group of 
installations ... including without limitation, keys, authorization 
tokens or enforcement criteria." PFJ, 66 Fed. Reg. at 59455. 
Therefore, the way the provision appears in the PFJ as opposed to 
the CIS, is that it is not limited to the user-specific security 
duties protecting specific computer networks that no one argument 
should be disclosed publicly.
    Section III.J.2 also imposes onerous preconditions on ISVs for 
the receipt from Microsoft of APIs "related to" 
encryption, authentication and other security matters. In order to 
receive relevant APIs that relate to security technologies, 
competitors must meet a subjective standard of 
"reasonableness" which the decree appears to consign to 
Microsoft's discretion. Thus, an ISV is only entitled to the APIs if 
the competitor (1) "has a reasonable business need" for 
the information "for a planned or shipping product," (2) 
satisfies "reasonable, objective standards established by 
Microsoft" for "certifying the authenticity and 
viability of its business," and (3) submits its software for 
Microsoft testing to "ensure verification and compliance with 
Microsoft specifications for use of the API or interface."
    None of these limitations seems appropriate, because they unduly 
rely on Microsoft to determine "reasonable business" 
need. As one example, Microsoft clearly views "open 
source" software, or a threat, but will no doubt continue to 
claim that it is not a "viable business".
    6. Cross-Licensing of Middleware APIs
    The API section must also be read in conjunction with Section 
III.I of the proposed decree. This portion of the proposed decree 
contains a provision (Section III.5) that grants Microsoft the right 
to require ISVs and other API recipients to cross-license their own 
intellectual property back to Microsoft if it relates "to the 
exercise of their options or alternatives provided by this Final 
Judgment." PFJ, 66 Fed. Reg. at 59455. Under this approach, 
Microsoft can, at is own discretion, require that the products 
developed with APIs and related interface information--for 
instance, a competing middleware program--be licensed back to 
Microsoft, because they "relate[] to the exercise" of an 
ISV's "options or alternatives" under the proposed 
decree. That is not a new issue in the industry. For years Microsoft 
has attempted to extract

[[Page 28988]]

cross-licensing requirements and most in the industry have 
successfully resisted. If this provision is exercised, Provision 
III.D will simply not be utilized if the result is a requirement 
that intellectual property resulting from competitors" own 
investments in software research and development. Again, the CIS 
purports to limit the plain meaning of Section III.I by opining that 
the intellectual property cross-licenses are only available if 
Microsoft "is required to disclose interfaces that might be 
used by others to support a similar feature in the same 
fashion." CIS, 66 Fed. Reg. at 59472. But that does not appear 
to be consistent with the language of the PFJ.
    7. Timing of API Disclosure Obligation Finally, under Section 
III.D, the requirement for Microsoft to release APIs and 
Documentation to competitors does not commence for one year. This 
delay means that Microsoft's own middleware will continue to be 
preferred in terms of its interoperability with the Windows 
operating system. The one-year period in which competitors must wait 
for API releases is one-fifth of the decree's five-year term. 
Nothing in the CIS discusses or explains a rationale for this 
substantial delay. B. The Communications Protocol Provisions of the 
Decree Do Not Require Release of any Server APIs and are Based on 
Terms the Department Failed to Include in the Settlement The 
Competitive Impact Statement claims that the server provisions in 
Section III.E of the proposed decree will "prevent Microsoft 
from incorporating into its Windows Operating System Products 
features or functionality with which its own server software can 
intemperate, and then refusing to make available information about 
those features that non-Microsoft servers need in order to have the 
same opportunities to interoperate with the Windows Operating System 
Product." \48\ Like the decree's API disclosure 
provisions, this obligation is ephemeral.
---------------------------------------------------------------------------

    \48\ CIS, 66 Fed. Reg. at 59469. See also CIS, 66 Fed. 
Reg. at 59460 (decree "prevent[s] Microsoft from incorporating 
into the Windows operating system features or functionality with 
which only its own servers can interoperate by requiring Microsoft 
to disclosure the communications protocols that are necessary for 
software located on a computer server to interoperate with the 
Windows operating system").
---------------------------------------------------------------------------

    First, Section III.E is designed only to support 
interoperability between Windows PCs and non-Windows servers. See 
CIS, 66 Fed. Reg. at 59469 (interoperability between "Windows 
Operating System Products and non-Microsoft servers on a 
network"). It expressly does not cover interoperability 
between Windows servers and non-Windows PCs. Thus, Apple, Linux and 
all other desktop operating systems competitors have no right under 
the proposed decree to obtain any of the technical information 
needed to allow PCs running such competing operating systems to 
intemperate with Windows servers.
    Second, as with the API disclosure requirements, Microsoft can 
easily avoid Communications Protocol disclosure through product 
design. For example, Microsoft can implement protocols in other 
software on the desktop, such as Office, or from software it 
downloads over the Internet from its servers to its Windows 
Operating Systems Product rather than implementing those protocols 
directly in the Windows Operating Systems Product.\49\ Indeed, we 
understand that with Microsoft's new .Net offering, Microsoft plans 
to download code from the Internet to effect communications between 
clients and Microsoft's .Net servers. This will require no 
disclosure under Section III.E.
---------------------------------------------------------------------------

    \49\ The CIS makes clear that this ploy avoids the Section 
III.E obligations, stating that disclosure is not required if 
Microsoft "only distributes code that implements that protocol 
along with its server software or otherwise separately from the 
client operating system ..." CIS, 66 Fed. Reg. At 59469.
---------------------------------------------------------------------------

    Third, the definition of "Communications Protocols" 
itself is extraordinarily ambiguous. The decree defines 
Communications Protocol in Section VI.B as: 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.
    PFJ, 66 Fed. Reg. 59458. This definition does not prescribe what 
"predefined tasks" are encompassed, and the phrase 
"format, semantics, sequencing, and error control of 
messages" can just as easily be read to apply only to the 
physical means of sending information to or from a server (the rules 
for transmitting information packets over a network) rather then the 
content of such information (the rules for structuring and 
interpreting information within such packets). Thus, Microsoft 
competitors wilt be able to learn how to construct messages that can 
be passed to or from Microsoft severs, but will not learn the 
substance of the information necessary to invoke the features and 
functionalities of the server.
    Fourth, like the PFJ's API disclosure provisions, the key terms 
of Section III.E are undefined. We have addressed Windows Operating 
System Product, which allows Microsoft itself to define the term, 
above. The corresponding prong of Section III.E is that 
Communications Protocols are disclosable when used by a Windows 
Operating System Product to interoperate with "a Microsoft 
server operating system product." The CIS claims that [t]he 
term "server operating system product" includes, but is 
not limited to, the entire Windows 2000 Server product families and 
any successors. All software code that is identified as being 
incorporated within a Microsoft server operating system and/or is 
distributed with the server operating system (whether or not its 
installation is optional or is subject to supplemental license 
agreements) is encompassed by the term. For example, a number of 
server software products and functionality, including Internet 
Information Server (a "web server") and ActiveDirectory 
(a "directory server"), are included in the commercial 
distributions of most versions of Windows 2000 Server and fall 
within the ambit of "server operating system product."
    CIS, 66 Fed. Reg. at 59468-69. Amazingly, this term is 
nowhere defined in the PFJ, despite the fact that this language is 
what bounds the scope of Microsoft's obligation to disclose crucial 
information to rivals. Based on the plain language of the PFJ alone, 
there is no reason to believe that, for example, Internet 
Information Server is covered by the undefined PFJ term 
"server operating system product." Although the 
Department attempts to clarify this definition in the CIS, as noted 
above there is no reason to expect Microsoft to accept the 
Department's CIF definition.
    Fifth, a large share of PC interactions with servers occur via 
the Interact browser. (For instance, all Web browsing, e-commerce 
and other Web functionalities are a result of the browser 
interoperating with a server.) Section III.E does not cover 
protocols that are implemented in Internet Explorer to support 
interoperability with Microsoft's server operating systems products. 
Therefore, Microsoft can easily evade the scope of this 
provision--whatever that may be--by incorporating 
proprietary interfaces and protocols into IE rather than Windows. 
Sixth, the obligations of Section III.E appear to only apply to 
Communications Protocols that are "implemented ... on or after 
the date this Final Judgment is submitted to the Court." Read 
literally, all of the Communications Protocols built into Windows 
2000 and Windows XP are exempt from disclosure because they were 
implemented before the proposed decree was submitted.
    Finally, Section III.J constrains the Communications Protocol 
provisions of Section III.E in the same way it limits the API 
disclosure provisions of Section III.D. Thus, any Communications 
Protocols that "would compromise the security" of 
authentication, encryption or related technologies are exempt from 
disclosure. Because the heart of sever-based network 
interoperability is authentication and encryption, these exemptions 
once again swallow the rule. For all these reasons, the decree's 
provisions for server interface information disclosure do not 
provide Microsoft competitors with the interface or protocol 
information necessary to enable interoperability between Windows PCs 
and non-Windows servers. Section III.E does not even cover 
interoperability between non-Windows PCs and Windows servers. The 
central terms establishing the scope of Microsoft's obligations are 
undefined and subject to Microsoft's unilateral control. In short, 
the PFJ has created another Venn Diagram with no intersecting 
circles, because the Communications Protocol provisions of the 
decree require nothing at all. C. The Proposed Decree's Provisions 
for OEM Flexibility Do Not Open the PC Manufacturing Channel to 
Future Middleware Competitors
    The Department explains that the personal computer manufacturer 
("OEM") provisions of the proposed decree support 
"the ability for computer manufacturers and consumers to 
customize, without interference or reversal, their personal 
computers as to the middleware they install, use and feature." 
CIS, 66 Fed. Reg. at 59460, 59471. In reality, these measures hardly 
change anything in existing Microsoft-OEM relations, and do not 
appreciably alter the dynamics of the OEM

[[Page 28989]]

distribution channel. Most important, Sections III.C and III.H 
cannot, by their very design, provide an opportunity for rival 
middleware products--as compared to Microsoft's 
middleware--to attract sufficient distribution to have any 
impact at all on the applications barrier to entry. The OEM sections 
may actually make matters worse for middleware rivals. The PFJ 
limits what OEMs can remove from their PC products to just the 
middleware icons, euphemistically referred to as "access 
to" middleware in Sections III.C and III.H. In other words, 
OEMs are not permitted to remove the code for Microsoft Internet 
Explorer, Windows Media Player or any other Microsoft middleware, 
and the proposed decree allows Microsoft to commingle and integrate 
middleware with its Windows operating system software. The fact that 
the flexibility guaranteed to OEMs is limited to removing icons, and 
not the middleware itself, has major competitive significance and 
actually guarantees perpetuation of the applications barrier 
protecting Microsoft's operating systems monopoly.
    1. The OEM Provisions Place Sole Responsibility for Introducing 
Middleware Competition on PC Manufacturers
    To achieve its goal of "recreating the potential for the 
emergence" of middleware alternatives to Microsoft's monopoly 
operating system, the PFJ delegates the role of competitive 
gatekeepers to OEMs. Instead of requiting the monopolist itself to 
unfetter the market for entry by competitors, here the PFJ imposes 
that obligation on third-parties who are partners with, not 
competitors of, the defendant. If PC manufacturers do not act on the 
desktop flexibility powers provided by Sections III.C or III.H of 
the PFJ, there will, by definition, be no OEM-based remedy. Walter 
Mossberg, Personal Technology columnist for the Wall Street Journal, 
captured the problem elegantly. "Much" of the DOJ 
settlement, he explained, "pertains to the company's relations 
with the hapless makers of PCs, which aren't in any position to defy 
Microsoft."\50\
---------------------------------------------------------------------------

    \50\ Walter S. Mossberg, Microsoft Has Good Year, At 
Expense of Customers, Wall Street J., Dec. 27, 2001, at B1.
---------------------------------------------------------------------------

    OEMs are captives of Microsoft for a number of reasons, 
beginning with the obvious fact that there are no commercially 
viable alternatives to the Windows operating system; there are no 
real alternatives to Microsoft's Office suite of personal 
productivity applications (Word Processing, Spreadsheets, E-Mail, 
etc.); and there is de minimis competition for Interact browsers. 
The fact that OEMs find themselves in a sole source relationship 
with the defendant provides Microsoft with innumerable avenues to 
exercise its leverage over the OEM channel. These complex 
relationships are built more on the subtleties of a sole source 
relationship than on written contracts, or overt retaliation, and 
thus are hardly resolved by the uniform Windows pricing obligation 
provided for in Section III.B.
    It must also be understood that personal computer manufacturers 
are in the business of producing low margin commodity equipment, a 
business characterized by very minimal (and shrinking) R&D 
budgets. It is unrealistic to expect any Windows-centric OEM to 
develop, test, and pre-install packages of rival middleware, because 
that would require substantial expenditures in technical software 
expertise and customer support which would further narrow already 
shrinking profit margins in a business where competitors are 
currently engaged in a major price war to gain market share.
    The financial burden of customer support, where a single end 
user service call can eliminate an OEM's profit margin on a PC, 
creates powerful disincentives to the inclusion of non-Microsoft 
middleware. See Microsoft III, 253 F.3d at 62. Judge Jackson found 
and the Court of Appeals affirmed that in light of their customer 
support obligations, which are "extremely expensive," 
Microsoft III, 253 F.3d at 61 (citing Findings of Fact 210), 
OEMs are disinclined to install multiple versions of middleware. 
Since OEMs "have a strong incentive to minimize costs," 
id., the customer confusion resulting from duplicative middleware is 
sufficient to preclude OEMs from installing competitive programs 
where comparable Microsoft middleware is included with Windows.
    Under the proposed decree, however, these are precisely the 
circumstances faced by OEMs. There are no restrictions in the PFJ on 
Microsoft's ability to integrate middleware technologies into 
Windows; in fact Microsoft is allowed to do so at its "sole 
discretion." Even if an OEM wants to install a competitive 
non-Microsoft middleware program, it will be required to deal with 
the fact that the corresponding Microsoft middleware product is 
already present on its PCs, which it is not permitted to remove. 
Consequently, just as OEMs" cost minimization requirements 
forced them not to pre-install Netscape where IE was included with 
Windows, so too will these same profit pressures force OEMs to 
decline to install competing middleware programs under the PFJ.
    This is in stark contrast to the provision of the Interim Order 
on which the Department claims to have based its settlement. Both 
the Interim Order and the remedy proposed by the Litigating States 
would require Microsoft to ship a version of the operating system 
without any middleware included, if requested by an OEM. That scheme 
makes it possible for an OEM to truly offer a differentiated product 
suite without the burden of having Microsoft's corresponding 
technology present on the system as well.
    Even if they had an independent economic incentive to support 
middleware competition, however, Windows OEMs are still held captive 
under the proposed decree's retaliation provisions. Section III.A 
prohibits "retaliation" (another undefined term) by 
Microsoft against OEMs for developing, distributing or supporting 
competitive middleware or exercising their desktop icon flexibility 
rights.
    Despite their relative length, the retaliation provisions do not 
at all effectively preclude retaliation. Retaliation is only 
prohibited under Section III.A where "it is known to 
Microsoft" that an OEM is undertaking a permitted, competitive 
action. This subjective, actual knowledge standard will be difficult 
if not impossible to enforce. In addition:
    . Microsoft is not prohibited from retaliating if an OEM removes 
the code for a Microsoft Middleware Product from its retail PCs.
    . Nor does this provision prevent retaliation if an OEM removes 
either icons or code for Microsoft software that does not qualify as 
a "Microsoft Middleware Product" (for instance, 
Microsoft Movie Maker).
    . And Microsoft is not prohibited from retaliating against OEMs 
for promoting products that fall outside of the Section III.A terms. 
By way of example, Microsoft could retaliate against OEMs for 
promoting non-Microsoft Internet services, server operating systems, 
server middleware or server applications. Microsoft could even 
retaliate against OEMs for distributing or promoting middleware that 
does not yet compete with Microsoft Middleware Products.
    Section III.A also limits the prohibited forms of retaliation to 
"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)." PFJ, 66 Fed. Reg. 59453. Microsoft 
is not precluded from denying new monetary consideration to OEMs as 
a means of retaliation, as that is neither an "alter[ed] 
commercial relation" nor a "newly introduced form of 
non-Monetary Consideration." Similarly, Microsoft can also 
reward compliant OEMs by providing concessions on license fees for 
non-Windows Microsoft software, including applications such as 
Office, server operating system software and server applications, as 
well as Microsoft Middleware Products. None of these types of 
software is covered by the pricing parity requirements of Section 
III.B, which apply only to "Microsoft Operating System 
Products." Id.
    Finally, as a general matter there is no practical way to 
identify and prohibit all the subtle ways Microsoft can 
preferentially favor some OEMs, and harm others, depending on their 
degree of support for Windows. For instance, the definition of 
Consideration in Section VI.C covets "product 
information" and "information about future plans." 
Id. at 59458. Yet Microsoft could retaliate against OEMs by denying 
them sufficient technical information regarding important, upcoming 
Windows features, for example by not inviting them to internal 
development conferences or presentations. Likewise, Microsoft could 
assign fewer or less knowledgeable technical support personnel to a 
specific OEM's account team, a form of retaliatory discrimination 
that would be difficult to detect and virtually impossible to prove. 
In sum, the anti-retaliation provisions offer little shelter for 
OEMs desiring to respond to legitimate demands by their customers 
for choice among competing software products. If there is any doubt 
about this analysis of Sections III.C and III.H above, the Court 
should took no further than the OEMs" treatment of Microsoft 
Internet Explorer. On July 11, 2001 Microsoft announced that OEMs 
would be free to remove access to Internet Explorer, which

[[Page 28990]]

they had previously been prohibited from doing.\51\ Since this 
announcement was made more than six months ago, not one OEM has 
actually taken advantage of this provision and removed the icon for 
Internet Explore from retail PCs This real-world market test is an 
accurate gauge of how many OEMs will likely take advantage of the 
exact same flexibility provided in Section III.H of the decree, 
albeit for a somewhat wider range of middleware products: none.
---------------------------------------------------------------------------

    \51\ We note that at the time of the announcement, 
Microsoft had already achieved significantly greater than 80 percent 
of the browser market as a result of its six-year anticompetitive 
campaign, so it is hard to view this as a concession.
---------------------------------------------------------------------------

    2. The Provisions Allowing OEM Flexibility Do Not Address the 
Key Issue of Microsoft's Ubiquitous Middleware Development Platform
    The core of the case against Microsoft rests on the theory that 
Netscape and Java provided an alternative development platform 
(middleware) for applications developers, which, if applications 
developers began writing applications to the middleware, would 
undermine the applications barrier to entry and thus Microsoft's 
Windows monopoly. For this to occur, developers need to view rival 
middleware as a more attractive development platform than Windows. 
Unfortunately, the PFJ provides a solution to the wrong problem and 
actually ensures that rival middleware applications will never be 
able to attract a critical mass of developers.
    Sections III.C and III.H of the decree allow OEMs to install 
competing middleware and to "enable or remove access to" 
Microsoft Middleware Products from the desktop of Windows PCs that 
they sell to end users. However, as noted, these provisions do not 
authorize OEMs to delete the Microsoft middleware itself, and 
Microsoft is not prohibited from retaliating against OEMs that 
attempt to delete Microsoft middleware code from its configured PCs.
    This distinction between icons and code is competitively 
decisive. The applications barrier exists because developers write 
to Windows-centric APIs. Under the terms of the decree, however, the 
APIs exposed by Microsoft middleware remain on every Windows PC even 
if OEMs and end-users exercise all of the flexibility provided by 
Section III.H. It is crucial to understand that an application 
developer can write to Microsoft middleware regardless of whether 
"access" to that software is removed. In other words, 
Microsoft's middleware APIs remain ubiquitously available on all 
Windows PCs under the proposed decree. The best a rival middleware 
provider can hope for is to be "carried" alongside 
Microsoft's middleware on some lesser portion of personal computers.
    A critical lesson learned in this case is that, as with Netscape 
and Java, ubiquity trumps technology in network effects markets. 
Professor Arrow explains that no middleware competitor can expect 
any economically significant chance to compete on the merits if, as 
permitted under the decree, Microsoft middleware is ubiquitous. 
Arrow Decl. 26. The important distinction between icons and 
code was explained by the DC Court of Appeals in 1998. The court 
emphasized that removal of end user access "do[es] not remove 
the IE software code, which indeed continues to play a role in 
providing non-browser functionality for Windows. In fact, browser 
functionality itself persists, and can be summoned up by ... running 
any application (such as Quicken) that contains the code necessary 
to invoke the functionality." Microsoft II, 147 F.3d at 941.
    Consequently, by limiting its effect to the removal of icons 
only, the proposed decree cannot achieve any appreciable effect in 
eroding the applications barrier. They cannot "recreate the 
potential for the emergence" of middleware alternatives in a 
way that provides an economically realistic opportunity for 
operating systems competition. 3. The OEM Provisions Do Not Create a 
Level Playing Field for Middleware Desktop Competition
    We explained above why it is unlikely that OEMs will expend 
resources to promote rival middleware products. The alternative 
model is that rival middleware providers would pay an OEM to feature 
its software and delete end-user access to Microsoft's middleware. 
This is consistent with the CIS, which explains that the function of 
the OEM provisions is to allow OEMs to "feature and 
promote" non-Microsoft middleware. CIS, 66 Fed. Reg. at 59460.
    Section III.H does not achieve this goal, for two primary 
reasons. First, as detailed above, the "value" of the PC 
desktop is diminished by the fact that an OEM is not permitted to 
remove the Microsoft middleware code, and thus cannot offer a rival 
exclusivity.
    Second, Section III.H.3 does not guarantee that a rival's 
middleware icon will even remain on the desktop. As the Department 
explains the theory of this remedy, it is to create a 
"marketplace" on the desktop where OEMs can "stand 
in the shoes" of consumers and exercise choices in which 
middleware technologies to feature based on price and performance. 
Yet, the PFJ permits Microsoft to "sweep" competing 
middleware icons placed on the Windows desktop by OEMs.
    That is, Windows may automatically remove the icons featured by 
an OEM just fourteen days "after the initial boot-up of a new 
Personal Computer." True, this section contains a proviso 
stating that Microsoft may not do so absent end user 
"confirmation," but neither the text of this provision 
nor the Competitive Impact Statement require that confirmation be 
based on any objective notice or alert by Microsoft. CIS, 66 Fed. 
Reg. at 59471.
    The fourteen-day desktop sweep proviso directly contradicts the 
objective of fostering OEM flexibility to feature and promote non-
Microsoft middleware, because it undermines the ability of OEMs to 
sell desktop placement an ISV can count on. Under Section III.H.5, 
the best an OEMs can offer is a guarantee of desktop placement for 
fourteen days.
    This is critically important for the reasons stated above. As 
rival middleware vendors attempt to attract developers to write 
applications to their platforms, as opposed to Microsoft's platform, 
they will have to make representations as to how many PC desktops 
actually have the rival middleware installed and available to 
consumers. With the fourteen day "sweep" provision 
included in the PFJ, ISVs will simply not be able to make any 
accurate projections, which will further reduce the price they might 
be willing to pay for desktop placement. 4. Additional OEM 
Provisions Further Undermine the Crucial Ability of ISVs to 
Differentiate Competing Middleware Products
    In order to displace Microsoft middleware and encourage 
applications developers to write to their APIs, competing ISVs will 
need to differentiate their middleware products from Windows Media 
Player, Windows Messenger and the other Microsoft middleware 
products that are bundled with Windows. The OEM provisions 
affirmatively undermine the ability of ISVs to achieve any 
meaningful degree of product differentiation.
    First, Section III.C.3 permits OEMs to launch automatically non-
Microsoft middleware only at boot-up or upon making a connection to 
the Interact. This constrains the ability of manufacturers to 
configure competing middleware products and reduces the value of 
this flexibility for (and hence potential OEM revenues from) ISVs.
    Second, auto-launch of competing middleware is permissible under 
Section III.C.3 only (a) "if a Microsoft Middleware Product 
that provides similar functionality would otherwise be launched 
automatically at that time," PFJ, 66 Fed. Reg. 59454, and (b) 
if the 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." Id. These limitations allow Microsoft to gate 
middleware competition by reducing the role of non-Microsoft 
middleware to only those instances in which Microsoft's own products 
are launched. If Microsoft decides that its middleware products will 
not have a user interface, or will utilize a window of a specific 
size, those decisions are binding on competitors" product 
designs as well. Indeed, the PFJ surprisingly appears not even to 
contemplate a situation where Microsoft's competitors develop a 
middleware product for which there is no "corresponding" 
Microsoft middleware. Third, the PFJ empowers Microsoft to limit the 
freedom of ISVs in their product design and functionality decisions 
on its competitors. Microsoft can also limit the placement of icons 
and shortcuts may appear on the desktop and elsewhere, id. at 59454, 
59455, the "functionality" of middleware products whose 
icons and shortcuts may be included by the OEM, and the ability of 
end users to designate non-Microsoft middleware as default 
middleware on their computers. Id. at 59455.
    Each of these provisions has a similar, substantial effect. By 
allowing middleware to be substituted by an OEM only when (a) it 
performs similarly to Microsoft middleware, (b) exhibits 
functionality defined by Microsoft, or (c) includes the same user 
interface as Microsoft middleware, the PFJ allows Microsoft to 
"gate" competition. There is no competitive 
justification for these provisos, all of which serve to eliminate 
opportunities for product differentiation and

[[Page 28991]]

permit Microsoft to constrain middleware competition to the scope, 
location and even "look and feel" it determines for its 
own products.
    5. The OEM Provisions Contain Other Superfluous Terms that 
Substantially Limit Any Potential Market Impact
    Section III.H of the proposed decree allows Microsoft twelve 
months to modify Windows XP in order to permit OEMs to remove 
Microsoft middleware icons or change default settings for invoking 
middleware functionalities. Yet the modification necessary to allow 
removal of icons via the "Add/Remove Programs" utility 
is a trivial exercise. Demonstrable proof of this fact is that 
Microsoft was able to modify the beta version of Windows XP to 
permit removal of the Interact Explorer icon within weeks of its 
July 11, 2001 announcement. We can not fathom why Microsoft is now 
given twelve months to accomplish the same task.
    Section VI.N of the decree also provides that a "Non-
Microsoft Middleware Product" is software with certain 
functionalities "of which at least one million copies were 
distributed in the United States within the previous year." 
Because the Section III.H obligations requiring modification of 
Windows XP to permit addition and removal of competing middleware 
apply to "Non-Microsoft Middleware Products," OEMs are 
foreclosed from the ability to feature and promote small middleware 
start-up competitors in Windows XP, Section VLN is a very veal 
impediment to achievement of the innovative middleware market the 
PFJ is purportedly designed to promote. 6. The OEM Provisions Have 
No Impact on Java.
    Sections III.C and III.H also do not apply to Microsoft's Java 
Virtual Machine ("JVM"), or Microsoft's equivalent of 
the JVM, its Common Language Runtime. Despite the fact that the 
"Microsoft Middleware Product" definition includes the 
Microsoft Java Virtual Machine, it appears there is no competitive 
consequence to its inclusion in this definition in any of the 
provisions of the decree. First, Microsoft no longer ships its JVM 
with Windows, so there is nothing for OEMs to remove. Second, even 
if they did continue to ship a JVM, there is no "icon" 
or "end-user access" to Java. Rather, Java is invoked 
automatically by programs that rely on its presence.
    7. The OEM Provisions Largely Codify Microsoft's Existing 
Business Practices. Users today enjoy the flexibility--without 
the benefit of the PFJ--to add, delete or customize their own 
PC desktops. Users may delete icons by simply "dragging" 
the icon to the "recycle bin" or "right-
clicking" on the icon and simply choosing 
"delete."
    Thus, the decree's OEM provisions allowing OEM removal of icons 
only codify Microsoft's current business practices. In response to 
the Court of Appeals" opinion, Microsoft on July 11, 2001 
announced that "it is offering computer manufacturers greater 
flexibility in configuring desktop versions of the Windows operating 
system in light of the recent ruling by the U.S. Court of Appeals 
for the District of Columbia." \52\ According to the 
Microsoft press release, under this policy OEMs can "remove 
the Start menu entries and icons that provide end users with access 
to the Interact Explorer components of the operating system," 
and "Microsoft will include Internet Explorer in the Add/
Remove programs feature in Windows XP." Id. Thus, Microsoft 
stressed that "Microsoft has always made it easy for consumers 
to delete the icons for Interact Explorer, but will now offer 
consumers this additional option in Windows XP." Id.
---------------------------------------------------------------------------

    \52\ Available at www.microsoft.com/MSCorp/presspass/
Press/2001/Jul01/07-11OEMFlexibilityPR.asp.
---------------------------------------------------------------------------

    This announcement is revealing because it confirms, from 
Microsoft itself, that the "flexibility" provided to end 
users by Section III.H of the decree has always existed. And by 
revising Windows XP to permit OEMs to remove the Interact Explorer 
icon, Microsoft has already done precisely what the decree requires. 
Thus, the OEM provisions of the decree succeed mostly in codifying 
Microsoft's current business practices and achieve minimal, if any, 
remedial purpose.
    In sum, the relief provided by Sections III.C and III.H is 
fundamentally at odds with the theory of the case. These OEM 
"desktop" remedies will not provide any opportunity for 
alternative middleware platforms to attract developers and thus to 
challenge the applications barrier to entry.
    They are economically irrational since Microsoft's middleware 
will continue to be ubiquitously available on all PCs, regardless of 
the choices exercised by OEMs. These provisions allow Microsoft to 
dictate product design features to its rivals, to limit product 
differentiation and to restrict OEM deals with rivals to a brief, 
fourteen-day exclusivity period. And at bottom, they cannot change 
the economic structure of the PC distribution channel because OEMs 
are sole-source partners of Microsoft, not competitors.
    D. The Proposed Decree Does Not Effectively Preclude Microsoft's 
Exclusive Dealings Although the proposed decree purports to ban 
exclusive dealing by Microsoft with respect to Windows software, 
Section III.G expressly permits Microsoft to establish favored or 
exclusive relations with certain OEMs, ISVs, etc., if the parties 
enter into "any bona fide joint venture or ... any joint 
development or joint services arrangement." This exception all 
but vitiates the supposed prohibition, for it allows Microsoft to 
enter into the identical distribution agreements that were held 
unlawful at trial merely by denoting them as "nt" 
activities.
    E. Current Market and Economic Realities Demonstrate that the 
PFJ is Incapable of Having Any Substantial Procompetitive Impact
    The Department recognizes explicitly that relief in this case 
must "'ensure that there remain no practices likely to 
result in monopolization in the future."' Microsoft Ill, 
253 F.3d at 103 (citations omitted); see CIS, 66 Fed. Reg. at 59465 
(monopolization remedy should "avoid a recurrence of the 
violation" in the future). Yet by failing to address 
significant market and technological developments that have occurred 
in the period since the trial record closed, the narrow remedies of 
the proposed decree do not provide relief that comes even close to 
ensuring that Microsoft's unlawful practices will not be repeated in 
the future.
    1. New Monopolies Enable Microsoft to Protect its Operating 
System Monopoly Despite the PFJ Since the trial, Microsoft has 
solidified three new chokeholds with which it can easily perpetuate 
its monopoly power:
    Microsoft's monopoly power over Internet browsers and its 
integration of IE into Windows allow it to replicate many of the 
prohibited practices through IE.
    Microsoft's monopoly power over the Office suite and its 
anticompetitive use of Office porting allow it to replicate many of 
the prohibited practices through Office.\53\
---------------------------------------------------------------------------

    \53\ Microsoft's resulting power over Internet browsers 
and personal productivity applications provides it with alternative 
vehicles with which to achieve the same anticompetitive foreclosure 
of middleware threats that it accomplished in 1995-98 through 
Windows itself.
---------------------------------------------------------------------------

    Microsoft is fast acquiring monopoly power in the operating 
systems for low-end servers used in local or wide area networks. 
Microsoft can just as easily exploit the APIs exposed by the 
operating system on the network to perpetuate the applications 
barrier to entry.
    However, the PFJ does not require the disclosure of APIs exposed 
by IE, Office the low-end server operating systems. Microsoft can 
develop middleware programs that utilize these APIs--which are 
as ubiquitous as the Windows APIs themselves--and thus evade 
the API disclosure provisions of the PFJ. Similarly, although 
Section III.E of the PFJ requires the disclosure of Communications 
Protocols used for interoperability with Microsoft server operating 
systems, by controlling the client (IE), Microsoft can control the 
server irrespective of these provisions.\54\ That is, Microsoft's 
monopoly control over IE allows it unilaterally to implement 
proprietary standards and protocols within IF, that are not 
disclosable under the PFJ because they are not "implemented in 
a Windows Operating System Product installed on a client 
computer" within the scope of Section III.E.
---------------------------------------------------------------------------

    \54\ As Microsoft executive (and trial witness) Paul 
Maritz put it, "the most important thing we can do is not lose 
control of the Web client," because "[b]y controlling 
the client, you also control the server." Gov't Ex. 498. 
Microsoft can suppress competition by adding proprietary features 
and protocols to the IE browser that are necessary to generate 
actions by its server operating systems products or by refusing to 
add features and protocols that would similarly support a 
competitor. Professor Schmalensee acknowledged this incentive at 
trial: "[I]f one company controlled the browser and its look 
and feel and how it presented applications, it could severely 
enhance or detract from the application functionality of programs or 
applications running on the server." 6/24/99 (p.m.) Tr. 
46-47; see also id. at 48; Henderson Decl. 82 (quoting 
Rasmussen Dep., 12/15/98 (a.m.), at 67-68).
---------------------------------------------------------------------------

    2. The Proposed Settlement Ignores the Likely Tactics Microsoft 
Will Use to Eliminate the Next Significant Threat to its Monopoly 
Position
    The primary competitive threat to the Windows OS/IE platform is 
the emergence of applications and services provided over the 
Internet, where the application or service is independent of the 
computing platform employed by the user. The recent spread of high-
speed Internet service has further spurred the development of this 
category of

[[Page 28992]]

distributed applications or web services that take advantage of 
Internet's underlying architecture.
    Two features of distributed applications in particular 
constitute a revolutionary change from the previous "client-
server" model. First, rather than residing principally on one 
machine (either a client or a server), distributed applications 
effectively reside on the network itself. It is therefore possible 
to access these services from any computer or device connected to 
the Internet. From the user's perspective, although the application 
itself resides on the network, it is accessible as rapidly and 
seamlessly as if it resided on the user's own PC.
    Second, because the applications and data are accessible from 
different machines, access to these services depends critically upon 
being able to establish the identity of the user seeking access to 
those services. Web identity and authentication services accordingly 
take on extraordinary importance in the world of distributed 
applications.
    These changes in the market reveal a picture of today's PC 
industry that is radically different from the Department's placid 
vision of "recreating the potential" for middleware 
competition by opening the OEM channel to possible future middleware 
innovations. The critical question, however, is whether distributed 
web-based applications, which do not need to be compliant with any 
particular operating system, will be able to remain independent of 
Windows and in the process bring down the applications barrier to 
entry.
    The PFJ does not protect the Internet-based competition for the 
Windows operating systems monopoly in the future because the 
proposed decree does nothing to prevent Microsoft from continuing to 
shift from one anticompetitive activity to another in order to 
maintain its monopoly. Instead of bundling middleware code into 
Windows and creating exclusive dealing arrangements with ISVs and 
OEMs, Microsoft today is attempting to defeat the threat from Web-
based services by bundling its Web services technologies into 
Windows and entering into exclusive vertical distribution 
arrangements with Web-based content and e-commerce providers.
    See Passport to Monopoly: Windows XP, Passport, and the Emerging 
World of Distributed Applications at 25 (ProComp June 21, 2001) and 
Microsoft's Expanding Monopolies: Casting A Wider .Net (ProComp May 
15, 2001).
    As would be expected, Microsoft now attempts to create a 
proprietary equivalent to the distributed applications paradigm by 
bundling its latest operating system with certain applications and 
technologies in order to secure dominance in distributed 
applications. For example, Microsoft Passport, a proprietary 
authentication technology built on the .NET Framework, is bundled 
with Windows XP. This bundling allows Microsoft's own authentication 
services to have a ubiquitous distribution base--and deny rival 
technologies ubiquity--in the same way that its bundling 
practices extinguished the middleware threats from Netscape and 
Java. A monopoly in web identity services will enable Microsoft to 
control the means by which users access distributed applications 
from the Internet. Nonetheless, the PFJ does nothing to restrict 
Microsoft's practices in this area. The API disclosure provisions 
only mandate the release (if at all) of APIs used by a Microsoft 
Operating System product to interoperate with Microsoft Middleware, 
which excludes Passport.
    Similarly, Microsoft's broader .NET initiative is replacement of 
the Java and Netscape technologies that it unlawfully crippled with 
Microsoft proprietary technology. Microsoft defines .NET as its 
"platform for XML web services." \55\ The services 
which .NET offers are a combination of pre-designed applications, 
some of which come under the rubric "Hailstorm," and a 
set of tools, under the rubric of Visual Studio Integration Program, 
designed to allow developers to create web applications which rely 
on the all-important APIs exposed by Microsoft programs. At the core 
of .NET stands the Common Language Runtime environment 
("CLR").
---------------------------------------------------------------------------

    \55\ .NET Defined. available at www.Microsoft.com/net/
whatis.asp.
---------------------------------------------------------------------------

    CLR is Microsoft's answer to the Java runtime environment, with 
a key difference. CLR provides the developer with a device that is 
similar to the JVM, but that lacks the element so destructive to 
Microsoft's hegemony--freedom from reliance on Microsoft's 
APIs. Of course, CLR will take full advantage of Microsoft's vast 
distribution network via bundling with future versions of Windows 
(including Windows XP) as well as with IE and Microsoft Network.
    Microsoft's monopolization strategy has not changed at all. Bill 
Gates has explained that "there's a very strong analogy here 
between what we're doing now [with Web-based services] and what we 
did with Windows." \56\ Since Microsoft will pursue the 
same tactics and strategies found unlawful in the instant case, any 
remedy that does not prohibit a repeat of these practices in new 
markets and new contexts is facially flawed.
---------------------------------------------------------------------------

    \56\ "So for every element of Windows--user 
interface, the APIs .-.-. for each one of those things 
there's an analogy here." Bill Gates, Forum 2000 Keynote, Bill 
Gates Speaks About the .NET Platform. (Available at 
www.microsoft.com/BUSINESS/vision/gates.asp)
---------------------------------------------------------------------------

    In sum, the proposed decree fails to address identifiable market 
and technological developments since the trial record closed that 
allow Microsoft both to protect its operating systems monopoly 
against current potential rivals and to engage in the same types of 
conduct adjudged unlawful by the Court of Appeals. Consequently, the 
proposed decree does not and cannot "ensure that there remain 
no practices likely to result in monopolization in the 
future," Microsoft III, 253 F.3d at 103 (citations omitted), 
and must be rejected by this Court.
    F. The Decree Increases Microsoft's Market Dominance and 
Actually, Worsens Competitive Conditions in the Relevant Software 
Markets
    The proposed settlement not only does not achieve the 
procompetitive effects that the Department claims, it increases 
Microsoft's dominance of the operating systems market and actually 
worsens competitive conditions across the entire software industry. 
Among other things, the proposed decree rewards Microsoft for its 
illegalities, promoting future defiance of antitrust laws and 
intransigent tactics by dominant firms. Many of the deficiencies of 
the proposed decree have been outlined in this submission. These 
deficiencies will allow Microsoft to perpetuate its monopoly 
position. In addition, the decree represents a step back from the 
current state of affairs notably because it sanctions continued 
bundling or commingling by Microsoft of middleware technologies with 
Windows, thus increasing rather than decreasing Microsoft's power to 
sustain the applications barrier to entry protecting its operating 
systems monopoly while disadvantaging non-Microsoft middleware 
providers. By enhancing Microsoft's ability to buttress the 
applications barrier to entry, the proposed settlement harms 
competition, and increases, rather than terminates, Microsoft's 
monopoly power.
    G. The Settlement Would Not Have Prevented Microsoft's Unlawful 
Campaign Against Netscape and Java
    One appropriate measure for assessing whether the PFJ is 
adequate is whether it would preclude today the same conduct 
Microsoft used to foreclose Netscape and Java, and thus preserve its 
monopoly power, in 1995-98. It would not.
    As a fundamental matter, this is because Microsoft is not 
required to disclose the APIs needed for new and innovative forms of 
middleware. When Netscape was launched in late 1994, Microsoft did 
not have an Internet browser and was focused on Chairman 
Gates" vision of interactive television, rather than the 
Internet. Thus, there were no APIs exposed by Windows that were 
"used by Microsoft Middleware to interoperate" within 
the scope of Section III.D of the proposed decree. Had the decree 
been in place when Jim Barksdale, former CEO of Netscape, met with 
Microsoft in 1995, Netscape would not have been entitled to APIs or 
any other interoperability information under the express terms of 
the decree. "For the same reasons, no interoperability 
information would have been disclosable to Sun in order to enable 
interoperability of Java runtime technology with Windows.
    Most of the distribution tactics Microsoft used to cut off 
Netscape's air supply and to "pollute the market for cross-
platform Java" are also permissible under the decree. 
Microsoft can still force OEMs to take its own middleware through 
bundling. Microsoft can still coerce or threaten partners like Intel 
and rivals like Apple and can still refuse to port its monopoly 
Office suite in order to protect the applications barrier to entry. 
Microsoft can still throttle middleware innovations because the PFJ 
gives it the ability to "gate" the functionality and 
product design of rival middleware products. Microsoft can still 
prohibit OEMs from removing its middleware, or applications, and is 
free to retaliate against OEMs that do so. Microsoft can still 
deceive middleware developers and can still introduce application 
development tools that pollute open standards by producing only 
Windows-compatible

[[Page 28993]]

programs. And Microsoft can still protect the applications barrier 
by utilizing the very same practices through its monopoly IE and 
Office products that the PFJ purportedly outlaws for Windows.
    In short, the PFJ does not even foreclose the means of 
foreclosure that were proved at trial and affirmed by the Court of 
Appeals. Under any Tunney Act standard of review, it must be 
rejected.
    V. THE PROPOSED DECREE IS HOPELESSLY VAGUE AND INHERENTLY 
UNENFORCEABLE
    The proposed decree is fiddled with ambiguities and loopholes 
and grants unilateral, essentially unreviewable, power to Microsoft 
to define the scope of its own ambiguous obligations. As such, the 
PFJ is an illusory contract, and unenforceable as a matter of well-
settled contract law.
    As the Court emphasized in Microsoft I, a proposed settlement 
cannot be entered, at least without substantive modification, if it 
is ambiguous or if there are "foresee[able] difficulties in 
implementation." 56 F.3d at 1462. The proposed decree here is 
the epitome of such a case.
    Twenty-four different sections of the PFJ provide that specific 
actions by Microsoft, or standards for assessing whether its 
practices are permissible, must be 
"reasonable." \57\ In a decree purportedly drafted 
to provide a "certain" remedy, this is anything but. As 
just two examples, in addition to the reasonable scope of 
"bona fide," exclusive joint ventures discussed in the 
preceding section, Microsoft is expressly permitted to adopt 
"reasonable technical requirements" on which to override 
an OEM's or end user's choice of non-Microsoft middleware (Section 
III.H) and to enter into concerted refusals to deal with 
ISVs--requiring them not to develop software for competing 
platforms--that are "of reasonable scope and 
duration" (Section III.F.2). Consent decrees are interpreted 
as contracts, and it is black letter contract law that illusory 
contracts, those that give one party the fight to decide the scope 
of its own obligations, are not enforceable. See Rest. Contracts 2d 
 77.
---------------------------------------------------------------------------

    \57\ Substantive "reasonable" provisions are 
III.B.2, III.C.5, III.E, III.F2 (two), III.G, III.H.2, III.I, 
III.J.2.b and III.J.2.C. Procedural "reasonable" 
provisions are IV.A.2, IV.A.2.b, IV.A.2.c, IV.A.4, IV.A.6, IV.A.7 
(two), IV.A.8.b (three), IV.A.8.h and IV.A.8.l (three).
---------------------------------------------------------------------------

    The judge in the first instance for all of these reasonableness 
clauses is Microsoft itself. In short, it is difficult to conceive 
of a more loosely drafted decree than the PFJ, which allows the 
defendant, without any practical constraint except lengthy contempt 
proceedings, to establish unilaterally the extent of its own decree 
obligations. Due to the inherent ambiguity in 
"reasonableness" terms, these disputes will be complex, 
tedious and time-consuming exercises for the Court.
    The "Technical Committee" and so-called "Crown 
Jewel" provisions are equally inefficacious. The Technical 
Committee ("TC") established by Section IV.B of the 
proposed decree does not help enforcement matters appreciably. Most 
significantly, nothing that the Technical Committee does is binding 
and nothing that it investigates, analyzes or recommends is 
permitted to see the light of day. The TC reports only to the 
plaintiffs (Section IV.B.8.e) and "all information" 
gathered by the TC is subject to confidentiality and non-disclosure 
agreements and a protective order (Section IV.B.9). The members of 
the TC may "communicate" with third-parties, but only 
about "how their complaints or inquiries might be resolved 
with Microsoft" (Section IV.B.8.g). Furthermore, "[n]o 
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 the decree" 
(Section IV.D.4.d).
    Rather than a vehicle for prompt resolution of enforcement 
disputes, the TC provisions are a charter for delay and obfuscation. 
By denying the Court any access--whether or not in 
camera--to the work product of the TC, the proposed decree 
simply creates another hoop through which third-party complainants, 
and the government itself, must pass in order to enforce violations 
of the decree b5, the defendant It also denies the Court the benefit 
of the unbiased, objective technical expertise of the TC, which is 
the principal criterion on which its members are to be selected. 
Coupled with the sheer number of "reasonableness" 
provisions in the decree itself, the TC process will therefore delay 
enforcement and make clean resolution of decree interpretation 
issues more costly and burdensome for all affected parties and non-
parties.
    Finally, Section V.B of the PFJ provides that if the Court finds 
Microsoft "has engaged in a pattern of willful and systematic 
violations," on application of the plaintiffs a "one-
time extension" of the decree may be granted, for up to two 
years. Although presented as a "Crown Jewel" provision, 
this section does little to ensure compliance. The function of a 
Crown Jewel clause is to provide such an onerous penalty that the 
defendant's compliance with its substantive obligations can be 
coerced, and deliberate evasion avoided, without ever having to 
invoke the penalty. Here, the "threat" Microsoft is 
being presented with is that of being forced for two more years to 
decide at its "sole discretion" what constitutes 
Windows, to constrain exclusive joint ventures to 
"reasonable" duration, to gain access to intellectual 
property developed by middleware competitors, and to dictate to 
those competitors the functionality and user interface of their 
products. This is plainly something Microsoft should welcome with 
open arms rather than fear.
    The vagueness of the terms, the ineffectiveness of the Technical 
Committee and the lack of a meaningful deterrent Crown Jewel 
provision will plague the courts for years to come. In the absence 
of any deterrent, Microsoft will no doubt interpret the 
"reasonableness" standards generously incorporated in 
the proposed settlement in its own favor. The enforcement agencies 
and numerous competitors will witness the ill effects of future 
Microsoft actions and challenge these practices. However, without 
the proper dispute resolution mechanisms in place, it will be up to 
the courts to resolve all these "reasonableness" issues 
arising out of the proposed settlement.
    VI. DIVESTITURE REMAINS THE PREFERABLE AND MOST EFFECTIVE REMEDY 
FOR MICROSOFT'S SECTION 2 VIOLATIONS
    ProComp and its members have consistently supported structural 
relief in this case. In our view, divestiture remains the most 
effective remedy for Microsoft's wide-ranging unlawful practices. 
Conduct remedies like the proposed decree are a second-best 
solution, because they rely on the defendants good will to comply. 
An injunctive decree in a Section 2 monopolization case "does 
no more than encourage the monopolist to look for some new way of 
exercising its dominance that is not covered by the current 
injunction." \58\ Comprehensive behavioral decrees 
inevitably require interpretation and application as the defendant 
introduces new products, moves into new markets, or changes its 
business strategies in its traditional markets.
---------------------------------------------------------------------------

    \58\ 3 P. AREEDA & H. HOVENKAMP ANTITRUST LAW 
704.3, at 213 (1999 Supp). See William K. Kovacic, Designing 
Antitrust Remedies for Dominant Firm Misconduct, 31 Conn. L. Rev. 
1285, 1311 (1999) ("By blockading recourse to certain 
commercial tactics, a remedial decree will inspire the defendant to 
pursue other paths that circumvent the judicially imposed 
constraints."). As the Supreme Court cautioned in the landmark 
DuPont antitrust case, "the policing of an injunction would 
probably involve the courts and the Government in regulation of 
private affairs more deeply than the administration of a simple 
order of divestiture. United States v. E.I. du Pont de Nemours & 
Co., 366 U.S. 316, 334 (1961); accord, AT&T, 552 F.Supp. at 
167-68.
---------------------------------------------------------------------------

    That does not mean, however, that conduct remedies will 
necessarily be ineffective here, but rather that they must be 
targeted and broad enough to redress the core practices used to 
maintain Microsoft's monopoly and to eliminate the barriers to entry 
protecting that monopoly power. The proposed decree does not even 
purport to satisfy this goal, which we submit is compelled by the 
Ford/United Shoe standard required for assessing relief in this 
case. The relief proposed by the Litigating States achieves these 
objectives. We respectfully submit that the Court adopt a crown 
jewel divestiture provision to deter Microsoft from engaging in 
further unlawful conduct.
    VII. THE COURT SHOULD CONDUCT A RIGOROUS TUNNEY ACT EXAMINATION 
OF THE DECREE, THE COMPETITIVE IMPACT STATEMENT AND THE DEPARTMENT'S 
UNSUBSTANTIATED PROJECTIONS OF FUTURE COMPETITIVE EFFECT
    There are several circumstances in which it is established that 
district courts must engage in rigorous scrutiny of proposed 
antitrust settlements under the Tunney Act. This case epitomizes 
those circumstances. If ever there was a case in which a full, 
independent judicial assessment should be conducted, it is this one.
    A. The Complexity and Substantial National Importance of this 
Case, the Government's Flat Reversal of Position and its Disregard 
of Clear Tunney Act Obligations All Dictate the Necessity of 
Critical Judicial Oversight in this Landmark Proceeding

[[Page 28994]]

    Even in the pretrial context with its more limited review, 
Tunney Act courts will rigorously scrutinize proposed settlements 
when an antitrust case is complex, subject to considerable 
controversy, and affects large segments of the public.\59\ 
Especially rigorous scrutiny is also undertaken when the proposed 
decree departs substantially from the relief sought in the 
government's complaint,\60\ or otherwise represents a sharp reversal 
in the government's prior position.\61\ Each of these situations is 
present in this case
---------------------------------------------------------------------------

    \59\ Cascade Natural Gas Corp. v. El Paso Natural Gas Co., 
356 U.S. 129, 136, 141 (1967); AT&T, 552 F. Supp. at 152; 
Associated Milk Producers, 394 F. Supp. 35, 42 (W.D. Mo. 1975).
    \60\ United States v. Automobile Mfrs. Ass'n, 307 F. Supp. 
617, 621 (C.D. Cal. 1969), aff'd mem. sub nom. New York v. United 
States, 90 S. Ct. 1105 (1970).
    \61\ Cascade, 386 U.S. at 137; Automobile Mfrs. Ass'n, 307 
F. Supp. at 621.
---------------------------------------------------------------------------

    1. This Complex, Controversial, Nationally Important Antitrust 
Prosecution Demands Serious Judicial Oversight
    This is certainly a highly complex case that has preoccupied the 
political, technology and business communities for years. These are 
precisely the circumstances in which the Tunney Act's genesis 
reveals a major policy concern with the appearance of the government 
settling for too little "because of the powerful influence of 
antitrust defendants and the complexity and importance of antitrust 
litigation." SENATE REPORT, supra, at 147 (statement of Judge 
J. Skelly Wright).
    Microsoft plainly "wield[s] great influence and 
power" and has brought "significant pressure to bear on 
[the] Government" throughout the litigation. Id. Thus, the 
Court needs to consider whether this is a case, such as Cascade, 
where the Department "knuckled under" to an economically 
and politically powerful antitrust defendant. Cascade Natural Gas 
Corp. v. El Paso Natural Gas Co., 386 U.S. 129, 136, 142 (1967).\62\
---------------------------------------------------------------------------

    \62\ In Cascade, the Department refused to implement an 
antitrust divestiture decree affirmed on appeal by the Supreme 
Court. The Court eventually directed the Department to oversee 
"divestiture without delay" and instructed the district 
court to prepare "meticulous findings .-.-. in 
light of the competitive requirements" of the remedy. 386 U.S. 
at 137.
---------------------------------------------------------------------------

    2. Heightened Scrutiny is Needed Because Neither the Department 
Nor Microsoft Complied With their Respective Tunney Act Obligations
    Courts have also refused to enter proposed antitrust consent 
decrees where the Government or the defendant did not comply with 
its procedural responsibilities under the Tunney Act. Even technical 
and formalistic failures have been deemed grounds to deny entry of a 
proposed judgment. United States v. Central Contracting Co., 527 F. 
Supp. 1101 (E.D. Va. 1981).
    The procedural irregularities in this case are far greater, and 
are of substantive importance to the Court's review. First, the 
Tunney Act requires the Department to provide an explanation of 
"alternatives" to the proposed decree considered in 
evaluating a settlement proposal. 15 U.S.C.  16(b)(6). 
Here, however, the Department simply offers a laundry list of other 
conduct remedies proposed by third-parties, dismissing all of them 
collectively with the terse statement that the PFJ "provide[s] 
the most effective and certain relief in the most timely 
manner." CIS, 66 Fed. Reg. at 59475. The Department's 
assertion is unexplained.
    The CIS recites only that the Department considered intervening 
changes "in the computer industry, as well as the decision of 
the Court of Appeals, which reversed certain of the District Court's 
liability findings." \63\ Nothing in the CIS offers any 
useful guidance to the Court, or the public, as to why the rejected 
conduct remedies are inappropriate; thus, the Department fails to 
come forward with the "detailed notice to the public" 
the Tunney Act was intended to require.\64\ This violates the 
Government's duty not just to "describe" the 
alternatives (which the CIS does), but also to provide an 
"explanation" of their adequacy (which the CIS does 
not). This is an improperly narrow view of the government's Tunney 
Act responsibilities is incompatible with the purpose of the Tunney 
Act to ensure that all relevant issues are subject to maximum 
"ventilation." \65\
---------------------------------------------------------------------------

    \63\ CIS, 66 Fed. Reg. at 59475.
    \64\ The CIS was intended, rather, to be "detailed 
notice to the public what the case is all about. Further than that, 
the public impact statement makes the lawyers for the Department of 
Justice go through the process of thinking and addressing themselves 
to the public interest consideration in the proposed decree. There 
is no better exercise for determining whether you are right or not 
than trying to put it down on paper to see how it writes." 
SENATE REPORT, supra, at 8 (remarks of Judge J. Skelly Wright).
    \65\ See Central Contracting. 527 F. Supp. at 1103 
(quoting 119 Cong. Rec. 24597 (1973) (remarks by Senator Tunney)).
---------------------------------------------------------------------------

    The government's "predictive judgments" about market 
structure and competitive effect should be accorded a presumption of 
regularity, Microsoft I, 56 F.3d at 1460 (quoting United States v. 
Western Elec. Co., 993 F.2d 1572, 1577 (DC Cir.), cert. denied 510 
U.S. 984 (1993), but on& when tile circumstances are regular. 
Where, as here, the Department's exposition of the reasons for its 
settlement and its legal interpretation of the Court of 
Appeals" mandate are woefully lacking, such a presumption of 
regularity should not apply. In these circumstances, the Court 
cannot "carefully consider the explanations of the government 
in the competitive impact statement." CIS, 66 Fed. Reg. at 
59476 (citation omitted).
    Second, the Tunney Act mandates that the government make 
available all "materials and documents which the [it] 
considered determinative in formulating [a settlement] 
proposal." 15 U.S.C.  16(b). The CIS responds to 
this requirement with a blanket statement that [n]o materials and 
documents of the type described in the [Tunney Act] were considered 
in formulating the Proposed Final Judgment. Consequently, none are 
being filed with this Competitive Impact Statement.
    CIS, 66 Fed. Reg. at 59476. That cannot be accurate. Even in 
antitrust cases that are not the length and complexity of the 
Microsoft litigation, courts have found similar disclaimers 
"to be almost incredible." Central Contracting Co., 527 
F. Supp. at 1104. It defies credulity to suggest that there does not 
exist even one document, memorandum or analysis that the Department 
considered "determinative" in selecting the relief 
package presented to this Court.
    Third, the CIS misstates many provisions of the PFJ. We address 
these in detail in Section III above, and will not repeat that 
analysis here. Where, as here, the government presents a document 
that seeks to justify provisions that on close examination arc 
illusory, it has in effect challenged the legitimacy of statute. 
Under even the strictest interpretations of Tunney Act deference, 
this Court cannot permit the Tunney Act process to "make a 
mockery of judicial power." Microsoft I, 56 F.3d at 1462.
    Fourth, the Tunney Act requires that the defendant file a list 
of "all" written or oral communications "by or on 
behalf of such defendant .-.-. with any officer or 
employee of the United States concerning or relevant to such 
proposal, except [for] communications made by counsel of record 
alone with the Attorney General or the employees of the Department 
of Justice alone." 15 U.S.C.  16(g). Remarkably, 
Microsoft's Section 16(g) filing indicates that only two such 
communications occurred, both in connection with negotiations 
together with Microsoft and the Court-appointed mediator. This 
cannot be true It has been publicly confirmed by numerous public 
officials, and acknowledged by Microsoft, that a large number of 
Microsoft-retained lawyers and lobbyists have advocated its position 
on this case before countless officials in Congress and the 
Executive Branch. The Court should require Microsoft to fully comply 
with Section 16(g).\66\
---------------------------------------------------------------------------

    \66\ The company apparently takes the unsupportable 
position that lobbying communications on the subject of the 
Microsoft litigation occurring before the September 2001 
negotiations resumed are not "relevant" to the 
settlement. Microsoft also claims many communications were protected 
by the "counsel of record" exception. "Counsel of 
record" for purposes of these disclosures is intended to 
differentiate between lawyers actively appearing before the trial 
court and those undertaking related, but non-judicial 
"lobbying" functions. Central Contracting Co., 527 F. 
Supp. at 1105. The House Report discusses Congress's intent to 
distinguish "lawyering contacts," which warrant 
protection, from "lobbying contacts," which must be 
disclosed. It states that a lobbying contact is performed by 
"counsel of record accompanied by corporate officers; or by 
attorneys not counsel of record." HOUSE REPORT, supra, at 6 
(emphasis added). Congress requires their disclosure in order to 
guarantee "that the Government and its employees in fact avoid 
practicing political justice." Id. (quoting Civil Service 
Comm'n, 414 U.S. 906 (1973)).
---------------------------------------------------------------------------

    3. The Court Should Closely Examine the Government's Reversal of 
Position on Relief The government's about-face on its remedy 
proposals provides another reason why heightened judicial scrutiny 
is required. While the government now says that the PFJ will provide 
effective relief, this reflects a marked abandonment of its earlier 
position. Indeed, the Justice Department's position just 18 months 
ago was that only structural relief was adequate, and conduct 
decrees like the proposed PFJ were inherent failures. As emphasized 
in one of the cases cited by the

[[Page 28995]]

Justice Department, less deference is warranted when "the 
government has requested broad relief at the outset, represented to 
the courts that nothing less would do, and then abruptly knuckled 
under." United States v. National Broad. Co., 449 F. Supp. 
1127, 1144 (C.D. Cal. 1978).
    The point is not that the Department has decided not to seek 
divestiture, but instead that the conduct remedies it now proposes 
contradict its prior representations to this Court on their 
effectiveness. The earlier DOJ position was also consistent with its 
prior settlement decisions in this litigation itself. In the 
mediations supervised by Chief Judge Richard Posner in March 2000, 
the Department and the State plaintiffs demanded settlement terms 
that would have gone far beyond the limited provisions of the PFJ in 
eradicating Microsoft's ability to act anticompetitively. Indeed, 
the plaintiffs" last settlement proposal in the 
mediations--dubbed "Mediator's Draft 18 (Attachment 
B)--would have included provisions requiring Microsoft to 
license the actual source code for Windows, to permit ISVs to modify 
Windows itself, and to allow OEMs to "display[] a middleware 
user interface" in lieu of the Windows desktop. None of these 
or similar provisions is included in the proposed decree. Thus, the 
PFJ is considerably weaker in several key respects than the very 
conduct relief which the Department demanded in settlement before 
Microsoft's Sherman Act liability had been established. \67\
---------------------------------------------------------------------------

    \67\ The barrier to introduction into evidence of 
settlement offers under Rule 408 of the Federal Rules of Evidence 
does not apply where the settlement is not used to show liability 
but instead, as here, to illuminate the policy considerations 
governing fashioning of a remedy. E.g., Carney v. American Univ., 
151 F.3d 1090, 1095 (DC Cir. 1998). Rule 408 precludes proof of 
settlements and settlement offers only "to prove liability for 
or invalidity of" a claim. Fed. R. Evid. 408. Indeed, evidence 
of settlements is expressly permitted by Rule 408 "when the 
evidence is offered for another purpose." Id.
---------------------------------------------------------------------------

    Given the importance of this case, and Court's obligation to 
look to the Supreme Court and the DC Circuit for guidance rather 
than the Justice Department, the Court must decide for itself 
whether the settlement would give the public effective relief 
against Microsoft's proven wrongdoing.
    B. Live Evidence is Needed on the Technical and Economic 
Complexities of the Software Industry and the Profound Failings of, 
and Harms Caused by, the PFJ The drafting of an antitrust decree 
necessarily "involves predictions and assumptions concerning 
future economic and business events." \68\ It is a 
"cardinal principle" of our system of justice that 
"factual disputes must be heard in open court and resolved 
through trial-like evidentiary proceedings." Microsoft III, 
253 F.3d at 101. This mandate for evidentiary hearings applies not 
just to liability determinations, but also to determinations 
concerning the "appropriate [form of] relief." Id.; see 
also, id. at 107 (vacating and remanding Judge Jackson's remedy 
decree in large part due to his "fail[ure] to hold an 
evidentiary hearing despite the presence of remedies-specific 
factual disputes," and holding that a remedies decree must be 
vacated whenever there is "a bona fide disagreement concerning 
the substantive items of relief which could be resolved only by 
trial" Id. (quoting Interim Order at 62).
---------------------------------------------------------------------------

    \68\ Ford, 405 U.S. at 578.
---------------------------------------------------------------------------

    The Tunney Act contemplates an evidentiary hearing in these 
circumstances. As the Justice Department recognizes, this court must 
permit the use of the "additional procedures" authorized 
by 15 U.S.C.  16(f)"--which include live 
hearings with fact and expert testimony--if "the [public] 
comments have raised significant issues and .-.-. 
further proceedings would aid the court in resolving those 
issues." CIS, 66 Fed. Reg. at 59476. It strains credulity to 
suggest, as the Justice Department does, that the remedial phase of 
the most complicated antitrust case in decades will not involve 
"significant issues" that would benefit from 
"further proceedings." Evidentiary hearings are 
critically important in complex antitrust cases because the 
assessment of antitrust remedies necessarily requires the Court to 
determine a number of facts relevant to both the degree of 
anticompetitive harm and the likely future condition of the market 
in which competition must be restored. United States v. United 
States Gypsum Co., 340 U.S. 76, 89 (1950); see also United States v. 
Glaxo Group, Ltd., 410 U.S. 52, 64 (1973). In particular, any 
proposed settlement decree must reach forward in time to 
"assure the public freedom from" continuance of the 
monopolistic practices. Id. As such, this Court must make 
"'predictions and assumptions concerning future economic 
and business events."' Microsoft III, 253 F.3d at 102 
(quoting Ford, 405 U.S. at 578). Although courts retain wide 
discretion in fashioning such forward-looking relief, they must base 
that relief on a sound evidentiary record. International Salt, 332 
U.S. at 401.
    In this case it is especially important to heed Congress's 
instruction to "resort to calling witnesses for the purpose of 
eliciting additional facts," HOUSE REPORT, supra, at 5, 
because the record has not yet been developed on remedies. See 
Associated Milk Producers, Inc., 394 F. Supp. 34 (W.D. Mo. 
1975).\69\ Indeed, the procedural posture that the Court now faces 
is more closely akin to a contested summary judgment motion or 
administrative consent decree, for which hearings are the standard 
method of resolution. E.g., Celotex Corp. v. Catrett, 477 U.S. 317 
(1986); Citizens for a Better Environment v. Gorsuch, 718 F.2d 1117 
(DC Cir. 1983); United States v. Trucking Employers, Inc., 561 F.2d 
313 (DC Cir. 1977).\70\
---------------------------------------------------------------------------

    \69\ To the contrary, the DC Circuit reversed and remanded 
precisely because the prior District Judge did not permit an 
evidentiary hearing on remedies. The court stressed that "a 
full exploration of the facts is usually necessary to properly draw 
an antitrust decree so as to prevent future violations and eradicate 
existing evils," and remanded for such an exploration of 
facts. Microsoft III, 253 F.3d at 101 (quoting United States v. Ward 
Baking Co., 376 U.S. 327, 330-31 (1964) (internal quotations 
and brackets omitted)).
    \70\ In summary judgment practice, complex legal issues 
are frequently presented to courts on the basis of affidavits and 
other "paper" evidence. But, unless the papers reveal no 
"genuine issue" of "material fact," a 
standard that cannot be met here, summary judgment motions must be 
denied and a case set for trial so that the Court can adduce whether 
the parties have met their respective burdens of proof on the 
disputed factual issues. E.g., Celotex Corp., 477 U.S. at 323; 
Thompson Everett, Inc. v. National Cable Adver., 57 F.3d 1317, 1322 
(4th Cir. 1995) (applying Celotex to review of a motion for summary 
judgment of antirust conspiracy claim). Indeed, where the 
credibility of an affiant is at issue, as it undoubtedly will be 
here with respect to the reliability of expert opinions and 
projections of future economic and technological developments, it is 
difficult to conceive of any basis on which the Court would be 
permitted to resolve such controverted issues without availing 
itself of ordinary, trial-type evidentiary procedures.
---------------------------------------------------------------------------

    Only by permitting third parties, such as ProComp and its 
members, to participate fully in such a proceeding can the Court 
assure that there will be adequate evidentiary attention to facts 
and circumstances that contradict the Department's views on the 
market, competition and other issues relevant for remedy purposes. 
Otherwise, this Court would repeat the very error that led the DC 
Circuit to reverse the last judgment in this case.
    VIII. CONCLUSION
    For all the foregoing reasons, the Court must find that the 
Proposed Final Judgment is not in the public interest. At a minimum, 
the Court should defer any judgment on the PFJ until the upcoming 
remedies hearing in the ongoing litigation is conducted. This is 
necessary to avoid inconsistent remedies. Indeed, many of the 
remedies proposed by the Litigating States are irreconcilable with 
those proposed by the PFJ. When the Court does consider the PFJ, it 
is obliged in the discharge of its Article III duties to make an 
independent determination whether the PFJ adequately fulfills the 
mandate of the DC Circuit.
    Attachment A
    IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA 
-----------------------
-----------------------
-----------------------
-------
    UNITED STATES OF AMERICA, Plaintiff,
    v. Civil Action No. 98-1232 (CKK)
    MICROSOFT CORPORATION,
    Defendant.-------------------
-----------------------
-----------------------
---------)
    STATE OF NEW YORK, et al.,
    Plaintiffs,
    v. Civil Action No. 98-1233 (CKK)
    MICROSOFT CORPORATION,
    Defendant.-------------------
-----------------------
----------------------
-----------)
    DECLARATION OF KENNETH J. ARROW
    Kenneth J. Arrow declares under penalty of perjury as follows:
    I. INTRODUCTION
    1. I am the Joan Kenney Professor of Economics Emeritus and 
Professor of Operations Research Emeritus at Stanford University. I 
received the degrees of B.S. in Social Science from The City College 
in 1940, M.A. in mathematics from Columbia University in 1941, and 
Ph.D. in economics from Columbia University in 1951. I have taught 
economics, statistics, and operations research at the University of 
Chicago, Harvard University, and Stanford University,

[[Page 28996]]

and I have written more than 200 books and articles in economics and 
operations research. I am the recipient of numerous awards and 
degrees, including the Nobel Memorial Prize in Economic Science 
(1972). A significant part of my writing and research has been in 
the area of economic theory, including the economics of innovation 
and its relation to industrial organization. My curriculum vitae is 
attached.
    2. I have been asked by ProComp to comment on various economic 
issues related to the Revised Proposed Final Judgment 
("PFJ" or the "decree") proposed by the 
United States, various settling States and Microsoft Corporation 
("Microsoft").
    3. My review of the PFJ begins with the fact that Microsoft has 
been found liable for violating Section 2 of the Sherman Act by 
engaging in a widespread series of practices that illegally 
maintained its monopoly in Intel-compatible PC operating systems. 
These practices were focused on eliminating the threat posed to 
Microsoft's PC operating system monopoly by the combination of 
Netscape Navigator and cross-platform Java technology 
("middleware competition").
    4. Given that Microsoft has been found liable for illegal 
monopoly maintenance, the remedies in this case should be designed 
to eliminate the benefits to Microsoft from its illegal conduct. To 
the extent possible, the remedies should be designed to restore the 
possibility of competition in the market where monopoly was 
illegally maintained (i.e., the market for PC operating systems). In 
addition, the remedies should strengthen the possibilities for 
competition and deter the exercise of monopoly power in the present 
and future, taking account of the special problems of an industry in 
which network effects are important.
    5. It is my opinion that the PFJ fails to accomplish these 
objectives. First, the PFJ is unduly focused on attempting to re-
create an opportunity for future middleware competition. Because of 
network effects and path dependencies, Microsoft's monopoly power in 
PC operating systems is more entrenched than it was in the mid-
1990s. It will be exceedingly difficult now, even with the best of 
remedies, to re-establish middleware fully as the kind of 
competitive threat to Microsoft's monopoly power that it posed in 
the mid-1990s. Additional remedial steps need to be taken to ensure 
that Microsoft does not benefit from its illegal conduct and the 
consequences of that conduct on dynamic competition in the OS 
market. Second, the PFJ does not address the fact that no effort to 
restore competition in the market for PC operating systems will be 
successful without measures designed to lower the applications 
barrier to entry that currently protects Microsoft's position in 
this market. Third, the enforcement mechanism described in the PFJ 
seems likely to be ineffective, even with respect to the inadequate 
remedies in the PFJ. Fourth, the PFJ pays insufficient attention to 
the ways in which Microsoft is currently attempting to protect its 
monopoly power by using its illegally maintained monopoly in PC 
operating systems against current and future competitive threats, 
such as server operating systems and Web services.
    6. This affidavit has six pans and is organized as follows. 
After this introduction (Part I), Part II reviews the threat that 
Netscape, Java and the Internet posed in the mid-1990s to 
Microsoft's monopoly power in PC operating systems. Part HI then 
reviews the illegal conduct that Microsoft used in defeating this 
threat. Part III also analyzes the state of the computer industry 
today following this illegal conduct and explains why it seems 
unlikely, at this stage, that the middleware threat can be re-
created. With this as background, Parts IV and V review and assess 
the remedies proposed in the PFJ. Part IV critiques the remedies 
designed to restore middleware competition. In addition, Part IV 
discusses the lack of attention in the PFJ to the applications 
barrier to entry that protects Microsoft's monopoly power in PC 
operating systems. It also notes certain deficiencies in the 
enforcement mechanism proposed in the PFJ. Part V follows with a 
discussion of Microsoft's efforts to protect its existing monopoly 
power by using its illegally maintained monopoly in PC operating 
systems to gain advantages in other markets that threaten to reduce 
the scope of its current market power. Part V explains that the PFJ 
gives insufficient attention to this important subject--a 
subject that bears on the future of competition in the computing 
industry. The affidavit concludes in Part VI with a summary of 
conclusions.
    II. MICROSOFT'S MONOPOLY POWER AND THE THREAT POSED BY NETSCAPE, 
JAVA AND THE INTERNET
    A. NETWORK EXTERNALITIES
    7. Network externalities have been central to Microsoft's 
ability to maintain its monopoly power in the market for PC 
operating systems. Both the District Court and the U.S. Court of 
Appeals for the District of Columbia Circuit referred to the 
"applications barrier to entry," the process by which a 
large installed base induces the development of applications and 
other complementary goods designed for the dominant operating 
system, which further reinforces the position of the dominant 
operating system. I described this process in a declaration that I 
submitted in 1995 on behalf of the government in a prior settlement 
with Microsoft:
    A software product with a large installed base has several 
advantages relative to a new entrant. Consumers know that such a 
product is likely to be supported by the vendor with upgrades and 
service. Users of a product with a large installed base are more 
likely to find that their products are compatible with other 
products. They are more likely to he able successfully to exchange 
work products with their peers, because a large installed base makes 
it more likely that their peers will use the same product or 
compatible products. Installed base is particularly important to the 
economic success of an operating system software product. The value 
of the operating system is in its capability to run application 
software. The larger the installed base of a particular operating 
system, the more likely it is that independent software vendors will 
write programs that run on that operating system, and, in this 
circular fashion, the more valuable the operating system will be to 
consumers.
    8. The applications barrier to entry implies that it is likely 
that a single platform (or programming environment) will dominate 
broad segments of the computer software industry at any point in 
time. This does not necessarily imply that there will be monopoly; 
that depends on the extent to which the dominant platform is 
proprietary or closed. However, if the dominant platform is 
proprietary (which is certainly the case with Windows), then the 
interdependence of applications and operating systems creates a 
barrier against any new entrant. A new entrant would need to create 
both an operating system and the applications that make it useful.
    9. In addition, any customer of a new entrant would have to 
incur considerable costs in switching to a new system. In the first 
place, the customer would have to learn new operating procedures. 
Second, there would be a problem of compatibility of files. These 
factors constitute a natural obstacle to change, so that a system 
with a large installed base will have a tendency to retain its 
users.
    10. The special nature of operating systems and software also 
gives Microsoft, because of its large installed base of operating 
system, a great advantage in the markets for complementary software. 
Specifically, it can distribute the software much more easily than 
its competitors. Since virtually every new PC ships with Windows, 
Microsoft can put its software into the hands of users by including 
it with the operating system. Any other vendor of complementary 
software that wanted to distribute through OEMs would have to cut a 
separate deal with each OEM, and would face the task of persuading 
OEMs to carry software products that may be directly competitive 
with products offered by Microsoft. As a result, complementary 
software from other vendors typically either has to be downloaded 
(which imposes added costs on users) or distributed separately to 
users in "shrink wrap." In addition, Microsoft has the 
ability to allow Microsoft developers of complementary software 
access to "hidden APIs"--application programming 
interfaces in the PC operating system that Microsoft developers know 
about but which are not disclosed fully to competing developers of 
complementary software. of the OEM distribution channel. Most 
important, Sections III.C and III.H cannot, by their very design, 
provide an opportunity for rival middleware products--as 
compared to Microsoft's middleware--to attract sufficient 
distribution to have any impact at all on the applications barrier 
to entry.
    The OEM sections may actually make matters worse for middleware 
rivals. The PFJ limits what OEMs can remove from their PC products 
to just the middleware icons, euphemistically referred to as 
"access to" middleware in Sections III.C and III.H. In 
other words, OEMs are not permitted to remove the code for Microsoft 
Interact Explorer, Windows Media Player or any other Microsoft 
middleware, and the proposed decree allows Microsoft to commingle 
and integrate middleware with its Windows operating system software. 
The fact that the flexibility guaranteed to OEMs is limited to 
removing icons, and not the middleware itself, has major competitive

[[Page 28997]]

significance and actually guarantees perpetuation of the 
applications barrier protecting Microsoft's operating systems 
monopoly.
    1. The OEM Provisions Place Sole Responsibility for Introducing 
Middleware Competition on PC Manufacturers
    To achieve its goal of "recreating the potential for the 
emergence" of middleware alternatives to Microsoft's monopoly 
operating system, the PFJ delegates the role of competitive 
gatekeepers to OEMs. Instead of requiring the monopolist itself to 
unfetter the market for entry by competitors, here the PFJ imposes 
that obligation on third-parties who are partners with, not 
competitors of, the defendant. If PC manufacturers do not act on the 
desktop flexibility powers provided by Sections III.C or III.H of 
the PFJ, there will, by definition, be no OEM-based remedy. Walter 
Mossberg, Personal Technology columnist for the Wall Street Journal, 
captured the problem elegantly. "Much" of the DOJ 
settlement, he explained, "pertains to the company's relations 
with the hapless makers of PCs, which aren't in any position to defy 
Microsoft." \50\
---------------------------------------------------------------------------

    \50\ Waiter S. Mossberg, Microsoft Has Good Yea); At 
Expense of Customers, Wall Street J., Dec. 27, 2001, at B1.
---------------------------------------------------------------------------

    OEMs are captives of Microsoft for a number of reasons, 
beginning with the obvious fact that there are no commercially 
viable alternatives to the Windows operating system; there are no 
real alternatives to Microsoft's Office suite of personal 
productivity applications (Word Processing, Spreadsheets, E-Mail, 
etc.); and there is de minimis competition for Internet browsers. 
The fact that OEMs find themselves in a sole source relationship 
with the defendant provides Microsoft with innumerable avenues to 
exercise its leverage over the OEM channel. These complex 
relationships are built more on the subtleties of a sole source 
relationship than on written contracts, or overt retaliation, and 
thus are hardly resolved by the uniform Windows pricing obligation 
provided for in Section III.B.
    It must also be understood that personal computer manufacturers 
are in the business of producing low margin commodity equipment, a 
business characterized by very minimal (and shrinking) R&D 
budgets. It is unrealistic to expect any Windows-centric OEM to 
develop, test, and pre-install packages of rival middleware, because 
that would require substantial expenditures in technical software 
expertise and customer support which would further narrow already 
shrinking profit margins in a business where competitors are 
currently engaged in a major price war to gain market share.
    The financial burden of customer support, where a single end 
user service call can eliminate an OEM's profit margin on a PC, 
creates powerful disincentives to the inclusion of non-Microsoft 
middleware. See Microsoft III, 253 F.3d at 62. Judge Jackson found 
and the Court of Appeals affirmed that in light of their customer 
support obligations, which are "extremely expensive," 
Microsoft III, 253 F.3d at 61 (citing Findings of Fact 210), 
OEMs are disinclined to install multiple versions of middleware. 
Since OEMs "have a strong incentive to minimize costs," 
id., the customer confusion resulting from duplicative middleware is 
sufficient to preclude OEMs from installing competitive programs 
where comparable Microsoft middleware is included with Windows.
    Under the proposed decree, however, these are precisely the 
circumstances faced by OEMs. There are no restrictions in the PFJ on 
Microsoft's ability to integrate middleware technologies into 
Windows; in fact Microsoft is allowed to do so at its "sole 
discretion." Even if an OEM wants to install a competitive 
non-Microsoft middleware program, it will be required to deal with 
the fact that the corresponding Microsoft middleware product is 
already present on its PCs, which it is not permitted to remove. 
Consequently, just as OEMs" cost minimization requirements 
forced them not to pre-install Netscape where IE was included with 
Windows, so too will these same profit pressures force OEMs to 
decline to install competing middleware programs under the PFJ.
    This is in stark contrast to the provision of the Interim Order 
on which the Department claims to have based its settlement. Both 
the Interim Order and the remedy proposed by the Litigating States 
would require Microsoft to ship a version of the operating system 
without any middleware included, if requested by an OEM. That scheme 
makes it possible for an OEM to truly offer a differentiated product 
suite without the burden of having Microsoft's corresponding 
technology present on the system as well.
    Even if they had an independent economic incentive to support 
middleware competition, however, Windows OEMs are still held captive 
under the proposed decree's retaliation provisions. Section III.A 
prohibits "retaliation" (another undefined term) by 
Microsoft against OEMs for developing, distributing or supporting 
competitive middleware or exercising their desktop icon flexibility 
fights.
    Despite their relative length, the retaliation provisions do not 
at all effectively preclude retaliation. Retaliation is only 
prohibited under Section III.A where "it is known to 
Microsoft" that an OEM is undertaking a permitted, competitive 
action. This subjective, actual knowledge standard will be difficult 
if not impossible to enforce. In addition:
    Microsoft is not prohibited from retaliating if an OEM removes 
the code for a Microsoft Middleware Product from its retail PCs.
    Nor does this provision prevent retaliation if an OEM removes 
either icons or code for Microsoft software that does not qualify as 
a "Microsoft Middleware Product" (for instance, 
Microsoft Movie Maker).
    And Microsoft is not prohibited from retaliating against OEMs 
for promoting products that fall outside of the Section III.A terms. 
By way of example, Microsoft could retaliate against OEMs for 
promoting non-Microsoft Interact services, server operating systems, 
server middleware or server applications. Microsoft could even 
retaliate against OEMs for distributing or promoting middleware that 
does not yet compete with Microsoft Middleware Products.
    Section III.A also limits the prohibited forms of retaliation to 
"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)." PFJ, 66 Fed. Reg. 59453. Microsoft 
is not precluded from denying new monetary consideration to OEMs as 
a means of retaliation, as that is neither an "alter[ed] 
commercial relation" nor a "newly introduced form of 
non-Monetary Consideration." Similarly, Microsoft can also 
reward compliant OEMs by providing concessions on license fees for 
non-Windows Microsoft software, including applications such as 
Office, server operating system software and server applications, as 
well as Microsoft Middleware Products. None of these types of 
software is covered by the pricing parity requirements of Section 
III.B, which apply only to "Microsoft Operating System 
Products." Id.
    Finally, as a general matter there is no practical way to 
identify and prohibit all the subtle ways Microsoft can 
preferentially favor some OEMs, and harm others, depending on their 
degree of support for Windows. For instance, the definition of 
Consideration in Section VI.C covers "product 
information" and "information about future plans." 
Id. at "59458. Yet Microsoft could retaliate against OEMs by 
denying them sufficient technical information regarding important, 
upcoming Windows features, for example by not inviting them to 
internal development conferences or presentations. Likewise, 
Microsoft could assign fewer or less knowledgeable technical support 
personnel to a specific OEM's account team, a form of retaliatory 
discrimination that would be difficult to detect and virtually 
impossible to prove.
    In sum, the anti-retaliation provisions offer little shelter for 
OEMs desiring to respond to legitimate demands by their customers 
for choice among competing software products. If there is any doubt 
about this analysis of Sections III.C and III.H above, the Court 
should look no further than the OEMs" treatment of Microsoft 
Internet Explorer. On July 11, 2001 Microsoft announced that OEMs 
would be free to remove access to Internet Explorer, which they had 
previously been prohibited from doing.\51\ Since this announcement 
was made more than six months ago, not one OEM has actually taken 
advantage of this provision and removed the icon for Internet 
Explore from retail PCs This real-world market test is an accurate 
gauge of how many OEMs will likely take advantage of the exact same 
flexibility provided in Section III.H of the decree, albeit for a 
somewhat wider range of middleware products: none.
---------------------------------------------------------------------------

    \51\ We note that at the time of the announcement, 
Microsoft had already achieved significantly greater than 80 percent 
of the browser market as a result of its six-year anticompetitive 
campaign, so it is hard to view this as a concession.
---------------------------------------------------------------------------

    2. The Provisions Allowing OEM Flexibility Do Not Address the 
Key Issue of Microsoft's Ubiquitous Middleware Development Platform
    The core of the case against Microsoft rests on the theory that 
Netscape and Java provided an alternative development

[[Page 28998]]

platform (middleware) for applications developers, which, if 
applications developers began writing applications to the 
middleware, would undermine the applications barrier to entry and 
thus Microsoft's Windows monopoly. For this to occur, developers 
need to view rival middleware as a more attractive development 
platform than Windows. Unfortunately, the PFJ provides a solution to 
the wrong problem and actually ensures that rival middleware 
applications will never be able to attract a critical mass of 
developers.
    Sections III.C and III.H of the decree allow OEMs to install 
competing middleware and to "enable or remove access to" 
Microsoft Middleware Products from the desktop of Windows PCs that 
they sell to end users. However, as noted, these provisions do not 
authorize OEMs to delete the Microsoft middleware itself, and 
Microsoft is not prohibited from retaliating against OEMs that 
attempt to delete Microsoft middleware code from its configured PCs.
    This distinction between icons and code is competitively 
decisive. The applications barrier exists because developers write 
to Windows-centric APIs. Under the terms of the decree, however, the 
APIs exposed by Microsoft middleware remain on every Windows PC even 
if OEMs and end-users exercise all of the flexibility provided by 
Section III.H. It is crucial to understand that an application 
developer can write to Microsoft middleware regardless of whether 
"access" to that software is removed. In other words, 
Microsoft's middleware APIs remain ubiquitously available on all 
Windows PCs under the proposed decree. The best a rival middleware 
provider can hope for is to be "carried" alongside 
Microsoft's middleware on some lesser portion of personal computers.
    A critical lesson learned in this case is that, as with Netscape 
and Java, ubiquity trumps technology in network effects markets. 
Professor Arrow explains that no middleware competitor can expect 
any economically significant chance to compete on the merits if, as 
permitted under the decree, Microsoft middleware is ubiquitous. 
Arrow Decl. 26. The important distinction between icons and 
code was explained by the DC Court of Appeals in 1998. The court 
emphasized that removal of end user access "do[es] not remove 
the IE software code, which indeed continues to play a role in 
providing non-browser functionality for Windows. In fact, browser 
functionality itself persists, and can be summoned up by 
.-.-. running any application (such as Quicken) that 
contains the code necessary to invoke the functionality." 
Microsoft II, 147 F.3d at 941.
    Consequently, by limiting its effect to the removal of icons 
only, the proposed decree cannot achieve any appreciable effect in 
eroding tile applications barrier. They cannot "recreate the 
potential for the emergence" of middleware alternatives in a 
way that provides an economically realistic opportunity for 
operating systems competition.
    3. The OEM Provisions Do Not Create a Level Playing Field for 
Middleware Desktop Competition
    We explained above why it is unlikely that OEMs will expend 
resources to promote rival middleware products. The alternative 
model is that rival middleware providers would pay an OEM to feature 
its software and delete end-user access to Microsoft's middleware. 
This is consistent with the CIS, which explains that the function of 
the OEM provisions is to allow OEMs to "feature and 
promote" non-Microsoft middleware. CIS, 66 Fed. Reg. at 59460.
    Section III.H does not achieve this goal, for two primary 
reasons. First, as detailed above, the "value" of the PC 
desktop is diminished by the fact that an OEM is not permitted to 
remove the Microsoft middleware code, and thus cannot offer a rival 
exclusivity.
    Second, Section III.H.3 does not guarantee that a rival's 
middleware icon will even remain on the desktop. As the Department 
explains the theory of this remedy, it is to create a 
"marketplace" on the desktop where OEMs can "stand 
in the shoes" of consumers and exercise choices in which 
middleware technologies to feature based on price and performance. 
Yet, the PFJ permits Microsoft to "sweep" competing 
middleware icons placed on the Windows desktop by OEMs.
    That is, Windows may automatically remove the icons featured by 
an OEM just fourteen days "after the initial boot-up of a new 
Personal Computer." True, this section contains a proviso 
stating that Microsoft may not do so absent end user 
"confirmation," but neither the text of this provision 
nor the Competitive Impact Statement require that confirmation be 
based on any objective notice or alert by Microsoft. CIS, 66 Fed. 
Reg. at 59471.
    The fourteen-day desktop sweep proviso directly contradicts the 
objective of fostering OEM flexibility to feature and promote non-
Microsoft middleware, because it undermines the ability of OEMs to 
sell desktop placement an ISV can count on. Under Section III.H.5, 
the best an OEMs can offer is a guarantee of desktop placement for 
fourteen days.
    This is critically important for the reasons stated above. As 
rival middleware vendors attempt to attract developers to write 
applications to their platforms, as opposed to Microsoft's platform, 
they will have to make representations as to how many PC desktops 
actually have the rival middleware installed and available to 
consumers. With the fourteen day "sweep" provision 
included in the PFJ, ISVs will simply not be able to make any 
accurate projections, which will further reduce the price they might 
be willing to pay for desktop placement.
    4. Additional OEM Provisions Further Undermine the Crucial 
Ability of ISVs to Differentiate Competing Middleware Products
    In order to displace Microsoft middleware and encourage 
applications developers to write to their APIs, competing ISVs will 
need to differentiate their middleware products from Windows Media 
Player, Windows Messenger and the other Microsoft middleware 
products that are bundled with Windows. The OEM provisions 
affirmatively undermine the ability of ISVs to achieve any 
meaningful degree of product differentiation.
    First, Section III.C.3 permits OEMs to launch automatically non-
Microsoft middleware only at boot-up or upon making a connection to 
the Internet. This constrains the ability of manufacturers to 
configure competing middleware products and reduces the value of 
this flexibility for (and hence potential OEM revenues from) 1SVs.
    Second, auto-launch of competing middleware is permissible under 
Section III.C.3 only (a) "if a Microsoft Middleware Product 
that provides similar functionality would otherwise be launched 
automatically at that time," PFJ, 66 Fed. Reg. 59454, and (b) 
if the 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." Id. These limitations allow Microsoft to 
gate middleware competition by reducing the role of non-Microsoft 
middleware to only those instances in which Microsoft's own products 
are launched. If Microsoft decides that its middleware products will 
not have a user interface, or will utilize a window of a specific 
size, those decisions are binding on competitors" product 
designs as well. Indeed, the PFJ surprisingly appears not even to 
contemplate a situation where Microsoft's competitors develop a 
middleware product for which there is no "corresponding" 
Microsoft middleware.
    Third, the PFJ empowers Microsoft to limit the freedom of ISVs 
in their product design and functionality decisions on its 
competitors. Microsoft can also limit the placement of icons and 
shortcuts may appear on the desktop and elsewhere, id. at 59454, 
59455, the "functionality" of middleware products whose 
icons and shortcuts may be included by the OEM, and the ability of 
end users to designate non-Microsoft middleware as default 
middleware on their computers. Id. at 59455.
    Each of these provisions has a similar, substantial effect. By 
allowing middleware to be substituted by an OEM only when (a) it 
performs similarly to Microsoft middleware, (b) exhibits 
functionality defined by Microsoft, or (c) includes the same user 
interface as Microsoft middleware, the PFJ allows Microsoft to 
"gate" competition. There is no competitive 
justification for these provisos, all of which serve to eliminate 
opportunities for product differentiation and permit Microsoft to 
constrain middleware competition to the scope, location and even 
"look and feel" it determines for its own products.
    5. The OEM Provisions Contain Other Superfluous Terms that 
Substantially Limit Any Potential Market Impact
    Section III.H of the proposed decree allows Microsoft twelve 
months to modify Windows XP in order to permit OEMs to remove 
Microsoft middleware icons or change default settings for invoking 
middleware functionalities. Yet the modification necessary to allow 
removal of icons via the "Add/Remove Programs" utility 
is a trivial exercise. Demonstrable proof of this fact is that 
Microsoft was able to modify the beta version of Windows XP to 
permit removal of the Internet Explorer icon within weeks of its 
July 11, 2001 announcement. We can not fathom why Microsoft is now 
given twelve months to accomplish the same task.

[[Page 28999]]

    Section VI.N of the decree also provides that a "Non-
Microsoft Middleware Product" is software with certain 
functionalities "of which at least one million copies were 
distributed in the United States within the previous year." 
Because the Section III.H obligations requiting modification of 
Windows XP to permit addition and removal of competing middleware 
apply to "Non-Microsoft Middleware Products," OEMs are 
foreclosed from the ability to feature and promote small middleware 
start-up competitors in Windows XP, Section VI.N is a very real 
impediment to achievement of the innovative middleware market the 
PFJ is purportedly designed to promote.
    6. The OEM Provisions Have No Impact on Java.
    Sections III.C and III.H also do not apply to Microsoft's Java 
Virtual Machine ("JVM"), or Microsoft's equivalent of 
the JVM, its Common Language Runtime. Despite the fact that the 
"Microsoft Middleware Product" definition includes the 
Microsoft Java Virtual Machine, it appears there is no competitive 
consequence to its inclusion in this definition in any of the 
provisions of the decree. First, Microsoft no longer ships its JVM 
with Windows, so there is nothing for OEMs to remove. Second, even 
if they did continue to ship a JVM, there is no "icon" 
or "end-user access" to Java. Rather, Java is invoked 
automatically by programs that rely on its presence.
    7. The OEM Provisions Largely Codify Microsoft's Existing 
Business Practices.
    Users today enjoy the flexibility--without the benefit of 
the PFJ--to add, delete or customize their own PC desktops. 
Users may delete icons by simply "dragging" the icon to 
the "recycle bin" or "right-clicking" on the 
icon and simply choosing "delete."
    Thus, the decree's OEM provisions allowing OEM removal of icons 
only codify Microsoft's current business practices. In response to 
the Court of Appeals" opinion, Microsoft on July 11, 2001 
announced that "it is offering computer manufacturers greater 
flexibility in configuring desktop versions of the Windows operating 
system in light of the recent ruling by the U.S. Court of Appeals 
for the District of Columbia." \52\ According to the 
Microsoft press release, under this policy OEMs can "remove 
the Start menu entries and icons that provide end users with access 
to the Internet Explorer components of the operating system," 
and "Microsoft will include Internet Explorer in the Add/
Remove programs feature in Windows XP." Id. Thus, Microsoft 
stressed that "Microsoft has always made it easy for consumers 
to delete the icons for Internet Explorer, but will now offer 
consumers this additional option in Windows XP." Id.
---------------------------------------------------------------------------

    \52\ Available at www.microsoft.com/MSCorp/presspass/
Press/2001/Jul01/07-11OEMFlexibilityPR.asp.
---------------------------------------------------------------------------

    This announcement is revealing because it confirms, from 
Microsoft itself, that the "flexibility" provided to end 
users by Section III.H of the decree has always existed. And by 
revising Windows XP to permit OEMs to remove the Internet Explorer 
icon, Microsoft has already done precisely what the decree requires. 
Thus, the OEM provisions of the decree succeed mostly in codifying 
Microsoft's current business practices and achieve minimal, if any, 
remedial purpose. In sum, the relief provided by Sections III.C and 
III.H is fundamentally at odds with the theory of the ease. These 
OEM "desktop" remedies will not provide any opportunity 
for alternative middleware platforms to attract developers and thus 
to challenge the applications barrier to entry.
    They are economically irrational since Microsoft's middleware 
will continue to be ubiquitously available on all PCs, regardless of 
the choices exercised by OEMs. These provisions allow Microsoft to 
dictate product design features to its rivals, to limit product 
differentiation and to restrict OEM deals with rivals to a brief, 
fourteen-day exclusivity period. And at bottom, they cannot change 
the economic structure of the PC distribution channel because OEMs 
are sole-source partners of Microsoft, not competitors.
    D. The Proposed Decree Does Not Effectively Preclude Microsoft's 
Exclusive Dealings
    Although the proposed decree purports to ban exclusive dealing 
by Microsoft with respect to Windows software, Section III.G 
expressly permits Microsoft to establish favored or exclusive 
relations with certain OEMs, ISVs, etc., if the parties enter into 
"any bona fide joint venture or .-.-. any joint 
development or joint services arrangement." This exception all 
but vitiates the supposed prohibition, for it allows Microsoft to 
enter into the identical distribution agreements that were held 
unlawful at trial merely by denoting them as "joint" 
activities.
    E. Current Market and Economic Realities Demonstrate that the 
PFJ is Incapable of Having Any Substantial Procompetitive Impact
    The Department recognizes explicitly that relief in this case 
must "ensure that there remain no practices likely to result 
in monopolization in the future." Microsoft III 253 F.3d at 
103 (citations omitted); see CIS, 66 Fed. Reg. at 59465 
(monopolization remedy should "avoid a recurrence of the 
violation" in the future). Yet by failing to address 
significant market and technological developments that have occurred 
in the period since the trial record closed, the narrow remedies of 
the proposed decree do not provide relief that comes even close to 
ensuring that Microsoft's unlawful practices will not be repeated in 
the future.
    1. New Monopolies Enable Microsoft to Protect its Operating 
System Monopoly Despite the PFJ Since the trial, Microsoft has 
solidified three new chokeholds with which it can easily perpetuate 
its monopoly power:
    Microsoft's monopoly power over Interact browsers and its 
integration of IE into Windows allow it to replicate many of the 
prohibited practices through IE.
    Microsoft's monopoly power over the Office suite and its 
anticompetitive use of Office porting allow it to replicate many of 
the prohibited practices through Office.\53\
---------------------------------------------------------------------------

    \53\ Microsoft's resulting power over Internet browsers 
and personal productivity applications provides it with alternative 
vehicles with which to achieve the same anticompetitive foreclosure 
of middleware threats that it accomplished in 1995-98 through 
Windows itself.
---------------------------------------------------------------------------

    Microsoft is fast acquiring monopoly power in the operating 
systems for low-end servers used in local or wide area networks. 
Microsoft can just as easily exploit the APIs exposed by the 
operating system on the network to perpetuate the applications 
barrier to entry.
    However, the PFJ does not require the disclosure of APIs exposed 
by IE, Office the low-end server operating systems. Microsoft can 
develop middleware programs that utilize these APIs--which are 
as ubiquitous as the Windows APIs themselves--and thus evade 
the API disclosure provisions of the PFJ. Similarly, although 
Section III.E of the PFJ requires the disclosure of Communications 
Protocols used for interoperability with Microsoft server operating 
systems, by controlling the client (IE), Microsoft can control the 
server irrespective of these provisions.\54\
---------------------------------------------------------------------------

    \54\ As Microsoft executive (and trial witness) Paul 
Maritz put it, "the most important thing we can do is not lose 
control of the Web client," because "[b]y controlling 
the client, you also control the server." Gov't Ex. 498. 
Microsoft can suppress competition by adding proprietary features 
and protocols to the IE browser that are necessary to generate 
actions by its server operating systems products or by refusing to 
add features and protocols that would similarly support a 
competitor. Professor Schmalensee acknowledged this incentive at 
trial: "[I]f one company controlled the browser and its look 
and feel and how it presented applications, it could severely 
enhance or detract from the application functionality of programs or 
applications running on the server." 6/24/99 (p.m.) Tr. 
46-47; see also id. at 48; Henderson Decl. 82 (quoting 
Rasmussen Dep., 12/15/98 (a.m.), at 67-68).
---------------------------------------------------------------------------

    That is, Microsoft's monopoly control over IE allows it 
unilaterally to implement proprietary standards and protocols within 
IE that are not disclosable under the PFJ because they are not 
"implemented in a Windows Operating System Product installed 
on a client computer" within the scope of Section III.E.
    2. The Proposed Settlement Ignores the Likely Tactics Microsoft 
Will Use to Eliminate the Next Significant Threat to its Monopoly 
Position
    The primary competitive threat to the Windows OS/IE platform is 
the emergence of applications and services provided over the 
Internet, where the application or service is independent of the 
computing platform employed by the user. The recent spread of high-
speed Internet service has further spurred the development of this 
category of distributed applications or web services that take 
advantage of Internet's underlying architecture.
    Two features of distributed applications in particular 
constitute a revolutionary change from the previous "client-
server" model. First, rather than residing principally on one 
machine (either a client or a server), distributed applications 
effectively reside on the network itself. It is therefore possible 
to access these services from any computer or device connected to 
the Internet. From the user's perspective, although the application 
itself resides on the network, it is accessible as rapidly and 
seamlessly as if it resided on the user's own PC.
    Second, because the applications and data are accessible from 
different machines,

[[Page 29000]]

access to these services depends critically upon being able to 
establish the identity of the user seeking access to those services. 
Web identity and authentication services accordingly take on 
extraordinary importance in the world of distributed applications.
    These changes in the market reveal a picture of today's PC 
industry that is radically different from the Department's placid 
vision of "recreating the potential" for middleware 
competition by opening the OEM channel to possible future middleware 
innovations. The critical question, however, is whether distributed 
web-based applications, which do not need to be compliant with any 
particular operating system, will be able to remain independent of 
Windows and in the process bring down the applications barrier to 
entry.
    The PFJ does not protect the Internet-based competition for the 
Windows operating systems monopoly in the future because the 
proposed decree does nothing to prevent Microsoft from continuing to 
shift from one anticompetitive activity to another in order to 
maintain its monopoly. Instead of bundling middleware code into 
Windows and creating exclusive dealing arrangements with ISVs and 
OEMs, Microsoft today is attempting to defeat the threat from Web-
based services by bundling its Web services technologies into 
Windows and entering into, exclusive vertical distribution 
arrangements with Web-based content and e-commerce providers. See 
Passport to Monopoly: Windows XP, Passport, and the Emerging World 
of Distributed Applications at 25 (ProComp June 21, 2001) and 
Microsoft "s Expanding Monopolies: Casting A Wider .Net 
(ProComp May 15, 2001).
    As would be expected, Microsoft now attempts to create a 
proprietary equivalent to the distributed applications paradigm by 
bundling its latest operating system with certain applications and 
technologies in order to secure dominance in distributed 
applications. For example, Microsoft Passport, a proprietary 
authentication technology built on the .NET Framework, is bundled 
with Windows XP. This bundling allows Microsoft's own authentication 
services to have a ubiquitous distribution base--and deny rival 
technologies ubiquity--in the same way that its bundling 
practices extinguished the middleware threats from Netscape and 
Java. A monopoly in web identity services will enable Microsoft to 
control the means by which users access distributed applications 
from the Interact. Nonetheless, the PFJ does nothing to restrict 
Microsoft's practices in this area. The API disclosure provisions 
only mandate the release (if at all) of APIs used by a Microsoft 
Operating System product to intemperate with Microsoft Middleware, 
which excludes Passport.
    Similarly, Microsoft's broader .NET initiative is replacement of 
the Java and Netscape technologies that it unlawfully crippled with 
Microsoft proprietary technology. Microsoft defines .NET as its 
"platform for XML web services." \55\ The services 
which .NET offers are a combination of pre-designed applications, 
some of which come under the rubric "Hailstorm," and a 
set of tools, under the rubric of Visual Studio Integration Program, 
designed to allow developers to create web applications which rely 
on the all-important APIs exposed by Microsoft programs. At the core 
of .NET stands the Common Language Runtime environment 
("CLR").
---------------------------------------------------------------------------

    \55\ .NET Defined, available at www.Microsoft.com/net/
whatis.asp.
---------------------------------------------------------------------------

    CLR is Microsoft's answer to the Java runtime environment, with 
a key difference. CLR provides the developer with a device that is 
similar to the JVM, but that lacks the element so destructive to 
Microsoft's hegemony--freedom from reliance on Microsoft's 
APIs. Of course, CLR will take full advantage of Microsoft's vast 
distribution network via bundling with future versions of Windows 
(including Windows XP) as well as with IE and Microsoft Network.
    Microsoft's monopolization strategy has not changed at all. Bill 
Gates has explained that "there's a very strong analogy here 
between what we're doing now [with Web-based services] and what we 
did with Windows." \56\ Since Microsoft will pursue the 
same tactics and strategies found unlawful in the instant case, any 
remedy that does not prohibit a repeat of these practices in new 
markets and new contexts is facially flawed.
---------------------------------------------------------------------------

    \56\ "So for every element of Windows--user 
interface, the APIs ... for each one of those things there's an 
analogy here." Bill Gates, Forum 2000 Keynote, Bill Gates 
Speaks About the .NET Platform. (Available at www.microsoft.corn/
BUSINESS/vision/gates.asp)
---------------------------------------------------------------------------

    In sum, the proposed decree fails to address identifiable market 
and technological developments since the trial record closed that 
allow Microsoft both to protect its operating systems monopoly 
against current potential rivals and to engage in the same types of 
conduct adjudged unlawful by the Court of Appeals. Consequently, the 
proposed decree does not and cannot "ensure that there remain 
no practices likely to result in monopolization in the 
future," Microsoft III, 253 F.3d at 103 (citations omitted), 
and must be rejected by this Court.
    F. The Decree Increases Microsoft's Market Dominance and 
Actually Worsens Competitive Conditions in the Relevant Software 
Markets
    The proposed settlement not only does not achieve the 
procompetitive effects that the Department claims, it increases 
Microsoft's dominance of the operating systems market and actually 
worsens competitive conditions across the entire software industry. 
Among other things, the proposed decree rewards Microsoft for its 
illegalities, promoting future defiance of antitrust laws and 
intransigent tactics by dominant firms. Many of the deficiencies of 
the proposed decree have been outlined in this submission. These 
deficiencies will allow Microsoft to perpetuate its monopoly 
position. In addition, the decree represents a step back from the 
current state of affairs notably because it sanctions continued 
bundling or commingling by Microsoft of middleware technologies with 
Windows, thus increasing rather than decreasing Microsoft's power to 
sustain the applications barrier to entry protecting its operating 
systems monopoly while disadvantaging non-Microsoft middleware 
providers. By enhancing Microsoft's ability to buttress the 
applications barrier to entry, the proposed settlement harms 
competition, and increases, rather than terminates, Microsoft's 
monopoly power.
    G. The Settlement Would Not Have Prevented Microsoft's Unlawful 
Campaign Against Netscape and Java One appropriate measure for 
assessing whether the PFJ is adequate is whether it would preclude 
today the same conduct Microsoft used to foreclose Netscape and 
Java, and thus preserve its monopoly power, in 1995-98. It 
would not.
    As a fundamental matter, this is because Microsoft is not 
required to disclose the APIs needed for new and innovative forms of 
middleware. When Netscape was launched in late 1994, Microsoft did 
not have an Internet browser and was focused on Chairman 
Gates" vision of interactive television, rather than the 
Interact. Thus, there were no APIs exposed by Windows that were 
"used by Microsoft Middleware to interoperate" within 
the scope of Section III.D of the proposed decree. Had the decree 
been in place when Jim Barksdale, former CEO of Netscape, met with 
Microsoft in 1995, Netscape would not have been entitled to APIs or 
any other interoperability information under the express terms of 
the decree. "For the same reasons, no interoperability 
information would have been disclosable to Sun in order to enable 
interoperability of Java runtime technology with Windows.
    Most of the distribution tactics Microsoft used to cut off 
Netscape's air supply and to "pollute the market for cross-
platform Java" are also permissible under the decree. 
Microsoft can still force OEMs to take its own middleware through 
bundling. Microsoft can still coerce or threaten partners like Intel 
and rivals like Apple and can still refuse to port its monopoly 
Office suite in order to protect the applications barrier to entry. 
Microsoft can still throttle middleware innovations because the PFJ 
gives it the ability to "gate" the functionality and 
product design of rival middleware products. Microsoft can still 
prohibit OEMs from removing its middleware, or applications, and is 
free to retaliate against OEMs that do so. Microsoft can still 
deceive middleware developers and can still introduce application 
development tools that pollute open standards by producing only 
Windows--compatible programs. And Microsoft can still protect 
the applications barrier by utilizing the very same practices 
through its monopoly IE and Office products that tile PFJ 
purportedly outlaws for Windows.
    In short, the PFJ does not even foreclose the means of 
foreclosure that were proved at trial and affirmed by the Court of 
Appeals. Under any Tunney Act standard of review, it must be 
rejected.
    V. THE PROPOSED DECREE IS HOPELESSLY VAGUE AND INHERENTLY 
UNENFORCEABLE
    The proposed decree is riddled with ambiguities and loopholes 
and grants unilateral, essentially unreviewable, power to Microsoft 
to define the scope of its own ambiguous obligations. As such, the 
PFJ is an

[[Page 29001]]

illusory contract, and unenforceable as a matter of well-settled 
contract law. As the Court emphasized in Microsoft I, a proposed 
settlement cannot be entered, at least without substantive 
modification, if it is ambiguous or if there are 
"foresee[able] difficulties in implementation." 56 F.3d 
at 1462. The proposed decree here is the epitome of such a case.
    Twenty-four different sections of the PFJ provide that specific 
actions by Microsoft, or standards for assessing whether its 
practices are permissible, must be 
"reasonable." \57\ In a decree purportedly drafted 
to provide a "certain" remedy, this is anything but. As 
just two examples, in addition to the reasonable scope of 
"bona fide," exclusive joint ventures discussed in the 
preceding section, Microsoft is expressly permitted to adopt 
"reasonable technical requirements" on which to override 
an OEM's or end user's choice of non-Microsoft middleware (Section 
III.H) and to enter into concerted refusals to deal with 
ISVs--requiring them not to develop software for competing 
platforms--that are "of reasonable scope and 
duration" (Section III.F.2). Consent decrees are interpreted 
as contracts, and it is black letter contract law that illusory 
contracts, those that give one party the right to decide the scope 
of its own obligations, are not enforceable. See Rest. Contracts 2d 
 77.
---------------------------------------------------------------------------

    \57\ Substantive "reasonable" provisions are 
III.B.2, III.C.5, III.E, III.F2 (two), III.G, III.H.2, III.I, 
lll.J.2.b and III.J.2.C. Procedural "reasonable" 
provisions are IV.A.2, IV.A.2.b, IV.A.2.c, IV.A.4, IV.A.6, IV.A.7 
(two), IV.A.8.b (three), IV.A.8.h and IV.A.8.1 (three).
---------------------------------------------------------------------------

    The judge in the first instance for all of these reasonableness 
clauses is Microsoft itself. In short, it is difficult to conceive 
of a more loosely drafted decree than the PFJ, which allows the 
defendant, without any practical constraint except lengthy contempt 
proceedings, to establish unilaterally the extent of its own decree 
obligations. Due to the inherent ambiguity in 
"reasonableness" terms, these disputes will be complex, 
tedious and time-consuming exercises for the Court.
    The "Technical Committee" and so-called "Crown 
Jewel" provisions are equally inefficacious. The Technical 
Committee ("TC") established by Section IV.B of the 
proposed decree does not help enforcement matters appreciably. Most 
significantly, nothing that the Technical Committee does is binding 
and nothing that it investigates, analyzes or recommends is 
permitted to see the light of day. The TC reports only to the 
plaintiffs (Section IV.B.8.e) and "all information" 
gathered by the TC is subject to confidentiality and non-disclosure 
agreements and a protective order (Section IV.B.9). The members of 
the TC may "communicate" with third-parties, but only 
about "how their complaints or inquiries might be resolved 
with Microsoft" (Section W.B.8.g).
    Furthermore, "[n]o 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 the decree" (Section 
IV.D.4.d).
    Rather than a vehicle for prompt resolution of enforcement 
disputes, the TC provisions are a charter for delay and obfuscation. 
By denying the Court any access--whether or not in 
camera--to the work product of the TC, the proposed decree 
simply creates another hoop through which third-party complainants, 
and the government itself, must pass in order to enforce violations 
of the decree by the defendant. It also denies the Court the benefit 
of the unbiased, objective technical expertise of the TC, which is 
the principal criterion on which its members are to be selected. 
Coupled with the sheer number of "reasonableness" 
provisions in the decree itself, the TC process will therefore delay 
enforcement and make clean resolution of decree interpretation 
issues more costly and burdensome for all affected parties and non-
parties.
    Finally, Section V.B of the PFJ provides that if the Court finds 
Microsoft "has engaged in a pattern of willful and systematic 
violations," on application of the plaintiffs a "one-
time extension" of the decree may be granted, for up to two 
years. Although presented as a "Crown Jewel" provision, 
this section does little to ensure compliance. The function of a 
Crown Jewel clause is to provide such an onerous penalty that the 
defendant's compliance with its substantive obligations can be 
coerced, and deliberate evasion avoided, without ever having to 
invoke the penalty. Here, the "threat" Microsoft is 
being presented with is that of being forced for two more years to 
decide at its "sole discretion" what constitutes 
Windows, to constrain exclusive joint ventures to 
"reasonable" duration, to gain access to intellectual 
property developed by middleware competitors, and to dictate to 
those competitors the functionality and user interface of their 
products. This is plainly something Microsoft should welcome with 
open arms rather than fear.
    The vagueness of the terms, the ineffectiveness of the Technical 
Committee and the lack of a meaningful deterrent Crown Jewel 
provision will plague the courts for years to come. In the absence 
of any deterrent, Microsoft will no doubt interpret the 
"reasonableness" standards generously incorporated in 
the proposed settlement in its own favor. The enforcement agencies 
and numerous competitors will witness the ill effects of future 
Microsoft actions and challenge these practices. However, without 
the proper dispute resolution mechanisms in place, it will be up 1o 
the courts to resolve all these "reasonableness" issues 
arising out of the proposed settlement.
    VI. DIVESTITURE REMAINS THE PREFERABLE AND MOST EFFECTIVE REMEDY 
FOR MICROSOFT'S SECTION 2 VIOLATIONS
    ProComp and its members have consistently supported structural 
relief in this case. In our view, divestiture remains the most 
effective remedy for Microsoft's wide-ranging unlawful practices. 
Conduct remedies like the proposed decree are a second-best 
solution, because they rely on the defendants good will to comply. 
An injunctive decree in a Section 2 monopolization case "does 
no more than encourage the monopolist to look for some new way of 
exercising its dominance that is not covered by the current 
injunction." \58\ Comprehensive behavioral decrees 
inevitably require interpretation and application as the defendant 
introduces new products, moves into new markets, or changes its 
business strategies in its traditional markets.
---------------------------------------------------------------------------

    \58\ 3 P. AREEDA & H. HOVENKAMP ANTITRUST LAW 
704.3, at 213 (1999 Supp). See William K. Kovacic, Designing, 
Antitrust Remedies for Dominant Firm Misconduct, 31 Conn. L. Rev. 
1285, 1311 (1999) ("By blockading recourse to certain 
commercial tactics, a remedial decree will inspire the defendant to 
pursue other paths that circumvent the judicially imposed 
constraints."). As the Supreme Court cautioned in the landmark 
DuPont antitrust case, "the policing of an injunction would 
probably involve the courts and the Government in regulation of 
private affairs more deeply than the administration of a simple 
order of divestiture. United States v. E.I. du Pont de Nemours & 
Co., 366 U.S. 316, 334 (1961); accord, AT&T, 552 F.Supp. at 
167-68.
---------------------------------------------------------------------------

    That does not mean, however, that conduct remedies will 
necessarily be ineffective here, but rather that they must be 
targeted and broad enough to redress the core practices used to 
maintain Microsoft's monopoly and to eliminate the barriers to entry 
protecting that monopoly power. The proposed decree does not even 
purport to satisfy this goal, which we submit is compelled by the 
Ford/United Shoe standard required for assessing relief in this 
case.
    The relief proposed by the Litigating States achieves these 
objectives. We respectfully submit that the Court adopt a crown 
jewel divestiture provision to deter Microsoft from engaging in 
further unlawful conduct.
    VII. THE COURT SHOULD CONDUCT A RIGOROUS TUNNEY ACT EXAMINATION 
OF THE DECREE, THE COMPETITIVE IMPACT STATEMENT AND THE DEPARTMENT'S 
UNSUBSTANTIATED PROJECTIONS OF FUTURE COMPETITIVE EFFECT
    There are several circumstances in which it is established that 
district courts must engage in rigorous scrutiny of proposed 
antitrust settlements under the Tunney Act. This case epitomizes 
those circumstances. If ever there was a case in which a full, 
independent judicial assessment should be conducted, it is this one.
    A. The Complexity and Substantial National Importance of this 
Case, the Government's Fiat Reversal of Position and its Disregard 
of Clear Tunney Act Obligations All Dictate the Necessity of 
Critical Judicial Oversight in this Landmark Proceeding
    Even in the pretrial context with its more limited review, 
Tunney Act courts will rigorously scrutinize proposed settlements 
when an antitrust case is complex, subject to considerable 
controversy, and affects large segments of the public.\59\ 
Especially rigorous scrutiny is also undertaken when the proposed 
decree departs substantially from the relief sought in the 
government's complaint,\60\ or otherwise represents a sharp

[[Page 29002]]

reversal in the government's prior position.\61\ Each of these 
situations is present in this case
---------------------------------------------------------------------------

    \59\ Cascade Natural Gas Corp. v. El Paso Natural Gas Co., 
386 U.S. 129, 136, 141 (1967); AT&T, 552 F. Supp. at 152; 
Associated Milk Producers, 394 F. Supp. 35, 42 (W.D. Mo. 1975).
    \60\ 60 United States v. Automobile Mfrs. Ass'n, 307 F. 
Supp. 617, 621 (C.D. Cal. 1969), aff'd mere. sub nom. New York v. 
United States, 90 S. Ct. 1105 (1970).
    \61\ Cascade, 386 U.S. at 137; Automobile Mfrs. Ass'n, 307 
F. Supp. at 621.
---------------------------------------------------------------------------

    1. This Complex, Controversial, Nationally Important Antitrust 
Prosecution Demands Serious Judicial Oversight
    This is certainly a highly complex case that has preoccupied the 
political, technology and business communities for years. These are 
precisely the circumstances in which the Tunney Act's genesis 
reveals a major policy concern with the appearance of the government 
settling for too little "because of the powerful influence of 
antitrust defendants and the complexity and importance of antitrust 
litigation." SENATE REPORT, supra, at 147 (statement of Judge 
J. Skelly Wright).
    Microsoft plainly "wield[s] great influence and 
power" and has brought "significant pressure to bear on 
[the] Government" throughout the litigation. Id. Thus, the 
Court needs to consider whether this is a case, such as Cascade, 
where the Department "knuckled under" to an economically 
and politically powerful antitrust defendant. Cascade Natural Gas 
Corp. v. El Paso Natural Gas Co., 386 U.S. 129, 136, 142 (1967).\62\
---------------------------------------------------------------------------

    \62\ In Cascade, the Department refused to implement an 
antitrust divestiture decree affirmed on appeal by the Supreme 
Court. The Court eventually directed the Department to oversee 
"divestiture without delay" and instructed the district 
court to prepare "meticulous findings ... in light of the 
competitive requirements" of the remedy. 386 U.S. at 137.
---------------------------------------------------------------------------

    2. Heightened Scrutiny is Needed Because Neither the Department 
Nor Microsoft Complied With their Respective Tunney Act Obligations
    Courts have also refused to enter proposed antitrust consent 
decrees where the Government or the defendant did not comply with 
its procedural responsibilities under the Tunney Act. Even technical 
and formalistic failures have been deemed grounds to deny entry of a 
proposed judgment. United States 1,. Central Contracting Co., 527 F. 
Supp. 1101 (E.D. Va. 1981).
    The procedural irregularities in this case are far greater, and 
are of substantive importance to the Court's review. First, the 
Tunney Act requires the Department to provide an explanation of 
"alternatives" to the proposed decree considered in 
evaluating a settlement proposal. 15 U.S.C.  16(b)(6). 
Here, however, the Department simply offers a laundry list of other 
conduct remedies proposed by third-parties, dismissing all of them 
collectively with the terse statement that the PFJ "provide[s] 
the most effective and certain relief in the most timely 
manner." CIS, 66 Fed. Reg. at 59475. The Department's 
assertion is unexplained.
    The CIS recites only that the Department considered intervening 
changes "in the computer industry, as well as the decision of 
the Court of Appeals, which reversed certain of the District Court's 
liability findings." \63\ Nothing in the CIS offers any 
useful guidance to the Court, or the public, as to why the rejected 
conduct remedies are inappropriate; thus, the Department fails to 
come forward with the "detailed notice to the public" 
the Tunney Act was intended to require.\64\ This violates the 
Government's duty not just to "describe" the 
alternatives (which the CIS does), but also to provide an 
"explanation" of their adequacy (which the CIS does 
not). This is an improperly narrow view of the government's Tunney 
Act responsibilities is incompatible with the purpose of the Tunney 
Act to ensure that all relevant issues are subject to maximum 
"ventilation." \65\
---------------------------------------------------------------------------

    \63\ CIS, 66 Fed. Reg. at 59475.
    \64\ The CIS was intended, rather, to be "detailed 
notice to the public what the case is all about. Further than that, 
the public impact statement makes the lawyers for the Department of 
Justice go through the process of thinking and addressing themselves 
to the public interest consideration in the proposed decree. There 
is no better exercise for determining whether you are right or not 
than trying to put it down on paper to see how it writes." 
SENATE REPORT, supra, at 8 (remarks of Judge J. Skelly Wright).
    \65\ 65 See Central Contracting. 527 F. Supp. at 1103 
(quoting 119 Cong. Rec. 24597 (1973) (remarks by Senator Tunney)).
---------------------------------------------------------------------------

    The government's "predictive judgments" about market 
structure and competitive effect should be accorded a presumption of 
regularity, Microsoft I, 56 F.3d at 1460 (quoting United States v. 
Western Elec. Co., 993 F.2d 1572, 1577 (DC Cir.), cert. denied 510 
U.S. 984 (1993), but only when the circumstances are regular. Where, 
as here, the Department's exposition of the reasons for its 
settlement and its legal interpretation of the Court of 
Appeals" mandate are woefully lacking, such a presumption of 
regularity should not apply. In these circumstances, the Court 
cannot "carefully consider the explanations of the government 
in the competitive impact statement." CIS, 66 Fed. Reg. at 
59476 (citation omitted).
    Second, tile Turnkey Act mandates that the government make 
available all "materials and documents which the [it] 
considered determinative in formulating [a settlement] 
proposal." 15 U.S.C.  16(b). The CIS responds to 
this requirement with a blanket statement that [n]o materials and 
documents of the type described in the [Tunney Act] were considered 
in formulating the Proposed Final Judgment. Consequently, none are 
being filed with this Competitive Impact Statement.
    CIS, 66 Fed. Reg. at 59476. That cannot be accurate. Even in 
antitrust cases that are not the length and complexity of the 
Microsoft litigation, courts have found similar disclaimers 
"to be almost incredible." Central Contracting Co., 527 
F. Supp. at 1104. It defies credulity to suggest that there does not 
exist even one document, memorandum or analysis that the Department 
considered "determinative" in selecting the relief 
package presented to this Court.
    Third, the CIS misstates many provisions of the PFJ. We address 
these in detail in Section III above, and will not repeat that 
analysis here. Where, as here, the government presents a document 
that seeks to justify provisions that on close examination are 
illusory, it has in effect challenged the legitimacy of statute. 
Under even the strictest interpretations of Tunney Act deference, 
this Court cannot permit the Tunney Act process to "make a 
mockery of judicial power." Microsoft I, 56 F.3d at 1462.
    Fourth, the Tunney Act requires that the defendant file a list 
of "all" written or oral communications "by or on 
behalf of such defendant ... with any officer or employee of the 
United States concerning or relevant to such proposal, except [for] 
communications made by counsel of record alone with the Attorney 
General or the employees of the Department of Justice alone." 
15 U.S.C.  16(g). Remarkably, Microsoft's Section 16(g) 
filing indicates that only two such communications occurred, both in 
connection with negotiations together with Microsoft and the Court-
appointed mediator. This cannot be true It has been publicly 
confirmed by numerous public officials, and acknowledged by 
Microsoft, that a large number of Microsoft-retained lawyers and 
lobbyists have advocated its position on this case before countless 
officials in Congress and the Executive Branch. The Court should 
require Microsoft to fully comply with Section 16(g).\66\
---------------------------------------------------------------------------

    \66\ The company apparently takes the unsupportable 
position that lobbying communications on the subject of the 
Microsoft litigation occurring before the September 2001 
negotiations resumed are not "relevant" to the 
settlement. Microsoft also claims many communications were protected 
by the "counsel of record" exception. "Counsel of 
record" for purposes of these disclosures is intended to 
differentiate between lawyers actively appearing before the trial 
court and those undertaking related, but non-judicial 
"lobbying" functions. Central Contracting Co., 527 F. 
Supp. at 1105. The House Report discusses Congress's intent to 
distinguish "lawyering contacts," which warrant 
protection, from "lobbying contacts," which must be 
disclosed. It states that a lobbying contact is performed by 
"counsel of record accompanied by corporate officers; or by 
attorneys not counsel of record." HOUSE REPORT, supra, at 6 
(emphasis added). Congress requires their disclosure in order to 
guarantee "that the Government and its employees in fact avoid 
practicing political justice." Id. (quoting Civil Service 
Comm'n, 414 U.S. 906 (1973)).
---------------------------------------------------------------------------

    3. The Court Should Closely Examine the Government's Reversal of 
Position on Relief
    The government's about-face on its remedy proposals provides 
another reason why heightened judicial scrutiny is required. While 
the government now says that the PFJ will provide effective relief, 
this reflects a marked abandonment of its earlier position. Indeed, 
the Justice Department's position just 18 months ago was that only 
structural relief was adequate, and conduct decrees like the 
proposed PFJ were inherent failures. As emphasized in one of the 
cases cited by the Justice Department, less deference is warranted 
when ???"the government has requested broad relief at the 
outset, represented to the courts that nothing less would do, and 
then abruptly knuckled under." United States v. National 
Broad. Co., 449 F. Supp. 1127, 1144 (C.D. Cal. 1978).
    The point is not that the Department has decided not to seek 
divestiture, but instead that the conduct remedies it now proposes 
contradict its prior representations to this Court on their 
effectiveness. The earlier DOJ position was also consistent with its 
prior settlement decisions in this litigation itself. In the 
mediations supervised by Chief Judge

[[Page 29003]]

Richard Posner in March 2000, the Department and the State 
plaintiffs demanded settlement terms that would have gone far beyond 
the limited provisions of the PFJ in eradicating Microsoft's ability 
to act anticompetitively. Indeed, the plaintiffs" last 
settlement proposal in the mediations--dubbed "Mediator's 
Draft 18 (Attachment B)--would have included provisions 
requiring Microsoft to license the actual source code for Windows, 
to permit ISVs to modify Windows itself, and to allow OEMs to 
"display[] a middleware user interface" in lieu of the 
Windows desktop. None of these or similar provisions is included in 
the proposed decree. Thus, the PFJ is considerably weaker in several 
key respects than the very conduct relief which the Department 
demanded in settlement before Microsoft's Sherman Act liability had 
been established.\67\
---------------------------------------------------------------------------

    \67\ The barrier to introduction into evidence of 
settlement offers under Rule 408 of the Federal Rules of Evidence 
does not apply where the settlement is not used to show liability 
but instead, as here, to illuminate the policy considerations 
governing fashioning of a remedy. E.g., Carney v. American Univ., 
151 F.3d 1090, 1095 (DC Cir. 1998). Rule 408 precludes proof of 
settlements and settlement offers only "to prove liability for 
or invalidity of" a claim. Fed. R. Evid. 408. Indeed, evidence 
of settlements is expressly permitted by Rule 408 "when the 
evidence is offered for another purpose." Id.
---------------------------------------------------------------------------

    Given the importance of this case, and Court's obligation to 
look to the Supreme Court and the DC Circuit for guidance rather 
than the Justice Department, the Court must decide for itself 
whether the settlement would give the public effective relief 
against Microsoft's proven wrongdoing.
    B. Live Evidence is Needed on the Technical and Economic 
Complexities of the Software Industry and the Profound Failings of, 
and Harms Caused by, the PFJ
    The drafting of an antitrust decree necessarily "involves 
predictions and assumptions concerning future economic and business 
events." \68\ It is a "cardinal principle" 
of our system of justice that "factual disputes must be heard 
in open court and resolved through trial-like evidentiary 
proceedings." Microsoft III, 253 F.3d at 10l. This mandate for 
evidentiary hearings applies not just to liability determinations, 
but also to determinations concerning the "appropriate [form 
of] relief." Id.; see also, id. at 107 (vacating and remanding 
Judge Jackson's remedy decree in large part due to his 
"fail[ure] to hold an evidentiary hearing despite the presence 
of remedies-specific factual disputes," and holding that a 
remedies decree must be vacated whenever there is "a bona fide 
disagreement concerning the substantive items of relief which could 
be resolved only by trial" Id. (quoting Interim Order at 62).
---------------------------------------------------------------------------

    \68\ 68 Ford, 405 U.S. at 578.
---------------------------------------------------------------------------

    The Tunney Act contemplates an evidentiary hearing in these 
circumstances. As the Justice Department recognizes, this court must 
permit the use of the "additional procedures" authorized 
by 15 U.S.C.  16(t)"--which include live 
hearings with fact and expert testimony--if "the [public] 
comments have raised significant issues and ... further proceedings 
would aid the court in resolving those issues." CIS, 66 Fed. 
Reg. at 59476. It strains credulity to suggest, as the Justice 
Department does, that the remedial phase of the most complicated 
antitrust case in decades will not involve "significant 
issues" that would benefit from "further 
proceedings."
    Evidentiary hearings are critically important in complex 
antitrust cases because the assessment of antitrust remedies 
necessarily requires the Court to determine a number of facts 
relevant to both the degree of anticompetitive harm and the likely 
future condition of the market in which competition must be 
restored. United States v. United States Gypsum Co., 340 U.S. 76, 89 
(1950); see also United States v. Glaxo Group, Ltd., 410 U.S. 52, 64 
(1973). In particular, any proposed settlement decree must reach 
forward in lime to "assure the public freedom from" 
continuance of the monopolistic practices. Id. As such, this Court 
must make "'predictions and assumptions concerning 
future economic and business events."' Microsoft III, 
253 F.3d at 102 (quoting Ford, 405 U.S. at 578). Although courts 
retain wide discretion in fashioning such forward-looking relief, 
they must base that relief on a sound evidentiary record. 
International Salt, 332 U.S. at 401.
    In this case it is especially important to heed Congress's 
instruction to "resort to calling witnesses for the purpose of 
eliciting additional facts," HOUSE REPORT, supra, at 5, 
because the record has not yet been developed on remedies. See 
Associated Milk Producers, Inc., 394 F. Supp. 34 (W.D. Mo. 
1975).\69\ Indeed, the procedural posture that the Court now faces 
is more closely akin to a contested summary judgment motion or 
administrative consent decree, for which hearings are the standard 
method of resolution. E.g., Celotex Corp. v. Catrett, 477 U.S. 317 
(1986); Citizens for a Better Environment v. Gorsuch, 718 F.2d 1117 
(DC Cir. 1983); United States v. Trucking Employers, Inc., 561 F.2d 
313 (DC Cir. 1977).\70\
---------------------------------------------------------------------------

    \69\ To the contrary, the DC Circuit reversed and remanded 
precisely because the prior District Judge did not permit an 
evidentiary hearing on remedies. The court stressed that "a 
full exploration of the facts is usually necessary to properly draw 
an antitrust decree so as to prevent future violations and eradicate 
existing evils," and remanded for such an exploration of 
facts. Microsoft III, 253 F.3d at 101 (quoting United States v. Ward 
Baking Co., 376 U.S. 327, 330-31 (1964) (internal quotations 
and brackets omitted)).
    \70\ In summary judgment practice, complex legal issues 
are frequently presented to courts on the basis of affidavits and 
other "paper" evidence. But, unless the papers reveal no 
"genuine issue" of "material fact," standard 
that cannot be met here, summary judgment motions must be denied and 
a case set for trial so that the Court can adduce whether the 
parties have met their respective burdens of proof on the disputed 
factual issues. E.g., Celotex Corp., 477 U.S. at 323; Thompson 
Everett, Inc. v. National Cable Adver., 57 F.3d 1317, 1322 (4 th 
Cir. 1995) (applying Celotex to review of a motion for summary 
judgment of antirust conspiracy claim). Indeed, where the 
credibility of an affiant is at issue, as it undoubtedly will be 
here with respect to the reliability of expert opinions and 
projections of future economic and technological developments, it is 
difficult to conceive of any basis on which the Court would be 
permitted to resolve such controverted issues without availing 
itself of ordinary, trial-type evidentiary procedures.
---------------------------------------------------------------------------

    Only by permitting third parties, such as ProComp and its 
members, to participate fully in such a proceeding can the Court 
assure that there will be adequate evidentiary attention to facts 
and circumstances that contradict the Department's views on the 
market, competition and other issues relevant for remedy purposes. 
Otherwise, this Court would repeat the very error that led the DC 
Circuit to reverse the last judgment in this case.
    VIII. CONCLUSION
    For all the foregoing reasons, the Court must find that the 
Proposed Final Judgment is not in the public interest. At a minimum, 
tile Court should defer any, judgment on the PFJ until the upcoming 
remedies hearing in the ongoing litigation is conducted. This is 
necessary to avoid inconsistent remedies. Indeed, many of the 
remedies proposed by the Litigating States are irreconcilable with 
those proposed by the PFJ. When the Court does consider the PFJ, it 
is obliged in the discharge of its Article Ill duties to make an 
independent determination whether the PFJ adequately fulfills the 
mandate of the DC Circuit.
    Attachment A
    IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
    (UNITED STATES OF AMERICA,)
    (Plaintiff,)
    (v.) Civil Action No. 98-1232 (CKK)
    (MICROSOFT CORPORATION,)
    (Defendant.)
    (STATE OF NEW YORK, et al.,)
    (Plaintiffs,)
    (v.) Civil Action No. 98-1233 (CKK)
    (MICROSOFT CORPORATION,)
    (Defendant.)
    DECLARATION OF KENNETH J. ARROW
    Kenneth J. Arrow declares under penalty of perjury as follows:
    I. INTRODUCTION
    1. I am the Joan Kenney Professor of Economics Emeritus and 
Professor of Operations Research Emeritus at Stanford University. I 
received the degrees of B.S. in Social Science from The City College 
in 1940, M.A. in mathematics from Columbia University in 1941, and 
Ph.D. in economics from Columbia University in 1951. I have taught 
economics, statistics, and operations research at the University of 
Chicago, Harvard University, and Stanford University, and I have 
written more than 200 books and articles in economics and operations 
research. I am the recipient of numerous awards and degrees, 
including the Nobel Memorial Prize in Economic Science (1972). A 
significant part of my writing and research has been in the area of 
economic theory, including the economics of innovation and its 
relation to industrial organization. My curriculum vitae is 
attached.
    2. I have been asked by ProComp to comment on various economic 
issues related to the Revised Proposed Final Judgment 
("PFJ" or the "decree") proposed by the 
United States, various settling States and Microsoft Corporation 
("Microsoft").
    3. My review of the PFJ begins with the fact that Microsoft has 
been found liable for

[[Page 29004]]

violating Section 2 of the Sherman Act by engaging in a widespread 
series of practices that illegally maintained its monopoly in Intel-
compatible PC operating systems. These practices were focused on 
eliminating the threat posed to Microsoft's PC operating system 
monopoly by the combination of Netscape Navigator and cross-platform 
Java technology ("middleware competition").
    4. Given that Microsoft has been found liable for illegal 
monopoly maintenance, the remedies in this case should be designed 
to eliminate the benefits to Microsoft from its illegal conduct. To 
the extent possible, the remedies should be designed to restore the 
possibility of competition in the market where monopoly was 
illegally maintained (i.e., the market for PC operating systems). In 
addition, the remedies should strengthen the possibilities for 
competition and deter the exercise of monopoly power in the present 
and future, taking account of the special problems of an industry in 
which network effects are important.
    5. It is my opinion that the PFJ fails to accomplish these 
objectives. First, the PFJ is unduly focused on attempting to re-
create an opportunity for future middleware competition. Because of 
network effects and path dependencies, Microsoft's monopoly power in 
PC operating systems is more entrenched than it was in the mid-
1990s. It will be exceedingly difficult now, even with the best of 
remedies, to re-establish middleware fully as the kind of 
competitive threat to Microsoft's monopoly power that it posed in 
the mid-1990s. Additional remedial steps need to be taken to ensure 
that Microsoft does not benefit from its illegal conduct and the 
consequences of that conduct on dynamic competition in the OS 
market. Second, the PFJ does not address the fact that no effort to 
restore competition in the market for PC operating systems will be 
successful without measures designed to lower the applications 
barrier to entry that currently protects Microsoft's position in 
this market. Third, the enforcement mechanism described in the PFJ 
seems likely to be ineffective, even with respect to the inadequate 
remedies in the PFJ. Fourth, the PFJ pays insufficient attention to 
the ways in which Microsoft is currently attempting to protect its 
monopoly power by using its illegally maintained monopoly in PC 
operating systems against current and future competitive threats, 
such as server operating systems and Web services.
    6. ]his affidavit has six pans and is organized as follows. 
After this introduction (Part I), Part II reviews the threat that 
Netscape, Java and the Internet posed in the mid-1990s to 
Microsoft's monopoly power in PC operating systems. Part III then 
reviews the illegal conduct that Microsoft used in defeating this 
threat. Part III also analyzes the state of the computer industry 
today following this illegal conduct and explains why it seems 
unlikely, at this stage, that the middleware threat can be re-
created. With this as background, Parts IV and V review and assess 
the remedies proposed in the PFJ. Part IV critiques the remedies 
designed to restore middleware competition. In addition, Part IV 
discusses the lack of attention in the PFJ to the applications 
barrier to entry that protects Microsoft's monopoly power in PC 
operating systems. It also notes certain deficiencies in the 
enforcement mechanism proposed in the PFJ. Part V follows with a 
discussion of Microsoft's efforts to protect its existing monopoly 
power by using its illegally maintained monopoly in PC operating 
systems to gain advantages in other markets that threaten to reduce 
the scope of its current market power. Part V explains that the PFJ 
gives insufficient attention to this important subject--a 
subject that bears on the future of competition in the computing 
industry. The affidavit concludes in Part VI with a summary of 
conclusions.
    II. MICROSOFT'S MONOPOLY POWER AND THE THREAT POSED BY NETSCAPE, 
JAVA AND THE INTERNET
    A. NETWORK EXTERNALITIES
    7. Network externalities have been central to Microsoft's 
ability to maintain its monopoly power in the market for PC 
operating systems. Both the District Court and the U.S. Court of 
Appeals for the District of Columbia Circuit referred to the 
"applications barrier to entry," the process by which a 
large installed base induces the development of applications and 
other complementary goods designed for the dominant operating 
system, which further reinforces the position of the dominant 
operating system. 1 described this process in a declaration that I 
submitted in 1995 on behalf of the government in a prior settlement 
with Microsoft:
    A software product with a large installed base has several 
advantages relative to a new entrant. Consumers know that such a 
product is likely to be supported by the vendor with upgrades and 
service. Users of a product with a large installed base are more 
likely to find that their products are compatible with other 
products. They are more likely to be able successfully to exchange 
work products with their peers, because a large installed base makes 
it more likely that their peers will use the same product or 
compatible products. Installed base is particularly important to the 
economic success of an operating system software product. The value 
of the operating system is in its capability to run application 
software. The larger the installed base of a particular operating 
system, the more likely it is that independent software vendors will 
write programs that run on that operating system, and, in this 
circular fashion, the more valuable the operating system will be to 
consumers.
    8. The applications barrier to entry implies that it is likely 
that a single platform (or programming environment) will dominate 
broad segments of the computer software industry at any point in 
time. This does not necessarily imply that there will be monopoly; 
that depends on the extent to which the dominant platform is 
proprietary or closed. However, if the dominant platform is 
proprietary (which is certainly the case with Windows), then the 
interdependence of applications and operating systems creates a 
barrier against any new entrant. A new entrant would need to create 
both an operating system and the applications that make it useful.
    9. In addition, any customer of a new entrant would have to 
incur considerable costs in switching to a new system. In the fast 
place, the customer would have to learn new operating procedures. 
Second, there would be a problem of compatibility of files. These 
factors constitute a natural obstacle to change, so that a system 
with a large installed base will have a tendency to retain its 
users.
    10. The special nature of operating systems and software also 
gives Microsoft, because of its large installed base of operating 
system, a great advantage in the markets for complementary software. 
Specifically, it can distribute the software much more easily than 
its competitors. Since virtually every new PC ships with Windows, 
Microsoft can put its software into the hands of users by including 
it with the operating system. Any other vendor of complementary 
software that wanted to distribute through OEMs would have to cut a 
separate deal with each OEM, and would face the task of persuading 
OEMs to carry software products that may be directly competitive 
with products offered by Microsoft. As a result, complementary 
software from other vendors typically either has to be downloaded 
(which imposes added costs on users) or distributed separately to 
users in "shrink wrap." In addition, Microsoft has the 
ability to allow Microsoft developers of complementary software 
access to "hidden APIs"--application programming 
interfaces in the PC operating system that Microsoft developers know 
about but which are not disclosed fully to competing developers of 
complementary software.
    B. THE MIDDLEWARE THREAT: NETSCAPE AND JAVA
    11. A threat to Microsoft's monopoly in PC operating systems 
arose in the mid-1990s with the nearly simultaneous emergence of the 
Internet browser developed by Netscape and the Java programming 
environment. These are both examples of middleware--application 
software designed to run on multiple operating systems and which has 
its own set of APIs. Middleware that provides extensive 
functionality through a broad set of APIs has the potential to 
become an alternative platform for application development. If many 
applications valued by PC users were written to middleware APIs, and 
if the middleware were ported to other operating systems (existing 
or to be created), then the applications barrier to entry in the 
market for PC operating systems would be weakened.
    12. Netscape Navigator was a browser that also had the potential 
to become a platform for application programs. Netscape's browser 
had its own set of APIs to which developers could write application 
programs.
    13. The initial success of Netscape Navigator was dramatic. 
Netscape shipped its first browser in September 1994.\1\ In July 
1995, less than a year later, its share of the browser market was 
74%.\2\ By mid-1996, Netscape's Share had reached 85%.\3\
---------------------------------------------------------------------------

    \1\ "A Software Giant's March Onto the 
Internet," New York Times (Jan. 12, 1998) at C4.
    \2\ "Browser Usage: How It's Trending," 
Interactive Age (Jul. 31, 1995) (citing figures compiled by Interse 
Market Focus).
    \3\ "Microsoft v Netscape: Freer than Free," 
The Economist (Aug. 17, 1996, U.S. Edition).
---------------------------------------------------------------------------

    14. The threat that Netscape pored to Microsoft's monopoly power 
in PC operating

[[Page 29005]]

systems was made even greater by the nearly simultaneous development 
of Java. The Java technology has several pieces. It is a programming 
language that I understand has features well suited for writing 
"distributed applications"dash;applications that run on 
networks, calling upon resources located on different computers in 
the network. Java technology also includes the Java Virtual Machine 
("JVM") and Java Class Libraries. The JVM and Java Class 
Libraries am forms of middleware.
    They are software programs that have been implemented on Windows 
and many other operating systems. A JVM is software that converts 
Java code into instructions that can be processed by the operating 
system on which the JVM sits. The Java Class Libraries are software 
that performs specific functions that developers can call upon, and 
build into, their Java application programs.
    The JVM and Java Class Libraries are sometimes referred to 
collectively as the "Java runtime environment." The Java 
technology has been licensed in a way designed to encourage its 
implementation on a variety of different operating systems. The Java 
ideal was captured in the phrase, "write once, run 
anywhere."
    15. Java added to the threat posed by Netscape because it 
extended the set of middleware APIs to which developers could write 
application programs. It increased the chances that developers could 
write sophisticated PC application programs written to middleware 
APIs instead of Windows APIs. Netscape also complemented Java by 
serving as a distribution mechanism. The Java technology could not 
succeed without widespread distribution of the Java runtime 
environment. Because Netscape supported Java and included the Java 
runtime environment with every copy of its browser, growth in the 
share of PCs that used the Netscape browser also meant growth in the 
share of PCs with a Java runtime environment that supported Java's 
"write once, run anywhere" ideal.
    16. The economic relationship between middleware and the OS is 
unusual among the commodities that economic theory usually deals 
with. Middleware is a complement to any OS in the short run, but it 
facilitates substitution among operating systems in the long run. 
Middleware is a complement in the short run because it adds 
functionality to the existing OS, but it is in a sense a substitute 
in the long run, because applications can be written to it rather 
than to the OS. Middleware therefore permits substitution among 
operating systems, since the applications are not specific to any 
one OS. Therefore, an OS monopolist will have an incentive to 
control middleware in order to maintain its OS monopoly. The short-
run complementarity becomes an instrument by which this incentive 
can be realized. The middleware has to be ported to the OS, and the 
OS producer's control of the needed APIs can be used to restrict the 
spread and use of the middleware.
    17. Middleware is naturally thought of as a disruptive 
technology, and the emergence of middleware in 1995 created what is 
frequently referred to as an "inflection point." Put 
simply, this means that the then well-defined organization of the 
software market for personal computers might be altered 
substantially, or at least such a risk existed. As that organization 
was centered on the Microsoft Windows operating system and its 
productivity application suite Microsoft Office, Microsoft had the 
most at risk from any disrupting change that resulted from 
middleware.
    18. Technological disruptions such as the middleware threat of 
the mid-1990s do not occur frequently. They only arise when there is 
an important innovation that allows technology to evolve and create 
new products or functionality that has widespread appeal. At times 
of technological disruption, the forces of dynamic competition can 
play an especially important role. The Netscape browser and the 
cross-platform Java technology separately and in combination had the 
potential to develop into an alternative platform for application 
programs that could run on any operating system and which could 
transform PC operating systems into a commodity business. Bill 
Gates, in his memorandum of May 26, 1995 on the "Internet 
Tidal Wave," described just this sort of dynamic competitive 
threat when he realized that, if successful, Netscape could 
"commoditize" the operating system.
    19. There is no easy method by which an economist can determine 
exactly how significant a threat Java and Netscape actually 
represented to Microsoft's operating system monopoly. A precise 
determination of whether Netscape and Java could have succeeded in 
eroding Microsoft's monopoly power absent Microsoft's illegal 
conduct would require a counterfactual analysis that addressed a 
variety of complex interrelations. However, even without this kind 
of analysis, we have evidence that a reasonably expert onlooker felt 
the threat was serious, namely, the statements and behavior of 
Microsoft. Bill Gates, in his memorandum on the "Internet 
Tidal Wave," explained:
    A new competitor "born" on the Internet is Netscape. 
Their browser is dominant, with 70% usage share., allowing them to 
determine which network extensions will catch on. They are pursuing 
a multi-platform strategy where they move the key API into the 
client to commoditize the underlying operating system. ... One scary 
possibility being discussed by Internet fans is whether they should 
get together and create something far less expensive than a PC which 
is powerful enough for Web browsing.
    20. In the same memorandum, Gates made clear that he understood 
how Microsoft should leverage its Windows advantage to bolster its 
Internet position:
    We need to move all of our Internet value added from the Plus 
pack into Windows 95 as soon as we possibly can with a major goal to 
get OEMs shipping our browser preinstalled. This follows directly 
from the plan to integrate the MSN and Interact clients. Another 
place for integration is to eliminate today's Help and replace it 
with the format our browser accepts including exploiting our unique 
extensions so there is another reason to use our browser.
    21. To summarize, in an industry marked by network 
externalities, there is a strong tendency to monopoly (at least when 
the dominant platform is proprietary or closed). The consumer 
welfare and efficiency losses associated with monopoly are well 
known, but the one most relevant here is the decreased incentive to 
technological innovation. It is all the more important to encourage 
what may be called dynamic competition, the entry of new firms and 
new products. At certain periods, whether due to technological 
innovation or to a transient situation in which the tendency to 
monopoly has not yet worked to its completion, the market will be 
confronted with alternative lines of development; Netscape Navigator 
and Java as against Microsoft products in 1995, client-server 
networks and web services today. At these periods, there may be 
opportunities for a new platform to compete with and possibly take 
over from the existing one. In view of the strong tendency to 
monopoly in this industry (because of network externalities), it is 
all the more important to keep the competition as viable as possible 
when the opportunity presents itself. In particular, illegal 
anticompetitive steps by existing monopolists should be prevented to 
the maximum extent possible. Such a policy prevents the stagnation 
of existing monopolists and encourages the expansion of the number 
of alternatives among which the buyers can choose.
    III. MICROSOFT DEFEATED THE THREAT POSED BY NETSCAPE AND JAVA
    A. MICROSOFT'S ILLEGAL PRACTICES
    22. Microsoft made a concerted effort to eliminate the threat 
from middleware competition. Microsoft was found to have engaged in 
illegal conduct exactly at the moment that dynamic competition might 
have flourished. As the DC Circuit concluded, Microsoft took illegal 
steps to exclude the middleware threat, and in particular, took 
anticompetitive actions directed against Netscape Navigator and 
Java. In particular, the DC Circuit judged illegal significant 
elements of Microsoft's strategy:
    a) By barring original equipment manufacturers 
("OEMs") from removing access to Microsoft's Internet 
Explorer ("IE") browser from the Windows desktop, 
Microsoft prevented many OEMs from installing Navigator or other 
browsers, and that in turn protected Microsoft's OS monopoly by 
reducing potential middleware competition. This violated Sec. 2 of 
the Sherman Act.
    b) By preventing OEMs from altering the initial boot sequence 
for Windows, Microsoft prevented OEMs from promoting Internet access 
providers, many of whom were using and distributing Navigator to 
their customers. Again, this reduced competition with IE and 
protected Microsoft's OS market power in violation of Sec. 2.
    c) Through commingling software code for Windows with that of 
Internet Explorer, Microsoft deterred OEMs from installing 
Navigator. That, in turn, reduced Navigator's usage share, and 
thereby protected the applications barrier to entry by reducing 
developer's interest in the APIs exposed by Navigator. Microsoft 
also removed Internet Explorer from its Add/Remove utility, further 
entrenching Internet Explorer and further discouraging OEMs from 
distributing Navigator. The DC Circuit found these

[[Page 29006]]

actions to be anticompetitive and to support a finding of liability 
for exclusionary conduct and therefore monopolization under Section 
2.
    d) By entering into contracts with Internet access providers 
that foreclosed Navigator's access to an economically significant 
share of the Internet access provider ("IAP") market, 
Microsoft engaged in exclusionary conduct in protection of its OS 
monopoly, again in violation of See. 2
    e) By entering into contracts with independent software vendors 
that required those independent software vendors 
("ISVs") to use Internet Explorer if the ISV need web 
display, Microsoft further foreclosed distribution of Navigator, 
again in protection of its OS monopoly, in violation of Sec. 2.
    f) By entering into an exclusive distribution contract with 
Apple for Internet Explorer after Microsoft had threatened to cancel 
the Macintosh version of Office, Microsoft engaged in exclusionary 
conduct in protection of its OS monopoly in violation of Sec. 2.
    g) Through a number of exclusionary actions directed at Java, 
Microsoft limited Java's viability as a cross-platform threat and 
did so in violation of Sec. 2. Those actions included: limiting 
distribution of "write once, run anywhere" JVMs directly 
through exclusionary contracts with ISVs and indirectly through 
Microsoft's actions against Netscape; deceiving developers who 
wanted to develop pure Java code into writing code with Windows-
specific extensions that would make the code Windows dependent; and 
threatening Intel and inducing it to stop developing Intel 
multimedia software for Java.
    B. THE STATE OF THE MARKET TODAY
    23. As of 1995, Microsoft's share was of the installed base of 
PC operating systems was 870% \4\ while its share of the 
Internet browser market was less than 5%.\5\ Today, those figures 
stand at 92% for PC operating systems \6\ and 91% for 
browsers.\7\ Thus Microsoft's position in PC operating systems 
remains strong, while its share in Internet browsers has risen 
dramatically.
---------------------------------------------------------------------------

    \4\ Dataquest, "All Platform Operating Systems Sales 
History and Forecast Summary," Table 12 (Mar. 1997).
    \5\ "Microsoft v Netscape: Freer than Free," 
The Economist (Aug. 17, 1996, U.S. Edition).
    \6\ IDC, "Worldwide Client and Server Operating 
Environments, Market Forecast and Analysis, 2001-2005" 
(Aug. 2001).
    \7\ "AOL Files Suit Against Microsoft For Damages 
Inflicted on Netscape," Wall Street Journal (Jan. 23, 2002) 
(citing data compiled by WebSideStory, a market research firm).
---------------------------------------------------------------------------

    24. Microsoft's illegal practices were successful in helping to 
minimize the threat that middleware posed for the creation of a 
programming environment outside of Microsoft's control. I am aware 
of no middleware today that poses a risk to Microsoft comparable to 
that posed by Navigator and Java in 1995. Nor does the government's 
Competitive Impact Statement suggest that such a threat exists today 
or is likely to emerge over the five-year duration of the PFJ.
    C. MICROSOFT'S MIDDLEWARE ADVANTAGES
    25. Microsoft today has substantial advantages in middleware 
that make it unlikely the market itself will generate new entrants 
into middleware capable of re-creating the competitive risk faced by 
Microsoft in 1995. As noted earlier, through its control over 
Windows, Microsoft has had--and under the PFJ will continue to 
have--an enormous advantage in the distribution of software 
that is complementary to Windows. Since every new PC ships with 
Windows, Microsoft has a very easy way to get software into the 
hands of users: it can include it with the operating system. 
Microsoft can simply bundle the middleware with Windows or it can 
integrate the code into Windows itself.
    26. This ensures the ubiquity of Microsoft middleware and 
operates as a barrier to entry for competing middleware. Any entrant 
would have to make a substantial investment to achieve comparable 
widespread distribution. A firm considering entry should understand 
that its inability to guarantee a universally exposed set of APIs 
means that, all other things equal, developers would prefer to write 
to the APIs exposed by Microsoft middleware. The ubiquity of 
Microsoft middleware and its ability to integrate middleware into 
Windows--which the PFJ does not constrain--therefore 
operate as economic disincentives for the development of competing 
middleware by potential entrants.
    27. Microsoft also has complete freedom in how it prices its 
middleware. In bundling middleware with Windows, Microsoft need not 
charge an incremental price for the middleware. It can simply fold 
into the price of Windows whatever price it would charge for the 
middleware were it distributed separately. This would not be an 
option available for a potential entrant who will expect that it 
would need to establish a separate, discrete positive price for any 
middleware that it might create. The ability of Microsoft to set an 
apparent price of zero for its middleware operates as a barrier to 
entry in middleware.
    28. Even if competing middleware were created, the ubiquity of 
Microsoft middleware would operate as a direct barrier of the 
distribution of that middleware. As the DC Circuit affirmed, OEMs 
are reluctant to install two products that perform the same 
function, as this raises support costs. Twice as many products will 
be supported for the same function, plus consumers may be confused 
by the presence of both products.
    29. Moreover, Microsoft's ability to "embrace and 
extend" any middleware created by an entrant also operates as 
a barrier to entry. Again, it will take a substantial amount of time 
for an entrant to distribute innovative middleware. During that 
time, Microsoft will likely be able to imitate that middleware and 
distribute updated" versions of Microsoft middleware over the 
Internet to end users through its Windows Update feature. Given 
this, entry into middleware is less likely and this may reduce 
innovation in and development of middleware.
    30. In sum, Microsoft took substantial steps to eliminate the 
threat posed to it by Netscape and Java. The DC Circuit affirmed 
that a substantial number of those actions constituted impermissible 
monopoly maintenance and therefore monopolization in violation of 
Section 2 of the Sherman Act. Today, Microsoft's illegally 
maintained monopoly operates as a substantial barrier to new entry 
into middleware. The monopoly operates as a disincentive for entry 
and thereby likely reduces innovation in middleware. Given this 
market structure, it is highly unlikely that market forces alone 
will lead to the development of innovative middleware that creates 
the same competitive risk to Microsoft that it faced from Navigator 
and Java in 1995.
    IV. THE RESTRICTIONS ON MICROSOFT'S BEHAVIOR CONTAINED IN PFJ 
ARE INSUFFICIENT TO RESTORE THE COMPETITIVE THREAT THAT MIDDLEWARE 
POSED IN 199'5
    31. No remedy can turn back the clock to 1995 and re-create the 
competitive threat that existed at that crucial time of 
technological disruption. Technological disruptions of the magnitude 
that Bill Gates called "the Internet tidal wave" cannot 
be created by judicial proceedings. Even so, one of the objectives 
of the remedies should be to attempt to restore, to whatever extent 
possible, the possibility of competition in the market where the 
illegal monopoly was maintained (i.e., the market for PC operating 
systems). The restrictions on Microsoft's behavior in the PFJ fall 
well short of this objective.
    A. PROBLEMS WITH THE MIDDLEWARE REMEDIES
    32. Following its years of illegal conduct, Microsoft's position 
in the core middleware products (Internet browsers and Java 
technology) is totally different today than it was in 1995. 
Microsoft has a dominant share of the browser market, IE has caught 
up to and surpassed Navigator's technical capabilities, and the 
prospect of large numbers of desktop applications written in 
"write once, run anywhere" Java seems remote.
    33. There are two features of the industry that made the threat 
from Netscape and Java so significant. First, the technological 
disruption of the Internet made the functionality of the browser 
sufficiently important that it could become a platform for large 
numbers of applications. Second, the head start that Netscape and 
Java had over Microsoft middleware provided a substantial first-
mover advantage, a particularly important element for competitive 
success in network industries prone to "tipping." 
Probably the only chance a competitor has to overcome the inherent 
advantages that Microsoft has in distribution is to create a large 
installed base of users before Microsoft can develop and launch a 
competitive product.
    34. The market position that Microsoft has today makes it 
difficult for any set of conduct remedies to lead to significant 
middleware competition. Neither the PFJ nor any other set of conduct 
remedies can re-create the technological disruption or competitive 
head start that existed before Microsoft acted illegally. However, 
for the reasons explained below, the middleware remedies in the PFJ 
seem especially likely to be ineffective.
    1. The Reliance in the PFJ on OEMs to Distribute Competing 
Middleware

[[Page 29007]]

    35. The PFJ relies heavily on competition in the OEM 
distribution channel as the key mechanism for overcoming the 
competitive harm created by Microsoft's actions. The same was true 
in the government's prior settlement with Microsoft, as I noted in 
my 1995 declaration:
    Despite the importance of natural advantages [referring to the 
installed base discussion above] in the market for IBM-compatible 
PCs, the complaint and proposed remedies addressed competitive 
issues that are critical to the success of new competition in this 
market. The most effective and economic point of entry for sales of 
IBM-compatible PC operating systems is the OEM distribution channel. 
New operating system software products should have unimpeded access 
to this channel. The Government's complaint and proposed settlement 
provide needed relief to facilitate the entry of new competitors, 
such as IBM's OS/2.
    36. Seven years later, it is clear that little was accomplished 
in the prior consent decree in relying on the OEM channel to 
facilitate competition in PC operating systems. Unimpeded access to 
this channel may indeed be necessary for effective competition. 
However, it is far from sufficient to create effective competition 
for middleware given the current state of the industry.
    37. One obstacle to competition in middleware, which the PFJ 
does not address, is the applications barrier that now protects the 
position of Microsoft middleware. ISVs have a strong incentive to 
write applications to Microsoft middleware, since Microsoft 
middleware will be present on every Windows machine that is shipped. 
The PFJ does not restrict Microsoft's ability to commingle code and 
include middleware APIs in with its Windows operating system. The 
PFJ permits OEMs to remove Microsoft middleware icons, but the 
middleware itself, and its associated API set, will remain. Thus, 
the ubiquity of Microsoft's middleware will encourage ISVs to write 
applications to these APIs.
    38. The PFJ restricts Microsoft's ability to discriminate 
against OEMs that also ship competing middleware, but this does not 
create an incentive for OEMs to ship competing middleware. For the 
reasons explained by the District Court and the Court of Appeals, 
OEMs are reluctant to include software that provides similar 
functionality to other software on the machine--it increases 
confusion among users and raises support costs.
    39. If ISVs do not write applications to the competing 
middleware, OEMs will not distribute it. If OEMs do not distribute 
it, ISVs will not write applications to it. The current dominance of 
Microsoft middleware thus makes it very unlikely that this circle 
can be broken by the non-discrimination restrictions in the PFJ.
    40. The PFJ also seeks to increase the role of OEMs in defining 
the Windows desktop. This is also insufficient to create significant 
middleware competition. Even if OEMs had complete control over the 
icons that would appear on the Windows desktop--and they would 
not under the PFJ--this would not alter in any way the software 
that would actually be present on the computer. Removing an icon 
from the desktop just removes the most obvious point of consumer 
access to the software, but the ability of ISVs to write to the APIs 
presented by the software remains unchanged.
    41. The PFJ also attempts to prohibit Microsoft from 
discriminating against OEMs that distribute competing middleware. It 
does this by requiring Microsoft to provide uniform licensing terms 
to the 20 largest OEMs and preventing specific retaliation against 
OEMs that distribute competing middleware. It is not clear to me 
that these restrictions are sufficient to prevent Microsoft from 
exercising influence over the behavior of OEMs towards products that 
compete with Microsoft. First, I understand that the non-
discrimination provisions apply only to certain Windows desktop 
operating systems (Windows XP and Windows 2000 Professional) and not 
to other Microsoft products that an OEM might purchase. Second, the 
relationships between Microsoft and OEMs are complex and multi-
faceted. For example, Microsoft provides marketing and promotion 
support to OEMs; its provides technical assistance; its provides 
allowances for product development. Microsoft may provide these 
services differently to OEMs. Since the PFJ does not prohibit all 
forms of discrimination across OEMs, Microsoft may have sufficient 
ability to influence OEM decision-making.
    42. The PFJ also contains limited disclosure requirements. The 
exact scope of these disclosures depends on careful interpretation 
of the complex language of the PFJ. I do not attempt such an 
interpretation but comment only on the limited impact of the 
disclosure remedies under any reasonable interpretation. There is a 
requirement to disclose interfaces that permit competing middleware 
to interoperate with Windows operating systems. I understand, 
however, that Microsoft is only required to make these disclosures 
if the interface is already in use by a Microsoft middleware 
product. A disclosure requirement limited in this manner pushes 
potential middleware competitors in the direction of "me 
too" products and does little to create incentives for 
significant innovation in middleware.
    2. IE Open Source and Java Must-Carry
    43. There are alternative middleware remedies that could have a 
more significant effect. More aggressive remedies with respect to 
that middleware threat would be open source Internet Explorer and a 
requirement for Microsoft to distribute the most current version of 
the standard Java runtime environment with IE and Windows. Even 
these remedies are likely to be insufficient to turn back the clock 
to the level of competition that existed before Microsoft's illegal 
conduct. But they are likely to have more impact than the remedies 
in the PFJ.
    44. Open source IE is the most effective way to fully expose the 
links between IE and Windows as well as the IE APIs. This creates 
the possibility of interoperability between competing products and 
it furthers the possibility of operating system competition. It also 
allows anyone who wants to develop a competitive browser to be fully 
compatible with applications that are written to IE APIs. This way 
it limits the extension of the applications barrier to entry created 
by Microsoft's dominance in the browser.
    45. The Java must-carry remedy works to erode the application 
barrier to entry by helping to overcome reluctance of ISVs to 
develop programs that require Java on the client. It is only by 
assuring sufficient ubiquity of Java and browser functionality that 
there is any chance that Microsoft may lose control of the 
applications barrier through competing middleware.
    B. INATTENTION TO THE APPLICATIONS BARRIER TO ENTRY
    46. The applications barrier to entry identified by the DC 
Circuit consists in part of the large number of applications 
available on the Windows platform. As discussed above, successful 
entry in middleware of the type commenced by Netscape Navigator and 
Java could have substantially eroded the applications barrier to 
entry and facilitated entry into the operating systems market.
    47. Microsoft controls the most economically important set of 
applications in its Microsoft Office suite. Office accounts for 
nearly 30% of Microsoft's annual revenue.\8\ Software suites 
consisting of personal productivity applications such as word 
processing, spreadsheets, presentation software, electronic mail, 
and calendar and contact management constitute a distinct and 
relevant product market. Microsoft's share of that market today is 
in the mid-90s\9\ and Microsoft almost certainly holds substantial 
market power.
---------------------------------------------------------------------------

    \8\ Dresdner Kleinwort Wasserstein, "Microsoft 
Corporation," Figure 4 (1 Aug. 2001).
    \9\ In 1999, Microsoft accounted for 96.1% of the revenues 
of office suites designed for Windows. Since 98.1% of all sales of 
office suites in 1999 were for the Windows platform, these figures 
by themselves imply an industry share of 94%. But Microsoft also 
accounted for a large share of the revenues of office suites 
designed for Apple's Macintosh OS--a platform that accounted 
for nearly all of the non-Windows sales of office suites. IDC Office 
Suite Market Review and Forecast, 1998-2003 (Aug. 1999).
---------------------------------------------------------------------------

    48. As found by the DC Circuit, Microsoft has used its control 
over Office to maintain its OS monopoly. Microsoft threatened to 
cancel the Macintosh version of Office if Apple did not distribute 
Internet Explorer, Microsoft's Interact browser. It is clear that 
Microsoft's ability to make such threats would be diminished if 
Microsoft had an obligation to license the rights to port Office to 
competing OS platforms.
    49. Since remedies focused entirely on middleware will not re-
create the threat to Microsoft's monopoly power in PC operating 
systems that existed prior to Microsoft's illegal conduct, 
additional actions need to be taken to ensure that Microsoft does 
not benefit from its illegal conduct. These additional actions 
should be targeted at further reducing the underlying source of 
Microsoft's market power, namely the applications barrier to entry. 
Porting Office to other platforms would be a remedy of this type 
that could have a significant impact on the applications barrier. 
One factor that limits the demand for Unix workstations, which have 
computational advantages over Intel-based PCs, is the inability to

[[Page 29008]]

interoperate with Office. The thin-client model of computing, where 
most computing occurs on the server, not the client, represents one 
of the most important threats to Windows desktop computing. The 
switching costs of adopting new personal productivity software with 
files not compatible with Office represents a significant barrier to 
Unix-based thin client networks. A requirement to license the rights 
to port Office may be one of the most effective ways to create 
competition for Windows, something which can probably no longer be 
achieved by remedies exclusively related to middleware.
    C. PROBLEMS WITH THE ENFORCEMENT MECHANISM
    50. The remedies in the PFJ are too limited in scope to re-
create past competitive conditions even if they are enforced 
perfectly. However, the enforcement mechanisms in the PFJ are far 
from perfect and will likely lead to delays and costs that further 
limit the effectiveness of the remedies. The PFJ relies on a 
technology committee to oversee Microsoft's compliance with the PFJ. 
The membership in the committee is controlled 50% by the company 
whose past illegal activities have been the subject of the Circuit 
Court's decision. The committee lacks both resources and the power 
to enforce the PFJ. The committee must rely on information provided 
to it by Microsoft and has little ability to engage in its own 
investigations. Furthermore, if it uncovers a violation, it must 
rely on lengthy litigation to enforce it.
    51. The implication is that failures by Microsoft to comply may 
go undetected and if they are detected, it may take a great deal of 
time and effort to impose a change on Microsoft's behavior. Delays 
can greatly limit the effectiveness of any particular remedy in a 
dynamic industry subject to network effects. If enforcement will be 
ineffective, it may create an incentive for Microsoft to violate the 
terms of the decree.
    52. Other consent decrees have used special masters with 
sufficient resources and expedited judicial review to enforce their 
terms. Given the complex, dynamic nature of the software industry, 
it is especially important that the resources are in place to 
monitor the terms of the decree and that swift enforcement is 
possible.
    V. APPROPRIATE REMEDIES SHOULD NOT ALLOW MICROSOFT TO PROTECT 
ITS ILLEGALLY MAINTAINED MONOPOLY AGAINST CURRENT AND FUTURE 
COMPETITION FROM OTHER MARKETS
    53. The PFJ focuses on the PC desktop as the central space in 
which competition will take place going forward. It does this by 
creating limited new operating rights for OEMs coveting the 
appearance of the desktop and greater protections for installing 
middleware that competes with Microsoft. As I have discussed above, 
given the substantial advantages in middleware that Microsoft has 
through its illegally maintained monopoly, I think that it is 
unlikely that these desk-top-oriented remedies will spur 
economically meaningful entry in middleware and that there is 
therefore little reason to think that those remedies will re-create 
the competitive risk Microsoft's desktop monopoly faced from 
middleware entrants in 1995.
    54. The PFJ therefore needs to be augmented with remedies that 
take a forward-looking approach. The PFJ needs to focus on the 
current and future threats to Microsoft's market power and ensure 
that Microsoft is not allowed to use its illegally maintained 
monopoly in PC operating systems to dilute these current and future 
competitive threats. A PFJ focused on desktop remedies not only will 
not jump start competition now, but by allowing Microsoft to keep 
the benefits of its illegal activities, such remedies will fail to 
deter future illegal anticompetitive actions by Microsoft. Instead, 
additional remedies should naturally be directed at ensuring 
competition going forward uninfected by Microsoft's illegally 
maintained monopoly. In particular, these remedies should seek to 
re-create the same risks faced by Microsoft in 1995 when the 
middleware threat arose. "
    A. FUTURE COMPETITION IN SERVERS AND WEB SERVICES
    55. A forward-looking remedy should seek to limit Microsoft's 
ability to use its illegally maintained monopoly power to bias 
competition in complementary products that have the potential to 
develop into substitutes for desktop computers. Server operating 
systems and Web services are two prime examples. These products 
intersect at the middle of two related trends. To date, the Internet 
has been a PC Interact. Most Interact users access the Internet 
through a PC or workstation. The first trend is a probable shift to 
the use of many devices to access the Interact, including cell 
phones, handhelds such as the Palm Pilot and other personal digital 
assistants, and thin clients. As these devices themselves are not as 
powerful as a typical PC, they will demand more work from the 
servers and sewer operating systems delivering the information. The 
implication is that, in the future, a significant amount of 
computing will bypass the desktop--which in turn implies that 
Microsoft has an incentive (if it can) to extend its monopoly from 
the desktop into servers.
    56. The second trend is a related shift in how software is owned 
and managed. Prior to the Internet, PC software and content was 
largely locally owned and locally managed. The software was 
installed directly on the user's PC, from a floppy disk and then 
later a CO. The rise of the Interact makes it possible to move the 
location of software off of the PC and onto a remote device--a 
server--with much of the work done remotely. This gives rise to 
the generalized notion of a web service, where software is no longer 
a thing like a CD but instead a service delivered to a connecting 
device, much the way electricity is delivered to many devices.
    57. On November 29, 2001, Steve Ballmer, Microsoft's CEO, 
discussed these trends and how Microsoft was approaching them 
through its .NET initiative: \10\
---------------------------------------------------------------------------

    \10\ S. Ballmer speech, Credit Suisse First Boston 
Technology Conference (Nov. 29, 2001) (http://www.microsoft.com/
msft/speech/BallmerCSFB112901.htm).
---------------------------------------------------------------------------

    About three years ago we changed the vision of our company. 
Instead of talking about a computer on every desk and in every home 
we started talking about empowering people through software anytime, 
any place, any device. ... It starts with a view, which came to us 
quite clearly about five, almost six years ago now that XML 
[eXtensible Markup Language] would really be the transforming 
industry phenomenon of the next five years. If it was the PC 20 
years ago and graphical user interface 10 or 15 years ago and the 
Internet five or six years ago, it's XML. And I'm not going to give 
a long description, but I think the way you should think about it is 
XML will be the Lingua Franca of computing. It will be the basis on 
which systems work better with systems, people with people, 
businesses with businesses, businesses with consumers. It will 
improve the level of integration and connectivity. It gives us a 
framework at least for the software community to build the software 
that allows that. ... .NET is our platform to let people take 
advantage of the XML revolution.
    58. Ballmer also discussed the Microsoft business model and how 
.NET fits within it. He sees Microsoft as targeted on seven business 
areas, including, unsurprisingly, PC operating systems, PC 
productivity solutions "anchored" by Office, and server 
software for building and deploying these applications. All of these 
are now being organized around .NET:
    I think you could say we are a company that invests in seven 
businesses around one platform. That platform is .NET. .NET is our 
platform for the next technology revolution that is going on. And 
that is the shift to the XML web service model as the fundamental 
way of building and deploying software. .NET is our platform to do 
that. ... That's how we think about the seven business areas in 
which we are investing. They're all being re-platformed or re-
plumbed around .NET and XML web services.
    59. A computing world in which Web services, hosted on servers, 
are delivered on demand over the Internet is a world that has 
negative implications for Microsoft's near-monopoly in desktop 
operating systems. In such a world, there is no longer the same need 
for desktop computers to have "fat" operating systems 
such as Windows. In many respects, the Web services model is simply 
a more developed version of the thin-client, "network 
computer" model advocated by Oracle and Sun in the mid/late-
1990s. As such, the Web services model is a threat to Microsoft's 
desktop monopoly and Microsoft therefore has an incentive (if it 
can) to use its existing monopoly to gain control over this possible 
threat. It has an incentive to ensure that Windows remains at the 
center of the Web services model and/or to migrate its monopoly from 
the desktop to Web services.
    B. MICROSOFT IS ATTEMPTING TO PROTECT ITS EXISTING MARKET POWER 
BY USING ITS ILLEGALLY MAINTAINED MONOPOLY IN PC OPERATING SYSTEMS 
TO GAIN ADVANTAGES IN SERVERS AND WEB SERVICES
    60. Microsoft's illegally maintained monopoly in the market for 
PC operating systems provides it with important advantages in server 
operating systems, in particular operating systems for workgroup 
servers. Workgroup servers are the servers in a "client-
server" network that interoperate directly with desktop 
clients. Workgroup

[[Page 29009]]

servers provide services such as authentication and authorization, 
directory, and file and print. Very importantly, they are also the 
point of contact or gateway between an organization's network of 
servers and the Interact. Workgroup servers are distinct from 
enterprise servers, which are more powerful, reliable and expensive 
servers that handle databases and other "mission 
critical" applications.
    61. Some of Microsoft's advantages in workgroup server operating 
systems arise because of the distribution advantage provided by its 
monopoly in PC operating systems. Suppose a vendor of workgroup 
operating systems develops a new feature (such as a new directory 
service for keeping track of the users and resources on a network or 
a new security system for authentication and authorization). In the 
usual case, the network cannot make use of the new service in a 
server operating system unless certain new code (supplied by the 
vendor of the server operating system) is also installed on the 
clients in the network. In large networks, this can be a costly and 
time-consuming exercise--unless the network is running Windows 
on its servers. A network that runs Windows on its servers does not 
face this kind of problem because Microsoft ensures that the client-
side pieces of server-side technologies are built into its Windows 
desktop operating system. This gives Microsoft a competitive 
advantage over other vendors of workgroup server operating systems. 
But it is an advantage that derives from Microsoft's illegally 
maintained monopoly in PC operating systems. Moreover, there may be 
significant long-run costs through the adverse effect that 
Microsoft's distribution advantages (derived from its illegally 
maintained monopoly in desktop operating systems) may have on 
incentives to invest in server-side innovation.
    62. There are other ways in which Microsoft's past illegal 
conduct has provided it with advantages today in the market for 
workgroup server operating systems--advantages that help 
protect and enhance Microsoft's existing market power. For example, 
one of the benefits to Microsoft from the defeat of Netscape's 
browser was the resulting reduction in demand for Netscape 
application programs for servers. These server-side applications 
were designed to interoperate with the Netscape browser and certain 
client-side applications, such as e-mail, written to the Netscape 
Navigator APIs. Unlike Microsoft's server-side applications (such as 
Exchange) that run only on Windows, Netscape's server-side 
applications were implemented on multiple platforms, including Unix 
and Novell's NetWare. As Netscape's share of the browser market 
declined following Microsoft's illegal conduct, the demand for 
Netscape's server applications also declined. Thus a consequence of 
Microsoft's illegal conduct has been an increase in the demand for 
Microsoft server-side applications such as Exchange that, as 
mentioned above, run only on Windows server operating systems. Put 
differently, Microsoft's past illegal conduct towards Netscape is 
helping Microsoft establish an applications barrier that will 
protect and enhance its future position in the market for workgroup 
server operating systems.
    63. Another way in which Microsoft's past illegal conduct 
affects the market for workgroup operating systems today involves 
distributed application programs. As I mentioned before, Java is a 
programming language with features that I understand make it well 
suited for distributed applications, i.e., applications that call 
upon resources located on multiple different computers located 
around a network. As I understand it, for distributed applications 
to work, they need to conform to a particular set of protocols, and 
these protocols need to be supported by the operating systems of the 
computers involved in executing the distributed application. Java 
had protocols for distributed applications (RMI and CORBA) that were 
supported by multiple operating systems. Microsoft had an 
alternative, proprietary set of protocols called DCOM. By 
interfering with the development of cross-platform Java, Microsoft 
gave an advantage to its framework for distributed applications 
(DCOM) and promoted the development of distributed applications 
written to protocols that run only on Windows operating systems. In 
addition, since the programs that are written to these Microsoft 
protocols are targeted for computers using the Windows operating 
system, such programs also make use of Windows APIs. This means that 
even if rival operating systems were given the ability to support 
DCOM, they could not run most of the distributed applications 
written to this protocol because these applications also make use of 
Windows APIs. Thus this is another example of how Microsoft's past 
illegal conduct, this times towards Java, is helping Microsoft 
establish an applications barrier that will protect and enhance its 
future position in the market for server operating systems.
    64. Microsoft's past illegal conduct has also given it 
advantages today in Web services. For example, one of the Web 
services that Microsoft has promoted heavily is Passport, its 
Internet authentication and authorization service. In a network 
environment, key issues are verifying the identity of users or 
computers ("who are you?") and determining the resources 
to which you are entitled to have access ("what are you 
authorized to do?"). Passport is an authentication and 
authorization service targeted, at least initially, at e-commerce. 
Consumers who subscribe to Microsoft's Passport service will have 
their name and credit card information on file on servers controlled 
by Microsoft. E-commerce vendors who participate in Passport will 
have back office connections with the Microsoft servers so that, 
when a consumer who subscribes to Passport wants to purchase 
something, the e-commerce vendor can check with Microsoft's Passport 
servers to authenticate and authorize the purchase (and debit the 
consumer's credit card). The theory is that Passport will simplify 
e-commerce transactions.
    65. For Passport to be successful, Microsoft needs to have a 
large base of consumers who subscribe to the service. A large base 
of consumers will make firms engaged in e-commerce interested in 
joining Passport on the vendor side, which in turn will make 
Passport more attractive to consumers. Thus there are potential 
network effects which, if they get started, may result in Passport 
being in the middle of a very large volume of Internet transactions.
    66. Microsoft is actively using its illegally maintained 
monopoly in PC operating systems as a vehicle for enrolling 
consumers in Passport. Every time a consumer boots up a new copy of 
Windows, the consumer is asked multiple times whether he or she 
would like to sign up with Passport. In addition, the consumer is 
told that he or she will not receive information about product 
upgrades unless the consumer signs up for Passport. Thus this is an 
example in which Microsoft is using the distribution advantages that 
it has by virtue of its illegally maintained monopoly in PC 
operating systems to gain advantages in Web services. In so doing, 
Microsoft helps protect its existing monopoly power and/or helps 
migrate its market power from the desktop to Web services.
    C. THE PFJ GIVES INSUFFICIENT ATTENTION TO:FUTURE COMPETITION
    67. The implications of these trends are significant. 
Microsoft's monopoly in desktop operating systems provides it with 
advantages in adjacent markets that Microsoft is able to use to 
protect and enhance its illegally maintained monopoly power. By 
migrating its monopoly from desktop operating systems into server 
operating systems and Web services, Microsoft can help ensure that 
its future market power is comparable to (or greater than) the 
market power it possessed when the desktop was the principal hub of 
computing activity.
    68. Given these links between Microsoft's past illegal conduct 
and Microsoft's future market power, an appropriate remedy should be 
focused on limiting Microsoft's ability to use its illegally 
maintained monopoly to gain advantages in products in other markets 
that have the potential to become substitutes for the Windows 
desktop operating system. Disclosure remedies have the potential to 
be an important step in this direction. For example, if Microsoft 
were required to fully disclose the interfaces and protocols used by 
its server and client operating systems, then vendors of non-
Microsoft server operating systems could design their products so 
that they could interoperate smoothly in networks populated by 
Windows clients and servers. The resulting competition among vendors 
of server operating systems would help ensure that servers remain a 
threat to Microsoft's illegally maintained monopoly in desktop 
operating systems.
    69. The PFJ does, not ignore completely issues related to 
adjacent markets. The PFJ does require disclosure for communication 
protocols that allow for servers to interoperate with Windows 
operating systems. This requirement, in contrast with the other 
provisions of the PFJ, appears to focus more on the server operating 
system market than competition in middleware. I understand, however, 
that the disclosure requirements proposed in the PFJ are exceedingly 
narrow and ultimately inadequate to allow full and equal 
interoperability for competitive server operating systems or Web 
services architectures.

[[Page 29010]]

    70. In designing disclosure remedies (or any other remedy), it 
is important to remember that one is try to cure the consequences of 
past illegal conduct. As a result, there is no reason to be troubled 
by remedies that impose obligations that one would be reluctant to 
impose on other firms. Against this background, it seems reasonable 
to consider a remedy that requires disclosure sufficient to allow 
competitive products to interoperate with Microsoft software on an 
equal basis as Microsoft's own products. It is not clear that even 
this would be enough to offset the advantages that Microsoft has 
gained for itself in adjacent markets through past illegal conduct 
and which serve to protect and enhance its existing market power. 
But it scans like a reasonable step.
    VI. SUMMARY OF CONCLUSIONS
    71. As the DC Circuit found, Microsoft violated Sec. 2 of the 
Sherman Act in impermissibly maintaining its monopoly through 
actions designed to eliminate the threat to that monopoly posed in 
the mid 1990s by competition from Netscape Navigator and Java 
middleware. Given that finding, the remedies in this case should 
eliminate the benefits to Microsoft of its illegal conduct; should 
restore, if possible, the possibility of competition in operating 
systems; and should not allow Microsoft to protect its illegally 
maintained monopoly from current and future competition in related 
markets, such as server operating systems and Web services. In my 
opinion, the PFJ fails to accomplish these objectives.
    72. The PFJ focuses on the desktop and on re-creating the 
possibility for middleware competition by giving OEMs freedom with 
regard to icon display and more limited freedom in installing and 
using non-Microsoft middleware. In doing so, it ignores the reality 
that Microsoft's market position in browsers and other middleware is 
substantially stronger today than it was in 1995. I know of no 
competing middleware today--and none is suggested in the 
Competitive Impact Statement--that begins to enjoy the time-to-
market and market presence advantages held by Netscape Navigator and 
Java in the mid-1990s. The PFJ does nothing to address the powerful 
distributional advantage that Microsoft alone has and which ensures 
that its middleware will be ubiquitous. That ubiquity operates as an 
unchecked barrier to entry and reduces the incentive for others to 
create innovative, competitive middleware. I therefore see no reason 
to think that the PFJ will succeed in spurring a new middleware 
threat to the Microsoft operating system or in denying Microsoft the 
fruits of its illegally maintained monopoly.
    73. The PFJ ignores remedies that could have a more significant 
effect in middleware markets, in particular, remedies that require 
Internet Explorer to be open source and that require Microsoft to 
distribute the most current version of the Java runtime environment 
with IE and Windows. Although these remedies are unlikely to fully 
restore the competitive threat posed by middleware before 
Microsoft's illegal activities took place, these remedies would 
likely have a greater impact than those set forth in the PFJ.
    74. More fundamentally, the PFJ does nothing to address the 
applications barrier to entry that defines Microsoft's monopoly in 
PC operating systems. Microsoft also controls the most economically 
important set of applications for Windows through its control over 
Microsoft Office. As the DC Circuit found, Microsoft used that 
control to protect its operating system monopoly through threats 
against Apple. It is clear that Microsoft's ability to make such 
threats would be diminished if Microsoft has an obligation to 
license the rights to port Office to competing operating systems. 
Indeed, porting Office to other operating systems is a remedy that 
could have a significant impact on the applications barrier to 
entry.
    75. In addition, the PFJ should focus on the current and future 
threats to Microsoft's market power and ensure that Microsoft cannot 
use its illegally maintained monopoly to stifle such threats. This 
ease makes clear that those threats are likely to come from products 
that are complements to Windows in the short run and potential 
competitors in the long run. That was precisely the position of 
Netscape Navigator and Java in 1995; today, based on Microsoft's?? 
public statements, that may be the position of server operating 
systems and Web services. Both of these represent a move away from a 
computing structure organized around desktop computers using 
"fat" operating systems such as Windows. Server 
operating systems and Web services represent an evolution of the 
thin-client model of computing, and as such, represent a threat to 
Microsoft's desktop monopoly. Microsoft is currently attempting to 
defeat this threat by using its illegally maintained monopoly in PC 
operating systems as a vehicle for expanding its market share in 
servers and attaching consumers to its Web services infrastructure. 
The PFJ is missing forward-looking remedies that address such 
efforts by Microsoft to protect and enhance its existing market 
power by using its illegally maintained monopoly in PC operating 
systems to defeat competitive threats in adjacent markets. This is a 
significant hole in the PFJ that bears on the future of competition 
in the computing industry.
    I hereby affirm under penalty of perjury that the foregoing is 
true and correct to the best of my knowledge, information and 
belief. Executed this 25th day of January, 2002 in Palo Alto, 
California.
    Kenneth J. Arrow
    Attachment B
    PRIVILEGED AND CONFIDENTIAL
    In re: United States v. Microsoft Corp., Civ. Action No. 
98-1232; New York v. Microsoft Corp., Civ. Action No. 
98-1233
    Mediator's Draft No. 18 of Settlement Stipulation and Proposed 
Consent Decree Stipulation
    The parties, by their respective attorneys, agree as follows:
    1. The court has jurisdiction over the subject matter of this 
action and over all the parties to it.
    2. The final judgment attached hereto (sometimes referred to as 
the "decree") may be entered by the court upon 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.
    3. The parties shall comply with the terms of the attached final 
judgment no later than 30 days after the date of the execution of 
this stipulation, with the exception of  3.9 and 4.1, 
with respect to which compliance shall be due no later than 60 days 
after the date of the execution of this stipulation, and 
 4.2, which specifies the time for compliance with that 
section.
    4. The plaintiffs agree not to oppose a motion by Microsoft to 
vacate the findings of fact that the court issued on November 5, 
1999, and to declare that those findings, and the judgment when 
entered, shall have no preclusive effect, either under principles of 
collateral estoppel (issue preclusion) or section 5(a) of the 
Clayton Act, 15 U.S.C.  16(a), in any proceeding, the 
court having rendered no conclusions of law or determination of 
liability and Microsoft Corporation having not acknowledged 
liability and having represented that it has agreed to the entry of 
this judgment solely for business reasons, to avoid the expense and 
uncertainties of continued litigation. Microsoft's consent to the 
entry of this judgment is conditional upon the grant of this motion.
    5. If the court does not enter the decree as the final judgment 
in this proceeding, all the parties are relieved from all 
obligations under the decree and this stipulation.
    6. This stipulation will not be effective until all the parties 
to the litigation have signified in writing that they agree to it. 
It will become effective on the day on which the last party 
communicates its acceptance to the other parties.
    7. This stipulation and the attached decree are the complete and 
integrated expression of the parties" settlement agreement.
    For the United States
    For the other plaintiffs
    For Microsoft Corporation 
Dated:---- ------ ----
 ----, 2000 4/5/00
    Final Judgment
    It is ordered, adjudged, and decreed, as follows:
     1. Jurisdiction:
    This court has jurisdiction of the subject matter of this action 
and of Microsoft. Microsoft has violated sections 1 and 2 of the 
Sherman Act, 15 U.S.C.  1, 2, and related state laws of 
the States of New York, California, Connecticut, Florida, Illinois, 
Iowa, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, 
Michigan, Minnesota, New Mexico, North Carolina, Ohio, Utah, West 
Virginia, and Wisconsin, and the District of Columbia.
     2. Definitions:
    (1) "operating system": the software that controls 
the operation of a computer. An "operating system 
product" is any operating system or part or feature thereof 
that is distributed commercially whether or not it is marketed for a 
positive price. A "personal computer operating system" 
is an operating system intended to be used with personal computers, 
whether or not such operating system is also intended to be used 
with other computers.
    (2) "Windows operating system." Software code 
(including source code and binary) of

[[Page 29011]]

Windows 98, Windows 2000 Professional, and their successors, 
including the Windows operating systems codenamed 
"Millennium," "Whistler," and 
"Blackcomb."
    (3) "middleware": software that operates between two 
or more types of software (such as an application, an operating 
system, a server operating system, or a database management system) 
and could, if ported to multiple operating systems, enable software 
products written for that middleware to be run on multiple operating 
systems. Software does not cease to be middleware, if otherwise 
within the definition in this subsection, merely because it 
interacts directly with the operating system or other software. 
Examples of middleware within the meaning of the decree include 
Internet Explorer, the Outlook Express e-marl client, Windows Media 
Player, and the Java Virtual Machine. Examples of software that are 
not middleware within the meaning of the decree are disk compression 
and memory management.
    (4) "platform software": either an operation system 
or middleware, as these terms are defined above.
    (5) "default Middleware": software configured to 
launch automatically (that is, by "default") to provide 
particular functionality-when-other middleware has not been selected 
for this purpose. For example; a default browser is middleware 
configured to launch automatically to display Web pages transmitted 
over the Interact or an intranet that hear the .htm extension, when 
other software has not been selected for this purpose.
    (6) "personal computer": a computer that is designed 
to he used by one person at a time that uses a video display and 
keyboard (whether or not the video display and keyboard are actually 
included), and that contains an Intel x86 or competitive 
microprocessor, and computers that are commercial substitutes for 
such computers.
    (7) "original equipment manufacturer (OEM)": the 
manufacturer or assembler of a personal computer.
    (8) "independent software vendor (ISV)": any entity 
other than Microsoft (or any subsidiary, division, or other 
operating unit of any such other entity) that is engaged in the 
development and licensing (or other marketing) of software products 
intended to intemperate with Microsoft platform software.
    (9) "application programming interfaces (APIs)": the 
interfaces and protocols that enable an application, middleware, or 
server operating system to efficiently and effectively obtain 
services from (or provide services in response to requests from) 
platform software in a personal computer and to use, benefit from, 
and rely on the resources, facilities, and capabilities of such 
platform software.
    (10) "communications interfaces": the interfaces and 
protocols that enable applications, middleware, or operating systems 
installed on other computers (including servers) to interoperate 
satisfactorily with the Windows platform software on a personal 
computer.
    (11) "technical information": all information, 
regarding the identification and means of using APIs (or 
communications interfaces), that competent software developers 
require to make their products running on a personal computer, 
server, or other device interoperate satisfactorily with Windows 
platform software running on a personal computer. Technical 
information includes reference implementations, communications 
protocols, file formats, data formats, data structure definitions 
and layouts, error codes, memory allocation and deallocation 
conversions, threading and synchronization conventions, algorithms 
for data translation or reformatting (including compression/
decompression algorithms and encryption/decryption algorithms), 
registry settings, and field contents.
    (12)
    (a) "intellectual property rights": copyrights, 
patents, trademarks, and trade secrets;
    (b) "to infringe intellectual property rights": to 
commit a legal violation of such a right.
    (13) "end-user access": the invocation of middleware 
by an end user of a personal computer or the ability of such an end-
user to invoke middleware. "End-user access" includes 
invocation of middleware by end-users which is compelled by the 
design of the operating system.
    (14) "Market Development Agreement (MDA)": the class 
of agreements with OEMs that provides discounts from Windows 
operating system royalties.
     3. Prohibitions:
    Microsoft Corporation is enjoined from:(1) agreeing or offering 
to provide any consideration or advantage to any person in exchange 
for, or conditioned on, such person's agreement or willingness not 
to develop, promote or distribute (or to limit the development, 
promotion or distribution) of any operating system product or 
middleware competitive with any Windows operating system product or 
middleware.
    (2) offering or conditioning a Windows operating system license 
to any OEM, or the terms of administration of a license, or any 
change in Microsoft's commercial relations with an OEM, or offering 
or threatening to do any of these things, related to whether (or to 
the extent) the OEM
    (a) makes or promotes (or declines to make promote, distribute, 
or license) a non-Microsoft operating system product or middleware;
    (b) makes, promotes, distributes, or licenses a modified version 
of the Windows operating system; or
    (c) exercises any of the options provided under this decree;
    (3) limiting an OEM's
    (a) interrupting the Windows initial boot sequence by a 
registration sequence used to obtain subscription or other 
information from the user;,
    (b) displaying icons of a competing platform software product on 
the Windows desktop, or the size, shape, or convenience of such 
icons;
    (c) displaying a middleware user interface, provided that an 
icon is also displayed that allows the user to access the Windows 
desktop and that the OEM makes clear that the interface is not 
Microsoft's; or
    (d) offering its own sign-up sequence, which may include an 
option to make a non-Microsoft middleware product (for example, non-
Microsoft Web-browsing functionality) the default middleware product 
and to remove the icon for Microsoft's middleware product from the 
Windows desktop;
    (4) conditioning the licensing of a Windows operating system, or 
the terms or administration of any such license (including the 
nature and extent of support provided), on the OEM's
    (a) also licensing, shipping, or promoting (or declining to 
license, ship, promote; or limiting its licensing, shipment, or 
promotion of) (i) a Microsoft middleware product (ii) any other 
Microsoft software product that Microsoft distributes, in whole or 
in part, separately from the Windows -operating system(whether or 
not for a separate or positive price) (iii) the unmodified version 
of such an operating system if the OEM offers a modified version of 
the Windows operating system pursuant to this decree, or
    (b) making middleware supplied by Microsoft the default 
middleware in computers sold or distributed by the OEM;
    (c) whether the OEM limits end-user access to the middleware 
that is distributed with the operating system,
    (5) Entering into any agreement with an OEM in which the 
operating system royalties are payable to Microsoft by the OEM are 
set otherwise than by reference to a uniform royalty schedule to be 
established by Microsoft: in its sole discretion, except that the 
schedule may specify different royalties for different language 
versions
    (6) agreeing or offering
    (a) to provide any consideration or advantage to any person in 
exchange for, or conditioned on such person's agreement or 
willingness to degrade or limit the quality of any non-Microsoft 
platform software, or not to may the supplier of any non-Microsoft 
platform software, or
    (b) to include or promote any product of any person on the 
Windows desktop, in a folder on the Windows desktop, in the Active 
Desktop, or in the Windows initial boot sequence, related to the 
distribution, use, or promotion of Microsoft platform software, or 
to the limitation of the distribution, use, or promotion of non-
Microsoft platform software;
    (7) conditioning any bona fide ISV's access to technical 
information, or developer support to assist in its use, to assist in 
the creation of Windows-based applications (or the terms on which 
such Information or support is provided), upon such ISV's
    (a) use, distribution, promotion, or support of any Microsoft 
middleware
    (b) declining to use, distribute, promote, or support any non-
Microsoft middleware
    (8) failing to disclose (at the time such APIs, technical 
information, or communications interfaces are disclosed to 
Microsoft's own software developers) for use in interoperating with 
Windows operating systems and middleware distributed with such 
operating systems, the APIs, technical information and 
communications interfaces that Microsoft employs to enable
    (a) Windows platform software to interoperate with Microsoft 
applications installed on the same personal computer, or
    (b) Windows operating system software and middleware distributed 
with such

[[Page 29012]]

operating system to interoperate with Microsoft middleware installed 
on the same personal computer if the middleware is (i) Internet 
Explorer, the Outlook Express e-mail client, Windows Media Player, 
or the Java Virtual Machine, or their successors, or (ii) 
distributed separately from the operating system for installation on 
any Windows operating system; or
    (c) a Windows operating system and middleware distributed with 
such operating system installed on one personal computer to 
interoperate with any of the following software installed on a 
different personal computer or on a server--(i) Microsoft 
applications, (ii) Microsoft middleware, or (iii) Microsoft client 
or server operating systems,
    (9) tying or combining any middleware product to or with a 
Windows operating system unless Microsoft offers a version of that 
operating system without such middleware product at a reduced price 
that reasonably reflects the relative costs of the operating system 
and the excluded middleware
    (10) limiting an OEM's right or ability to add non-Microsoft 
middleware to a Windows operating system
     4. Affirmative Provisions:
    (1) Microsoft shall license the source code for Windows 
operating systems on the following terms:
    (a) Microsoft-shall grant each of its 50 highest-volume OEM 
customers, at the OEM's option, a perpetual, nonexclusive license to 
the source code of Windows operating systems for the sole purpose of 
using that source code to modify those operating systems for 
purposes of (i) preventing end-user access to any middleware 
included in the operating system, (ii) facilitating, improving, or 
otherwise optimizing the interoperation of any non-Microsoft 
middleware with, and fixing the bugs in, the operating system, and 
(iii) installing any end-user interface; provided that OEMs shall 
have no right to make modifications to a Windows operating system 
that render inoperable any of the APIs exposed to ISVs by that 
operating system unless doing so is reasonably necessary to 
accomplishing purposes (i), (ii), or (iii) above and the end-user to 
whom such operating system is licensed is given the means readily to 
install all software necessary to endure that such APIs are rendered 
operable. The source code licenses granted by Microsoft under this 
subsection shall not entitle OEMs to use such source code for any 
purpose other than creating modified versions of Windows operating 
systems for the purposes stated in this section and working with 
ISVs to facilitate the interoperation of such ISV's products with 
Windows operating systems.
    (b) The terms of source code licenses granted by Microsoft under 
this subsection shall be standardized and not be subject to 
negotiation with individual OEMs. Microsoft shall not charge OEMs a 
royalty or fee for access to the source code of Windows operating 
systems.
    (c) Microsoft's royalty for any modified version of a Windows 
operating system installed on an end-user's personal computer shall 
be calculated as follows: (i) if the royalty charged that OEM for 
the unmodified version is no higher than the royalty charged for the 
predecessor operating system, the royalty charged the OEM for the 
modified version shall not exceed the royalty charged that OEM for 
the predecessor operating system; (ii) if the royalty charged that 
OEM for the unmodified version exceeds the royalty charged that OEM 
for the predecessor system, the royalty charged that OEM for the 
modified version shall be the royalty charged that OEM for the 
unmodified version discounted by the percentage difference that is 
allocable in accordance with accepted accounting principles to the 
middleware that is (i) excluded or (ii) made not end-user accessible 
by the OEM. The allocation shall be based on the development costs 
of the unmodified version of the operating system, as determined by 
the agreement of the parties or, in the absence of the agreement, by 
an arbitrator selected in accordance with the rules of the American 
Arbitration Association.
    (d) OEMs shall have the right to license any modified version of 
a Windows operating system that they create pursuant to this 
 4(1) to end-users, and to value-added resellers, 
systems integrators, retailers, ISVs, and other OEMs for licensing 
to end-users, for installation and use on personal computers, 
provided only that such non-end-user licensees agree, either in a 
sublicense With-the OEM or in a license with Microsoft, to be bound 
by the terms set forth in-the OEM's license (other than those terms 
providing for access to and modification of source code) with 
Microsoft pursuant to this section.
    (e) Microsoft may require that modified versions of Windows 
operating systems created by a particular OEM be installed only in 
the form in which the unmodified versions of that operating system 
are installed, but must permit the OEM to distribute any non-
Microsoft software in any form. Microsoft may also require that 
OEMs, and any licensees pursuant to  4(1)(d) above, 
provide their customers with end-user licenses for such modified 
versions of Windows operating systems in a form prescribed by 
Microsoft .that is consistent with this decree. Microsoft is not 
required-to grant OEMs any right to disclose source code for the 
original or any modified version of a Windows operating system 
except as provided in the preceding sentence and in subsection 4(h) 
below.
    (f) Microsoft may require that an OEM that develops a modified 
version of a Windows operating system that boots up automatically 
into a non-Microsoft user interface to include an icon on the 
primary screen of that user interface that enables the end-user to 
return to the Windows desktop as designed by Microsoft.
    (g) Microsoft shall make all source code for Windows operating 
systems available to OEMs that enter into source code licenses 
pursuant to this section beginning with the first alpha, beta, or 
other release of the operating system outside of Microsoft and shall 
supply complete updates to that source code at the time of all later 
releases and release candidates. Microsoft may require OEMs to base 
their modified versions of Windows operating systems on the 
commercially released versions of those operating systems and not on 
a beta release or a release candidate, provided that Microsoft 
supplies OEMs with the final code for such systems at least 180 days 
prior to the earlier of their scheduled release date or their 
release. Microsoft may prohibit OEMs from releasing any modified 
version of a Windows operating system prior to the earlier release 
of Microsoft's release of that operating system or 60 days after the 
scheduled release date.
    (h) To facilitate creation of modified versions of Windows 
operating systems by OEMs, Microsoft shall provide OEMs with its 
internal build tools, source code archives, bug-tracking databases, 
custom compilers, test suites, and other development tools 
ordinarily used by software developers in modifying and testing 
modified source code for operating systems (subject to normal and 
customary restrictions on disclosure of such proprietary 
technology), as well as reasonable access to knowledgeable Microsoft 
support engineers familiar with the source code, whose time may be 
billed by Microsoft to OEMs at customary rates. Subject to customary 
and reasonable intellectual property rights (including customary and 
reasonable nondisclosure agreements executed by ISVs and their 
personnel exposed to Microsoft's source code), Microsoft must permit 
an OEM to work with one or more ISVs or other software developers 
(which may participate in modifying the source code) to facilitate 
the OEM's development of a modified version of a Windows operating 
system pursuant to  4(1) of this decree.
    (i) OEMs shall have the right to use the word 
"Windows" to designate any modified version of a Windows 
operating system created pursuant to this section and to state, when 
true, that the modified version runs applications that run on 
Microsoft Windows, provided that the OEM states clearly that such 
modified version has been modified by the OEM, and does not imply 
that Microsoft endorses the modifications.
    (j) Microsoft shall have no obligation to provide product 
support to an OEM's customers for those aspects of a modified 
version of a Windows operating system created by the OEM that are 
due to the modification.
    (2) Microsoft shall, when it makes a major Windows operating 
system release (such as Windows95,Windows 98, Windows 2000 
Professional, Windows "Millennium," 
"Whistler," "Blackcomb," and successors to 
these), continue to license the previous Windows operating system at 
the existing royalty rate for three years to any OEM that desires 
such a license. During that period, Microsoft shall make the 
previous Windows operating system's code available to its 50 
highest-volume OEM customers at customary and reasonable terms, 
together with reasonable personnel support (for which Microsoft may 
require compensation from the OEM at customary rates), for the 
purpose of enabling those OEMs to adapt the operating system to the 
latest hardware advances and to fix bugs. The OEM shall be free to 
market computers in which it preinstalls such an operating system in 
the same manner in which it markets computers

[[Page 29013]]

preinstalled with other Windows operating systems, provided, 
however, that Microsoft shall be entitled to require OEMs to inform 
their customers that such computers contain a modified version of a 
Windows operating system.
    (3) In all future MDAs, Microsoft shall offer the same MDA terms 
to all OEMs whose shipments of Microsoft operating systems fall 
within a specified range (e.g., the 10 largest OEMs, as measured by 
total annual volume of modified and unmodified versions of Microsoft 
operating systems that they ship, would be entitled to the highest 
MDA, the next 10 to a lower MDA, and the remaining OEMs to no MDA), 
subject to variations by geography for OEMs that make more than S0 
percent of their sales outside the United States. No class entitled 
to the same MDA terms in accordance with this subsection shall have 
fewer than 10 members.
    (4) Notwithstanding the foregoing provisions, upon the release 
of its next Windows operating system, codenamed 
"Millennium," and upon the next release, version, or 
service pack update of Windows 2000 Professional after May 30, 2000, 
Microsoft shall provide the means for OEMs and end users at their 
option readily to prevent end-user access to the operating system's 
browsing functionality.  5. Term:
    (1) Microsoft shall comply with the provisions of this decree 
within 30 days after its submission to the district court for 
approval.
    (2) This decree shall expire at the end of five years from the 
date of that submission, except that:
    (a) The source code licenses granted pursuant to 
 4(1) are perpetual, and the right to license modified 
operating systems created thereunder shall continue for an 
additional five years; and
    (b) If the obligation set forth in  4(2) to continue 
to license a predecessor operating system is triggered during the 
five-year period referred to in the preceding subsection, Microsoft 
shall continue to comply with that obligation with respect to that 
predecessor operating system for an additional two years, but 
 4(2) shall have no further force or effect after the 
expiration of the two-year period.
     6. Enforcement: In order to minimize the burden on 
the judicial system of enforcing this decree, the plaintiffs have 
agreed that exclusive responsibility for enforcing it shall be 
lodged with the United Department of Justice and with one of the-
States that are plaintiffs in this action, as selected by the 
plaintiff States.
     7. Reporting and Compliance:
    (1) To determine or secure compliance with this decree, duly 
authorized representatives of the plaintiffs shall, upon reasonable 
notice given to Microsoft at its principal office, subject to any 
lawful privilege, be permitted:
    (a) access during normal office hours to inspect and copy all 
books, ledgers, accounts, correspondence, memoranda, source code, 
and other documents and records in the possession, custody, or 
control of Microsoft (which may have counsel present) relating to 
any hinters contained in this decree;
    (b) subject to the reasonable convenience of Microsoft and 
without restraint or interference from it, to interview officers, 
employees, or agents of Microsoft, who may have counsel present, 
regarding any matters contained in this decree;
    (c) upon written request and on reasonable notice to Microsoft 
at its principal office, require Microsoft to submit written 
reports, under oath if requested, with respect to any matters 
contained in this decree.
    (2) No information or documents obtained by the means provided 
by this decree shall be divulged by any of the plaintiffs except in 
the course of legal proceedings to which one or more of the 
plaintiffs is a party, or for the purpose of securing compliance 
with this decree, or as otherwise required by law. If when 
information or documents are furnished by it Microsoft identified in 
writing material to which a claim of protection may be asserted 
under Rule 26(c)(7) of the Federal Rules of Civil Procedure and 
marks each page of such material "Subject to claim of 
protection under Rule 26(c)(7) of the Federal Rules of Civil 
Procedure," ten days" notice shall be given to Microsoft 
prior to divulging such material in any legal proceeding (other than 
a grand jury proceeding) to which Microsoft is not a party.
    (3) Within thirty days of the date of submission of this decree 
for approval by the court, Microsoft shall designate an officer of 
the corporation to be the antitrust compliance officer. That officer 
shall have primary responsibility within the corporation for 
achieving and maintaining full compliance with this decree and shall 
serve as liaison with the plaintiffs with respect to the 
administration of the decree. The officer may be assisted by other 
employees of Microsoft and will report directly to Microsoft's chief 
executive officer.
     8. Miscellaneous Provisions:
    (1) This decree applies not only to Microsoft but also to each 
of its officers, directors, agents, employees, successors, and 
assigns, and to all persons in active concert or participation with 
any of them who shall have received actual notice of this decree by 
personal service or otherwise.
    (2) The district court shall retain jurisdiction to enforce the 
decree.
    (3) The decree is in the public interest.
    IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA 
----------------------
----------------------
----------------------
--------- )
    UNITED STATES OF AMERICA, ) ) Plaintiff, ) ) v. ) Civil Action 
No. 98-1232 (CKK) ) MICROSOFT CORPORATION, ) ) Defendant. ) ) 
----------------------
----------------------
-----------------------
----------)
    STATE OF NEW YORK, et al., ) ) Plaintiffs, ) ) v. ) Civil Action 
No. 98-1233 (CKK) ) MICROSOFT CORPORATION, ) ) Defendant. ) ) 
----------------------
----------------------
----------------------
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    DECLARATION OF KENNETH J. ARROW
    Kenneth J. Arrow declares under penalty of perjury as follows:
    I. INTRODUCTION
    1. I am the Joan Kenney Professor of Economics Emeritus and 
Professor of Operations Research Emeritus at Stanford University. I 
received the degrees of B.S. in Social Science from The City College 
in 1940, M.A. in mathematics from Columbia University in 1941, and 
Ph.D. in economics from Columbia University in 1951. I have taught 
economics, statistics, and operations research at the University of 
Chicago, Harvard University, and Stanford University, and I have 
written more than 200 books and articles in economics and operations 
research. I am the recipient of numerous awards and degrees, 
including the Nobel Memorial Prize in Economic Science (1972). A 
significant part of my writing and research has been in the area of 
economic theory, including the economics of innovation and its 
relation to industrial organization. My curriculum vitae is 
attached.
    2. I have been asked by ProComp to comment on various economic 
issues related to the Revised Proposed Final Judgment 
("PFJ" or the "decree") proposed by the 
United States, various settling States and Microsoft Corporation 
("Microsoft").
    3. My review of the PFJ begins with the fact that Microsoft has 
been found liable for violating Section 2 of the Sherman Act by 
engaging in a widespread series of practices that illegally 
maintained its monopoly in Intel-compatible PC operating systems. 
These practices were focused on eliminating the threat posed to 
Microsoft's PC operating system monopoly by the combination of 
Netscape Navigator and cross-platform Java technology 
("middleware competition").
    4. Given that Microsoft has been found liable for illegal 
monopoly maintenance, the remedies in this ease should be designed 
to eliminate the benefits to Microsoft from its illegal conduct. To 
the extent possible, the remedies should be designed to restore the 
possibility of competition in the market where monopoly was 
illegally maintained (i.e., the market for PC operating systems). In 
addition, the remedies should strengthen the possibilities for 
competition and deter the exercise of monopoly power in the present 
and future, taking account of the special problems of an industry in 
which network effects are important.
    5. It is my opinion that the PFJ fails to accomplish these 
objectives. First, the PFJ is unduly focused on attempting to re-
create an opportunity for future middleware competition. Because of 
network effects and path dependencies, Microsoft's monopoly power in 
PC operating systems is more entrenched than it was in the mid-
1990s. It will be exceedingly difficult now, even with the best of 
remedies, to re-establish middleware fully as the kind of 
competitive threat to Microsoft's monopoly power that it posed in 
the mid- 1990s. Additional remedial steps need to be taken to ensure 
that Microsoft does not benefit from its illegal conduct and the 
consequences of that conduct on dynamic competition in the OS market 
Second, the PFJ does not address the fact that no effort to restore 
competition in the market for PC operating systems will be 
successful without measures designed to lower the applications 
barrier to entry that currently protects Microsoft's position in 
this market. Third, the enforcement mechanism described in the PFJ 
seems likely to be ineffective, even with respect to the inadequate 
remedies in the PFJ. Fourth, the PFJ pays insufficient attention to 
the ways in

[[Page 29014]]

which Microsoft is currently attempting to protect its monopoly 
power by using its illegally maintained monopoly in PC operating 
systems against current and future competitive threats, such as 
server operating systems and Web services.
    6. This affidavit has six parts and is organized as follows. 
After this introduction (Part I), Part II reviews the threat that 
Netscape, Java and the Internet posed in the mid-1990s to 
Microsoft's monopoly power in PC operating systems. Part III then 
reviews the illegal conduct that Microsoft used in defeating this 
threat. Part III also analyzes the state of the computer industry 
today following this illegal conduct and explains why it seems 
unlikely, at this stage, that the middleware threat can be re-
created. With this as background, Parts IV and V review and assess 
the remedies proposed in the PFJ. Part IV critiques the remedies 
designed to restore middleware competition. In addition, Part IV 
discusses the lack of attention in the PFJ to the applications 
barrier to entry that protects Microsoft's monopoly power in PC 
operating systems. It also notes certain deficiencies in the 
enforcement mechanism proposed in the PFJ. Part V follows with a 
discussion of Microsoft's efforts to protect its existing monopoly 
power by using its illegally maintained monopoly in PC operating 
systems to gain advantages in other markets that threaten to reduce 
the scope of its current market power. Part V explains that the PFJ 
gives insufficient attention to this important subject--a 
subject that bears on the future of competition in the computing 
industry. The affidavit concludes in Part VI with a summary of 
conclusions.
    II. MICROSOFT'S MONOPOLY POWER AND THE THREAT POSED BY NETSCAPE, 
JAVA AND THE INTERNET
    A. NETWORK EXTERNALITIES
    7. Network externalities have been central to Microsoft's 
ability to maintain its monopoly power in the market for PC 
operating systems. Both the District Court and the U.S. Court of 
Appeals for the District of Columbia Circuit referred to the 
"applications barrier to entry," the process by which a 
large installed base induces the development of applications and 
other complementary goods designed for the dominant operating 
system, which further reinforces the position of the dominant 
operating system. I described this process in a declaration that I 
submitted in 1995 on behalf of the government in a prior settlement 
with Microsoft:
    A software product with a large installed base has several 
advantages relative to a new entrant. Consumers know that such a 
product is likely to be supported by the vendor with upgrades and 
service. Users of a product with a large installed base are more 
likely to find that their products are compatible with other 
products. They are more likely to be able successfully to exchange 
work products with their peers, because a large installed base makes 
it more likely that their peers will use the same product or 
compatible products. Installed base is particularly important to the 
economic success of an operating system software product. The value 
of the operating system is in its capability to run application 
software. The larger the installed base of a particular operating 
system, the more likely it is that independent software vendors will 
write programs that run on that operating system, and, in this 
circular fashion, the more valuable the operating system will be to 
consumers.
    8. The applications barrier to entry implies that it is likely 
that a single platform (or programming environment) will dominate 
broad segments of the computer software industry at any point in 
time. This does not necessarily imply that there will be monopoly; 
that depends on the extent to which the dominant platform is 
proprietary or closed. However, if the dominant platform is 
proprietary (which is certainly the case with Windows), then the 
interdependence of applications and operating systems creates a 
barrier against any new entrant. A new entrant would need to create 
both an operating system and the applications that make it useful.
    9. In addition, any customer of a new entrant would have to 
incur considerable costs in switching to a new system. In the first 
place, the customer would have to learn new operating procedures. 
Second, there would be a problem of compatibility of files. These 
factors constitute a natural obstacle to change, so that a system 
with a large installed base will have a tendency to retain its 
users.
    10. The special nature of operating systems and software also 
gives Microsoft, because of its large installed base of operating 
system, a great advantage in the markets for complementary software. 
Specifically, it can distribute the software much more easily than 
its competitors. Since virtually every new PC ships with Windows, 
Microsoft can put its software into the hands of users by including 
it with the operating system. Any other vendor of complementary 
software that wanted to distribute through OEMs would have to cut a 
separate deal with each OEM, and would face the task of persuading 
OEMs to carry software products that may be directly competitive 
with products offered by Microsoft. As a result, complementary 
software from other vendors typically either has to be downloaded 
(which imposes added costs on users) or distributed separately to 
users in "shrink wrap." In addition, Microsoft has the 
ability to allow Microsoft developers of complementary software 
access to "hidden APIs" -application programming 
interfaces in the PC operating system that Microsoft developers know 
about but which are not disclosed fully to competing developers of 
complementary software.
    B. THE MIDDLEWARE THREAT: NETSCAPE AND JAVA
    11. A threat to Microsoft's monopoly in PC operating systems 
arose in the mid-1990s with the nearly simultaneous emergence of the 
Internet browser developed by Netscape and the Java programming 
environment. These are both examples of middleware--application 
software designed to run on multiple operating systems and which has 
its own set of APIs. Middleware that provides extensive 
functionality through a broad set of APIs has the potential to 
become an alternative platform for application development If many 
applications valued by PC users were written to middleware APIs, and 
if the middleware were ported to other operating systems (existing 
or to be created), then the applications barrier to entry in the 
market for PC operating systems would be weakened.
    12. Netscape Navigator was a browser that also had the potential 
to become a platform for application programs. Netscape's browser 
had its own set of APIs to which developers could write application 
programs.
    13. The initial success of Netscape Navigator was dramatic. 
Netscape shipped first browser in September 1994.\1\ In July 1995, 
less than a year later, its share of the browser market was 74%. \2\ 
By mid-1996, Netscape's share had reached 85%. \3\
---------------------------------------------------------------------------

    \1\ "A Software Giant's March Onto the 
Internet," New York Times (Jan. 12, 1998) at CA.
    \2\ "Browser Usage: How It's Trending," 
Interactive Age (Jul. 31, 1995) (citing figures compiled by Interse 
Market Focus).
    \3\ "Microsoft v Netscape: Freer than Free," 
The Economist (Aug. 17, 1996, U.S. Edition).
---------------------------------------------------------------------------

    14. The threat that Netscape posed to Microsoft's monopoly power 
in PC operating systems was made even greater by the nearly 
simultaneous development of Java. The Java technology has several 
pieces. R is a programming language that I understand has features 
well suited for writing "distributed 
applications"--applications that run on networks, calling 
upon resources located on different computers in the network. Java 
technology also includes the Java Virtual Machine 
("JVM") and Java Class Libraries. The JVM and Java Class 
Libraries are forms of middleware. They are software programs that 
have been implemented on Windows and many other operating systems. A 
JVM is software that converts Java code into instructions that can 
be processed by the operating system on which the JVM sits. The Java 
Class Libraries are software that performs specific functions that 
developers can call upon, and build into, their Java application 
programs. The JVM and Java Class Libraries are sometimes referred to 
collectively as the "Java runtime environment." The Java 
technology has been licensed in a way designed to encourage its 
implementation on a variety of different operating systems. The Java 
ideal was captured in the phrase, "write once, run 
anywhere."
    15. Java added to the threat posed by Netscape because it 
extended the set of middleware APIs to which developers could write 
application programs. It increased the chances that developers could 
write sophisticated PC application programs written to middleware 
APIs instead of Windows APIs. Netscape also complemented Java by 
serving as a distribution mechanism. The Java technology could not 
succeed without widespread distribution of the Java runtime 
environment. Because Netscape supported Java and included the Java 
runtime environment with every copy of its browser, growth in the 
share of PCs that used the Netscape browser also meant growth in the 
share of PCs with a Java runtime environment that supported Java's 
"write once, run anywhere" ideal.
    16. The economic relationship between middleware and the OS is 
unusual among the commodities that economic theory usually deals 
with. Middleware is a complement to

[[Page 29015]]

any OS in the short run, but it facilitates substitution among 
operating systems in the long run. Middleware is a complement in the 
short run because it adds functionality to the existing OS, but it 
is in a sense a substitute in the long run, because applications can 
be written to it rather than to the OS. Middleware therefore permits 
substitution among operating systems, since the applications are not 
specific to any one OS. Therefore, an OS monopolist will have an 
incentive to control middleware in order to maintain its OS 
monopoly. The short-run complementarity becomes an instrument by 
which this incentive can be realized. The middleware has to be 
ported to the OS, and the OS producer's control of the needed APIs 
can be used to restrict the spread and use of the middleware.
    17. Middleware is naturally thought of as a disruptive 
technology, and the emergence of middleware in 1995 created what is 
frequently referred to as an "inflection point." Put 
simply, this means that the then well-defined organization of the 
software market for personal computers might be altered 
substantially, or at least such a risk existed. As that organization 
was centered on the Microsoft Windows operating system and its 
productivity application suite Microsoft Office, Microsoft had the 
most at risk from any disrupting change that resulted from 
middleware.
    18. Technological disruptions such as the middleware threat of 
the mid- 1990s do not occur frequently. They only arise when there 
is an important innovation that allows technology to evolve and 
create new products or functionality that has widespread appeal. At 
times of technological disruption, the forces of dynamic competition 
can play an especially important role. The Netscape browser and the 
cross-platform Java technology separately and in combination had the 
potential to develop into an alternative platform for application 
programs that could run on any operating system and which could 
transform PC operating systems into a commodity business. Bill 
Gates, in his memorandum of May 26, 1995 on the "Internet 
Tidal Wave," described just this sort of dynamic competitive 
threat when he realized that, if successful, Netscape could 
"commoditize" the operating system.
    19. There is no easy method by which an economist can determine 
exactly how significant a threat Java and Netscape actually 
represented to Microsoft's operating system monopoly. A precise 
determination of whether Netscape and Java could have succeeded in 
eroding Microsoft's monopoly power absent Microsoft's illegal 
conduct would require a counterfactual analysis that addressed a 
variety of complex interrelations. However, even without this kind 
of analysis, we have evidence that a reasonably expert onlooker felt 
the threat was serious, namely, the statements and behavior of 
Microsoft. Bill Gates, in his memorandum on the "Internet 
Tidal Wave," explained:
    A new competitor "born" on the Internet is Netscape. 
Their browser is dominant, with 70% usage share, allowing them to 
determine which network extensions will catch on. They are pursuing 
a multi-platform strategy where they move the key API into the 
client to commoditize the underlying operating system .... One scary 
possibility being discussed by Internet fans is whether they should 
get together and create something far less expensive than a PC which 
is powerful enough for Web browsing.
    20. In the same memorandum, Gates made clear that he understood 
how Microsoft should leverage its Windows advantage to bolster its 
Internet position:
    We need to move all of our Internet value added from the Plus 
pack into Windows 95 as soon as we possibly can with a major goal to 
get OEMs shipping our browser preinstalled. This follows directly 
from the plan to integrate the MSN and Internet clients. Another 
place for integration is to eliminate today's Help and replace it 
with the format our browser accepts including exploiting our unique 
extensions so there is another reason to use our browser.
    21. To summarize, in an industry marked by network 
externalities, there is a strong tendency to monopoly (at least when 
the dominant platform is proprietary or closed). The consumer 
welfare and efficiency losses associated with monopoly are well 
known, but the one most relevant here is the decreased incentive to 
technological innovation. It is all the more important to encourage 
what may be called dynamic competition, the entry of new firms and 
new products. At certain periods, whether due to technological 
innovation or to a transient situation in which the tendency to 
monopoly has not yet worked to its completion, the market will be 
confronted with alternative lines of development; Netscape Navigator 
and Java as against Microsoft products in 1995, client-server 
networks and web services today. At these periods, there may be 
opportunities for a new platform to compete with and possibly take 
over from the existing one. In view of the strong tendency to 
monopoly in this industry (because of network externalities), it is 
all the more important to keep the competition as viable as possible 
when the opportunity presents itself. In particular, illegal 
anticompetitive steps by existing monopolists should be prevented to 
the maximum extent possible. Such a policy prevents the stagnation 
of existing monopolists and encourages the expansion of the number 
of alternatives among which the buyers can choose.
    III. MICROSOFT DEFEATED THE THREAT POSED BY NETSCAPE AND JAVA
    A. MICROSOFT'S ILLEGAL PRACTICES
    22. Microsoft made a concerted effort to eliminate the threat 
from middleware competition. Microsoft was found to have engaged in 
illegal conduct exactly at the moment that dynamic competition might 
have flourished. As the DC Circuit concluded, Microsoft took illegal 
steps to exclude the middleware threat, and in particular, took 
anticompetitive actions directed against Netscape Navigator and 
Java. In particular, the DC Circuit judged illegal significant 
elements of Microsoft's strategy:
    a) By barring original equipment manufacturers 
("OEMs") from removing access to Microsoft's Internet 
Explorer ("IE") browser from the Windows desktop, 
Microsoft prevented many OEMs from installing Navigator or other 
browsers, and that in turn protected Microsoft's OS monopoly by 
reducing potential middleware competition. This violated Sec. 2 of 
the Sherman Act.
    b) By preventing OEMs from altering the initial boot sequence 
for Windows, Microsoft prevented OEMs from promoting Internet access 
providers, many of whom were using and distributing Navigator to 
their customers. Again, this reduced competition with IE and 
protected Microsoft's OS market power in violation of See. 2.
    c) Through commingling software code for Windows with that of 
Internet Explorer, Microsoft deterred OEMs from installing 
Navigator. That, in turn, reduced Navigator's usage share, and 
thereby protected the applications barrier to entry by reducing 
developer's interest in the APIs exposed by Navigator. Microsoft 
also removed Internet Explorer from its Add/Remove utility, further 
entrenching Internet Explorer and further discouraging OEMs from 
distributing Navigator. The DC Circuit found these actions to be 
anticompetitive and to support a finding of liability for 
exclusionary conduct and therefore monopolization under Section 2.
    d) By entering into contracts with Internet access providers 
that foreclosed Navigator's access to an economically significant 
share of the Internet access provider ("IAP") market, 
Microsoft engaged in exclusionary conduct in protection of its OS 
monopoly, again in violation of See. 2.
    e) By entering into contracts with independent software vendors 
that required those independent software vendors 
("ISVs") to use Internet Explorer if the ISV need web 
display, Microsoft further foreclosed distribution of Navigator, 
again in protection of its OS monopoly, in violation of See. 2.
    f) By entering into an exclusive distribution contract with 
Apple for Internet Explorer after Microsoft had threatened to cancel 
the Macintosh version of Office, Microsoft engaged in exclusionary 
conduct in protection of its OS monopoly in violation of Sec. 2.
    g) Through a number of exclusionary actions directed at Java, 
Microsoft limited Java's viability as a cross-platform threat and 
did so in violation of Sec. 2. Those actions included: limiting 
distribution of "write once, run anywhere" JVMs directly 
through exclusionary contracts with ISVs and indirectly through 
Microsoft's actions against Netscape; deceiving developers who 
wanted to develop pure Java code into writing code with Windows-
specific extensions that would make the code Windows dependent; and 
threatening Intel and inducing it to stop developing Intel 
multimedia software for Java.
    B. THE STATE OF THE MARKET TODAY
    23. As of 1995, Microsoft's share was of the installed base of 
PC operating systems was 87%,\4\ while its share of the Internet 
browser market was less than 5%.\5\ Today, those figures stand at 
92% for PC operating

[[Page 29016]]

systems \6\ and 91% for browsers.\7\ Thus Microsoft's position 
in PC operating systems remains strong, while its share in Interact 
browsers has risen dramatically.
---------------------------------------------------------------------------

    \4\ Dataquest, "All Platform Operating Systems Sales 
History and Forecast Summary," Table 12 (Mar. 1997).
    \5\ "Microsoft v Netscape: Freer than Free," 
The Economist (Aug. 17, 1996, U.S. Edition).
    \6\ IDC, "Worldwide Client and Server Operating 
Environments, Market Forecast and Analysis, 2001-2005" 
(Aug. 2001).
    \7\ "AOL Files Suit Against Microsoft For Damages 
Inflicted on Netscape," Wall Street Journal (Jan. 23, 2002) 
(citing data compiled by WebSideStory, a market research firm).
---------------------------------------------------------------------------

    24. Microsoft's illegal practices were successful in helping to 
minimize the threat that middleware posed for the creation of a 
programming environment outside of Microsoft's control. I am aware 
of no middleware today that poses a risk to Microsoft comparable to 
that posed by Navigator and Java in 1995. Nor does the government's 
Competitive Impact Statement suggest that such a threat exists today 
or is likely to emerge over the five-year duration of the PFJ.
    C. MICROSOFT'S MIDDLEWARE ADVANTAGES
    25. Microsoft today has substantial advantages in middleware 
that make it unlikely the market itself will generate new entrants 
into middleware capable of re-creating the competitive risk faced by 
Microsoft in 1995. As noted earlier, through its control over 
Windows, Microsoft has had and under the PFJ will continue to 
have--an enormous advantage in the distribution of software 
that is complementary to Windows. Since every new PC ships with 
Windows, Microsoft has a very easy way to get software into the 
hands of users: it can include it with the operating system. 
Microsoft can simply bundle the middleware with Windows or it can 
integrate the code into Windows itself.
    26. This ensures the ubiquity of Microsoft middleware and 
operates as a harrier to entry for competing middleware. Any entrant 
would have to make a substantial investment to achieve comparable 
widespread distribution. A firm considering entry should understand 
that its inability to guarantee a universally exposed set of APIs 
means that, all other things equal, developers would prefer to write 
to the APIs exposed by Microsoft middleware. The ubiquity of 
Microsoft middleware and its ability to integrate middleware into 
Windows--which the PFJ does not constrain--therefore 
operate as economic disincentives for the development of competing 
middleware by potential entrants.
    27. Microsoft also has complete freedom in how it prices its 
middleware. In bundling middleware with Windows, Microsoft need not 
charge an incremental price for the middleware. It can simply fold 
into the price of Windows whatever price it would charge for the 
middleware were it distributed separately. This would not be an 
option available for a potential entrant who will expect that it 
would need to establish a separate, discrete positive price for any 
middleware that it might create. The ability of Microsoft to set an 
apparent price of zero for its middleware operates as a barrier to 
entry in middleware.
    28. Even if competing middleware were created, the ubiquity of 
Microsoft middleware would operate as a direct barrier of the 
distribution of that middleware. As the DC Circuit affirmed, OEMs 
are reluctant to install two products that perform the same 
function, as this raises support costs. Twice as many products will 
be supported for the same function, plus consumers may be confused 
by the presence of both products.
    29. Moreover, Microsoft's ability to "embrace and 
extend" any middleware created by an entrant also operates as 
a barrier to entry. Again, it will take a substantial amount of time 
for an entrant to distribute innovative middleware. During that 
time, Microsoft will likely be able to imitate that middleware and 
distribute "updated" versions of Microsoft middleware 
over the Internet to end users through its Windows Update feature. 
Given this, entry into middleware is less likely and this may reduce 
innovation in and development of middleware.
    30. In sum, Microsoft took substantial steps to eliminate the 
threat posed to it by Netscape and Java. The DC Circuit affirmed 
that a substantial number of those actions constituted impermissible 
monopoly maintenance and therefore monopolization in violation of 
Section 2 of the Sherman Act. Today, Microsoft's illegally 
maintained monopoly operates as a substantial barrier to new entry 
into middleware. The monopoly operates as a disincentive for entry 
and thereby likely reduces innovation in middleware. Given this 
market structure, it is highly unlikely that market forces alone 
will lead to the development of innovative middleware that creates 
the same competitive risk to Microsoft that it faced from Navigator 
and Java in 1995.
    IV. THE RESTRICTIONS ON MICROSOFT'S BEHAVIOR CONTAINED IN PFJ 
ARE INSUFFICIENT TO RESTORE THE COMPETITIVE THREAT THAT MIDDLEWARE 
POSED IN 1995
    31. No remedy can turn back the clock to 1995 and re-create the 
competitive threat that existed at that crucial time of 
technological disruption. Technological disruptions of the magnitude 
that Bill Gates called "the Interact tidal wave" cannot 
be created by judicial proceedings. Even so, one of the objectives 
of the remedies should be to attempt to restore, to whatever extent 
possible, the possibility of competition in the market where the 
illegal monopoly was maintained (i.e., the market for PC operating 
systems). The restrictions on Microsoft's behavior in the PFJ fall 
well short of this objective.
    A. PROBLEMS WITH THE M1DDLEWARE REMEDIES
    32. Following its years of illegal conduct, Microsoft's position 
in the core middleware products (Internet browsers and Java 
technology) is totally different today than it was in 1995. 
Microsoft has a dominant share of the browser market, IE has caught 
up to and surpassed Navigator's technical capabilities, and the 
prospect of large numbers of desktop applications written in 
"write once, run anywhere" Java seems remote.
    33. There are two features of the industry that made the threat 
from Netscape and Java so significant First, the technological 
disruption of the Internet made the functionality of the browser 
sufficiently important that it could become a platform for large 
numbers of applications. Second, the head start that Netscape and 
Java had over Microsoft middleware provided a substantial first-
mover advantage, a particularly important element for competitive 
success in network industries prone to "tipping." 
Probably the only chance a competitor has to overcome the inherent 
advantages that Microsoft has in distribution is to create a large 
installed base of users before Microsoft can develop and launch a 
competitive product.
    34. The market position that Microsoft has today makes it 
difficult for any set Of conduct remedies to lead to significant 
middleware competition. Neither the PFJ nor any other set of conduct 
remedies can re-create the technological disruption or competitive 
head start that existed before Microsoft acted illegally. However, 
for the reasons explained below, the middleware remedies in the PFJ 
seem especially likely to he ineffective.
    1. The Reliance in the PFJ on OEMs to Distribute Competing 
Middleware
    35. The PFJ relies heavily on competition in the OEM 
distribution channel as the key mechanism for overcoming the 
competitive harm created by Microsoft's actions. The same was true 
in the government's prior settlement with Microsoft, as I noted in 
my 1995 declaration: Despite the importance of natural advantages 
[referring to the installed base discussion above] in the market for 
IBM-compatible PCs, the complaint and proposed remedies addressed 
competitive issues that are critical to the success of new 
competition in this market. The most effective and economic point of 
entry for sales of IBM-compatible PC operating systems is the OEM 
distribution channel. New operating system software products should 
have unimpeded access to this channel. The Government's complaint 
and proposed settlement provide needed relief to facilitate the 
entry of new competitors, such as IBM's OS/2.
    36. Seven years later, it is clear that little was accomplished 
in the prior consent decree in relying on the OEM channel to 
facilitate competition in PC operating systems. Unimpeded access to 
this channel may indeed he necessary for effective competition. 
However, it is far from sufficient to create effective competition 
for middleware given the current state of the industry.
    37. One obstacle to competition in middleware, which the PFJ 
does not address, is the applications barrier that now protects the 
position of Microsoft middleware. ISVs have a strong incentive to 
write applications to Microsoft middleware, since Microsoft 
middleware will be present on every Windows machine that is shipped. 
The PFJ does not restrict Microsoft's ability to commingle code and 
include middleware APIs in with its Windows operating system. The 
PFJ permits OEMs to remove Microsoft middleware icons, but the 
middleware itself, and its associated API set, will remain. Thus, 
the ubiquity of Microsoft's middleware will encourage ISVs to write 
applications to these APIs.
    38. The PFJ restricts Microsoft's ability to discriminate 
against OEMs that also ship

[[Page 29017]]

competing middleware, but this does not create an incentive for OEMs 
to ship competing middleware. For the reasons explained by the 
District Court and the Court of Appeals, OEMs are reluctant to 
include software that provides similar functionality to other 
software on the machine--it increases confusion among users and 
raises support costs.
    39. If ISVs do not write applications to the competing 
middleware, OEMs will not distribute it. If OEMs do not distribute 
it, ISVs will not write applications to it. The current dominance of 
Microsoft middleware thus makes it very unlikely that this circle 
can be broken by the non-discrimination restrictions in the PFJ.
    40. The PFJ also seeks to increase the role of OEMs in defining 
the Windows desktop. This is also insufficient to create significant 
middleware competition. Even if OEMs had complete control over the 
icons that would appear on the Windows desktop---and they would 
not under the PFJ--this would not alter in any way the software 
that would actually be present on the computer. Removing an icon 
from the desktop just removes the most obvious point of consumer 
access to the software, but the ability of ISVs to write to the APIs 
presented by the software remains unchanged.
    41. The PFJ also attempts to prohibit Microsoft from 
discriminating against OEMs that distribute competing middleware. It 
does this by requiring Microsoft to provide uniform licensing terms 
to the 20 largest OEMs and preventing specific retaliation against 
OEMs that distribute competing middleware. It is not clear to me 
that these restrictions are sufficient to prevent Microsoft from 
exercising influence over the behavior of OEMs towards products that 
compete with Microsoft. First, I understand that the non-
discrimination provisions apply only to certain Windows desktop 
operating systems (Windows XP and Windows 2000 Professional) and not 
to other Microsoft products that an OEM might purchase. Second, the 
relationships between Microsoft and OEMs are complex and multi-
faceted. For example, Microsoft provides marketing and promotion 
support to OEMs; its provides technical assistance; its provides 
allowances for product development Microsoft may provide these 
services differently to OEMs. Since the PFJ does not prohibit all 
forms of discrimination across OEMs, Microsoft may have sufficient 
ability to influence OEM decision-making.
    42. The PFJ also contains limited disclosure requirements. The 
exact scope of these disclosures depends on careful interpretation 
of the complex language of the PFJ. I do not attempt such an 
interpretation but comment only on the limited impact of the 
disclosure remedies under any reasonable interpretation. There is a 
requirement to disclose interfaces that permit competing middleware 
to interoperate with Windows operating systems. I understand, 
however, that Microsoft is only required to make these disclosures 
if the interface is already in use by a Microsoft middleware 
product. A disclosure requirement limited in this manner pushes 
potential middleware competitors in the direction of "me 
too" products and does little to create incentives for 
significant innovation in middleware.
    2. IE Open Source and Java Must-Carry
    43. There are alternative middleware remedies that could have a 
more significant effect. More aggressive remedies with respect to 
that middleware threat would be open source Internet Explorer and a 
requirement for Microsoft to distribute the most current version of 
the standard Java runtime environment with IE and Windows. Even 
these remedies are likely to be insufficient to turn back the clock 
to the level of competition that existed before Microsoft's illegal 
conduct. But they are likely to have more impact than the remedies 
in the PFJ.
    44. Open source IE is the most effective way to fully expose the 
links between IE and Windows as well as the IE APIs. This creates 
the possibility of interoperability between competing products and 
it furthers the possibility of operating system competition. It also 
allows anyone who wants to develop a competitive browser to be fully 
compatible with applications that are written to IE APIs. This way 
it limits the extension of the applications barrier to entry created 
by Microsoft's dominance in the browser.
    45. The Java must-carry remedy works to erode the application 
barrier to entry by helping to overcome reluctance of ISVs to 
develop programs that require Java on the client. It is only by 
assuring sufficient ubiquity of Java and browser functionality that 
there is any chance that Microsoft may lose control of the 
applications barrier through competing middleware.
    B. INATTENTION TO THE APPLICATIONS BARRIER TO ENTRY
    46. The applications barrier to entry identified by the DC 
Circuit consists in part of the large number of applications 
available on the Windows platform. As discussed above, successful 
entry in middleware of the type commenced by Netscape Navigator and 
Java could have substantially eroded the applications barrier to 
entry and facilitated entry into the operating systems market
    47. Microsoft controls the most economically important set of 
applications in its Microsoft Office suite. Office accounts for 
nearly 30% of Microsoft's annual revenue.\8\ Software suites 
consisting of personal productivity applications such as word 
processing, spreadsheets, presentation software, electronic mail, 
and calendar and contact management constitute a distinct and 
relevant product market. Microsoft's share of that market today is 
in the mid-90s \9\ and Microsoft almost certainly holds 
substantial market power.
---------------------------------------------------------------------------

    \8\ Dresdner Kleinwort Wasserstein, "Microsoft 
Corporation," Figure 4 (1 Aug. 2001).
    \9\ In 1999, Microsoft accounted for 96.1% of the revenues 
of office suites designed for Windows. Since 98.1% of all sales of 
office suites in 1999 were for the Windows platform, these figures 
by themselves imply an industry share of 94%. But Microsoft also 
accounted for a large share of the revenues of office suites 
designed for Apple's Macintosh OS--a platform that accounted 
for nearly all of the non-Windows sales of office suites. IDC Office 
Suite Market Review and Forecast, 1998-2003 (Aug. 1999).
---------------------------------------------------------------------------

    48. As found by the DC Circuit, Microsoft has used its control 
over Office to maintain its OS monopoly. Microsoft threatened to 
cancel the Macintosh version of Office if Apple did not distribute 
Internet Explorer, Microsoft's Internet browser. It is clear that 
Microsoft's ability to make such threats would be diminished if 
Microsoft had an obligation to license the rights to port Office to 
competing OS platforms.
    49. Since remedies focused entirely on middleware will not re-
create the threat to Microsoft's monopoly power in PC operating 
systems that existed prior to Microsoft's illegal conduct, 
additional actions need to be taken to ensure that Microsoft does 
not benefit from its illegal conduct. These additional actions 
should be targeted at further reducing the underlying source of 
Microsoft's market power, namely the applications barrier to entry. 
Porting Office to other platforms would be a remedy of this type 
that could have a significant impact on the applications barrier. 
One factor that limits the demand for Unix workstations, which have 
computational advantages over Intel-based PCs, is the inability to 
interoperate with Office. The thin-client model of computing, where 
most computing occurs on the server, not the client, represents one 
of the most important threats to Windows desktop computing. The 
switching costs of adopting new personal productivity software with 
files not compatible with Office represents a significant barrier to 
Unix-based thin client networks. A requirement to license the rights 
to port Office may be one of the most effective ways to create 
competition for Windows, something which can probably no longer be 
achieved by remedies exclusively related to middleware.
    C. PROBLEMS WITH THE ENFORCEMENT MECHANISM
    50. The remedies in the PFJ are too limited in scope to re-
create past competitive conditions even if they are enforced 
perfectly. However, the enforcement mechanisms in the PFJ are far 
from perfect and will likely lead to delays and costs that further 
limit the effectiveness of the remedies. The PFJ relies on a 
technology committee to oversee Microsoft's compliance with the PFJ. 
The membership in the committee is controlled 50% by the company 
whose past illegal activities have been the subject of the Circuit 
Court's decision. The committee lacks both resources and the power 
to enforce the PFJ. The committee must rely on information provided 
to it by Microsoft and has tittle ability to engage in its own 
investigations. Furthermore, if it uncovers a violation, it must 
rely on lengthy litigation to enforce it.
    51. The implication is that failures by Microsoft to comply may 
go undetected and if they are detected, it may take a great deal of 
time and effort to impose a change on Microsoft's behavior. Delays 
can greatly limit the effectiveness of any particular remedy in a 
dynamic industry subject to network effects. If enforcement will be 
ineffective, it may create an incentive for Microsoft to violate the 
terms of the decree.
    52. Other consent decrees have used special masters with 
sufficient resources and expedited judicial review to enforce their 
terms. Given the complex, dynamic nature of

[[Page 29018]]

the software industry, it is especially important that the resources 
are in place to monitor the terms of the decree and that swift 
enforcement is possible.
    V. APPROPRIATE REMEDIES SHOULD NOT ALLOW MICROSOFT TO PROTECT 
ITS ILLEGALLY MAINTAINED MONOPOLY AGAINST CURRENT AND FUTURE 
COMPETITION FROM OTHER MARKETS
    53. The PFJ focuses on the PC desktop as the central space in 
which competition will take place going forward. It does this by 
creating limited new operating fights for OEMs covering the 
appearance of the desktop and greater protections for installing 
middleware that competes with Microsoft. As I have discussed above, 
given the substantial advantages in middleware that Microsoft has 
through its illegally maintained monopoly, I think that it is 
unlikely that these desktop-oriented remedies will spur economically 
meaningful entry in middleware and that there is therefore little 
reason to think that those remedies will re-create the competitive 
risk Microsoft's desktop monopoly faced from middleware entrants in 
1995.
    54. The PFJ therefore needs to be augmented with remedies that 
take a forward-looking approach. The PFJ needs to focus on the 
current and future threats to Microsoft's market power and ensure 
that Microsoft is not allowed to use its illegally maintained 
monopoly in PC operating systems to dilute these current and future 
competitive threats. A PFJ focused on desktop remedies not only will 
not jump start competition now, but by allowing Microsoft to keep 
the benefits of its illegal activities, such remedies will fail to 
deter future illegal anticompetitive actions by Microsoft. Instead, 
additional remedies should naturally be directed at ensuring 
competition going forward uninfected by Microsoft's illegally 
maintained monopoly. In particular, these remedies should seek to 
re-create the same risks faced by Microsoft in 1995 when the 
middleware threat arose.
    A. FUTURE COMPETITION IN SERVERS AND WEB SERVICES
    55. A forward-looking remedy should seek to limit Microsoft's 
ability to use its illegally maintained monopoly power to bias 
competition in complementary products that have the potential to 
develop into substitutes for desktop computers. Server operating 
systems and Web services are two prime examples. These products 
intersect at the middle of two related trends. To date, the Internet 
has been a PC Internet. Most Internet users access the Internet 
through a PC or workstation. The first trend is a probable shift to 
the use of many devices to access the Internet, including cell 
phones, handhelds such as the Palm Pilot and other personal digital 
assistants, and thin clients. As these devices themselves are not as 
powerful as a typical PC, they will demand more work from the 
servers and server operating systems delivering the information. The 
implication is that, in the future, a significant amount of 
computing will bypass the desktop--which in turn implies that 
Microsoft has an incentive (if it can) to extend its monopoly from 
the desktop into servers.
    56. The second trend is a related shift in how software is owned 
and managed. Prior to the Internet, PC software and content was 
largely locally owned and locally managed. The software was 
installed directly on the user's PC, from a floppy disk and then 
later a CD. The rise of the Internet makes it possible to move the 
location of software off of the PC and onto a remote device---a 
server--with much of the work done remotely. This gives rise to 
the generalized notion of a web service, where software is no longer 
a thing like a CD but instead a service delivered to a connecting 
device, much the way electricity is delivered to many devices.
    57. On November 29, 2001, Steve Ballmer, Microsoft's CEO, 
discussed these trends and how Microsoft was approaching them 
through its .NET initiative:\10\
---------------------------------------------------------------------------

    \10\ S. Ballmer speech, Credit Suisse First Boston 
Technology Conference (Nov. 29, 2001) (http://www.microsoft.com/
msft/speech/BallmerCSFB112901.htm).
---------------------------------------------------------------------------

    About three years ago we changed the vision of our company. 
Instead of talking about a computer on every desk and in every home 
we started talking about empowering people through software anytime, 
any place, any device .... It starts with a view, which came to us 
quite clearly about five, almost six years ago now that XML 
[eXtensible Markup Language] would really be the transforming 
industry phenomenon of the next five years. If it was the PC 20 
years ago and graphical user interface 10 or 15 years ago and the 
Internet five or six years ago, it's XML. And I'm not going to give 
a long description, but I think the way you should think about it is 
XML will be the Lingua Franca of computing. It will be the basis on 
which systems work better with systems, people with people, 
businesses with businesses, businesses with consumers. It will 
improve the level of integration and connectivity. It gives us a 
framework at least for the software community to build the software 
that allows that ..... NET is our platform to let people take 
advantage of the XML revolution.
    58. Ballmer also discussed the Microsoft business model and how 
.NET fits within it. He sees Microsoft as targeted on seven business 
areas, including, unsurprisingly, PC operating systems, PC 
productivity solutions "anchored" by Office, and server 
software for building and deploying these applications. All of these 
are now being organized around .NET: I think you could say we are a 
company that invests in seven businesses around one platform. That 
platform is .NET..NET is our platform for the next technology 
revolution that is going on. And that is the shift to the XML web 
service model as the fundamental way of building and deploying 
software..NET is our platform to do that .... That's how we think 
about the seven business areas in which we are investing. They're 
all being re-platformed or re-plumbed around .NET and XML web 
services.
    59. A computing world in which Web services, hosted on servers, 
are delivered on demand over the Internet is a world that has 
negative implications for Microsoft's near-monopoly in desktop 
operating systems. In such a world, there is no longer the same need 
for desktop computers to have "fat" operating systems 
such as Windows. In many respects, the Web services model is simply 
a more developed version of the thin-client, "network 
computer" model advocated by Oracle and Sun in the mid/late-
1990s. As such, the Web services model is a threat to Microsoft's 
desktop monopoly and Microsoft therefore has an incentive (if it 
can) to use its existing monopoly to gain control over this possible 
threat. It has an incentive to ensure that Windows remains at the 
center of the Web services model and/or to migrate its monopoly from 
the desktop to Web services.
    B. MICROSOFT IS ATTEMPTING TO PROTECT ITS EXISTING MARKET POWER 
BY USING ITS ILLEGALLY MAINTAINED MONOPOLY IN PC OPERATING SYSTEMS 
TO GAIN ADVANTAGES IN SERVERS AND WEB SERVICES
    60. Microsoft's illegally maintained monopoly in the market for 
PC operating systems provides it with important advantages in server 
operating systems, in particular operating systems for workgroup 
servers. Workgroup servers are the servers in a "client-
server" network that interoperate directly with desktop 
clients. Workgroup servers provide services such as authentication 
and authorization, directory, and file and print. Very importantly, 
they are also the point of contact or gateway between an 
organization's network of servers and the Internet. Workgroup 
servers are distinct from enterprise servers, which are more 
powerful, reliable and expensive servers that handle databases and 
other "mission critical" applications.
    61. Some of Microsoft's advantages in workgroup server operating 
systems arise because of the distribution advantage provided by its 
monopoly in PC operating systems. Suppose a vendor of workgroup 
operating systems develops a new feature (such as a new directory 
service for keeping track of the users and resources on a network or 
a new security system for authentication and authorization). In the 
usual case, the network cannot make use of the new service in a 
server operating system unless certain new code (supplied by the 
vendor of the server operating system) is also installed on the 
clients in the network. In large networks, this can be a costly and 
time-consuming exercise--unless the network is running Windows 
on its servers. A network that runs Windows on its servers does not 
face this kind of problem because Microsoft ensures that the client-
side pieces of server-side technologies are built into its Windows 
desktop operating system. This gives Microsoft a competitive 
advantage over other vendors of workgroup server operating systems. 
But it is an advantage that derives from Microsoft's illegally 
maintained monopoly in PC operating systems. Moreover, there may be 
significant long-run costs through the adverse effect that 
Microsoft's distribution advantages (derived from its illegally 
maintained monopoly in desktop operating systems) may have on 
incentives to invest in server-side innovation.
    62. There are other ways in which Microsoft's past illegal 
conduct has provided it with advantages today in the market for 
workgroup server operating systems--advantages that help 
protect and enhance Microsoft's existing market power. For

[[Page 29019]]

example, one of the benefits to Microsoft from the defeat of 
Netscape's browser was the resulting reduction in demand for 
Netscape application programs for servers. These server-side 
applications were designed to interoperate with the Netscape browser 
and certain client-side applications, such as e-mail, written to the 
Netscape Navigator APIs. Unlike Microsoft's server-side applications 
(such as Exchange) that run only on Windows, Netscape's server-side 
applications were implemented on multiple platforms, including Unix 
and Novell's NetWare. As Netscape's share of the browser market 
declined following Microsoft's illegal conduct, the demand for 
Netscape's server applications also declined. Thus a consequence of 
Microsoft's illegal conduct has been an increase in the demand for 
Microsoft server-side applications such as Exchange that, as 
mentioned above, run only on Windows server operating systems. Put 
differently, Microsoft's past illegal conduct towards Netscape is 
helping Microsoft establish an applications barrier that will 
protect and enhance its future position in the market for workgroup 
server operating systems.
    63. Another way in which Microsoft's past illegal conduct 
affects the market for workgroup operating systems today involves 
distributed application programs. As I mentioned before, Java is a 
programming language with features that I understand make it well 
suited for distributed applications, i.e., applications that call 
upon resources located on multiple different computers located 
around a network. As I understand it, for distributed applications 
to work, they need to conform to a particular set of protocols, and 
these protocols need to be supported by the operating systems of the 
computers involved in executing the distributed application. Java 
had protocols for distributed applications (RMI and CORBA) that were 
supported by multiple operating systems. Microsoft had an 
alternative, proprietary set of protocols called DCOM. By 
interfering with the development of cross-platform Java, Microsoft 
gave an advantage to its framework for distributed applications 
(DCOM) and promoted the development of distributed applications 
written to protocols that run only on Windows operating systems. In 
addition, since the programs that are written to these Microsoft 
protocols are targeted for computers using the Windows operating 
system, such programs also make use of Windows APIs. This means that 
even if rival operating systems were given the ability to support 
DCOM, they could not run most of the distributed applications 
written to this protocol because these applications also make use of 
Windows APIs. Thus this is another example of how Microsoft's past 
illegal conduct, this times towards Java, is helping Microsoft 
establish an applications barrier that will protect and enhance its 
future position in the market for server operating systems.
    64. Microsoft's past illegal conduct has also given it 
advantages today in Web services. For example, one of the Web 
services that Microsoft has promoted heavily is Passport, its 
Internet authentication and authorization service. In a network 
environment, key issues are verifying the identity of users or 
computers ("who are you?") and determining the resources 
to which you are entitled to have access ("what are you 
authorized to do?"). Passport is an authentication and 
authorization service targeted, at least initially, at e-commerce. 
Consumers who subscribe to Microsoft's Passport service will have 
their name and credit card information on file on servers controlled 
by Microsoft. E-commerce vendors who participate in Passport will 
have back office connections with the Microsoft servers so that, 
when a consumer who subscribes to Passport wants to purchase 
something, the e-commerce vendor can check with Microsoft's Passport 
servers to authenticate and authorize the purchase (and debit the 
consumer's credit card). The theory is that Passport will simplify 
e-commerce transactions.
    65. For Passport to be successful, Microsoft needs to have a 
large base of consumers who subscribe to the service. A large base 
of consumers will make firms engaged in e-commerce interested in 
joining Passport on the vendor side, which in turn will make 
Passport more attractive to consumers. Thus there are potential 
network effects which, if they get started, may result in Passport 
being in the middle of a very large volume of Internet transactions.
    66. Microsoft is actively using its illegally maintained 
monopoly in PC operating systems as a vehicle for enrolling 
consumers in Passport. Every time a consumer boots up a new copy of 
Windows, the consumer is asked multiple times whether he or she 
would like to sign up with Passport. In addition, the consumer is 
told that he or she will not receive information about product 
upgrades unless the consumer signs up for Passport. Thus this is an 
example in which Microsoft is using the distribution advantages that 
it has by virtue of its illegally maintained monopoly in PC 
operating systems to gain advantages in Web services. In so doing, 
Microsoft helps protect its existing monopoly power and/or helps 
migrate its market power from the desktop to Web services.
    C. THE PFJ GIVES INSUFFICIENT ATTENTION TO FUTURE COMPETITION
    67. The implications of these trends are significant. 
Microsoft's monopoly in desktop operating systems provides it with 
advantages in adjacent markets that Microsoft is able to use to 
protect and enhance its illegally maintained monopoly power. By 
migrating its monopoly from desktop operating systems into server 
operating systems and Web services, Microsoft can help ensure that 
its future market power is comparable to (or greater than) the 
market power it possessed when the desktop was the principal hub of 
computing activity.
    68. Given these links between Microsoft's past illegal conduct 
and Microsoft's future market power, an appropriate remedy should be 
focused on limiting Microsoft's ability to use its illegally 
maintained monopoly to gain advantages in products in other markets 
that have the potential to become substitutes for the Windows 
desktop operating system. Disclosure remedies have the potential to 
be an important step in this direction. For example, if Microsoft 
were required to fully disclose the interfaces and protocols used by 
its server and client operating systems, then vendors of non-
Microsoft server operating systems could design their products so 
that they could interoperate smoothly in networks populated by 
Windows clients and servers. The resulting competition among vendors 
of server operating systems would help ensure that servers remain a 
threat to Microsoft's illegally maintained monopoly in desktop 
operating systems.
    69. The PFJ does not ignore completely issues related to 
adjacent markets. The PFJ does require disclosure for communication 
protocols that allow for servers to interoperate with Windows 
operating systems. This requirement, in contrast with the other 
provisions of the PFJ, appears to focus more on the server operating 
system market than competition in middleware. I understand, however, 
that the disclosure requirements proposed in the PFJ are exceedingly 
narrow mad ultimately inadequate to allow full and equal 
interoperability for competitive server operating systems or Web 
services architectures.
    70. In designing disclosure remedies (or any other remedy), it 
is important to remember that one is try to cure the consequences of 
past illegal conduct. As a result, there is no reason to be troubled 
by remedies that impose obligations that one would be reluctant to 
impose on other firms. Against this background, it seems reasonable 
to consider a remedy that requires disclosure sufficient to allow 
competitive products to interoperate with Microsoft software on an 
equal basis as Microsoft's own products. It is not clear that even 
this would be enough to offset the advantages that Microsoft has 
gained for itself in adjacent markets through past illegal conduct 
and which serve to protect and enhance its existing market power. 
But it seems like a reasonable step.
    VI. SUMMARY OF CONCLUSIONS
    71. As the DC Circuit found, Microsoft violated Sec. 2 of the 
Sherman Act in impermissibly maintaining its monopoly through 
actions designed to eliminate the threat to that monopoly posed in 
the mid 1990s by competition from Netscape Navigator and Java 
middleware. Given that finding, the remedies in this case should 
eliminate the benefits to Microsoft of its illegal conduct; should 
restore, if possible, the possibility of competition in operating 
systems; and should not allow Microsoft to protect its illegally 
maintained monopoly from current and future competition in related 
markets, such as server operating systems and Web services. In my 
opinion, the PFJ fails to accomplish these objectives.
    72. The PFJ focuses on the desktop and on re-creating the 
possibility for middleware competition by giving OEMs freedom with 
regard to icon display and more limited freedom in installing and 
using non-Microsoft middleware. In doing so, it ignores the reality 
that Microsoft's market position in browsers and other middleware is 
substantially stronger today than it was in 1995. I know of no 
competing middleware today--and none is suggested in the 
Competitive Impact Statement--that begins to enjoy the time-to-
market and market

[[Page 29020]]

presence advantages held by Netscape Navigator and Java in the mid-
1990s. The PFJ does nothing to address the powerful distributional 
advantage that Microsoft alone has and which ensures that its 
middleware will be ubiquitous. That ubiquity operates as an 
unchecked barrier to entry and reduces the incentive for others to 
create innovative, competitive middleware. I therefore see no reason 
to think that the PFJ will succeed in spurting a new middleware 
threat to the Microsoft operating system or in denying Microsoft the 
fruits of its illegally maintained monopoly.
    73. The PFJ ignores remedies that could have a more significant 
effect in middleware markets, in particular, remedies that require 
Internet Explorer to be open source and that require Microsoft to 
distribute the most current version of the Java runtime environment 
with IE and Windows. Although these remedies are unlikely to fully 
restore the competitive threat posed by middleware before 
Microsoft's illegal activities took place, these remedies would 
likely have a greater impact than those set forth in the PFJ.
    74. More fundamentally, the PFJ does nothing to address the 
applications barrier to entry that defines Microsoft's monopoly in 
PC operating systems. Microsoft also controls the most economically 
important set of applications for Windows through its control over 
Microsoft Office. As the DC Circuit found, Microsoft used that 
control to protect its operating system monopoly through threats 
against Apple. It is clear that Microsoft's ability to make such 
threats would be diminished if Microsoft has an obligation to 
license the rights to port Office to competing operating systems. 
Indeed, porting Office to other operating systems is a remedy that 
could have a significant impact on the applications barrier to 
entry.
    75. In addition, the PFJ should focus on the current and future 
threats to Microsoft's market power and ensure that Microsoft cannot 
use its illegally maintained monopoly to stifle such threats. This 
case makes clear that those threats are likely to come from products 
that are complements to Windows in the short run and potential 
competitors in the long run. That was precisely the position of 
Netscape Navigator and Java in 1995; today, based on Microsoft's 
public statements, that may be the position of server operating 
systems and Web services. Both of these represent a move away from a 
computing structure organized around desktop computers using 
"fat" operating systems such as Windows. Server 
operating systems and Web services represent an evolution of the 
thin-client model of computing, and as such, represent a threat to 
Microsoft's desktop monopoly. Microsoft is currently attempting to 
defeat this threat by using its illegally maintained monopoly in PC 
operating systems as a vehicle for expanding its market share in 
servers and attaching consumers to its Web services infrastructure. 
The PFJ is missing forward-looking remedies that address such 
efforts by Microsoft to protect and enhance its existing market 
power by using its illegally maintained monopoly in PC operating 
systems to defeat competitive threats in adjacent markets. This is a 
significant hole in the PFJ that bears on the future of competition 
in the computing industry.
    I hereby affirm under penalty of perjury that the forgoing is 
true and correct to the best of my knowledge, information and belieu 
Executed this 25th day of January, 2002 in Palo Alto, California.
    Kenneth J. Arrow
    BIOGRAPHICAL SKETCH
    KENNETH J. ARROW
    Personal
    Born: 23 August, 1921
    Wife's name: Selma
    Children: David Michael and Andrew Seth
    Education
    B.S. in Social Science, City College, New York, 1940. Major: 
Mathematics.
    M.A., Columbia University, 1941. Field: Mathematics.
    Ph.D., Columbia University, 1951. Field: Economics.
    Positions
    Captain, U. S. Army Air Corps, 1942-46 (Weather Officer). 
Research Associate, Cowles Commission for Research in Economics, 
1947-49.
    Assistant Professor of Economics, University of Chicago, 
1948-49.
    Consultant, the RAND Corporation, 1948-date.
    Acting Assistant Professor of Economics and Statistics, Stanford 
University, 1949-50.
    Associate Professor of Economics and Statistics, Stanford 
University, 1950-53.
    Professor of Economics, Statistics, and Operations Research, 
Stanford University, 1953-68
    Economist, Council of Economic Advisers, U. S. Government, 1962.
    Visiting Professor of Economics, Massachusetts Institute of 
Technology, Fall, 1966.
    Fellow, Churchill College (Cambridge, England), 1963-64, 
1970, 1973, 1986.
    Guest Professor, Institute for Advanced Studies, Vienna, June 
1964, June 1970.
    Professor of Economics, Harvard University, 1968-74.
    James Bryant Conant University Professor, Harvard University, 
1974-79.
    Joan Kenney Professor of Economics and Professor of Operations 
Research, Stanford University, 1979 to 1991.
    Senior Fellow by Courtesy, Hoover Institution on War, Revolution 
and Peace, 1981-94.
    Part-time Professor, European University Institute, 1986.
    External Professor, Santa Fe Institute, 1988 to date.
    Joan Kenney Professor of Economics Emeritus and Professor of 
Operations Research Emeritus, 1991 to date
    Fulbright Professor, University of Siena, Spring 1995.
    Visiting Fellow, All Souls College (Oxford, England), 1996.
    University and Faculty Administration at Stanford University
    Executive Head, Department of Economics, 1953-6
    Member and Chair, Executive Committee of the Academic Council
    Acting Executive Head, Department of Economics, 1962-3
    Member and Chair, Advisory Board
    Member and Chair, Senate of the Academic Council
    Director, Stanford Institute for Theoretical Economics, 
1993-98
    Director, Stanford Center on Conflict and Negotiation, 
1993-5
    Honors and Awards
    Gold Pell Medal (highest grades), City College, New York, 1940.
    Phi Beta Kappa.
    Social Science Research Fellow, 1952.
    Fellow, Center for Advanced Study in the Behavioral Sciences, 
1956-57.
    John Bates Clark Medal, American Economic Association, 1957.
    LL.D. (honorary), University of Chicago, 1967.
    M.A. (honorary), Harvard University, 1968.
    Marshall Lecturer, Cambridge University, Spring 1970.
    D.Soc/Eco.Sci. (honorary), University of Vienna, 1971.
    LL.D. (honorary), City University of New York, 1972.
    Nobel Memorial Prize in Economic Science, 1972.
    John R. Commons Lecture Award, Omicron Delta Epsilon, 1973.
    D.Sci. (honorary), Columbia University, 1973.
    D.Soc.Sci. (honorary), Yale University, 1974.
    Dr. (honorary), Universite Rene Descartes, 1974.
    LL.D. (honorary), Hebrew University of Jerusalem, 1975.
    LL.D. (honorary), University of Pennsylvania, 1976.
    D.Pol.Sci. (honorary), University of Helsinki, 1976.
    Member, National Academy of Sciences (Chairman, Section 54, 
1976-1979, Council member 1990 to date).
    Fellow, American Academy of Arts and Sciences (Vice President, 
1979-80, 1991-94).
    Member, American Philosophical Society.
    Member, Institute of Medicine.
    Foreign Honorary Member, Finnish Academy of Sciences.
    Corresponding Member, British Academy.
    Sigma Xi (President, Stanford Chapter, 1981-82).
    Tanner Lecturer, Oxford University, Spring 1983.
    2nd Class Order of the Rising Sun, Japan, 1984.
    Tanner Lecturer, Harvard University, Spring 1985.
    Dr. of Letters, University of Cambridge, 1985.
    Dr. Honoris Causa, Universite d'Aix-Marseille III, 1985.
    von Neumann Prize of The Institute of Management Sciences and 
the Operations Research Society of America, 1986.
    LL.D. (honorary), Washington University in St. Louis, 1989.
    Clarendon Lectures, Oxford University, November 1989.
    LL.D. (honorary), Ben-Gurion University of the Negev, 1992.
    Member, Pontifical Academy of Social Sciences
    Laurea (honoris causa) Universita Cattolica del Sacro Cuore 
(Milan)

[[Page 29021]]

    Dr. (hon causus) University of Uppsala, 1995.
    Publication of Enduring Quality Award 1995, Association of 
Environmental and Resource Economics (with Anthony C. Fisher)
    Kampe de Feriet Award (Information Processing for Management 
under Uncertainty), 1998
    Medal of the University of Paris, 1998
    Dr. (hon.) University of Buenos Aires, 1999
    LL.D. (hon.) Harvard University, 1999
    Dr. (hon. Causus) University of Cyprus, 2000.
    50th Anniversary Medal, School of Humanities, Arts, and Social 
Sciences, Massachusetts Institute of Technology
    Ph.D. (h.c.) University of Tel Aviv, 2001
    Professional Societies
    Econometric Society (Fellow; Vice President, 1955, President, 
1956, Member of the Council, 1983).
    Institute of Mathematical Statistics (Fellow).
    American Statistical Association (Fellow).
    American Economic Association (Member, Executive Committee, 
1967-1969; President-elect, 1972; President, 1973; 
Distinguished Fellow).
    The Institute of Management Sciences (President, 1963; Chairman 
of the Council, 1964).
    Western Economic Association (President, 1980-1981).
    American Association for the Advancement of Science (Fellow; 
Chair, Section K, 1982).
    International Society for Inventory Research (President, 
1983-1988).
    Honorary President, International Economic Association; 
President 1983-1986; Member, Executive Committee, 
1986-1992.
    The Society for Social Choice and Welfare, Caen, France, First 
President, 1992-93.
    Economists Allied for Arms Reduction, Co-Chair, 1990-1995
    Business Positions
    Member, Board of Directors, Varian Associates, Inc., 
1973-1991
    Member, Board of Directors, Abt Associates, Inc., 
1975-1985
    Member, Board of Directors, Fireman's Fund Insurance Company, 
1980-1991
    Member, Board of Directors, Strategies for a Global Environment, 
Inc., 1998-
    Member, Board of Directors, Unext, Inc., 2000-
    PUBLICATIONS OF KENNETH J. ARROW
    BOOKS
    1. [1951] Social Choice and Individual Values. New York: Wiley.
    2. [1958] (with S. Karlin and H. Scarf) Studies in the 
Mathematical Theory of Inventory and Production. Stanford, 
California: Stanford University Press.
    3. [1958] (with L. Hurwicz and H. Uzawa) Studies in Linear and 
Non-Linear Programming. Stanford, California: Stanford University 
Press.
    4. [1959] (with M. Hoffenberg and the assistance of H. Markowitz 
and R. Shephard) A Time Series Analysis of Interindustry Demands. 
Amsterdam: North-Holland Publishing Co.
    5. [1963] Social Choice and Individual Values. Wiley: New York, 
2nd edition.
    6. [1965] Aspects of the Theory of Risk-Bearing. Yrjo Jahnssonin 
saatio Helsinki, Finland.
    7. [1970] (with M. Kurz) Public Investment, the Rate of Return, 
and Optimal Fiscal Policy. Baltimore and London: The Johns Hopkins 
Press.
    8. [1971] (with F. H. Hahn) General Competitive Analysis. San 
Francisco: Holden-Day; Edinburgh: Oliver & Boyd.
    9. [1971] Essays in the Theory of Risk-Bearing. Chicago: 
Markham; Amsterdam and London: North-Holland.
    10. [1974] The Limits of Organization. New York: W. W. Norton.
    11. [1976] (with S. Shavell and J. Yellen) The Limits of the 
Market Economy, (in Japanese). Memorandum for Ministry of 
International Trade and Industry, Japan.
    12. [1976] The Viability and Equity of Capitalism. E. S. 
Woodward lecture, Department of Economics, University of British 
Columbia.
    13. [1977] (with L. Hurwicz) Studies in Resource Allocation 
Processes. Cambridge, London, New York, and Melbourne: Cambridge 
University Press.
    14. [1983] Collected Papers of Kenneth J. Arrow, Volume 1, 
Social Choice and Justice. Cambridge, Massachusetts: The Belknap 
Press of Harvard University Press.
    15. [1983] Collected Papers of Kenneth J. Arrow, Volume 2, 
General Equilibrium. Cambridge, Massachusetts: The Belknap Press of 
Harvard University Press.
    16. [1984] Collected Papers of Kenneth J. Arrow, Volume 3, 
Individual Choice under Certainty and Uncertainty. Cambridge, 
Massachusetts: The Belknap Press of Harvard University Press.
    17. [1984] Collected Papers of Kenneth J. Arrow, Volume 4, The 
Economics of Information. Cambridge, Massachusetts: The Belknap 
Press of Harvard University Press.
    18. [1985] Collected Papers of Kenneth J. Arrow, Volume 5, 
Production and Capital. Cambridge, Massachusetts: The Belknap Press 
of Harvard University Press.
    19. [1985] Collected Papers of Kenneth J. Arrow, Volume 6, 
Applied Economics. Cambridge, Massachusetts: The Belknap Press of 
Harvard University Press.
    20. [1986] (with Herve Raynaud) Social Choice and Multicriterion 
Decision-Making. Cambridge, Massachusetts: The MIT Press.
    22. [2000] Theorie de l'information et des organisations. Edited 
by T. Granger. Paris: Dunod.
    BOOKS EDITED
    1. [1960] (with S. Karlin and P. Suppes) Mathematical Methods in 
the Social Sciences, 1959: Proceedings of the First Stanford 
Symposium. Stanford, California: Stanford University Press.
    2. [1962] (with S. Karlin and H. Scarf) Studies in Applied 
Probability and Management Science. Stanford, California: Stanford 
University Press.
    3. [1969] (with T. Scitovsky) Readings in Welfare Economics. 
American Economic Association Series of Republished Articles in 
Economics. Homewood, Illinois: Richard D. Irwin, Vol. XII.
    4. [1971] Selected Readings in Economic Theory from 
Econometrica. Cambridge, Massachusetts, and London: MIT Press.
    5. [1978] (with S. J. Fitzsimmons and R. Wildenmann) 
Zukunftsorientierte Planung und Forschung fur die 80er Jahre. 
Koningstein/Ts., German Federal Republic: Athenaum Verlag.
    6. [1981] (with C. C. Abt and S. J. Fitzsimmons) Applied 
Research for Social Policy: The United States and the Federal 
Republic of Germany. Cambridge, Massachusetts: Abt.
    7. [1981] (with M. Intriligator) Handbook of Mathematical 
Economics, Volume I. Amsterdam, New York and London: North-Holland.
    8. [1982] (with M. Intriligator) Handbook of Mathematical 
Economics, Volume 11. Amsterdam, New York and London: North-Holland.
    9. [1985] (with Seppo Honkapohja) Frontiers of Economics. Oxford 
and New York: Basil Blackwell Ltd.
    10. [1986] (with M. Intriligator) Handbook of Mathematical 
Economics, Volume III. Amsterdam, New York and London: North-
Holland.
    11. [1988] (with M. J. Boskin) The Economics of Public Debt. 
Basingstoke and London: Macmillan in association with The 
International Economic Association.
    12. [1988] (with P. W. Anderson and D. Pines) The Economy as an 
Evolving Complex System. Redwood City, California: Addison-Wesley.
    13. [1988] The Balance between Industry and Agriculture in 
Economic Development. Volume 1: Basic Issues. Basingstoke and 
London: Macmillan in association with The International Economic 
Association.
    14. [1991] Issues in Contemporary Economics. Volume I, Markets 
and Welfare. Basingstoke and London: Macmillan for International 
Economic Association.
    15. [1994] (with R. Arnott, A.B. Atkinson, and J. Dreze) Public 
Economics, by William Vickrey. Cambridge, U.K., New York, and 
Oakleigh, Victoria: Cambridge University Press.
    16. [1995] (with R.H. Mnookin, L. Ross, A. Tversky, and R. 
Wilson) Barriers to Conflict Resolution. New York and London; W.W. 
Norton.
    17. [1996] (with E. Colombatto, M. Perlman, and C. Schmidt) The 
Rational Foundations of Economic Behavior. Basingstoke and London: 
Macmillan for the International Economic Association.
    18. [1996] (with R.W. Cottle, B.C. Eaves and I. Olkin) Education 
in a Research University. Stanford, CA: Stanford University Press.
    19. [1996-7] (with Amartya Sen and Kotaro Suzumura) Social 
Choice Re-examined. Basingstoke and London: MacMillan in association 
with the International Economic Association. 2 vol.
    20. [1998] (with Yew-Kwang Ng and Xiaokai Yang) Increasing 
Returns and Economic Progress. Basingstoke, UK: Macmillan, and New 
York: St. Martin's.
    22. [2000] (with S. Bowles and S. Durlauf) Meritocracy and 
Economic Inequality. Princeton, NJ: Princeton University Press.
    23. [2001] (with G. Debreu) Landmark Papers in General 
Equilibrium Theory, Social Choice, and Welfare Economics. 
Cheltenham, UK, and Northampton, MA: Edward Elgar.

[[Page 29022]]

    COLLECTIVE STUDIES
    1. [1971] (as member of Climatic Impact Committee of the 
National Research Council, National Academy of Sciences, National 
Academy of Engineering) Environmental Impact of Stratospheric 
Flight. Washington, D. C.: National Academy of Sciences.
    2. [1977] (as member of Nuclear Energy Policy Study Group) S. M. 
Keeny, Jr., et al, Nuclear Power Issues and Choices. Cambridge, 
Massachusetts: Ballinger.
    3. [1979] H.H. Landsberg, et al, Energy: The Next Twenty Years. 
Cambridge, Massachusetts: Ballinger.
    4. [1981] (as Chairman of the Committee for a Planning Study for 
an Ongoing Study of Costs of Environment-related Health Effects, 
Institute of Medicine) Costs of Environment-related Health Effects. 
Washington, D. C.: National Academy Press.
    5. [1991] (as member of the Oversight Review Board of the 
National Acid Precipitation Assessment Program) The Experience and 
Legacy of NAPAP. Washington, DC: National Acid Precipitation 
Assessment Program.
    6. [1993] (as Co-chair) Report of the NOAA [National Oceanic and 
Atmospheric Administration] Panel on Contingent Valuation. Federal 
Register, 58, No. 10 (January 15, 1993): 4602-4614.
    7. [1995] (with B. Bolin, R. Constanza, P. Dasgupta, C. Folke, 
C.S. Holing, B.-O. Jansson, S. Levin, K.-G. Maler, C. Perrings, and 
D. Pimentel) Economic growth, carrying capacity, and the 
environment. Science 268.28 April 1995, 520-521.
    8 [1996] (with M.L. Cropper, G.C. Eads, R.W. Hahn, L.B. Lave, 
R.G. Noll, P.R. Portney, M. Russell, R. Schmalensee, V.K. Smith, and 
R.N. Stavins) Benefit-Cost Analysis in Environmental, Health, and 
Safety Regulations: A Statement of Principles. La Vergne, TN: The 
AEI Press, c/o Publisher Resources, Inc.
    9 [2000] (with G. Daily, P. Dasgupta, S. Levin, K.-G. Maler, E. 
Maskin, D. Starrett, T. Sterner, and T. Tietenberg) Managing 
ecosystem resources. Environmental Science and Technology 34: 
1401-1406. NONTECHNICAL ARTICLES
    1. [1961] "Does the Majority Ever Rule?" 
introductory notes. Portfolio and Art News Annual 4:76-78.
    2. [1974] "Taxation and Democratic Values." The New 
Republic 171:18:23-25.
    3. [1975] "How Much to Fear from OPEC?" Moment 
1:2:32-34.
    4. [1978] "Capitalism, Socialism, and Democracy," 
(symposium). Commentary 65:4:29-31.
    5. [1978] "A Cautious Case for Socialism." Dissent, 
Fall, 472-480.
    6. [1979] "The Economy and the Economist." Partisan 
Review 1:113-116.
    7. [1981] "Two Cheers for Regulation." Harper's 
262:18-22.
    8. [1982] "Why People Go Hungry." New York Review of 
Books 29:12:24-26.
    9. [1983] "The Economics of 1984." In P. Stansky 
(ed.) On Nineteen Eighty-Four. San Francisco: W.H. Freeman, pp. 
43-48.
    10. [1984] "The International Economic Order of the 
Twenty-First Century." In Osaka Junior Chamber, Inc., Wisdom 
Toward the 21st Century. Tokyo: YMCA Press, pp. 173-227 (in 
Japanese).
    11. [1984] "The Economy as Order and Disorder." In 
P. Livingston (ed.) Disorder and Order. Saratoga, California: ANMA 
Libri., pp. 162-172.
    12. [1986] "Kenneth J. Arrow." In W. Breit and R. W. 
Spencer (eds.) Lives of the Laureates: Seven Nobel Economists. 
Cambridge, Massachusetts, and London, pp. 43-57.
    13. [1987] "Redistribution to the Poor: A Collective 
Expression of Individual Altruism." In F. Jimenez (ed.) 
Poverty and Social Justice. Tempe, Arizona: Bilingual Press, pp. 
39-46.
    14. [1989] "The Multiple Responsibilities of the 
Corporation." In J. E. Weiler (ed.), The First International 
Symposium on Stakeholders. Dayton, Ohio: Center for Business and 
Economic Research, School of Business Administration, University of 
Dayton, pp. 53-62.
    15. [1989] Chapter 1. In W. Sichel (ed.) The State of Economic 
Science. Kalamazoo, Michigan: W.E. Upjohn Institute for Employment 
Research.
    16. [1991] "Economic Forecasting." In G. E. Gaull 
(ed.) New Technologies and the Future of Food and Nutrition. New 
York: Wiley. Chapter 25, pp. 135-140.
    17. [1992] "Decision Making by Individuals and 
Systems." In Office of Naval Research: Forty Years of 
Excellence. Arlington, Virginia: Office of Naval Research. Pp. 
123-127.
    18. [1992] "I Know a Hawk from a Handsaw." In M. 
Szenberg (ed.) Eminent Economists. Cambridge and New York: Cambridge 
University Press. Pp. 42-50.
    19. [1992] "Moral Thinking and Economic 
Interaction." In Pontifical Council for Justice and Peace, 
Social and Ethical Aspects of Economics. Vatican City. Pp. 
17-22.
    20. [1994] "Gli Obblighi Etica del Mercato." Etica 
degli Affari e delle Professioni, VII: 1/94: 34-38.
    21. [1996] "Environmental Aspects of Environmental 
Challenges," in H.W. Kendall et. al., Meeting the Challenges 
of Population, Environment, and Resources: The Costs of Inaction. 
Washington, DC: The World Bank. Environmentally Sustainable 
Development Proceedings Series No. 14, pp. 29-31.
    22. [1996] What Does the Present Owe the Future: An Economic and 
Ethical Perspective on Climate Change. Grace A. Tanner Lecture on 
Human Values XVII. Cedar City, Utah: Southern Utah University.
    23. [1998] Tribute to Michael Bruno. The Economic Quarterly 
45:473-477 (in Hebrew).
    24. [2000] Globalization and its implications for international 
security. ECAAR Bulletin 12(3): 1,7.
    25. [2001] Is capitalism good for democracy? In J. Cohen and K. 
R Manning (eds.) Asking the Right Questions: A Colloquium 
Celebrating the 50th Anniversary. Massachusetts Institute of 
Technology, School of Humanities, Arts, and Social Sciences. Pp. 
90-96.
    26. [2001] John C. Harsanyi, 1920-2000. Biographical 
Memoirs of the National Academy of Sciences 80: 3-14.
    27. [2001] Armen Alchian's contributions of NIE. Newsletter 
International Society for New Institutional Economics 3 (Number 2): 
5-8.
    PAPERS
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Meteorology 6:150-159.
    2. [1949] (with D. Blackwell and M. A. Girshick) Bayes and 
Minimax Solutions of Sequential Decision Problems. Econometrica 
17:213-44.
    3. [1950] Homogeneous Systems in Mathematical Economics: A 
Comment. Econometrica 18:60-62.
    4. [1950] A Difficulty in the Concept of Social Welfare. Journal 
of Political Economy 58:328-46.
    5. [1951] Alternative Proof of the Substitution Theorem for 
Leontief Models in the General Case. In T. C. Koopmans, (ed.) 
Activity Analysis of Production and Allocation. New York: Wiley, 
Chapter IX.
    6. [1951] (with T. E. Harris and J. Marschak) Optimal Inventory 
Policy. Econometrica 19:250-72.
    7. [1951] Alternative Approaches to the Theory of Choice in 
Risk-Taking Situations. Econometrica 19:404-37.
    8. [1951] Little's Critique of Welfare Economics. American 
Economic Review 41:923-34.
    9. [1951] Mathematical Models in the Social Sciences. In D. 
Lerner and H. D. Lasswell (eds.), The Policy Sciences. Stanford, 
California: Stanford University Press, pp. 129-54.
    10. [1951] An Extension of the Basic Theorems of Classical 
Welfare Economics. In J. Neyman (ed.), Proceedings of the Second 
Berkeley Symposium on Mathematical Statistics and Probability. 
Berkeley and Los Angeles: University of California Press, pp. 
507-32.
    11. [1952] The Determination of Many-Commodity Preference Scales 
by Two-Commodity Comparison. Metroeconomica IV: 107-15.
    12. [1952] Le principe de rationalite dans les decisions 
collectives. Economie Appliquee V:469-84.
    13. [1953] Le role des valeurs boursieres pour la repartition la 
meilleure des risques, Econometrie. Colloques Internationaux du 
Centre National de la Recherche Scientifique, Vol. XI, pp. 
41-47.
    14. [1953] (with E. W. Barankin and D. Blackwell) Admissible 
Points of Convex Sets, Contributions to the Theory of Games, II. 
Princeton: Princeton University Press, pp. 87-91.
    15. [1954] (with G. Debreu) Existence of Equilibrium for a 
Competitive Economy. Econometrica 22:265-90.
    16. [1954] Import Substitution in Leontief Models. Econometrica 
22:481-492.
    17. [1956] (with L. Hurwicz) Reduction of Constrained Maxima to 
Saddle-Point Problems. In J. Neyman (ed.) Proceedings of the Third 
Berkeley Symposium on Mathematical Statistics and Probability. 
Berkeley and Los Angeles: University of California Press, Vol. V, 
pp. 1-20.
    18. [1956] (with A. C. Enthoven) A Theorem on Expectations and 
the Stability of Equilibrium. Econometrica 24:288-93.
    19. [1957] Statistics and Economic Policy. Econometrica 
25:523-31.
    20. [1957] (with L. Hurwicz) Gradient Methods for Constrained 
Maxima. Operations Research 5:258-65.

[[Page 29023]]

    21. [1957] Decision Theory and Operations Research. Operations 
Research 5:765-74.
    22. [1958] Utilities, Choices, Attitudes: A Review Note. 
Econometrica 26:1-23.
    23. [1958] Tinbergen on Economic Policy. Journal of the American 
Statistical Association 53:89-97.
    24. [1958] The Measurement of Price Changes. In Joint Economic 
Committee, The Relationship of Prices to Economic Stability and 
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MTC-00030609

    DAY CASEBEER
    MADRID & BATCHELDER LLP
    20300 Stevens Creek Blvd., Suite 400
    Cupertino, California 95014
Telephone: (408) 255--3255
Facsimile: (408) 255-3254
FACSIMILE TRANSMISSION
DATE: JANUARY 28, 2002 NO. OF PAGES: 43
PLEASE DELIVER TO:
ANTITRUST DIVISION
EPARTMENT OF JUSTICE
PHONE NO. ( ) FAX No. (202) 616-9937
FROM: ROBERT M. GALVIN, ESQ.
PHONE: (408 ) 342-4578 REPLY FAX: (408) 255-3254
    CLIENT NO: 1901-006
    MESSAGE:
    ORIGINALS TO FOLLOW: VIA
    If you have questions regarding this fax, please call
    Veronica at (408) 342-4571
    Comments to the Revised Proposed Final Judgment in United States 
v. Microsoft Corporation, No. 98-1232
    State of New York, et al. v. Microsoft Corporation, No. 
98-1233 Submitted By
    Sun Microsystems, Inc.
    Pursuant to the Tunney Act, 15 U.S.C.  16
    Lloyd R. Day, Jr Jeffrey S. Kingston, Michael H. Morris, Robert 
M. Galvin, James L. Miller Lee Patch Renee DuBord
    DAY CASEBEER
    MADRID & BATCHELDER LLP
    20300 STEVENS CREEK BLVD.
    SUITE 400
    CUPERTINO, CA 95014
    (408) 255-3255
    BROBECK, PHELGSTER & SUN MICROSYSTEMS, INC.
    901 SAN ANTONIO ROAD
    SPEAR STREET TOWER
    PALO ALTO, CA 94305
    (650) 960--1300
    HARRISON LLP
    ONE MARKET STREET
    SAN FRANCISCO, CA 94105Table of Contents
    I. Introduction.
    A. Competition in the market for PC operating systems must be 
restored.
    B. Microsoft's unlawful power to exclude competition in adjacent 
and downstream markets must be stopped and eventually dissipated
    C. The RPFJ fails to remedy the monopoly illegally maintained by 
Microsoft
    D. The loopholes in the RPFJ must be eliminated and its 
important ambiguities clarified
    II. Sun Microsystems" Interest Regarding the Terms of the 
RPFJ
    III. The RPFJ Fails To Remedy the Continuing Harm to Competition 
Caused By Microsoft's Illegal Acts
    A. The RPFJ fails to dissipate Microsoft's monopoly power in the 
market for PC operating systems.
    1. The Department previously acknowledged that an effective 
remedy had to eliminate the applications barrier protecting 
Microsoft's monopoly
    2. The RPFJ fails to address the effects of Microsoft's 
distribution power
    3. The RPFJ does little more than attempt to enjoin Microsoft 
from continuing to engage in the conduct a/ready found to be 
unlawful.
    4. The RPFJ assumes that Microsoft's Windows distributors will 
promote competitive middleware products
    B. The RPFJ does not remedy the continuing competitive harm to 
web browsers
    C. The RPFJ does not remedy the substantial harm to competition 
caused by Microsoft's illegal acts against the Java platform. IV. 
Critical Terms In The RPFJ Are Undefined or Ambiguous.
    A. Significant ambiguities in the RPFJ must be cured to avoid 
further litigation. B. "Interoperate" and 
"interoperating" must be defined.
    C. The scope of Microsoft's "Communication 
Protocols" disclosure should be clarified and exemplified.
    D. The scope of the "carve-out" provisions of 
Section III.J should be clarified.
    E. The definition of "Microsoft Middleware Product" 
should be amended
    V. Section III.I's Licensing Provisions Allow Microsoft to 
Profit from Its Unlawful Acts
    A. Microsoft should not be allowed to demand royalties as a 
condition for making interoperability disclosures.
    B. Microsoft has too much discretion over licensing terms trader 
the RPFJ.
    C. Microsoft should not be allowed to force third parties to 
forfeit their intellectual property claims against Microsoft
    VI. Conclusion
    I. Introduction
    Microsoft illegally maintained its monopoly over Intel-
compatible personal computer ("PC") operating systems by 
acting to undermine the distribution and commercial appeal of 
alternative computing platforms like Netscape Corporation's 
Navigator browser and Sun Microsystems, Inc.'s Java TM 
technology. \1\By eliminating the ability of alternative 
platforms to compete with Windows, Microsoft has not only maintained 
its monopoly over PC operating systems, it also has dramatically 
increased the economic power that it derives from that monopoly, 
such that Microsoft now has the power to control competition in a 
number of adjacent and downstream markets as well.
---------------------------------------------------------------------------

    \1\ United States v. Microsoft Corp., 253 F.3d 34, 46 (DC 
Cir. 2001) ("Microsoft III").
---------------------------------------------------------------------------

    In the emerging world of networked devices and services, the 
commercial appeal and success of adjacent or downstream devices and 
services such as servers, personal digital assistants 
("PDAs"), telephones, video game systems, television 
set-top boxes, and web-based services are in very large measure 
dependent on their ability to interoperate with PCs via the Internet 
or other networks. Microsoft's expanded monopoly power over PC 
operating systems and web browsers affords it the power to deny 
competing devices and services the same ability to interoperate 
fully and completely with PCs as Microsoft's networked devices and 
services enjoy. Microsoft is in fact exercising the power it derives 
from its PC monopoly in just this way to exclude competition in each 
of these adjacent markets. Unless and until that power is 
effectively checked and ultimately eliminated, Microsoft's past 
practices and insatiable ambition demonstrate that it will continue 
to destroy competition in each of these enormously important 
markets.
    Unfortunately, the Revised Proposed Final Judgment 
("RPFJ") does little or nothing to eliminate the 
unlawful monopoly maintained by Microsoft over PC operating systems. 
Nor does it redress the harm that Microsoft's illegal acts have 
caused to competition in that market. And while the RPFJ apparently 
recognizes the threat to competition posed by Microsoft's 
exclusionary behavior in adjacent and downstream markets, the 
remedies it

[[Page 29028]]

proposes to redress this threat are plagued with so many loopholes 
and ambiguities that there can be no assurance that Microsoft's 
anticompetitive conduct will stop.
    A. Competition in the market for PC operating systems must be 
restored
    The adjudicated facts establish that Microsoft illegally 
maintained a monopoly over the market for PC operating systems by 
undermining the ability of rival software platforms to compete in 
that or closely related markets. By offering consumers the ability 
to run compelling applications on operating systems other than 
Microsoft's Windows operating system, the Navigator browser and Java 
platform threatened to reduce or eliminate the applications barrier 
to competition that sustains Microsoft's monopoly. \2\ 
Microsoft fully recognized the threat these middleware platforms 
posed to its continued monopoly over PC operating systems and 
contrived to maintain that monopoly by restricting consumer access 
to these and any other non-Microsoft middleware platforms.
---------------------------------------------------------------------------

    \2\ United States v. Microsoft Corp., 84 F. Supp. 2d 9, 
 68 (D.DC 2000) ("Findings of Fact") 
(explaining how middleware technologies such as the Navigator 
browser and the Java platform have the ability to weaken the 
applications barrier to entry).
---------------------------------------------------------------------------

    The commercial appeal of any computing platform is dependent in 
very large measure on the numbers of consumers who own or use the 
platform. The greater the number of users, the greater the demand 
for applications capable of running on that platform. The greater 
the demand for applications, the greater the number and variety of 
applications developed for the platform. And the greater the number 
and variety of applications developed for a platform, the greater 
the consumer demand for a given computing platform.\3\ Once started, 
this "feedback" effect can and will sustain the adoption 
and commercial success of platform software, such as Microsoft's 
Windows operating system, Netscape's Navigator browser or Sun's Java 
platform.The key to successful competition in platform software is 
thus distribution.\4\ Unless a platform enjoys widespread and 
sustained distribution, such that large numbers of computer users 
have the platform installed and available for use on their computer 
systems, the feedback cycle of application development and platform 
adoption will not take effect.
---------------------------------------------------------------------------

    \3\ See Findings of Fact, 84 F. Supp. 2d at 
 39-40.
    \4\ See Microsoft III, 253 F.3d at 55-60, 
60-61, 70-71; Findings of Fact, 84 F. Supp. 2d at 
 3652, 143-44,
---------------------------------------------------------------------------

    As the District Court found, and the Court of Appeals affirmed, 
Microsoft engaged in a seal es of illegal acts to choke off the 
distribution channels for the Navigator and Java platforms.\5\ By 
restricting and disrupting the distribution of the Navigator browser 
and the Java platform, Microsoft sought to limit the numbers of 
computer users with access to these alternative platforms and 
thereby also limit the demand for, and economic incentives 
supporting, application development on the Navigator and Java 
platforms. By decreasing the distribution of non-Microsoft 
platforms, such as the Navigator browser and the Java platform, 
Microsoft knew that it could also decrease the number and variety of 
applications developed for such platforms, and thus their relative 
commercial appeal to consumers.
---------------------------------------------------------------------------

    \5\ See Microsoft III, 253 F.3d at 61, 72, 75-76; 
Findings of Facts, 84 F. Supp. 2d at  357, 395402.
---------------------------------------------------------------------------

    But for Microsoft's unlawful attack on the distribution of the 
Navigator and Java platforms, the installed base of these 
alternative platforms would have been very different today. So too 
would the economic incentives and choices of consumers and software 
developers.
    Consumers would have had the opportunity to choose among a 
variety of competing platforms--not just Microsoft's Windows 
platform--based upon performance, cost or personal preference. 
Developers too would have had the opportunity to choose among a 
variety of competing platforms on which to develop applications with 
the features, performance and cost that consumers demand.
    Indeed, because the Navigator and Java platforms were 
"cross-platform"--that is, ran on top of a variety 
of operating systems, not just Microsoft's Windows operating 
system--consumers would have had the ability to run 
applications written for the Navigator browser and Java platform on 
any operating system, not just Microsoft's Windows operating system. 
By dramatically lowering the cost to switch applications from one 
operating system to another, the Navigator and Java platforms 
directly attacked the applications barrier to competition that 
protects Microsoft's monopoly over PC operating systems, and greatly 
reduced the cost to consumers and developers alike of switching away 
from Microsoft's monopoly platform. In short, but for Microsoft's 
anticompetitive conduct, consumers today would have enjoyed far 
greater freedom, at far less cost, to choose among competing 
operating systems based on their comparative features, performance, 
and price, rather than simply the number of applications they 
support.
    B. Microsoft's unlawful power to exclude competition in adjacent 
and downstream markets must be stopped and eventually dissipated
    By disrupting and eliminating the distribution of competing 
platforms, Microsoft has not only maintained its monopoly over PC 
operating systems, it also has increased the economic power that it 
derives from that monopoly. By secretly manipulating the interfaces 
and protocols needed to intemperate with Windows, Microsoft can 
control which products and services in adjacent or downstream 
markets are capable of interoperating with PCs. Not only does this 
permit Microsoft to enhance the relative appeal and functionality of 
its products and services at the expense of its competitors, it 
denies consumers the benefits of competition. Instead of choosing a 
server, telephone, application, or web service based solely on its 
competitive merits, Microsoft is increasingly forcing consumers to 
purchase such products and services based upon their ability to 
interoperate with its unlawfully monopolized platforms.
    Microsoft is now abusing the power it has over PC operating 
systems and web browsers by seeking to extend its control to embrace 
any device, application, or web service that seeks to interoperate 
with Microsoft's monopolized PC operating systems or browsers. 
Microsoft's unbridled monopoly over a critical node on the digital 
network--PCs--provides it the power to allow only such 
servers, PDAs, telephones, television set-top boxes, videogame 
systems, or web services that implement Microsoft's proprietary 
interfaces and protocols to interoperate effectively with 
Microsoft's monopoly products. By illegally exploiting its PC 
operating system monopoly to acquire and utilize a chokehold over 
networked connections to PCs, Microsoft is dramatically expanding 
its power to deny consumers the benefits of choice and competition 
in adjacent and downstream markets as well.
    C. The RPFJ fails to remedy the monopoly illegally maintained by 
Microsoft
    In the face of this record, the law requires that any remedial 
decree "terminate" the monopoly, "unfetter" 
the market from anticompetitive conduct, "deny to the 
defendant the fruits" of its illegal acts, and 
"ensure" no repetition of such abuse in the 
future. \6\ Measured against this standard, the proposed 
settlement between the United States and Microsoft reflected in the 
RPFJ falls far short.
---------------------------------------------------------------------------

    \6\ Microsoft III, 253 F.3d at 103.
---------------------------------------------------------------------------

    Rather than act directly to restore competition to the market 
for PC operating systems, and redress the harm to competition 
inflicted by Microsoft's past misconduct in that and adjacent 
markets, the RPFJ actually accedes to Microsoft's monopoly, and does 
little or nothing to eliminate or check the enormous power it 
provides. Incredibly, the RPFJ barely proscribes behavior already 
held to be unlawful without remedying the far-reaching and 
continuing anticompetitive effects that have been caused by that 
behavior. \7\ Even though Microsoft effectively destroyed 
competition for web browsers and blocked the distribution of 
upgraded, compatible versions of the Java platform for the PC, the 
RPFJ fails to remedy directly these anticompetitive acts or disgorge 
Microsoft of the power it now enjoys as a result of those acts.
---------------------------------------------------------------------------

    \7\ See Schine Chain Theatres, Inc. v. United States, 334 
U.S. 110, 128 (1948) (concluding that injunctive relief which merely 
"forbid[s] a repetition of the illegal conduct" is 
legally insufficient because defendants would "retain the full 
dividends of their monopolistic practices and profit from the 
unlawful restraints of trade which they inflicted on 
competitors").
---------------------------------------------------------------------------

    Instead, the RPFJ relies on Microsoft's partners--PC 
manufacturers--to indirectly undermine Microsoft's monopoly by 
distributing non-Microsoft middleware. Relying on Microsoft's 
distributors to achieve the Department's goals is fundamentally 
flawed, since the PC manufacturers have little or no economic 
incentive or ability to work with Microsoft's competitors, absent 
fundamental changes to the competitive landscape in the PC operating 
system market, which the RPFJ fails to seek. \8\ At best, the

[[Page 29029]]

RPFJ will marginally increase the opportunity, but not the ability, 
of competitors to compete at some future date with Microsoft's 
middleware products. It does nothing directly to dislodge 
Microsoft's PC operating system monopoly or to restore the market 
for PC operating systems to the competitive dynamics the market 
would have possessed "but for" Microsoft's illegal 
conduct.
---------------------------------------------------------------------------

    \8\ Findings of Fact, 84 F. Supp. 2d at  54 
(stating that "[w]ithout significant exception, all OEMs pre-
install Windows on the vast majority of PCs that they sell, and they 
uniformly are of a mind that there exists no commercially viable 
alternative to which they could switch in response to a substantial 
and sustained price increase or its equivalent by 
Microsoft.").
---------------------------------------------------------------------------

    D. The loopholes in the RPFJ must be eliminated and its 
important ambiguities clarified
    While promising in principle, the disclosure remedies in the 
RPFJ (Sections III.D. and III.E) are likely to fail in practice to 
achieve the procompetitive objectives identified by the United 
States Justice Department (the "Department") in its 
Competitive Impact Statement. Key provisions in the RPFJ contain 
critical loopholes and glaring ambiguities. Given Microsoft's past 
disdain for compliance with the strictures of its prior antitrust 
consent decree with the Department, these ambiguities will likely 
lead to future litigation, particularly since Microsoft has 
repeatedly refused to answer any questions regarding whether it 
agrees or disagrees with the interpretations of the RPFJ proposed by 
the Department in the Competitive Impact Statement. Instead, it is 
clear that Microsoft's strategy is to say as little as possible 
about the meaning or application of the RPFJ prior to entry of 
judgment, hoping that any ambiguities in the language will 
ultimately be interpreted in its favor. In order to protect the 
public and ensure that the Department has actually secured a 
settlement that is consistent with its representations to the Court, 
the Department must force Microsoft to identify any disagreements 
that it has with the Department's interpretations prior to entry of 
the judgment. Unless such minimal steps are taken, the RPFJ will 
certainly fail to secure even the modest objectives it seeks to 
attain.
    The RPFJ is further flawed because it allows Microsoft to profit 
from its illegal acts by exacting royalties as a condition for 
making interoperability disclosures. Moreover, it gives Microsoft 
far too much discretion about how it will "comply" with 
the RPFJ. Given its past record of anticompetitive conduct, a 
remedial scheme which relies on Microsoft acting 
"reasonably" is doomed to fail. After having 
successfully prosecuted its case against Microsoft, it would be 
tragic for the Department to shirk its duty under the law, and 
through entry of the RPFJ, allow Microsoft to maintain and expand 
its monopoly power.
    II. Sun Microsystems" Interest Regarding the Terms of the 
RPFJ
    Since its founding in 1982, Sun has been propelled by an 
innovative vision- "The Network Is The Computer." TM Sun 
is a leader in the design, manufacture, and sale of computer 
hardware, software, and services. Sun directly competes with 
Microsoft across a wide variety of markets including operating 
systems, "middleware" platforms, software development 
tools, office productivity suites, directory services, and 
enterprise software.
    Sun's experience and expertise place it in a unique position to 
assess the true competitive impact of the RPFJ. As one of 
Microsoft's leading competitors and as the creator and licensor of 
the Java platform, Sun was a prime target of the anticompetitive 
conduct at issue in United States v. Microsoft. In addition, because 
Sun designs, manufactures, and sells a wide variety of products and 
services that must interoperate with Microsoft's products and 
services, Sun's realworld experience regarding the difficulties and 
barriers to effective interoperability with Microsoft's products 
affords Sun unique insights into whether the various technical 
disclosures and licensing practices mandated under the RPFJ will 
actually achieve the results intended by the Department. Sun's 
comments on the RPFJ are not intended to be exhaustive. Instead, the 
comments focus on key shortcomings or problems with the RPFJ, which 
most directly impact Sun, its distributors, developers, and 
customers. Others. including trade organizations of which Sun is a 
member, are likely to raise additional problems with the RPFJ, which 
should be addressed prior to entry of the judgment. By omitting such 
subjects from its submission, Sun does not wish to convey to the 
Department the impression that it believes the remainder of the RPFJ 
is satisfactory to Sun. Rather, Sun has merely focused its comments 
to highlight particular areas of concern. III. The RPFJ Fails To 
Remedy the Continuing Harm to Competition Caused By Microsoft's 
Illegal Acts A. The RPFJ fails to dissipate Microsoft's monopoly 
power in the market for PC operating systems A remedies decree in an 
antitrust case "must seek to unfetter a market from 
anticompetitive conduct, to terminate the illegal monopoly, deny the 
defendant the fruits of its statutory violation, and ensure that 
there remain no practices likely to result in monopolization in the 
future." \9\ Tile market over which Microsoft has 
unlawfully maintained its monopoly power is the market for PC 
operating systems. It is that market--the market for PC 
operating systems--that must be restored to competition, and in 
which Microsoft's power must be eliminated.
---------------------------------------------------------------------------

    \9\ Microsoft III, 253 F.3d at 103 (internal quotations 
and citations omitted). Although the Department acknowledges the 
required remedial objectives under the law, it fails to achieve them 
in practice. See Competitive Impact Statement ("CIS") at 
24 ("Appropriate injunctive relief in an antitrust case 
should: (1) end the unlawful conduct; (2) 'avoid a recurrence 
of the violation" and others like it; and (3) undo its ant/
competitive consequences."). The RPFJ, however, fails to serve 
this fundamental objective. The first and most important flaw in the 
RPFJ lies in its failure to do anything to restore competition in 
the market for PC operating systems. But for Microsoft's 
anticompetitive conduct, the market would today provide consumers 
and software developers with the benefits of competitive choice 
among at least three alternative computing platforms for desktop 
computers: the Windows operating system, the Navigator browser, and 
the Java platform. As a direct result of Microsoft's anticompetitive 
conduct, consumers and developers today effectively enjoy no such 
choice. Rather than restore the market to the state it would have 
enjoyed but for Microsoft's illegal conduct, or even attempt to 
dissipate Microsoft's illegally maintained power over that market, 
the RPFJ accedes to and accepts Microsoft's monopoly over PC 
operating systems, and does nothing to directly and immediately 
restore that market to competition.
---------------------------------------------------------------------------

    Indeed, the RPFJ does not even focus its principal remedies on 
the relevant market: the market for PC operating systems, Instead, 
it focuses its principal remedies on entirely different markets: the 
market for distribution of Microsoft operating systems and the 
market for middleware. In light of the record established and 
affirmed in this case, the Department's reliance on Microsoft's own 
distributors--entities whose commercial viability is dependent 
on and inextricably tied to Microsoft's success -to promote non-
Microsoft middleware products capable of threatening Microsoft's 
monopoly position is misplaced at best, and foolhardy at worst.
    1. The Department previously acknowledged that an effective 
remedy had to eliminate the applications barrier protecting 
Microsoft's monopoly
    In recognition of the Department's obligations under the law and 
the extent of Microsoft's misconduct, the Department originally set 
its remedial objectives much higher than those proposed in the RPFJ. 
In fact, both the Department and the District Court concluded that a 
combination of structural relief and conduct remedies was necessary 
to lower the applications barrier to entry and to restore 
competition in the market for PC operating systems. \10\ As 
the Department itself acknowledged, conduct remedies, by themselves, 
are likely to be insufficient in this case to remedy the past harm 
to competition:
---------------------------------------------------------------------------

    \10\ United States v. Microsoft Corp., 97 F. Supp. 2d 59 
(D,DC 2000), aff'd in part, rev'd in part, and remanded, 253 F.3d 34 
(DC Cir. 2001).
---------------------------------------------------------------------------

    [C]onduct remedies can do little to rectify the harm done to 
competition by Microsoft's illegal conduct in the past. For example, 
the evidence shows and the Court found that Microsoft's illegal 
conduct prevented Navigator and Java from eroding the applications 
barrier to entry "for several years, and perhaps 
permanently" because they could not facilitate entry unless 
they became almost ubiquitous and thus became attractive platforms 
for ISVs. A conduct remedy cannot undo the demise of Navigator and 
the concomitant rise of Internet Explorer, nor can it ensure that 
there will be other middleware threats comparable to Navigator in 
the future. \11\
---------------------------------------------------------------------------

    \11\ 11 4/28/00 Plaintiffs" Memo. in Support of 
Proposed Final Judgment at 7-8 (citations omitted).
---------------------------------------------------------------------------

    According to the Department, "[c]ompetition was injured in 
this case principally because Microsoft's illegal conduct raised 
entry barriers to the PC operating system market by destroying 
developments that would have made it more likely that competing 
operating systems would gain access to applications and other needed 
complements." \12\ Thus, "the key to a remedy in 
this case is to reduce Microsoft's

[[Page 29030]]

ability to erect or maintain entry barriers." \13\ To 
achieve this objective, the Department originally sought to divide 
Microsoft into an Applications Business and an Operating Systems 
Business in order to "create incentives for Microsoft's Office 
and its other uniquely valuable applications to be made available to 
competing operating systems when that is efficient and 
profitable--in other words, in response to ordinary market 
forces--instead of being withheld strategically, at the 
sacrifice of profits and to the detriment of consumers--in 
order to protect the Windows operating system 
monopoly." \14\
---------------------------------------------------------------------------

    \12\ Id. at 30.
    \13\ Id.
    \14\ Id.
---------------------------------------------------------------------------

    But now that the Department has reversed its prior position and 
seeks to rely solely on conduct remedies, the remedies it has 
proposed are even leas likely to rectify the harm done to 
competition than the interim conduct remedies previously adopted by 
the District Court. The conduct remedies of the RPFJ are simply not 
tailored to rectify the continuing harm or lower the barriers to 
competition for competing operating system vendors. For example, the 
RPFJ does not even attempt to redress the competitive harm caused by 
Microsoft's interference and disruption of the distribution channels 
for the Navigator browser or the Java platform, even though 
Microsoft correctly perceived that widespread distribution of those 
platforms would lower the barriers to competition protecting its 
monopoly. Nor does the RPFJ take any direct steps to loosen 
Microsoft's chokehold on the PC operating system market and 
facilitate the development of applications from both Microsoft and 
others that could run on competing operating systems. If, as the 
Department previously contended, the "key to a remedy" 
in this case is to reduce or eliminate Microsoft's ability to create 
and maintain barriers to competition, the RPFJ does not attempt to 
serve, much less achieve, that remedial objective.
    Although the Court of Appeals vacated and remanded the District 
Court's divestiture order, it affirmed the central liability 
findings against Microsoft. Rejecting Microsoft's numerous 
challenges, the Court of Appeals concluded that Microsoft had 
monopoly power over the PC operating system market, that Microsoft's 
monopoly was protected by an applications barrier to entry, and that 
Microsoft engaged in a panoply of illegal acts to maintain that 
monopoly in light of the competitive threat posed by the Navigator 
browser and the Java platform. \15\ Furthermore, it set forth 
the legal standard against which any remedy for such violations 
should be measured. \16\
---------------------------------------------------------------------------

    \15\ Microsoft III, 253 F.3d at 51, 60, 64, 71, 
76-78.
    \16\ Id. at 103.
---------------------------------------------------------------------------

    While the Department certainly had discretion to choose not to 
pursue a divestiture remedy on remand, the Court of Appeals" 
affirmance of the core liability findings against Microsoft provided 
no excuse for seeking watered-down conduct remedies that are likely 
to be even less effective than the interim conduct remedies 
previously ordered by the Court. This is not a case where the 
Department entered into a settlement with a defendant in lieu of 
trial. Here, the District Court held, and the Court of Appeals 
affirmed, that Microsoft violated the antirust laws. By failing to 
remedy file effects of Microsoft's illegal acts, disgorge 
Microsoft's ill-gotten gains, and attack the barriers to competition 
protecting Microsoft's monopoly, the Department has shirked its duty 
under the law.
    2. The RPFJ fails to address the effects of Microsoft's 
distribution power
    Any remedy designed to restore competition in the PC operating 
system market mast account for the economic realities of software 
platform development. Distribution is the key to competitive 
viability in the market for PC platform software. \17\ The 
applications barrier to entry which forms a "positive feedback 
loop" for Microsoft and a "vicious cycle" for 
Microsoft's competitors was a centerpiece of the Department's case: 
the number of installed units of a platform determines its 
commercial appeal to applications developers; the number and variety 
of applications available for a platform determines its commercial 
appeal to consumers; and the commercial appeal of the platform to 
consumers in turn drives its installed base and market 
share. \18\ As the Court of Appeals concluded, 
"[b]ecause the applications barrier to entry protects a 
dominant operating system irrespective of quality, it gives 
Microsoft power to stave off even superior new 
rivals." \19\In large measure, the Navigator browser and 
the Java platform threatened Microsoft's monopoly because they had 
achieved widespread distribution on both Windows and non-Windows 
platforms, thereby becoming a potentially more attractive platform 
for application development than Windows. If developers increasingly 
chose to develop their applications to the Navigator and Java 
platforms, rather than the Windows platform, consumers would have 
greater freedom to switch away from the Windows operating system 
because they would still be able to run the applications that they 
desire using competing operating systems.
---------------------------------------------------------------------------

    \17\ See Microsoft III, 253 F.3d at 55-56, 
60-61, 70-71; Findings of Facts, 84 F. Supp. 2d at 
 36-52, 143-44.
    \18\ Findings of Fact, 84 F. Supp. 2d at 
 39-40.
    \19\ Microsoft III, 253 F.3d at 55-56.
---------------------------------------------------------------------------

    To restore competition in the PC operating system market, an 
appropriate remedy should attempt to place the market back in the 
position it would have been "but for Microsoft's illegal 
conduct. In other words, an appropriate remedy would ensure, to the 
extent possible, that alternative platforms achieve the distribution 
that they would have received "but for" Microsoft's 
illegal conduct. Moreover, an appropriate remedy also would seek to 
open up Microsoft's distribution channels to expand consumer choice 
by ensuring that alternative platforms could compete on the merits 
with Microsoft's products, rather than having Microsoft's illegally 
maintained distribution powers effectively foreclose such choices.
    To evaluate the potential efficacy of the RPFJ, one must compare 
the competitive landscape before and after Microsoft's illegal acts. 
Prior to Microsoft's acts, the marketplace was undergoing dramatic 
changes as a result of the nearly simultaneous emergence of both the 
Navigator browser and the Java platform. By easily connecting 
consumers to resources across the Internet and providing a new 
platform for software development, these new, widely distributed 
platforms threatened Microsoft's monopoly power because they 
afforded consumers the ability to run applications on many different 
operating systems, not just Windows. Customers could chose between 
different browsers as well as different implementations of the Java 
platform. They were not reliant on a single vendor for their 
platform software. At this inflection point in the market, the 
barriers to competition protecting Microsoft's monopoly looked 
increasingly precarious. Microsoft's internal documents demonstrate 
how serious that threat really was. Despite its dominant market 
position, Microsoft believed it was necessary to engage in a 
campaign of illegal conduct to crush this competition. As a result 
of that conduct, consumers no longer have any real competitive 
choices for browsers for PCs, other than Microsoft's Internet 
Explorer. As a practical matter, PC consumers also have been denied 
access to the latest, compatible versions of the Java platform as a 
result of Microsoft's conduct. Instead, Microsoft first offered an 
incompatible version of the Java platform, and now seeks to roll-out 
their "knock-off" middleware runtime, the .NET 
Framework/Common Language Runtime, that copies many of the features 
of the Java platform with one critical difference--it rims only 
on Windows.
    The question that should be asked regarding the RPFJ is whether 
it will disgorge from Microsoft the fruits of its illegal acts and 
restore a competitive marketplace where consumers will have the 
ability to choose their platform software from an array of 
competitive choices. A critical review of the P,.PFJ makes plain it 
does not.
    3. The RPFJ does little more than attempt to enjoin Microsoft 
from continuing to engage in the conduct already found to be 
unlawful
    Rather than attempting to undo the damage to competition 
resulting from Microsoft's actions and pry open the PC operating 
system market to competition, the RPFJ is purely forwardlooking, 
focusing primarily on the precise Microsoft conduct already found to 
be unlawful. Injunctive relief which simply "forbid[s] a 
repetition oft he illegal conduct" is insufficient under 
Section 2 because it would allow Microsoft to "retain the full 
dividends of [its] monopolistic practices and profit from the 
unlawful restraint of trade which [it] had inflicted on 
competitors." \20\ As the Supreme Court has made plain, 
an antitrust remedy "does not end with enjoining continuance 
of the unlawful restraints" but must also seek to undo the 
effects of the illegal acts and ensure that they do not 
reoccur. \21\
---------------------------------------------------------------------------

    \20\ Schine, 334 U.S. at 128.
    \21\ See United States v. Paramount Pictures, 334 U.S. 
131, 171 (1948).
---------------------------------------------------------------------------

    Most of the RPFJ is oriented towards prohibiting a narrow set of 
future illegal

[[Page 29031]]

conduct by Microsoft. For example, the RPFJ contains provisions 
which would prohibit Microsoft from:
    . retaliating against distributors of or developers for Non-
Microsoft Operating Systems and Non-Microsoft Middleware (Sections 
III.A and III.F);
    . entering into certain restrictive agreements relating to the 
distribution of or development for Non-Microsoft Operating Systems 
and Non-Microsoft Middleware (Sections III.C, III. F.2, III.G); or
    . preventing end-users and OEMs from enabling non-Microsoft 
Middleware Products over Microsoft Middleware Products (Section 
III.H).
    Although sucb provisions are certainly appropriate in light of 
Microsoft's past conduct, they merely enjoin Microsoft from 
continuing to break the law in the future, and do nothing to repair 
the damage to competition caused by Microsoft's past acts.
    4. The RPFJ assumes that Microsoft's Windows distributors will 
promote competitive middleware products
    Sun questions whether the Department's reliance upon Microsoft's 
primary distributors, PC manufacturers, to re-start competition in 
the PC operating system market is fundamentally misplaced. In its 
Competitive Impact Statement, the Department contends that the RPFJ 
will "restore the competitive threat that middleware products 
posed prior to Microsoft's unlawful undertakings." \22\ 
The Department's assumption seems to be that by giving PC 
manufacturers greater contractual freedom to distribute non-
Microsoft Middleware Products, a rich market of competing middleware 
products will arise that could eventually give rise to alternative 
computing platforms capable of undermining Microsoft's application 
barrier to entry.
---------------------------------------------------------------------------

    \22\ CIS at 3.
---------------------------------------------------------------------------

    The RPFJ, however, does nothing to ensure that such alternative 
platforms are actually distributed to consumers. If PC manufacturers 
choose not to distribute such software, consumers will never have 
the choice that they had, prior to Microsoft's illegal acts, when 
alternative platforms like the Navigator browser or the Java 
platform were ubiquitously distributed. The key question then is 
whether PC manufacturers will aggressively distribute non-Microsoft 
platforms. Unfortunately, the Department's Competitive Impact 
Statement offers no explanation or empirical evidence to support 
this critical assumption.
    Given the limited nature of the relief proposed in the RPFJ, Sun 
is not as sanguine as the Department about such prospects.
    First, despite the retaliation restrictions contained in the 
RPFJ, because Microsoft's market power is left largely untouched and 
PC manufacturers remain dependent solely on Microsoft for a critical 
component for their products, it is very likely that, in practice, 
many PC manufacturers will remain reluctant to risk incurring 
Microsoft's wrath by supporting competing platforms. Microsoft 
simply retains too many formal and informal tactics to reward its 
"friends," and punish its "enemies." One 
need only look at PC manufacturers" treatment of Microsoft's 
Internet Explorer for guidance on how the terms of the RPFJ are 
likely to be applied in practice. In July 2001, Microsoft: announced 
that PC manufacturers, for the first time, would be free to remove 
access to Internet Explorer. Since that time, not one PC 
manufacturer has removed the Internet Explorer icon from retail PCs.
    Second, under the terms of the RPFJ, competing middleware 
vendors are at such a competitive disadvantage to Microsoft that it 
will remain extremely difficult to secure distribution of these 
competing products through PC manufacturers. Under the RPFJ, 
Microsoft's ability to bundle middleware products into its Windows 
operating system would remain essentially unfettered. PC 
manufacturers would have the legal fight to remove or disable 
certain Microsoft middleware products, but what commercial incentive 
will the PC manufacturers have to remove or disable the Microsoft 
products if they have already paid for such products in order to 
license the Windows operating system? Moreover, while Microsoft 
retains the ability to bundle its middleware product (e.g., a 
browser, media player, etc.) into every copy of Windows (absent an 
affirmative act by a PC manufacturer to exclude such product), a 
competitor would have to individually approach scores, if not 
hundreds, of different PC manufacturers around the world and 
negotiate a separate agreement with each to achieve a comparable 
degree of distribution. In addition, because the marginal cost to 
the PC manufacturer for the bundled Microsoft middleware product is 
effectively zero, PC manufacturers may be reluctant to pay non-
Microsoft middleware vendors a sufficient price to recoup the costs 
such middleware vendors would incur to make and sell competing 
products.
    Finally, since the vast majority of PC manufacturers are in the 
business of selling Windows PCs, some manufacturers might believe it 
is against their own commercial interests to support alternative 
middleware platforms. For example, if a middleware platform 
(e.g--, the Java platform) truly lowers barriers to entry and 
allows consumers to run applications on any operating system (e.g., 
Apple Mac operating system, etc.) that supports that middleware 
platform, consumers eventually might chose to purchase their 
computers from vendors other than Windows PC vendors. Thus, the RPFJ 
fails to account for the fact that many PC manufacturers may derive 
substantial benefit from maintaining the applications barrier to 
entry protecting Microsoft's Windows monopoly.
    B. The RPFJ does not remedy the continuing competitive harm to 
web browsers
    Prior to Microsoft's illegal campaign, Netscape's Navigator 
browser was the market leading web browser by a wide 
margin. \23\ Today, Microsoft's Internet Explorer browser 
dominates the market, accounting for over 87% of all 
users. \24\ To achieve this dramatic turn of events, the 
District Court found, and the Court of Appeals affirmed, that 
Microsoft engaged in a series of unlawful, anticompetitive acts:
---------------------------------------------------------------------------

    \23\ See Findings of Fact, 84 F. Supp. 2d at 
 360.
    \24\ 2/21/01 StatMarket Report Regarding Global Browser 
Usage Share.
---------------------------------------------------------------------------

    . Exclusionary contracts with OEMs, \25\ IAPs, \26\ 
and ISVs; \27\
---------------------------------------------------------------------------

    \25\ See Microsoft III, 253 F.3d at 64.
    \26\ See id. at 71.
    \27\ See id. at 72.
---------------------------------------------------------------------------

    . Commingling of software code to make it technologically 
difficult to remove Internet Explorer from Windows. \28\
---------------------------------------------------------------------------

    \28\ See id. at 67.
---------------------------------------------------------------------------

    Anticompetitive deals with Apple Computer. \29\
---------------------------------------------------------------------------

    \29\ See id. at 74.
---------------------------------------------------------------------------

    Not only did Microsoft effectively destroy Navigator as a viable 
alternative platform, by seizing control over the web browser, 
Microsoft greatly expanded its market power. By dominating web 
browsers and effectively excluding all competitors, Microsoft 
secured the power to set and control the protocols and interfaces 
used for connecting with and communicating over the Internet.
    Imagine, for example, that a single company monopolized the 
manufacture and supply of telephones, such that it supplied 95% of 
the world's telephones. If that company were permitted to change the 
dial tone on its phones, or the keypad, in ways that permitted only 
phones made by it to call and interact with its installed base of 
telephones, the telephones made and sold by its competitors would 
have very little or no value, since they could no longer 
interoperate effectively with 95% of all telephones. And if that 
company also altered the telephones it made so that they worked 
best--or indeed only--with the telephone switches and 
answering machines that the monopoly telephone company also made, 
then that company would quickly obtain a monopoly over the telephone 
switch and answering machine markets as well.
    Microsoft's control over the browser and PC operating system 
provides Microsoft with just such unbridled power to dictate 
unilaterally the interfaces and protocols by which other devices and 
applications can interoperate with Microsoft's products and services 
over the Internet. The role played by the browser in communicating 
with devices, applications, and web services over the Internet is 
directly analogous to the role played by the consumer telephone in 
the telephone network.
    As a result of Microsoft's illegal acts, Microsoft can now 
exclude competing products and services from being able to 
communicate over the Internet with Microsoft's browser, or Microsoft 
can mandate interfaces and protocols which favor its products over 
competitors" products. Thus, by virtue of its anticompetitive 
conduct, Microsoft has secured the power to potentially appropriate 
a public asset of immeasurable value--the 
Internet--through use of proprietary interfaces and protocols.
    Control of the browser also was essential to protecting 
Microsoft's PC operating system monopoly. By controlling this 
"killer application," Microsoft can determine which 
competing operating systems, if any, will be able to run Internet 
Explorer. Without first-rate browser support capable of 
communicating with the content available

[[Page 29032]]

across the Internet, competing PC operating systems simply will not 
be able to attract consumers away from Microsoft's monopoly 
operating system.
    Finally, control of the browser was important in order for 
Microsoft to be able to control a key distribution channel for 
middleware that potentially threatened Microsoft's monopoly. 
Browsers have been a vital distribution channel for a variety of 
middleware products, including the Java platform, media players, 
instant messaging products, etc. If Microsoft did not control this 
distribution channel, competitors could have continued to use 
competing browsers as a vehicle for distributing non-Microsoft 
middleware.
    Consequently, the continuing competitive harm flowing from 
Microsoft's unlawful conduct is substantial. The RPFJ, however, does 
nothing directly to address it. Instead, it leaves Microsoft to 
enjoy the spoils of its illegal conduct At best, the RPFJ attempts 
to make it easier for PC manufacturers to now distribute competing 
browsers. But given the dominant position that Internet Explorer has 
now achieved, who will develop and market a competing browser? 
Because Microsoft bundles Internet Explorer with its monopoly 
operating system, a competitor would have to compete against a 
product with a marginal cost to PC manufacturers and consumers of 
essentially zero, since Microsoft can recoup its costs from its 
monopoly products. Even if the competing browser were technically 
superior, Microsoft can regularly introduce new interfaces and 
protocols to interfere with the competing browser's ability to 
compete, forcing the competitor to chase each new proprietary 
standard Microsoft announces.
    Unless Microsoft is first stripped of the fruits of its illegal 
conduct, real competition in the browser market is unlikely to 
occur. Absent such remedial relief, it is akin to holding a 100-yard 
dash in which Microsoft has an 87-yard lead after jumping the gun 
and intentionally tripping all of its competitors. Consumers are 
directly harmed as a result. Instead of a marketplace offering many 
different browser choices, consumers are increasingly faced with 
only one choice--Microsoft's browser.
    C. The RPFJ does not remedy the substantial harm to competition 
caused by Microsoft's illegal acts against the Java platform
    The District Court found, and the Court of Appeals affirmed, 
that Microsoft engaged in numerous anticompetitive acts directed 
against the Java platform:
    Exclusionary ISV deals; \30\
---------------------------------------------------------------------------

    \30\ See id. at 76.
---------------------------------------------------------------------------

    Anticompetitive threats to Intel to stop Java platform 
development; \31\
---------------------------------------------------------------------------

    \31\ See id. at 78.
---------------------------------------------------------------------------

    Deceiving developers into using Microsoft's incompatible 
implementation of the Java platform; \32\
---------------------------------------------------------------------------

    \32\ See id. at 77.
---------------------------------------------------------------------------

    Blocking distribution of Netscape Navigator--a prime 
distribution channel for the Java platform to PCs. \33\
---------------------------------------------------------------------------

    \33\ See Findings of Fact, 84 F. Supp. 2d at 
 397 (explaining how Microsoft used some of its 
"surplus monopoly power" to suppress distribution of 
Netscape Navigator and inflict further competitive damage on the 
distribution of the Java platform).
---------------------------------------------------------------------------

    Prior to Microsoft's anticompetitive acts, Sun had secured two 
major distribution channels for delivering the Java platform to 
PCs--Netscape's Navigator browser and Microsoft's Internet 
Explorer browser and Windows operating system. By its illegal acts, 
Microsoft effectively blocked the distribution of compatible, 
upgraded versions of the Java platform through both channels, and 
substantially slowed the development of desktop applications written 
to the Java platform.
    First, by blocking distribution of Netscape Navigator and 
dramatically reducing its market share, Microsoft effectively closed 
this alternative channel for distributing compatible versions of the 
Java platform to PCs. Second, by developing and distributing its own 
incompatible version of the Java platform which was tied to Windows, 
Microsoft fragmented the Java platform in order to re-create its 
applications barrier to entry, ensuring that PC consumers only had 
Microsoft's version of the Java platform. By refusing to distribute 
compatible upgrades of the Java platform, Microsoft effectively 
froze desktop development for the Java platform by continuing to 
distribute an "old" version of the technology, which did 
not have the richer set of functionality available in later 
versions. Finally, by means of exclusionary deals, threats, and 
incompatible developer tools, Microsoft attempted to either deceive 
or coerce developers away from developing compatible applications 
written to the Java platform that could run on operating systems 
other than Windows.
    Since the trial, Microsoft has continued to attack the Java 
platform to the detriment of consumers. In its most recent version 
of Windows, Windows XP, Microsoft no longer included even the old 
version of the Java platform which it previously had been shipping 
as part of Windows in accordance with the terms of a settlement 
agreement with Sun. As a result, millions of consumers purchasing 
Windows XP will no longer be able to access web pages that contain 
applications written to the Java platform unless they engage in a 
time-consuming download of the entire Java platform.
    In addition, Microsoft recently unveiled its own competing 
middleware runtime--the .NET Framework--as part of its 
.NET initiative. During the time that Microsoft effectively halted 
the development and distribution of the Java platform for the PC for 
several years, it simultaneously was busy developing its own 
middleware runtime that copied the design and architecture of the 
Java platform with one glaring difference--the .NET Framework 
runs only on Windows. Thus, not only did Microsoft's illegal conduct 
allow it to blunt the competitive threat which the Java platform 
posed to Microsoft's Windows monopoly, it also allowed Microsoft the 
time to try and catch up with many of the compelling features that, 
at the time, only the Java platform offered. The RPFJ, however, does 
not seek to remedy the continuing competitive harm caused by 
Microsoft's actions. For example, the RPFJ does nothing to attempt 
to put the marketplace in the position it would have been "but 
for" Microsoft's conduct--ubiquitous distribution of an 
upgraded, compatible Java platform on top of every Windows operating 
system as an available, alternative platform for software 
applications. Nor does it account for the time-to-market advantage 
that the Java platform lost as a result of Microsoft's conduct, 
particularly now that Microsoft will attempt to compete against the 
Java platform with its .NET Framework. Instead of attempting to undo 
this damage to competition, the RPFJ would allow Microsoft to bundle 
its competing .NET Framework with Windows, while forcing Sun and its 
licensees to try and m-create the distribution channels that 
Microsoft unlawfully destroyed. Absent real remedial relief, 
Microsoft will continue to reap the benefits of its unlawful 
conduct, and consumers will have no meaningful alternative computing 
platform available on PCs that is not controlled by Microsoft.
    IV. Critical Terms In The RPFJ Are Undefined or Ambiguous
    A. Significant ambiguities in the RPFJ must be cured to avoid 
further litigation The dispute between Microsoft and the Department 
regarding the prior consent decree demonstrates the need to 
carefully define technical terms to avoid future litigation and 
ensure the parties agree with respect to Microsoft's obligations. As 
the Department is well aware, the 1995 consent decree with Microsoft 
prevented Microsoft from requiring PC manufacturers to license other 
products as a condition of licensing the Windows operating 
system. \34\ However, the consent decree specified that this 
obligation did not "prohibit Microsoft from developing 
integrated products," though the term "integrated 
products" was left undefined. \35\
---------------------------------------------------------------------------

    \34\ See United States v. Microsoft Corp., 980 F. Supp. 
537, 539 (D.DC 1997).
    \35\ Id. at 53940 (emphasis added).
---------------------------------------------------------------------------

    In 1997, the Department asked the District Court to find 
Microsoft in contempt for requiring PC manufacturers who licensed 
the Windows operating system to also license Internet Explorer. 
Although the District Court found that the Department's proposed 
definition was probably correct, the court declined to find 
Microsoft in contempt because Microsoft offered a "plausible 
interpretation," and any ambiguities had to be resolved in 
Microsoft's favor. \36\ Given that any ambiguities are likely 
to be resolved in Microsoft's favor in any future enforcement 
proceeding, Sun believes it is essential that any and all material 
ambiguities be clarified prior to the entry of the RPFJ.
---------------------------------------------------------------------------

    \36\ Id. at 541-42.
---------------------------------------------------------------------------

    Although the Department offers its own interpretation of some of 
the RPFJ's ambiguous terms in the Competitive Impact Statement, 
Microsoft has repeatedly refused to reveal whether it disagrees with 
those interpretations. For example, following recent testimony by 
Microsoft's counsel, Charles Rule, before the Senate Judiciary 
Committee, members of the Committee posed a series of questions to 
Mr. Rule regarding whether Microsoft agreed with the

[[Page 29033]]

Department's interpretation of the RPFJ as set forth in the 
Competitive Impact Statement. Mr. Rule's responses were telling. 
When asked a series of questions directed to whether 
"Microsoft disagree[d] with anything stated in the 
Department's Competitive Impact Statement concerning the meaning and 
scope of the proposed Final Judgment," Mr. Rule refused to 
answer the questions directly, instead repeatedly referring to the 
same "non-answer": Microsoft did not participate in the 
preparation of the Competitive Impact Statement. The language of the 
Revised Proposed Final Judgment was carefully negotiated and means 
what it says. The Department's Competitive Impact Statement has the 
same legal force and effect in this case as in any other. Beyond 
that I cannot go in light of the facts that the Tunney Act 
proceeding is currently under way before Judge Kollar-Kotelly and 
that the non-settling states are attempting to raise various issues 
concerning the Competitive Impact Statement as part of the ongoing 
"remedies" litigation also before Judge Kollar-Kotelly. 
Once that litigation is completed, I may be in a better position to 
discuss these issues with the Committee. \37\
---------------------------------------------------------------------------

    \37\ Responses of Charles F. Rule to Judiciary Committee 
Questions at 13.
---------------------------------------------------------------------------

    Microsoft's clear strategy is to refuse to reveal anything about 
its interpretations of the RPFJ prior to the Court's entry of the 
judgment, lest it become clear to both the Department and the public 
that Microsoft's understanding of its potential obligations under 
the RPFJ is substantially different from the Department's. Then, 
when disputes with the Department about the scope of its obligations 
arise, as they inevitably will, Microsoft will be free to argue that 
the R.PFJ is ambiguous, and therefore must be construed, as a matter 
of law, in Microsoft's favor. \38\
---------------------------------------------------------------------------

    \38\ See Microsoft, 980 F. Supp, at 541 ("The Court 
must resolve any ambiguities in the terms of the Final Judgment in 
favor of Microsoft, the party charged with contempt."); see 
also Cause v. Nuclear Regulatory Corem'n, 674 F.2d 921,927-28 
(DC Cir. 1982).
---------------------------------------------------------------------------

    While it certainly is in Microsoft's interest to pursue such a 
strategy, the Department should not risk being complicit in a scheme 
that would effectively mislead the Court and the public about the 
true nature and impact of the RPFJ. The Department should insist 
that Microsoft identify any and all disagreements that it has with 
the interpretations offered by the Department in the Competitive 
Impact Statement prior to entry of the RPFJ. Absent such an inquiry 
and a record of Microsoft's position, the District Court, Sun, and 
the public at large have no assurances that the terms of the RPFJ 
will actually be construed/n the manner proposed by the Department 
in its Competitive Impact Statement.
    B. "Interoperate" and "interoperating" 
must be defined
    The key disclosure provisions contained in the RPFJ rely on the 
terms "intemperate" and "interoperating" to 
define the scope of Microsoft's obligations, but these critical 
terms are not expressly defined.
    Section III.D of the RPFJ would require Microsoft to disclose 
"for the sole purpose of interoperate with a Windows Operating 
System Product ... the APIs and related Documentation that are used 
by Microsoft Middleware to interoperate with a Windows Operating 
System Product." (emphasis added).
    Section III.E would require Microsoft to: make available for use 
by third parties, for the sole purpose of interoperating with a 
Windows Operating System Product, on reasonable and non-
discriminatory terms..., any Communication Protocol that is ... (i) 
implemented in a Windows Operating System Product installed on a 
client computer, and (ii) used to interoperate natively (i.e., 
without the addition of software code to the client operating system 
product) with a Microsoft server operating system product. (emphasis 
added). \39\
---------------------------------------------------------------------------

    \39\ See also Section III.H (providing that a Windows 
Operating System Product may invoke a Microsoft Middleware Product 
in any instance in which "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)").
---------------------------------------------------------------------------

    Depending on the definition of these terms, the scope of 
Microsoft's obligations under these provisions could vary 
dramatically. Therefore, in order to avoid a reprise of the 
litigation surrounding the 1995 consent decree with Microsoft, the 
Department should clarify the meaning of these terms in the text of 
the RPFJ, particularly since any ambiguity is likely to be construed 
in Microsoft's favor in any enforcement action brought by the 
Department. An explicit definition of these terms is essential 
because Sun believes the Department and Microsoft likely attach very 
different meaning to these terms. For example, in the Competitive 
Impact Statement, the Department offers a number of broad 
characterizations regarding the scope of these interoperability 
disclosures: . "[I]f a Windows Operating System Product is 
using all the Communications Protocols that it contains to 
communicate with two servers, one of which is a Microsoft server and 
one of which is a competing server that has licensed and fully 
implemented all the Communications Protocols, the Windows Operating 
System Product should behave identically in its interaction with 
both the Microsoft and non-Microsoft servers."\40\
---------------------------------------------------------------------------

    \40\ CIS at 38.
---------------------------------------------------------------------------

    . "Section III.E. will permit seamless interoperability 
between WindowsOperating System Products and non-Microsoft servers 
on a network. For example, the provision requires the licensing of 
all Communications Protocols necessary for non-Microsoft servers to 
interoperate with the Windows Operating System Products" 
implementation of the Kerberos security standard in the same manner 
as do Microsoft servers, including the exchange of Privilege Access 
Certificates. Microsoft must license for use by non-Microsoft server 
operating system products the Communications Protocols that Windows 
Operating System Products use to enable network services through 
mechanisms such as Windows server message block protocol/common 
Internet file system protocol communications, as well as Microsoft 
remote procedure calls between the client and server operating 
systems."\41\
---------------------------------------------------------------------------

    \41\ CIS at 38-39.
---------------------------------------------------------------------------

    . "Section III.D of the proposed Final Judgment requires 
Microsoft to disclose to ISVs, IHVs, IAPs, ICPs and OEMs all of the 
interfaces and related technical information that Microsoft 
Middleware uses to interoperate with any Windows Operating System 
Product .... Microsoft will not be able to hamper the development or 
operation of potentially threatening software by withholding 
interface information or permitting its own products to use hidden 
or undisclosed interfaces."\42\
---------------------------------------------------------------------------

    \42\ CIS at 33.
---------------------------------------------------------------------------

    In light of these comments, the Department appears to be 
interpreting "interoperate" to mean the ability of two 
different products to access, utilize, and support the full features 
and functionality of one another. Under the Department's 
interpretation, the disclosures would be of sufficient detail to 
allow a non-Microsoft server operating system to implement the 
Microsoft Communication Protocols in a manner such that the non-
Microsoft server operating system could be substituted for a 
Microsoft server operating system without any disruption, 
degradation, or impairment of all the features, functionality, and 
services of any Microsoft PC operating system connected to such non-
Microsoft server operating system. By contrast, in proceedings 
before the European Commission, Microsoft has asserted a much 
narrower interpretation of "interoperate" than the 
Department's interpretation. In that forum, Microsoft has maintained 
it already discloses all information necessary to achieve 
interoperability between Microsoft's PC operating system and non-
Microsoft server operating systems. Since Microsoft contends that 
they already disclose all of the information necessary to satisfy 
this narrow definition of "interoperate," if this 
definition were to prevail, Microsoft will disclose nothing new. Its 
conduct will remain unchanged.
    Under Microsoft's narrow definition, interoperability is a one-
way street that is satisfied if all of the functionality of a non-
Microsoft server operating system can be accessed from a Windows PC 
operating system. In contrast to the Department's position, 
Microsoft has repeatedly taken the position that interoperability 
does not require a disclosure sufficient to allow a Windows PC 
operating system to behave identically when connected to both 
Microsoft and non-Microsoft server operating systems. Moreover, 
Microsoft has previously claimed that "interoperability" 
relates only to those protocols and interfaces which Microsoft has 
chosen to document and make available to third parties, and should 
not include protocols and interfaces that Microsoft reserves for 
itself to use to connect its PC and server operating system 
products. Absent an explicit definition of this critical term in the 
RPFJ, Sun believes the disclosure provisions of the RPFJ are doomed 
to fail. To avoid future disputes over the meaning of this term and 
to ensure that the public actually receives a remedy that is 
consistent with the Department's representations in the

[[Page 29034]]

Competitive Impact Statement, Sun proposes that the RPFJ should be 
amended to include the following definition: 
"Interoperate" or "Interoperating" means the 
ability of two different products to access, utilize and/or support 
the full features and functionality of one another in all of the 
ways they are intended to function. For example, a non-Microsoft 
operating system installed on a server computer 
"Interoperates" with a Windows Operating System Product 
installed on a Personal Computer if such non-Microsoft server 
operating system can (a) be substituted for a Microsoft operating 
system running on a server computer connected to a Personal Computer 
running a Windows Operating System Product, and Co) provide the user 
of the non-Microsoft server operating system the ability to access, 
utilize and/or support the full services, features and functionality 
of the Windows Operating System Product that are accessed, utilized 
and/or supported by such Microsoft server operating system without 
any disruption, degradation or impairment in such services, features 
and functions.
    C. The scope of Microsoft's "Communication 
Protocols" disclosure should be clarified and exemplified
    As a vendor of server operating systems that must connect and 
communicate with Microsoft's monopoly PC operating system, the 
disclosure and licensing provisions in Section III. E relating to 
Microsoft's Communications Protocols are especially important to 
Sun's business. Although the term Communications Protocols is 
expressly defined, the RPFJ lacks any explicit examples regarding 
which Microsoft technologies would currently be required to be 
disclosed or what the extent of such disclosure would be in 
practice. While the terms of the RPFJ must be written to anticipate 
Microsoft's future conduct, there is no excuse for misunderstandings 
regarding Microsoft's obligations with respect to known, existing 
interoperability barriers. Because the technical terms surrounding 
this provision are potentially subject to varying interpretations, 
the RPFJ would be substantially improved if it gave better guidance 
on how these provisions would actually be applied in practice.
    For example, in its Competitive Impact Statement, the Department 
identifies some of the specific protocols it believes Microsoft will 
be required to disclose under Section III.E to the extent such 
protocols are implemented in Microsoft's PC operating system 
products, including: protocols relating to Microsoft's Internet 
Information Services ("IIS") web server and Active 
Directory, Microsoft's implementation of the Kerberos security 
standard (including the exchange of Privilege Access Certificates), 
the Windows server message block protocol, the Windows common 
Internet file system protocol, Microsoft remote procedure calls 
between the client and server operating systems, and protocols that 
permit a runtime environment (e.g., the Common Language Runtime) to 
receive and execute code from a server. \43\
---------------------------------------------------------------------------

    \43\ CI8 at 37-39.
---------------------------------------------------------------------------

    Microsoft, however, has refused to say whether it agrees with 
the Department's interpretation. To avoid future disputes and ensure 
that the parties agree on the kinds of protocols that will fall 
within the scope of the term "Communications Protocols," 
the RPFJ should be amended to identify particular examples of 
protocols that Microsoft would be required to disclose. Furthermore, 
in advance of entry of the RPFJ, Microsoft should be required to 
fully detail what it will disclose with regard to existing 
Communications Protocols that pose a barrier to interoperability. At 
a minimum, the Department should require Microsoft to identify any 
disagreements Microsoft has with the Department's interpretation of 
this provision prior to entry of the RPFJ. Unless the Department and 
Microsoft go through the exercise of attempting to apply this 
provision in practice, the public cannot be assured that there truly 
has been a "meeting of the minds" regarding the scope 
and meaning of this important provision. Not only should the 
Department clarify the RPFJ with examples of particular protocols 
that Microsoft currently would be required to disclose, the 
Department also should clarify the kinds of information Microsoft 
will be required to disclose regarding its Communications Protocols. 
Although the term Communications Protocols appears to be defined 
broadly in Section VI.B of the RPFJ, in practice, the actual 
application of these provisions is likely to give rise to many 
potential questions and disputes. For example,
    . Is everything that is shipped with Microsoft Windows server 
operating system products (e.g., Windows 2000 Server, Windows 2000 
Advanced Server, etc.), including Microsoft's Active Directory or 
IIS, part of the "server operating system," and 
therefore potentially the subject of disclosure to the extent it 
comprises a "Communications Protocol"?
    . Are Active Directory, Kerberos security protocol, COM+, Dfs, 
DLT, CIFS extensions, RPC, the Win 32 APls, or Passport examples of 
"Communications Protocols" that must be disclosed and 
licensed pursuant to Section III.E of the RPFJ?
    . Where Microsoft has extended an industry standard like 
Kerberos, will Microsoft be required to disclose both the standard 
portion of its implementation and its proprietary extensions?
    . Will Microsoft be required to disclose the details regarding 
its proprietary implementation of the Kerberos security protocol in 
Windows 2000 and Windows XP Professional, including the information 
necessary for a non-Microsoft server to be able to generate, 
exchange, and process the authentication and authorization data in 
Privilege Access Certificates?
    . What does "make available for use by third 
parties" mean in practice in the context of Section III.E? 
Will Microsoft be required to just disclose fields, formats, etc., 
or will it be required to disclose sufficient information to allow a 
competitor to create its own implementation of the Communications 
Protocol that will allow a competitor's server operating system to 
seamlessly interoperate with the Windows PC operating system in the 
same manner as a Microsoft server operating system? Unless such 
questions are resolved and clarified in advance of entry of the 
RPFJ, the disclosure and licensing obligations of Section III.E will 
not provide any meaningful relief.
    D. The scope of the "carve-out" provisions of 
Section III.J should be clarified Particularly troubling to Sun is 
the possibility that the "carve-out" provisions of 
Section III.J might be broadly construed by Microsoft to exclude 
many of the kinds of disclosures that would otherwise fall within 
the scope of Sections III.D and III.E. Section III.J. 1 provides 
that no provision of the Final Judgment shall: [r]equire 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 .... 
(emphasis added).
    In the Competitive Impact Statement, the Department 
characterizes this exception as a "narrow one, limited to 
specific end-user implementations of security items such as actual 
keys, authorization tokens or enforcement criteria, the disclosure 
of which would compromise the security of 'a particular 
installation or group of installations" of the listed security 
features"\44\ But nowhere in the RPFJ is the term 
"compromise the security of a particular installation or group 
of installations" defined. What will this provision mean in 
practice? With respect to known interoperability problems relating 
to Active Directory, Microsoft's Kerberos security model, 
Windows Media Player, or the Passport authentication/authorization 
service, what portions of those protocols and interfaces can 
Microsoft refuse to disclose pursuant to this provision? If 
Microsoft refuses to disclose such information, will competitors be 
able to fully interoperate with all of the features and 
functionality of the Windows operating system, or will the value of 
the disclosure provisions be effectively eviscerated? What steps has 
the Department taken to ensure that, in practice, this exception 
will not swallow the intended effect of the disclosure provisions?
---------------------------------------------------------------------------

    \44\ CIS at 39.
---------------------------------------------------------------------------

    Again, unless such questions are clarified in advance of entry 
of the RPFJ, Microsoft is likely to use this purportedly narrow 
exception to eviscerate its disclosure and licensing obligations 
under the RPFJ.
    E. The definition of "Microsoft Middleware Product" 
should be amended The definition of "Microsoft Middleware 
Product"\45\ in the

[[Page 29035]]

RPFJ is fundamentally flawed because it grants Microsoft discretion 
to limit its obligations merely based on the way it chooses to 
trademark its products. For middleware functionality that is 
distributed after entry of the Final Judgment, except for a small, 
specified class of middleware applications (e.g., Internet browsers, 
email client software, etc.), Microsoft's obligations under the RPFJ 
are not triggered unless it chooses to distribute the middleware 
product under a trademark other than "Microsoft??" or 
"Windows??"\46\ In other words, after entry of the RPFJ, 
if Microsoft bundles its new middleware runtime alternative to the 
Java platform, the .NET Framework (also known as the Common Language 
Runtime) with Windows, it only would have to make disclosures about 
the APIs used by the .NET Framework or allow OEMs and consumers to 
remove access to it, if it chose to distribute the .NET Framework 
under the trademarked name ".NET Framework." If it 
simply distributed the product under the name 
"Microsoft??" .NET Framework," its activities 
would appear to be unconstrained by the RPFJ. To allow Microsoft to 
evade its obligations under the RPFJ based on arbitrary trademarking 
practices is absurd.
---------------------------------------------------------------------------

    \45\ The RPFJ defines "Microsoft Middleware 
Product" as Follows:
    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.
    \46\ See RPFJ, Sections VI.K and VI.T.
---------------------------------------------------------------------------

    To avoid this result, the definition of "Microsoft 
Middleware Product" should be amended as follows: the 
"Trademarked" requirement of Section VI.K.2.b.iii should 
be stricken; the terms ".NET Framework" and 
"Common Language Runtime" should be added to Section 
VI.K. 1; and the term "middleware runtime environment" 
should be added to Section VI.K.2.a.
    V. Section III.I's Licensing Provisions Allow Microsoft to 
Profit from Its Unlawful Acts
    A. Microsoft should not be allowed to demand royalties as a 
condition for making interoperability disclosures
    The licensing provisions of the RPFJ are fundamentally flawed 
because they would require the public to pay royalties to Microsoft 
in order to interoperate with Microsoft's illegally maintained 
monopoly products. If Microsoft had not engaged in its pattern of 
illegal conduct, its monopoly would have begun to dissipate, and it 
would have been unable to collect this 
"interoperability" tax. As the Department itself 
previously recognized, "[i]f Microsoft were in a competitive 
market, it would disclose its confidential interface information to 
other server software developers so that their complementary 
software would work optimally with, and thereby enhance the value 
of, Microsoft's PC operating systems."\47\ It is only because 
Microsoft has illegally maintained its PC operating system monopoly 
and wishes to expand its monopoly to server operating systems that 
Microsoft has an incentive to withhold information from competitors 
regarding complementary software. Thus, the RPFJ, in effect, 
authorizes Microsoft to collect a portion of its monopoly rents 
through this licensing regime.
---------------------------------------------------------------------------

    \47\ 4/28/00 Plaintiffs" Memo. in Support of 
Proposed Final Judgment at 28.
---------------------------------------------------------------------------

    Furthermore, not only is Microsoft authorized to collect 
royalties for the "privilege" of interoperating with its 
illegal monopoly, the RPFJ places no limits on how high a royalty 
Microsoft can demand, other than the royalty must be reasonable. 
However, since competitors" products must be able to 
interoperate with Microsoft's monopoly PC operating systems, they 
may be constrained to essentially pay whatever Microsoft demands. To 
ensure Microsoft does not continue to enjoy the fruits of its 
illegal conduct, Section III.I of the RPFJ should be mended to 
require Microsoft to grant any licenses required under the RPFJ on a 
royalty-free basis.
    B. Microsoft has too much discretion over licensing terms under 
the RPFJ Although Section III.I of the RPFJ places some limitations 
on the terms under which Microsoft must license its technology to 
facilitate the disclosure obligations of the RPFJ, Microsoft retains 
broad discretion, which it is likely to exploit. For example, 
Section III.I. 1 requires that all license terms be 
"reasonable." A reasonableness standard, however, 
provides little practical guidance, and is a particularly poor 
choice in the case of a monopolist like Microsoft who has repeatedly 
broken the law to secure commercial advantages over its competitors. 
Similarly, the fact that licenses must be 
"nondiscriminatory" could actually be exploited by 
Microsoft to ensure that its strongest competitors are denied access 
to Microsoft's disclosures. For instance, a small start-up company 
with no revenues and no existing intellectual property rights might 
be willing to agree to terms that would be commercially unacceptable 
to significant Microsoft competitors like Sun, IBM, or Novell. The 
terms of the RPFJ also allow Microsoft the ability to substantially 
delay making any interoperability disclosures. Under Section III.E, 
Microsoft does not even need to make its Communications Protocols 
available until nine months after submission of the RPFJ. But since 
Microsoft can insist that third parties enter into a license 
agreement before they receive any disclosures, Microsoft can 
continue to delay making disclosures to key competitors by dragging 
out negotiations and insisting on commercially unacceptable terms. 
Does the Department intend to review ongoing negotiations to ensure 
Microsoft is taking reasonable positions in the negotiations? How 
will the Department ensure that Microsoft does not exploit the 
negotiating process to facilitate delay and disadvantage key 
competitors? Will Microsoft's competitors be forced to sign license 
agreements before they know the scope of information that Microsoft 
will or will not disclose? Does the Department expect that the 
proposed Technical Committee will be involved in resolving such 
disputes? If so, will Technical Committee members have the requisite 
licensing and legal experience to assess whether Microsoft is 
insisting upon commercially unreasonable terms? To ensure Microsoft 
cannot circumvent the intent of the RPFJ, Sire proposes that the 
R.PFJ be amended to include a publicly available template 
identifying the terms under which Microsoft will license its 
technology pursuant to the RPFJ. In principle, this approach is 
analogous to Section III.B which requires Microsoft to have uniform 
license agreements with OEMs in accordance with published, uniform 
royalty rates. Requiring Microsoft to identify this license template 
in advance would serve two important objectives. First, it would 
help limit Microsoft's ability to evade the intent of the RPFJ 
through negotiation tactics. Second, it would allow the public to 
understand the true costs and conditions of licensing under the RPFJ 
in advance of entry of the RPFJ. Unless the material licensing terms 
are specified in advance, neither the Department nor the public can 
accurately assess the actual commercial significance of the proposed 
disclosure obligations.
    C. Microsoft should not be allowed to force third parties to 
forfeit their intellectual property claims against Microsoft
    Section III.I.5 provides that third parties "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." In other words, Microsoft would be 
free to infringe a third party's patents or copyrights, or steal its 
trade secrets, and then by virtue of its monopoly position, force 
such third party to grant Microsoft a license to do so as the price 
that third party must pay in order to interoperate with Microsoft's 
monopoly product. If Microsoft wished to obtain rights to practice 
or use a competitor's intellectual property, it could do so simply 
by incorporating that technology into Windows, then insisting on 
both a royalty and a grant-back license as the consideration that 
competitor must provide in order to enable its products to 
interoperate with Microsoft's monopolized PCs. Indeed, Microsoft's 
competitors would have to license Microsoft the right to whatever 
intellectual property Microsoft may have incorporated into Windows 
even before they know what intellectual property Microsoft has 
stolen or infringed. No other company has such power, let alone 
governmental blessing and endorsement, to extort such concessions. 
Sun therefore proposes that the RPFJ be mended to strike Section 
III. I.5 in its entirety.
    VI. Conclusion
    The RPFJ fails to remedy the continuing competitive harm 
resulting from Microsoft's actions, and instead improperly accedes 
to Microsoft's illegally maintained and

[[Page 29036]]

expanded monopoly power. The Department should withdraw its support 
for the RPFJ, and instead pursue remedies that will restore 
competition to the PC operating system market, prevent Microsoft 
from expanding its monopoly in that market into adjacent and 
downstream markets, and redress the harm to competition caused by 
Microsoft's illegal acts. At a minimum, the Department should seek 
to remedy directly the specific harm to competition caused by 
Microsoft's illegal acts against the Navigator browser and the Java 
platform, which formed the very heart of the Department's case 
against Microsoft. Because critical terms in the RPFJ are undefined 
or ambiguous, the Department also should assure the public that 
Microsoft is bound by the interpretation of the RPFJ set forth in 
the Department's Competitive Impact Statement. Finally, the 
Department should delay seeking entry of the RPFJ until the 
completion of trial on the remedies sought by the Department's co-
plaintiffs, the Litigating States. Sun believes that the evidentiary 
record from that trial is likely to demonstrate the substantial 
flaws and inadequacies of the RPFJ and cause the Department to 
seriously re-consider whether its support for the RPFJ is in the 
public interest.



MTC-00030610

MAYER, BROWN & PLATT
555 COLLEGE AVENUE
PALO ALTO, CA 94306- 1433
DONALD M. FALK
DIRECT DIAL (650) 33 1-2030
DIRECT FAX (650) 33 1-2068
dfalk @ mayerbrown.com
MAIN TELEPHONE
(650) 331-2000
MAIN FAX
(650) 33I-2060
January 28, 2002
VIA E-MAIL AND MESSENGER
Renata B. Hesse
Antitrust Division
U.S. Department of Justice
601 D Street NW
Suite 1200
Washington, DC 20530-0001
Re: Microsoft Settlement: United States v. Microsoft Corp., No. 
98-1232 Tunney Act proceedings
    Dear Renata:
    Enclosed please find the following comments on the settlement:
    (1) Comments of Computer & Communications Industry 
Association on the Revised Proposed Final Judgment;
    (2) Declaration of Joseph E. Stiglitz and Jason Furman; and
    (3) Declaration of Edward Roeder.
    Thank you for your assistance. Please feel free to call my 
Washington colleague, David Gossett (202-263-3384) or me 
if you have any questions.
    Hope all is well with you. It's a long way from the ELQ days.
    Sincerely,
    Donald M. Falk
    Enclosures
    BEFORE THE UNITED STATES DEPARTMENT OF JUSTICE UNITED STATES OF 
AMERICA Plaintiff, V. MICROSOFT CORPORATION, Defendant. Civil Action 
No. 98-1232 (CKK) United States District Court for the 
District of Columbia STATE OF NEW YORK ex rel. Attorney General 
ELIOT SPITZER, et al., Plaintiffs, v. MICROSOFT CORPORATION, 
Defendant. Civil Action No. 98-1233 (CKK) United States 
District Court for the District of Columbia
    COMMENTS OF COMPUTER & COMMUNICATIONS INDUSTRY ASSOCIATION 
ON THE REVISED PROPOSED FINAL JUDGMENT
    Donald M. Falk
    Mayer, Brown & Platt
    555 College Avenue
    Palo Alto, California 94306
    (650) 331-2030
    (650) 331-2060 facsimile
    Edward J. Black
    Jason M. Mahler
    Computer & Communications
    Industry Association
    666 11th Street NW
    Washington, DC 20001
    (202) 783-0070
    David M. Gossett
    Mayer, Brown & Platt
    1909 K Street, NW
    Washington, DC 20006
    (202) 263-3000
TABLE OF CONTENTS
Page(s)
INTRODUCTION 2
A. Liability Rests On Microsoft's Suppression Of Middleware Threats 
That Threatened To Erode The Applications Barrier To Entry 6
B. The RPFJ Does Not Prevent Microsoft From Abusing Its Position And 
Does Not Meet Basic Standards For An Antitrust Remedy 9
C. The Obligations That Supposedly Restore Competitive Conditions In 
Fact Make Microsoft Do Virtually Nothing Against Its Will 11
D. The Public Interest Requires An Effective Remedy That The RPFJ 
Does Not Provide 15
I. The Tunney Act Requires Close Scrutiny Under The Present 
Circumstances 18
A. The Government's Victory On Liability Removes Litigation Risk And 
Therefore Limits Deference 19
1. The Imposition And Affirmance Of Liability Remove Any 
Constitutional Concerns About Searching Review And Require The Court 
To Perform Its Constitutional Duty 19
2. The Extensive Record And Judicial Opinions Provide Clear, 
Manageable Standards For Substantive Review Of The RPFJ 23
B. Broad Deference Is Particularly Inappropriate Because The 
Circumstances Are Suspicious 26
1. Microsoft's Manifestly Inadequate Disclosure Under The Tunney 
Act's Sunshine Provisions Weighs Strongly Against Judicial Deference 
To The Terms Of The RPFJ<5>26
2. The RPFJ Represents A Swift And Significant Retreat By DOJ 32
3. The CIS Overstates The Terms Of The RPFJ, Reflecting The 
Indefensibility of the RPFJ Itself 33
II. the rpfj must meet the legal standards normally applicable to 
antitrust remedies 34
A. The Relief Should "Terminate The Illegal Monopoly" 35
B. The Relief Should Prevent "Practices Likely To Result In 
Monopolization In The Future" 36
C. The Relief Should "Deny To The Defendant The Fruits Of Its 
Statutory Violation" 37
D. Broader Principles Applicable To Injunctive Relief Also Should 
Inform The Analysis Of The RPFJ 37
III. The RPFJ falls far short of providing a remedy for proven 
offenses upheld on appeal 39
A. DOJ's Effort To Minimize The Scope Of The DC Circuit's Affirmance 
Cannot Obscure The Failure Of The RPFJ To Remediate Clear, Proven 
Violations 39
B. The RPFJ Simply Restates The Antitrust Laws At Critical Points 
And Thus Forfeits The Clarity And Efficiency Of The Contempt Process 
41
C. The RPFJ Provides No Remedy For Microsoft's Suppression Of The 
Browser And Java 42
IV. The Icon-focused Oem flexibility Provisions Are Ineffective 44
A. The PFJ Permits Microsoft's To Continue Illegally Commingling 
Middleware Code With The Code For The Monopoly Operating System 45
1. The DC Circuit Specifically Condemned Commingling Twice 46
2. The Failure To Limit Commingling Is Critical Because Ubiquity 
Trumps Technology In Platform Software Markets 49
3. The RPFJ Retreats From The 1995 Consent Decree 52
4. The RPFJ Encourages Illegal Commingling By Placing The Critical 
Definition of Windows Under Microsoft's Exclusive Control 53
B. Empirical Evidence Shows That The Icon Flexibility Provisions 
Will Not Be Used 54
C. The Icon Flexibility Provisions Require--And 
Accomplish--Little 55
D. The 14-Day Sweep Provision Effectively Nullifies RPFJ 
 III(H) 57
E. By Placing The Burden To Restore Competition On OEMs, The PFJ 
Leads To No Remedy At All For Much Of The Misconduct At Issue 58
F. The RPFJ Permits Microsoft To Control Consumers" Access To 
Innovation To Suit Its Monopolistic Aims 59
V. The API and Communications protocol Disclosure Provisions Are 
ineffective 60
A. The API Provisions Require Little, If Anything, Beyond Current 
Disclosure Practices In Microsoft's Self-Interest 60
B. The RPFJ Does Not Require Disclosure of Windows APIs, But Rather 
Lets Microsoft Determine The Scope of Disclosure Through The Design 
and Labeling of Its Operating System And Middleware 61
C. The Definition of "Microsoft Middleware" Gives 
Microsoft Further Leeway to Limit Its Disclosure Obligation 63
1. The RPFJ Requires Microsoft To Disclose Only The APIs Used By The 
"User Interface" Or Shell Of Microsoft Middleware 64
2. The RPFJ Requires Microsoft To Disclose APIs Only For 
"Microsoft Middleware" That Is Distributed Separately 
From

[[Page 29037]]

Windows, Yet Is Distributed To Update Windows 65
3. The Limitation Of Microsoft Middleware To 
"Trademarked" Products Further Eviscerates The API 
Disclosure Provision 65
D. The Disclosure Provisions--Particularly Those Concerning 
"Communications Protocols"--Depend On An Undefined 
And Thus Unenforceable Concept of "Interoperability" 69
E. The Narrow Scope Of The Disclosure Provisions Contrasts Sharply 
With The Broader Definitions In DOJ's Earlier Remedy Proposals 70
F. The "Security" Exceptions in Section III(J) Permit 
Microsoft To Avoid Its Disclosure Obligations 72
1. The Exclusions for Security-Related APIs and Protocols in 
RPFJ(J)(1) Permit Microsoft To Hobble Disclosures That Are Critical 
in Internet Computing 73
2. RPFJ III(J)(2) Permits Microsoft To Refuse Effective Disclosure 
To A Range Of Potentially Effective Competitors 77
G. RPFJ  III(I) Would Place A Judicial Imprimatur On 
Microsoft's Use Of Technical Information As A Lever To Extract 
Competitors" Intellectual Property 81
VI. built-in delays exacerbate the decree's unjustifiably brief 
duration 82
VII. Additional weaknesses undercut the rpfj 85
A. The Anti-Retaliation Provisions Are Deeply Flawed 85
B. Microsoft Can Evade The Price Discrimination Restrictions 87
C. Microsoft Can Enforce De Facto Exclusivity 88
VIII. THE RPFJ'S ENFORCEMENT MECHANISMS ARE FUNDAMENTALLY
INADEQUATE 89
CONCLUSION 93
    INTEREST OF THE COMMENTER
    The Computer & Communications Industry Association 
("CCIA") is an association of computer, communications, 
Internet and technology companies that range from small 
entrepreneurial firms to some of the largest members of the 
industry. CCIA's members include equipment manufacturers, software 
developers, providers of electronic commerce, networking, 
telecommunications and on-line services, resellers, systems 
integrators, and third-party vendors. Its member companies employ 
nearly one million persons and generate annual revenues exceeding 
$300 billion. CCIA's mission is to further the interests of its 
members, their customers, and the industry at large by serving as 
the leading industry advocate in promoting open, barrier-free 
competition in the offering of computer and communications products 
and services worldwide. CCIA's motto is "Open Markets, Open 
Systems, Open Networks, and Full, Fair and Open Competition," 
and its website is at www.ccianet.org. For nearly 30 years, CCIA has 
supported antitrust policy that ensures competition and a level 
playing field in the computer and communications industries. That 
involvement antedates the founding of Microsoft, much less its 
acquisition of its first monopoly and its refinement of 
anticompetitive techniques. CCIA supported the Tunney Act in the 
1973 congressional hearings preceding the enactment of that 
legislation, and played active roles on the side of competition in 
other significant antitrust cases, including those against AT&T 
and IBM. Before participating as amicus curiae at the trial and 
appellate stages of the current Microsoft case, CCIA participated as 
a leading amicus curiae in the proceedings examining the last 
Microsoft consent decree in 19941995, both in the district court and 
in the court of appeals. As a consequence, CCIA and its members are 
intimately familiar with the shortcomings of that decree, and its 
failure to prevent or deter Microsoft from continuing on an 
anticompetitive course. Microsoft's conduct in the intervening 
years, including the period while this case has been litigated, has 
only sharpened CCIA's awareness of Microsoft's dedication to driving 
out competition from as many aspects of the computer-software and 
related industries as possible. Microsoft may repeat its attempts to 
mischaracterize CCIA as a mere voice for competitors, but that 
innuendo cannot withstand scrutingy in light of the diversity of 
CCIA's membership now and over the years, combined with CCIA's 30 
years of vigorous commitment to supporting openness and competition 
in the computer technology and communications industries. In hopes 
that a meaningful remedy in this case will prevent Microsoft from 
further expanding the scope of its monopoly, and with the certainty 
that the current Revised Proposed Final Judgment 
("RPFJ") falls far short of that task, CCIA submits this 
analysis of the RPFJ in conjunction with the economic analysis of 
Nobel laureate Joseph Stiglitz and his colleague Jason Furman, and 
the Declaration of Edward Roeder.
    INTRONUCTION
    The Tunney Act was designed to constrain the Department of 
Justice ("DOJ") from entering into settlements that 
provided DOJ with an exit from an antitrust case but did not provide 
the public with a remedy commensurate with the defendant's antitrust 
violations. The Revised Proposed Final Judgment (RPFJ) in this case 
does not provide adequate relief for the extensive and thoroughly 
proven antitrust violations it purports to remedy. Review of the 
RPFJ in this case should be especially searching because there can 
be no doubt about Microsoft's liability. For the first time in the 
history of the Tunney Act, the Court will review a proposed 
settlement reached after liability has been not only imposed, but 
unanimously affirmed on the government's most sweeping and 
economically significant theory. That clear-cut liability, and the 
voluminous Findings of Fact and trial record, place the Court in 
this case in a different position from courts reviewing pre-trial 
settlements. Because there is no litigation risk on liability, the 
Court is uniquely situated to evaluate any asserted litigation risk 
as to remedy. Established principles of antitrust relief provide the 
Court in this case with concrete, recognized standards to ensure 
that the settlement serves the public interest in a way that courts 
reviewing pre-trial settlements cannot. Magnifying the need for 
close measurement of the RPFJ by objective principles is Microsoft's 
silence, in its filing under 15 U.S.C. 16(g), about its effort to 
truncate this case by a lobbying campaign of unprecedented scope 
directed at the Executive and Legislative Branches 
alike--despite extensive public reports of that lobbying. 
Microsoft's effort to deny the obvious gives rise to an inference 
that it has something to hide.
    The terms of the RPFJ provide the strongest reason for close 
scrutiny, because they cannot withstand analysis. The RPFJ would not 
provide a meaningful remedy for Microsoft's extensive campaign of 
exclusionary acts. That campaign suppressed the most serious threat 
to Microsoft's monopoly in the past decade, and not only prevented 
the erosion of the applications barrier to entry that insulates the 
monopoly, but increased the bar to new competition. The RPFJ ignores 
some of the most significant holdings of the court of appeals, 
however, including its separate imposition of liability for 
Microsoft's commingling of middleware code with the code for the 
Windows operating system.
    More fundamentally, the RPFJ misses the point of Microsoft's 
illegal conduct, which was to prevent erosion of the applications 
barrier to entry by preventing middleware from attracting software 
developers to the middleware application programming interfaces 
("APIs"). The RPFJ's basic premises, moreover, ignore 
the current economic and technical realities of the computer and 
software markets. In the seven years since Microsoft began the 
illegal conduct at issue in this case, Microsoft has strengthened 
its operating systems monopoly. The Internet browser, formerly a 
threat to that monopoly, has become an adjunct to it, with 
Microsoft's 91% share of that product adding further insulation to 
the operating systems monopoly. Microsoft's unadjudicated monopoly 
over personal productivity applications--a key to the 
applications barrier to entry in the operating systems 
market--likewise has grown in market share and market power. 
But the RPFJ does not try to deprive Microsoft of any of the 
benefits of its illegal activity directed at the browser and other 
middleware. DOJ's remedial theory rests entirely on unidentified 
future middleware threats. In fact, there are no technologies today 
presenting a threat as intense as that presented by the Netscape 
browser and Java, and the duration of the RPFJ is so short that it 
almost certainly will expire before any significant new threats 
materialize. Aside from some restrictions on commercial retaliation 
that at best might keep matters from getting worse, the RPFJ relies 
on two sets of putative obligations to achieve a more competitive 
market. But neither the provisions aimed at original equipment 
manufacturer ("OEM") flexibility nor those addressing 
information disclosure requirements in fact require anything 
competitively meaningful. In large part, these provisions replicate 
Microsoft's current business practices respecting the disclosure of 
technical information and the configuration of end-user access to 
middleware products.
    The OEM flexibility sections in RPFJ  III(C) 
and III(H) are literally superficial,

[[Page 29038]]

principally addressing desktop icons rather than the middleware code 
itself, which contains the APIs relied on by software applications 
developers. Even if successful, the flexibility provisions would not 
affect the applications barrier to entry. Moreover, these provisions 
largely restate current business practices or provide OEMs with 
flexibility that both Microsoft and DOJ understand from experience 
will never be exercised. OEMs have little or no incentive to 
exercise their options; if they decline to do so, then the 
flexibility provisions will have no competitive consequences for the 
industry. The RPFJ's information disclosure sections (Ill(D) and 
Ill(E)) are so transparently insubstantial as to cast doubt on the 
entire proposal. The purported disclosure requirements trace back to 
definitions that are committed to Microsoft's control, are circular, 
or simply do not exist. Neither DOJ nor any other objective observer 
could have any idea precisely which APIs or protocols must be 
disclosed. The RPFJ's provisions and definitions are so vague that 
only two practical results are possible. Either everyone will simply 
ignore the decree, which plainly would not be in the public interest 
for an antitrust remedy, or the Court will have to take primary 
responsibility for defining its terms during enforcement 
proceedings. DOJ's answer seems to be to let Microsoft set the terms 
of its obligations: the RPFJ gives the defendant "sole 
discretion" to define the decree's most important term, 
"Windows Operating System Product," which appears 46 
times to delimit the RPFJ's 10 substantive
    Indeed, much of DOJ's Competitive Impact Statement 
("CIS") seems to reflect an understanding that the RPFJ 
is inadequate in several critical respects. The CIS defines terms 
not defined in the RPFJ, exaggerates the scope of certain RPFJ 
provisions, and redefines other terms in order to minimize the 
impact of some of the broad exemptions in the RPFJ. It is the RPFJ 
that the Court would have to enforce, however, as the CIS is not 
part of the contract between DOJ and Microsoft.
    In sum, although the RPFJ's provisions superficially seem to 
restrict Microsoft's practices, there is no substance behind them. 
The provisions accomplish little beyond laying down criteria for 
Microsoft to follow in order to avoid any interference with its 
continuing campaign of illegal monopolization. The terms of the 
RPFJ, as much as the circumstances of the settlement, strongly 
suggest that Microsoft and the Department of Justice shared a desire 
to end this case, rather than to provide an effective remedy for 
Microsoft's substantial antitrust violations. The 1995 consent 
decree with Microsoft produced uninterrupted illegal monopolization, 
prompting the filing of this case in 1998. The Court can expect the 
same with this decree. The RPFJ, if approved, might temporarily end 
DOJ's involvement, but would not provide the type of remedy that the 
public interest and the Tunney Act demand. To the contrary, because 
the harm to the competitive process caused by Microsoft's 
adjudicated illegal conduct is certain, a remedy that masks but does 
not cure that harm affirmatively injures the public interest, and 
therefore should be rejected.
    A. Liability Rests On Microsoft's Suppression Of Middleware 
Threats That Threatened To Erode The Applications Barrier To Entry 
This case is about Microsoft's devastatingly thorough suppression of 
threats to its Windows operating system ("OS") monopoly 
by "middleware." That monopoly was insulated from 
competition by the applications barrier to entry described by the 
court of appeals and the CIS. See United States v. Microsoft Corp., 
253 F.3d 34, 55-56 (DC Cir. 2001) ("Microsoft 
III"); CIS 10-11, 66 Fed. Reg. 59,452, 59,462 (2001). 
See also Declaration of Joseph E. Stiglitz & Jason Furman 
7-9 ("Stiglitz/Furman Dec.") (attached). The 
middleware at issue in this case exposed APIs that could be used by 
software applications developers to write programs that did not rely 
on the underlying Windows operating system. As Microsoft recognized, 
if developers embraced non-Microsoft middleware APIs and designed 
their products to run on that middleware rather than directly on an 
operating system, "middleware" of this kind "would 
erode the applications barrier to entry," as 
"applications * * * could run on any operating system on which 
the middleware product was present with little, if any, 
porting." Microsoft III, 253 F.3d at 55. The threat that 
"middleware could usurp the operating system's platform 
function," id. at 53, prompted Microsoft's anticompetitive 
conduct. But non-Microsoft middleware can become a competing 
platform only if developers write software that calls on the non-
Microsoft middleware APIs. Most developers will create software only 
to run on platforms that are distributed widely enough for the 
developers to be reasonably certain that the APIs (on which their 
programs rely) will be present on most, if not all PCs. Likewise, if 
developers can be certain that Microsoft's middleware APIs are 
present on all PCs, this will strongly influence their initial 
decision as to whether it is worth the effort to write applications 
to alternative, non-Microsoft middleware APIs. The successful theory 
of the case--proved and accepted by two courts--is that 
Microsoft engaged in an "extensive campaign of exclusionary 
acts" that were designed "to maintain its 
monopoly" by suppressing middleware threats posed by the 
Netscape Navigator Internet browser and the cross-platform Java 
technologies. CIS 9, 66 Fed. Reg. 59,462; Microsoft III, 253 F.3d at 
53-56, 60-62, 74-78. Microsoft's response to this 
threat guaranteed that developers would not use the APIs of 
competing middleware, destroying the platform threat. Because 
Microsoft has a monopoly over the OS, it can ensure that its own 
versions of a middleware product have universal distribution, so 
that Microsoft's middleware APIs will be present on all PCs. For 
example, because Windows is both an operating system and a 
distribution channel for Microsoft's technologies, Microsoft could 
and did ensure that the code for its Internet Explorer 
("IE") browser was distributed to every PC.
    Ensuring that the code for Microsoft middleware was on every PC 
accomplished two related goals. First, it guaranteed instant and 
unassailable ubiquity for the Microsoft version of the middleware 
and the middleware APIs on which developers rely. Second, the forced 
ubiquity of Microsoft middleware prevents competing middleware from 
achieving ubiquity, or anything like it, because few distribution 
channels will incur the support and other costs of distributing two 
versions of the same functionality. A key theory of the case is that 
the applications barrier to entry could have been eroded only if 
developers chose and used alternative middleware platforms on which 
to write software. End-user access to middleware was significant 
only to the extent it influenced developers" choices to write 
to the APIs of that middleware. Thus, ensuring that the code for the 
Microsoft version of middleware is on every PC destroys the 
competitive threat presented by the competing middleware's APIs, 
since few developers will use them in preference to Microsoft 
middleware APIs that are certain to be ubiquitous. This fact 
provides the essential context for any meaningful analysis of the 
information disclosure and OEM flexibility provisions of the RPFJ.
    B. The RPFJ Does Not Prevent Microsoft From Abusing Its Position 
And Does Not Meet Basic Standards For An Antitrust Remedy
    The DC Circuit set out a simple standard for measuring the legal 
sufficiency of any remedy selected in the Microsoft litigation: the 
remedy must "seek to "unfetter [the] market from 
anticompetitive conduct," * * * 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." Microsoft III, 253 
F.3d at 103 (quoting Ford Motor Co. v. United States, 405 U.S. 562, 
577 (1972), and United States v. United Shoe Machinery Corp., 391 
U.S. 244, 250 (1968)). As the District Court recognized in beginning 
remedy proceedings on remand (9/28/01 Tr. 6-7), not one word 
in the DC Circuit's opinion suggests the slightest antipathy toward 
any conduct remedy related to the illegal monopolization that the 
Court of Appeals exhaustively condemned.\1\ The District Court 
warned the plaintiffs to be "cautiously attentive to the 
efficacy of every element of the proposed relief." 9/28/01 Tr. 
8. That is, the plaintiffs must make sure that the proposed remedy 
works.
---------------------------------------------------------------------------

    \1\ Indeed, in denying rehearing, the DC Circuit made 
crystal clear that "[n]othing in the Court's opinion is 
intended to preclude the District Court's consideration of remedy 
issues." Order, at 1 (DC Cir. Aug. 2, 2001) (per curiam).
---------------------------------------------------------------------------

    That admonition appears to have fallen on deaf ears. Because 
liability has been established and affirmed in great detail, the 
scope of the District Court's appropriate deference to DOJ is 
extremely limited because the range of permissible action by DOJ is 
closely confined. There is no litigation risk other than the risk 
that the District Court would not approve a particular remedy, or 
that the District Court's exercise of discretion in approving a 
remedy might be reversed on appeal. A remedy, even one imposed by 
agreement, must provide adequate relief for the violations that have 
been proved, however. DOJ is entitled to deference only for choices 
that fall within the range of adequate

[[Page 29039]]

relief. The RPFJ misses the point of the central theory of 
liability. The RPFJ does not impose certain, enforceable, or 
competitively significant obligations on Microsoft to restore 
competition or to avoid suppressing future threats. The RPFJ allows 
Microsoft to keep every anticompetitive gain that resulted from its 
illegal conduct, simply requiring Microsoft to find new and slightly 
different ways to accomplish its anticompetitive goals. DOJ seems to 
recognize that the case focused on two specific 
products--Netscape Navigator and Java--that embodied the 
broader threat of middleware and the Internet to the stability and 
significance of Microsoft's monopoly. The RPFJ does nothing to 
restore the specific competitive threat posed by an independent 
Internet browser. It does nothing to restore the threat of cross-
platform Java. And it does nothing to protect any other middleware 
threat--in the unlikely event that another such threat might 
arise within the short duration of the RPFJ--from much similar 
exclusionary conduct, or indeed from the identical commingling of 
code that sealed Netscape's fate. Rather, the RPFJ appears to assume 
that it is still 1995, and that the threat of the Internet browser 
can begin anew without confronting a more thoroughly entrenched 
Microsoft. The RPFJ does not take account of the impact on 
participants at different levels of the computer and software 
industries of an additional seven years of Microsoft's 
anticompetitive abuses. That view does not accord with reality, and 
the provisions intended to permit open competition in that 
counterfactual world cannot achieve their goal.
    C. The Obligations That Supposedly Restore Competitive 
Conditions In Fact Make Microsoft Do Virtually Nothing Against Its 
Will
    The RPFJ purports to give current and future middleware the 
ability to present the same threats to the Microsoft monopoly that 
Netscape and Java presented before the onset of Microsoft's illegal 
conduct. DOJ describes the obligations in the RPFJ as if they would 
have stopped Microsoft's suppression of Netscape, and as if they 
would allow rival middleware vendors to obtain the technical 
information that they need to "emulate Microsoft's integrated 
functions" (Testimony of Charles James before Senate Judiciary 
Committee 7 (Dec. 12, 2001)) and to step into the shoes of Microsoft 
middleware in relation to Windows and the Windows monopoly. The RPFJ 
does not achieve those goals. Most of the RPFJ reduces to two sets 
of obligations, along with some prohibitions on exclusive deals and 
on retaliation against those who take advantage of Microsoft's 
obligations. One set of obligations appears to restrain Microsoft 
from taking particular actions to interfere with OEMs" 
placement of the icons of Non-Microsoft Middleware on their 
machines, or with end-users" use of those products. These OEM 
flexibility provisions principally rely on the OEMs to provide a 
remedy for Microsoft's misconduct. The other set of obligations 
requires a certain degree of disclosure of APIs and Communications 
Protocols to allow competing software products can 
"interoperate" -an undefined term--with the 
monopoly OS. For the most part, the obligations placed on Microsoft 
by the RPFJ simply replicate current options voluntarily provided by 
Microsoft. For example, Microsoft must continue to disclose the APIs 
it currently discloses in the Microsoft Developers" Network 
(MSDN), a program Microsoft developed to further its self-interest 
in making the Windows platform popular with software developers. And 
Microsoft must continue to allow end-users to delete icons from the 
desktop and start menu. Such provisions at most simply prohibit 
Microsoft from making matters worse than they are after Microsoft's 
years-long anticompetitive campaign. Indeed, the RPFJ in some 
instances specifically approves potential misuse of Microsoft's 
current voluntary implementations of the flexibility and disclosure 
provisions. To begin with the flexibility provisions, their chief 
flaw is their focus on icons rather than on middleware 
functionality. This is literally a superficial approach. Microsoft 
can include its own middleware and middleware APIs on every PC. 
Developers will know those APIs are there and consequently will 
write to them in preference to the APIs of a competing product that 
may or may not be on a particular machine. No provision of the RPFJ 
restricts Microsoft's insertion and commingling of middleware code 
into the "Windows Operating System Product" bundle that 
Microsoft receives the right to define for decree purposes "in 
its sole discretion." RPFJ  VI(U). From the point 
of view of developers--and thus of the ability of middleware to 
erode the applications barrier to entry--these 
"flexibility" provisions are meaningless. Even to the 
extent that competing middleware vendors might obtain favorable 
placement for their products" icons in preference to the icons 
for Microsoft products, that achievement would be both superficial 
and temporary. The functionality of the Microsoft product would 
remain on the machine, and Microsoft could insist on its invocation 
for a variety of functions. And, 14 days after a PC first boots up, 
Microsoft would be free to nag users to click a "Clean Desktop 
Wizard" which would organize icons in the way that suited 
Microsoft. There is nothing in the RPFJ to stop that 
"Wizard" from resetting default applications to coincide 
with Microsoft's preferences as well, or even from enhancing the 
product so that it becomes a Clean File Wizard to remove code of 
competing middleware with a single click. These provisions place 
responsibility for restoring competition on innocent OEMs and ISVs 
rather than on Microsoft. And many provisions give end-users what 
they have now: the ability to remove an icon from the desktop or a 
program menu by right-clicking it and selecting 
"Delete," or by dragging it to the Recycle Bin. The 
provisions do change the status quo in one way. The "Add/
Remove" function, which now removes some underlying code for 
applications, will only remove a few icons when the removed 
application is Microsoft middleware. The disclosure provisions are 
no better. The RPFJ requires Microsoft to disclose APIs between 
"Microsoft Middleware" and a "Windows Operating 
System Product," but the definitions of those terms are so 
completely within Microsoft's control that it is impossible to tell 
whether Microsoft ever would have to disclose an API that might have 
competitive significance. As noted above, a "Windows Operating 
System Product" is whatever Microsoft says it is. 
"Microsoft Middleware" must be distributed separately 
from the OS (unlike, e.g., the current version of Windows Media 
Player). "Microsoft Middleware" must be 
"Trademarked" in a way that would exclude Windows 
Messenger, may exclude Windows Media Player, and certainly would 
exclude any products that followed Microsoft's practice of simply 
combining the Microsoft(r) or Windows(r) marks with a generic or 
descriptive term. Indeed, because "Microsoft Middleware" 
need not mean any more than the user interface of a middleware 
functionality that meets the other definitional requirements, see 
RPFJ  VI(J)(4), the only APIs that must be disclosed are 
those between the middleware user interface and 
"Windows," which Microsoft in its discretion can define 
to include all of any given middleware functionality. See id. 
 VI(U). Microsoft need not disclose how the middleware 
actually invokes Windows to work, except for the way that the OS 
displays the middleware's shell. The disclosure provisions applying 
to Communications Protocols are similarly weakened by non-existent 
definitions. The disclosable Protocols are those required to 
"interoperate"--whatever that may mean--with 
equally undefined "Microsoft server operating products." 
RPFJ  III(E). In addition, the Communications Protocol 
disclosure provisions are limited by sweeping exceptions applying to 
security protocols that are intertwined with all significant 
computer-to-computer communication. See id.  III(J)(I). 
Microsoft can withhold parts of those Protocols (and, indeed, parts 
of APIs) on the basis that disclosure would compromise security of 
an installation. If this exemption were limited to the customer-
specific data like encryption keys or authorization tokens, it would 
be necessary, not objectionable. But the exemption explicitly 
permits Microsoft to withhold portions of the Protocols and APIs 
themselves, which necessarily makes "interoperation" (as 
that term normally is used) incomplete. Interoperation, however, is 
an all-or-nothing state. Software that can use only parts of APIs 
and Communications Protocols simply cannot 
"interoperate" with the software on the other side of 
the API or Protocol. But that is not all. RPFJ 
 III(J)(2) permits Microsoft to refuse to disclose 
security-related Protocols or APIs to any company that does not meet 
Microsoft's standards of business viability or its standards for a 
business need. Again, little if anything is left of this disclosure 
requirement if Microsoft chooses to resist disclosure when that 
serves its anticompetitive goals. One thing is certain. Unless 
Microsoft and DOJ alike render the RPFJ irrelevant by simply 
ignoring it, the District Court will be faced again and again with 
the task of interpreting the RPFJ's indistinct provisions. Microsoft 
has demonstrated its incentive and ability to contest even the most 
seemingly obvious points of any court order.

[[Page 29040]]

    D. The Public Interest Requires An Effective Remedy That The 
RPFJ Does Not Provide
    Despite the belated efforts of DOJ to minimize the scope of this 
case, it remains the largest, most successful prosecution for 
monopolization liability since at least the Second World War. The DC 
Circuit affirmed "the District Court's holding that Microsoft 
violated  2 of the Sherman Act in a variety of 
ways." 253 F.3d at 59. The breadth of that holding is clear 
from the 20 Federal Reporter pages consumed by the court's detailed 
discussion of Microsoft's array of exclusionary behavior. The 
competitive significance of the conduct condemned by that holding is 
explained both in the opinion, in the Declaration of Joseph E. 
Stiglitz and Jason Furman ("Stiglitz/Furman Dec.") 
16-20, and in the Comment of Robert E. Litan, Roger G. Noll, 
and William D. Nordhaus ("Litan/Noll/Nordhaus Comment") 
12-31, among other submissions for this Tunney Act proceeding. 
The difficulties encountered by peripheral claims are irrelevant, 
particularly because all of the challenged conduct supported 
monopolization liability in addition to one or more of the since-
abandoned theories. The supposed "narrowing" left a huge 
monopolization case with a stark judgment affirming the government's 
theory. The RPFJ does not provide a remedy commensurate with that 
liability.
    The RPFJ is insufficient for another overarching reason. The 
passage of time has only exacerbated the problem of Microsoft's 
successful abuse of its operating systems monopoly to extend that 
monopoly to embrace other sectors of computing and to forestall 
threats to the monopoly from those sectors. Microsoft's monopoly 
over Internet browsing is complete, as its current 91% market share 
indicates. Julia Angwin, et al., AOL Sues Microsoft Over Netscape in 
Case That Could Seek Billions, WALL ST. J., Jan. 23, 2002, at B1. 
Even the RPFJ recognizes, albeit through toothless provisions, that 
Microsoft is using its desktop OS monopoly to force greater use of 
its server operating systems. And Microsoft's efforts to use the 
inclusion of its Passport authentication software on every Windows 
machine as a means of directing through a Microsoft server all 
authentication and identification transactions--gaining a 
literal chokehold over the communications aspect of Internet 
computing--is so significant that Microsoft sought and obtained 
an exemption in the RPFJ specifically designed to excuse that known 
monopolistic strategy. See RPFJ 
 III(H)(1)[second] \2\; see also id. 
 III(J).
---------------------------------------------------------------------------

    \2\ RPFJ  III(H) contains two subsections (1) 
and (2). We distinguish between the two sets of subsections with the 
bracketed terms "first" and "second."
---------------------------------------------------------------------------

    Microsoft has made ample use of the seven years since the 
beginning of the conduct at issue in this case. The RPFJ is wholly 
inadequate even on its own terms, which assume that the world has 
returned to 1995. But the RPFJ does not begin to address what has 
happened since then. The public interest in a remedy that achieves 
what antitrust law says it must cannot be obscured by focusing 
either on the preference of the technology industry for standards, 
or on the never-litigated assumption that Microsoft obtained its 
original operating systems monopoly legally in the 1980s. The last 
premise, after all, still suggests that the last ten years or so of 
Microsoft's hegemony have resulted from the illegal acts that 
prompted two government antitrust lawsuits. If DOJ's enforcement 
history is to be credited, Microsoft has at least doubled the life 
of its monopoly through illegal conduct. In addition, even if the 
nature of software platforms generally, or computer operating 
systems in particular, results in transitory single-firm dominance, 
that does not mean that competition has no place, or that entrenched 
monopoly is somehow without social costs. See Stiglitz/Furman Dec. 
13-16. Innovation results in the periodic replacement or 
"leapfrogging" of one standard by another. This is not 
some meaningless replacement of one monopoly with another, as some 
would have it. To the contrary, as economists--including those 
of the Chicago school--have recognized, "competition * * 
* 'for the field"' provides consumers with 
substantial benefits. See Microsoft III, 253 F.3d at 49 and sources 
cited therein. But if competition in a market is limited in scope to 
serial competition for transitory dominance, predatory conduct is 
especially harmful. See generally Stiglitz/Furman Dec. 13-16. 
The monopolist may need to eliminate only a few incipient but 
significant threats in the course of a decade in order to transform 
transitory dominance into a durable, even impregnable monopoly. That 
is what happened here. Although Netscape Navigator had not developed 
into a competing applications platform when Microsoft cut off its 
revenue sources, Netscape contemplated just such a 
development--and Microsoft both contemplated and deeply feared 
it. The outcome of the competition that Microsoft thwarted is 
unknowable. But there will be no further competition--much less 
competitive outcomes--if Microsoft is allowed to repeat the 
course of conduct it undertook here. But the RPFJ permits Microsoft 
to continue to fortify and expand its monopoly. Indeed, the RPFJ 
provides an imprimatur for Microsoft to continue and expand a whole 
range of additional, related anticompetitive practices. As a 
consequence, the RPFJ is an instrument of monopolization, not a 
remedy for it. The Court should not add judicial endorsement to 
DOJ's agreement to give up the case. The "public 
interest," within the meaning of the Tunney Act, 15 U.S.C. 
 16(e), requires far more effective relief.
    I. THE TUNNEY ACT REQUIRES CLOSE SCRUTINY UNDER THE PRESENT 
CIRCUMSTANCES
    The Tunney Act exists "to prevent 'judicial rubber 
stamping"' of proposed antitrust consent decrees. United 
States v. Microsoft Corp., 56 F.3d 1448, 1458 (DC Cir. 1995) 
(quoting H.R. Rep. No. 1463, 93d Cong. 2d sess. 8, reprinted in 1974 
U.S.C.C.A.N. 6535, 6538) ("Microsoft"); United States v. 
BNS, Inc., 858 F.2d 456, 459 (9th Cir. 1988); In re IBM, 687 F.2d 
591, 600 (2d Cir. 1982). Upon enactment it was immediately clear 
that "Congress did not intend the court's" review of a 
proposed settlement "to be merely pro forma, or to be limited 
to what appears on the surface." United States v. Gillette 
Co., 406 F. Supp. 713,715 (D. Mass. 1975) (Aldrich, J.). The Tunney 
Act requires particularly close scrutiny of the RPFJ in this case. 
The government seeks to remedy a proven, well-defined, serious 
violation of the antitrust laws. Microsoft's heavy lobbying of the 
executive and legislative branches in order to bring political 
pressure for a lenient settlement heightens the need for scrutiny, 
and in addition makes necessary the Court's active investigation 
into Microsoft's failure to disclose the bulk of that lobbying 
despite the command of 15 U.S.C.  16(g). The lenient 
terms of the RPFJ itself further underscore the need for close 
judicial scrutiny. Never in the history of the Tunney Act has a 
Court been confronted with this combination of an impregnable 
judgment of liability, pervasive lobbying, and apparent surrender by 
the federal government. The circumstances here indicate exactly the 
sort of "failure of the government to discharge its 
duty"--whether or not actually 
"corrupt"--that even DOJ concedes warrants close 
judicial scrutiny of a settlement. CIS 66, 66 Fed. Reg. 59,476 
(quoting United States v. Mid-America Dairymen, Inc., 1997-1 
Trade Cas. 61,508, at 71,980, 1977 WL 4352 at *8 (W.D. Mo. 
1977)).
    A. The Government's Victory On Liability Removes Litigation Risk 
And Therefore Limits Deference
    The CIS suggests (at 65-68, 66 Fed. Reg. at 
59,475-476) that the Court owes nearly absolute deference to 
DOJ's decision to retreat from its appellate victory. That is not 
true. The affirmance of liability on appeal removes any speculation 
that "remedies which appear less than vigorous" simply 
"reflect an underlying weakness in the government's 
case." Microsoft I, 56 F.3d at 1461. There is no 
"underlying weakness"; liability is a given, and 
provides a clear benchmark for measuring whether the proposed relief 
is sufficiently effective to come "within the reaches of the 
public interest." Id. at 1460. Those "reaches" are 
narrower when liability is proved and affirmed than when it is 
merely alleged, as it was in Microsoft I.
    1. The Imposition And Affirmance Of Liability Remove Any 
Constitutional Concerns About Searching Review And Require The Court 
To Perform Its Constitutional Duty
    Most important, the current posture of this case places it 
beyond the scope of the prudential and constitutional concerns 
expressed by some courts (and dissenting Justices) about judicial 
scrutiny of DOJ's charging decisions, or of its settlement of 
unproven claims. It may be that when "the government is 
challenged for not bringing as extensive an action as it might, a 
district judge must be careful not to exceed his or her 
constitutional role." Microsoft I, 56 F.3d at 1462. Such 
concerns did not persuade the majority of the Supreme Court, 
however, which over a dissent rejected similar arguments in 
summarily affirming the modifications imposed by the district court 
in the AT&T consent decree. See Maryland v. United States, 460 
U.S. 1001 (1983). In any

[[Page 29041]]

event, when the action has been brought, tried, and won, and the 
only question is whether the proposed relief is adequate, the 
constitutional concerns dissipate. Because DOJ already made the 
discretionary decision to bring the case, and successfully proved 
liability to the satisfaction of two courts, the Court in reviewing 
this settlement runs no risk that by exercising its normal remedial 
discretion under established legal principles it somehow might be 
said "to assume the role of Attorney General." Microsoft 
I, 56 F.3d at 1462. It was precisely the absence of a 
"judicial finding of illegality" that might impede the 
Tunney Act from "supply[ing] a judicially manageable standard 
for review." Id. at 1459. Here, two courts have provided the 
"findings that the defendant has actually engaged in illegal 
practices" that were missing in both Microsoft I and AT&T 
(like other cases settled before trial). Id. at 1460-1461 
(emphasis added). In addition, the appellate affirmance imposed 
monopolization liability for all of the significant conduct that had 
been alleged to support the additional, largely supererogatory legal 
theories that were rejected as ground for additional liability.
    It is accordingly entirely appropriate, and indeed necessary, 
for the Court in this case "to measure the remedies in the 
decree as if they were fashioned after trial," Microsoft I, 56 
F.3d at 1461, because they were "fashioned after trial" 
and appellate affirmance. The Court need not "assume that the 
allegations in the complaint have been formally made out" 
(id.), but rather knows beyond doubt exactly which allegations were 
proved. There is a "judicial finding of relevant markets, 
closed or otherwise, to be opened" and "of 
anticompetitive activity to be prevented." Maryland v. United 
States, 460 U.S. at 1004 (Rehnquist, J., dissenting). "[T]hat 
there was an antitrust violation," and "the scope and 
effects of the violation," were not assumed, as they must be 
in a pretrial settlement, but proved to the satisfaction of two 
courts. Id. Very limited prosecutorial discretion remains in this 
situation. The amorphous, policy-laden choices whether to bring a 
case and how much to allege, are behind us. The predictive judgment 
as to the chances of success on liability likewise is beyond serious 
dispute in light of the unanimous affirmance of monopolization 
liability by the en banc court of appeals. DOJ has some leeway in 
choosing a remedy, but its chosen remedy must be "adequate to 
remedy the antitrust violations alleged in the complaint," 
United States v. Bechtel Corp., 648 F.2d 660, 665 (9th Cir. 1981), 
under the well-established legal standards for antitrust relief. See 
Microsoft III, 253 F.3d at 103. Those standards inform the 
"public interest" determination under the Tunney Act, 
and, by contrast with the "public interest" standing 
alone, are judicially manageable without a doubt. The DC Circuit has 
made crystal clear that a consent decree "even entered as a 
pretrial settlement, is a judicial act," so that "the 
district judge is not obliged to accept one that, on its face and 
even after government explanation, appears to make a mockery of 
judicial power." Microsoft I, 56 F.3d at 1462. Judicial 
approval of the settlement in this case is far more of a classic 
"judicial act" than the typical settlement without proof 
of liability. As in the context of post-conviction criminal 
sentencing, the Court must act as more than a passive recipient of 
arrangements made between the parties There is no serious question 
that a federal court may reject a plea bargain in its sound 
discretion, Fed. R. Crim. P. 11, Santobello v. New York, 454 U.S. 
257, 262 (1971), for reasons that may include the "court's 
belief that the defendant would receive too light a sentence under 
the circumstances." United States v. Adams, 634 F.2d 830, 835 
(5th Cir. 1981).\3\ Granted, plea bargains in the criminal context 
generally involve admissions of liability. But the case here, if 
anything, is stronger here, where liability has been, not admitted, 
but established after extensive litigation and affirmed by an en 
banc court of appeals over the vigorous objection of the defendant.
---------------------------------------------------------------------------

    \3\ See also, e.g., United States v. Robertson, 250 F.3d 
500, 509 (6th Cir. 2001); United States v. Greener, 979 F.2d 517, 
521 (7th Cir. 1992); United States v. McGovern, 822 F.2d 739, 742 
n.4 (8th Cir. 1987); United States v. Randahl, 712 F.2d 1274, 1275 
(8th Cir. 1983).
---------------------------------------------------------------------------

    At this stage, "the discrepancy between the remedy and 
undisputed facts of antitrust violations" can "be such 
as to render the decree 'a mockery of judicial 
power."' Massachusetts School of Law, Inc. v. United 
States, 118 F.3d 776, 782 (DC Cir. 1997) (quoting Microsoft I, 56 
F.3d at 1462). By contrast with the concerns expressed in the 
pretrial settlement context about the intrusion of Tunney Act courts 
on functions that are constitutionally allocated to the executive 
branch, the situation after liability is established presents 
opposite concerns under our system of separated powers, and of 
checks and balances between the branches of government. 
Constitutional concerns in this case would arise only if the Court 
failed to apply the legal standards governing antitrust relief to 
the adjudicated liability here. DOJ asks the Court not only to 
abandon its traditional power over the relief to be imposed in an 
adjudicated case, but also to ignore the clear command of Congress 
to provide a check on the irresponsible exercise of power by a 
suddenly and inexplicably compliant prosecutor. The Court should 
refuse that suggestion.
    2. The Extensive Record And Judicial Opinions Provide Clear, 
Manageable Standards For Substantive Review Of The RPFJ
    None of the authorities on which DOJ relies involved a full 
trial in which liability was proved, much less one in which 
liability was affirmed on appeal. Indeed, the statements quoted in 
the CIS draw heavily on that fact--that in each case there had 
been no finding of liability, and that review of the settlement at 
issue necessarily involved second-guessing DOJ's prosecutorial 
discretion in making two rather standardless assessments: (1) 
whether to bring a case at all, and thus place the matter in a 
judicial forum, see Microsoft I, 56 F.3d at 1459-1460, and (2) 
the chances for success. See, e.g., Mid-America Dairymen, 1977 WL 
4352, at *8 (Tunney Act "did not give this Court authority to 
substitute its judgment about the advisability of settlement by 
consent judgment in lieu of trial") (emphasis added).
    Here, neither of these fundamentally discretionary prosecutorial 
judgments is at issue. The decision to bring the case was made years 
ago, and the case was litigated and won, establishing liability to a 
known extent. It is telling that in asking for broad deference DOJ 
places heavy reliance on language from the Ninth Circuit's decision 
in United States v. Bechtel Corp., 648 F.2d 660 (9th Cir. 1981). See 
CIS 66-67 & n.4; 66 Fed. Reg. 59,476. One could hardly 
find a setting more distant from this one. Not only did Bechtel not 
involve a finding of liability after full litigation and affirmance 
on appeal; and not only did the setting there--alleged 
complicity in the "Arab boycott" of Israel in the mid-
1970s--implicate the foreign policy powers of the executive 
branch; but the issue before the court in Bechtel was the 
defendant's effort to avoid its own settlement by arguing that the 
settlement to which it had agreed was "not in the public 
interest." Bechtel, 648 F.2d at 665.\4\
---------------------------------------------------------------------------

    \4\ Decided in an equally remote context was United States 
v. BNS, Inc., 858 F.2d 456 (9th Cir. 1988), in which the Ninth 
Circuit approved a preliminary injunction, entered over DOJ's 
objection, against a tender offer for an acquisition that a proposed 
consent decree would have permitted.
---------------------------------------------------------------------------

    As it happens, however, the court of appeals in Bechtel 
enunciated the legal standard that should be applied here: 
"whether the relief provided for in the proposed judgment was 
adequate to remedy the antitrust violations alleged in the 
complaint." Bechtel, 648 F.2d at 665 (emphasis added). That is 
precisely the standard that DOJ wishes to avoid. Where liability is 
a given, as it is here, the Court must ensure that the 
"remedies negotiated between the parties and proposed by the 
Justice Department clearly and effectively address the 
anticompetitive harms" that have been proved. United States v. 
Thomson Corp., 949 F. Supp. 907, 913 (D.DC 1996). When the 
"anticompetitive harms" and their illegality have been 
proved, the fit between those harms and the proposed remedies must 
be closer than when those harms merely have been "initially 
identified," id., as is usually the case in Tunney Act 
proceedings. Even if there were no finding a liability, the Court 
would not be compelled "unquestionably [to] accept a consent 
decree as long as it somehow, and, however inadequately, deals with 
the antitrust problems implicated in the lawsuit." United 
States v. Alcan Aluminum, Ltd., 605 F. Supp. 619, 622 (W.D. Ky. 
1985) (citing United States v. AT&T, 552 F. Supp. 131,151 (D.DC 
1982), aff'd sub nom. Maryland v. United States, 460 U.S. 1001 
(1983). With liability in place, however, the Court need not proceed 
"on the assumption that the government would have won." 
Gillette, 406 F. Supp. at 716 n.2. The government did win. The Court 
in this case need not "speculate in regard to the probability 
of what facts may or may not have been established at trial." 
United States v. Mid-America Dairymen, Inc., 1977 WL 4352, at *1. 
Those facts are a matter of record. Whatever narrow deference may be 
afforded here amounts only to the tested rule

[[Page 29042]]

that "[i]t is not the court's duty to determine whether this 
is the best possible settlement that could have been 
obtained." Gillette, 406 F. Supp. at 716 (emphasis added). 
Although the Court may not be able to insist on the "best 
possible" decree, the proof and affirmance of liability 
require the Court to ensure that the RPFJ is at least adequate on 
that record under well-established remedial principles. Bechtel, 648 
F.2d at 665. The differences are real, but not dramatic, between the 
Court's role in deciding whether to accept this settlement in Track 
I, and in deciding in Track II what relief to impose at the request 
of those plaintiffs who have not abandoned the pursuit of a full and 
effective remedy in this case. In each track, the Court must measure 
proposed remedies against the legal standards set out by the DC 
Circuit and by the Supreme Court. In each track, the Court should 
not approve a remedy that is inadequate to meet those standards. In 
evaluating the RPFJ, the Court is not at liberty to substitute its 
view of equally effective, or marginally more effective relief, if 
the terms of the RPFJ are fully adequate to the task as the law 
defines it. That is, the DOJ's choices among adequate alternatives 
warrant deference, but its determination of what is adequate 
warrants none. In the other track, the Court does have the liberty, 
not merely to go beyond any decree that might be entered in this 
track, but also to insist that the final decree address the 
competitive issues in a way that satisfies the Court's view as to 
the best and most effective means of opening the operating systems 
market to competition, depriving Microsoft of the fruits of its 
illegal conduct, and preventing similar monopolistic abuses in the 
future. That is, while in this track of the proceeding the Court 
cannot insist on the "best possible settlement," 
Gillette, 406 F. Supp. at 716, so long as the proposed relief meets 
the remedial standards anchored in antitrust law, in Track II the 
Court has not only the power but the duty to impose the "best 
possible" decree. B. Broad Deference Is Particularly 
Inappropriate Because The Circumstances Are Suspicious
    1. Microsoft's Manifestly Inadequate Disclosure Under The Tunney 
Act's Sunshine Provisions Weighs Strongly Against Judicial Deference 
To The Terms Of The RPFJ
    Section 2(g) of the Tunney Act requires Microsoft to file a 
"true and complete description" of "any and all 
written or oral communications" by it or on its behalf 
"with any officer or employee of the United States concerning 
or relevant to" the proposed settlement. 15 U.S.C. 
 16(g) (emphasis added). The only exception from this 
requirement is for settlement negotiations between "counsel of 
record alone" and "employees of the Department of 
Justice alone." Id. (emphasis added).
    When Senator Tunney first introduced his bill, he focused on the 
significance of the disclosure provision. "Sunlight is the 
best of disinfectants," he explained (quoting Justice 
Brandeis), and thus "sunlight * * * is required in the case of 
lobbying activities attempting to influence the enforcement of the 
antitrust laws." 119 Cong. Rec. 3449, 3453 (1973). Minor 
amendments to Section 2(g) were designed "to insure that no 
loopholes exist in the obligation to disclose all lobbying contacts 
made by defendants in antitrust cases culminating in a proposal for 
a consent decree." H.R. Rep. No. 1463, at 12 (emphasis added). 
The breadth of Microsoft's effort to use political pressure to 
curtail this case has no parallel in the history of the antitrust 
laws. The ITT episode that prompted the Tunney Act pales in 
comparison. It has been widely known that since 1998 Microsoft has 
comprehensively lobbied both the legislative and executive branches 
of the federal government in an effort to create political pressure 
to end this case.\5\ But Microsoft did not disclose any of these 
contacts, much less all of them, as the Tunney Act requires.
---------------------------------------------------------------------------

    \5\ See generally Declaration of Edward Roeder (attached). 
See also, e.g., Ian Hopper, Microsoft Lobbied Congress Over Case, 
SAN JOSE MERCURY NEWS, Jan. 11, 2002, at C3; Heather Fleming 
Phillips, Washington Politicians Chime In On Microsoft, SAN JOSE 
MERCURY NEWS, June 30, 2001, at Al; Rajiv Chandrasekaran & John 
Mintz, Microsoft's Window of Influence; Intensive Lobbying Aims to 
Neutralize Antitrust Efforts, WASH. POST, May 7, 1999, at Al; James 
Grimaldi & Jay Greene, Microsoft Hard At Work Outside Courtroom, 
SEATTLE TIMES, Feb. 17, 1999, at Al. See also Microsoft's Political 
Donation In Question; South Carolina COP Says Decision To Quit 
Lawsuit Coincidental, CHI. TRIB., Dec. 25, 1998, at 3.
---------------------------------------------------------------------------

    Rather, Microsoft disclosed only meetings that occurred during 
the last round of settlement negotiations ordered by the Court. 
Microsoft's insupportable interpretation of its statutory disclosure 
duty effectively nullifies the sunshine provisions of the Act, which 
are crucial to the Act's protection of the public interest.
    a. Contacts With All Branches Must Be Disclosed.
    All contacts with "any officer or employee of the United 
States" must be disclosed. As Senator Tunney explained, 
Included under [section 16(g)] are contacts on behalf of a defendant 
by any of its officers, directors, employees, or agents or any other 
person acting on behalf of the defendant, with any Federal official 
or employee. Thus, * * * the provision would include contacts with 
Members of Congress or staff, Cabinet officials, staff members of 
executive departments and White House staff. 119 Cong. Rec. at 3453 
(emphasis added). In other words, the disclosure applies equally to 
contact with any branch of Government, including the Congress. * * * 
[T]here is a great deal to be gained by having a corporate official 
who seeks to influence a pending antitrust case through 
congressional pressure, know that this activity is subject to public 
view. Id. Indeed, it is firmly established in other areas of the law 
that "officer" of the United States includes Members of 
Congress and their employees.\6\
---------------------------------------------------------------------------

    \6\ See, e.g., Williams v. Brooks, 945 F.2d 1322, 1325 n.2 
(5th Cir. 1991) ("a congressman is an 'officer of the 
United States" within the meaning of [28 U.S.C. 
 1442(a)(1)]"); Nebraska v. Finch, 339 F. Supp. 
528, 531 (D. Neb. 1972) ("It is * * * clear that a 
representative to the Congress of the United States is an officer of 
the United States, not an officer of the district in which he was 
elected."); United States v. Meyers, 75 F. Supp. 486, 487 
(D.DC 1948) ("Obviously, a Senator of the United States is an 
officer of the United States.").
---------------------------------------------------------------------------

    But Microsoft did not disclose its extensive and heavily 
reported lobbying of Congress. Indeed, upon the remand to the 
District Court, Microsoft's lobbying of Congress produced a 
letter signed by more than 100 Members urging a swift settlement. 
But Microsoft did not disclose even that lobbying, aimed at 
pressuring a swift capitulation by the government despite its 
victory on appeal, directly before the last round of settlement 
negotiations.
    b. The "Counsel of Record" Exception Is Very Narrow.
    Section 16(g) provides a narrow exception from disclosure for 
contacts between "counsel of record alone" (emphasis 
added)--that is, without any other corporate officers or 
employees also involved--and "the Attorney General or the 
employees of the Department of Justice alone." As Senator 
Tunney explained, this "limited exception" for attorneys 
of record "is designed to avoid interference with legitimate 
settlement negotiations between attorneys representing a defendant 
and Justice Department attorneys handling the litigation. * * * 
[T]he provision is not intended as loophole for extensive lobbying 
activities by a horde of 'counsel of record."' 119 
Cong. Rec. at 3453. The House Report further clarifies that this 
"limited exception" distinguishes 
"'lawyering" contacts of defendants from their 
'lobbying contacts'." H.R. REP. No. 1463, supra, 
at 9. Microsoft did not disclose the well-publicized participation 
in the last round of settlement negotiations of its lobbyist-lawyer, 
Charles F. "Rick" Rule. It appears that the critical 
"negotiations" leading to the RPFJ took place, not in 
the offices of Microsoft's counsel of record, but "in 
Justice's offices and those of Microsoft legal consultant Rick 
Rule." Paul Davidson, Some States Fear Microsoft Deal Has Big 
Loopholes, USA TODAY, Nov. 5, 2001. Rule has been a registered 
lobbyist for Microsoft for some years, but was not named as counsel 
of record until November 15, 2001, after the settlement negotiations 
were complete. See Notice of Appearance (D.DC filed Nov. 15, 2001). 
That designation--long after the settlement deal had been 
struck--cannot retroactively shield his extensive prior 
contacts with Mr. James or other executive or legislative officials 
from disclosure. Contacts by "[a]ttorney not counsel of 
record" must be disclosed. Id. Of course, Microsoft's many 
other lobbyists do not conceivably come within this exception. But 
Microsoft concealed all of those lobbying contacts.
    c. All Communications Urging The Government To Abandon Or Settle 
The Case Were "Relevant To" The Proposed Settlement
    Section 16(g) requires the disclosure of all contacts 
"concerning or relevant to" a proposed settlement. This 
statutory definition is intentionally broad. Microsoft's disclosure 
interprets the word "concerning" very narrowly, so that 
the provision covers only actual settlement discussions--and 
only the last round of them. In Microsoft's view, the Tunney Act 
would require disclosure only of the very meetings that must precede 
any settlement. Microsoft reads the words "relevant to" 
right out of the statute. That this statutory provision is broad is 
obvious by

[[Page 29043]]

its very terms; in order for the phrase "relevant to" 
not to be mere surplusage, it must encompass contacts less directly 
focused on the settlement than those that "concern[]" 
that agreement. Senator Tunney gave an example: "the provision 
would require disclosure * * * of a meeting between a corporate 
official and a Cabinet officer discussing "antitrust 
policy" during the pendency of antitrust litigation against 
that corporation." 119 Cong. Rec. at 3453. The Act borrows 
from evidentiary concepts, including the privilege for settlement 
discussions, which prompted the narrow exception for counsel of 
record. The evidentiary concept of relevance is very broad. See Fed. 
R. Evid. 401. "Relevance of evidence is established by any 
showing, however slight, that the evidence" makes a legally 
important factor "more or less likely." United States v. 
Mora, 81 F.3d 781, 783 (8th Cir. 1996) (emphasis added) (citation 
omitted). Plainly "relevant" to the question whether a 
defendant's lobbying activities influenced the existence and terms 
of a consent decree are contacts with the administration, and with 
members of Congress, that touch on the desirability of the 
government's agreeing to end the case. It is startling, for example, 
that Microsoft would omit reference to its efforts to enlist support 
for congressional proposals that would have cut DOJ's funding for 
the pursuit of this case, and for antitrust enforcement in high 
technology industries in general.\7\
---------------------------------------------------------------------------

    \7\ See Chandrasekaran & Mintz, supra, WASH. POST, May 
7, 1999, at Al; Grimaldi & Greene, supra, SEATTLE TIMES, Feb. 
17, 1999, at Al.
---------------------------------------------------------------------------

    Disclosure under Section 2(g) is not usually burdensome; most 
defendants do not try to win their case politically rather than in 
the courtroom. Microsoft's massive and unprecedented effort to 
distort the judicial process through political pressure makes its 
compliance burdensome, but all the more necessary. It is exactly 
this sort of manipulation that the Tunney Act was designed to 
discourage by bringing it to light.
    d. Microsoft's Flouting Of Its Statutory Duty Counsels 
Painstaking Judicial Scrutiny Of The RPFJ Microsoft's cunning 
"interpretation" of the statutory disclosure 
requirements -so that disclosures reach only the very settlement 
discussions that the Tunney Act was not concerned about--sheds 
considerable light on Microsoft's likely 
"interpretations" of any remedy imposed on it, 
especially one like the RPFJ of which it can claim to be an equal 
drafter, if not the principal author.
    Microsoft's disclosure is so inadequate as to raise questions 
about Microsoft's good faith. The filing includes no disclosure of 
any lobbying contacts between Microsoft and the administration; it 
includes no disclosure of any contacts between Microsoft and members 
of Congress; it includes no disclosure of any contacts whatsoever 
before September 27, 2001, although it is well known that Microsoft 
and the government have tried to settle the government's antitrust 
action since before it was filed, and that Microsoft lobbied 
Congress to bring pressure on DOJ to settle or simply abandon the 
case.
    Microsoft should face contempt sanctions for its certification 
"that the requirements of [Section 16(g)] have been complied 
with and that such filing is a true and complete description of such 
communications known to the defendant or which the defendant 
reasonably should have known." DOJ should refuse to acquiesce 
in Microsoft's deception. Although DOJ cannot be expected to be 
aware of all of Microsoft's lobbying of Congress in an effort to 
create pressure for a favorable settlement, DOJ should reveal the 
end-product of that pressure in the form of communications from 
Members and their staffs. And there is no excuse for DOJ to be 
complicit with Microsoft when it comes to contacts with DOJ itself. 
In particular, DOJ certainly is aware of Mr. Rule's lobbying 
contacts with before he belatedly appeared as counsel after the 
settlement had been concluded. The proper resolution of this issue 
is the appointment of a special master with the ability to examine 
the relevant participants under oath. In view of its responsibility 
to enforce 15 U.S.C. 16(g) along with the rest of the antitrust 
laws, DOJ should request (and support) the implementation of such a 
procedure by the Court.
    2. The RPFJ Represents A Swift And Significant Retreat By DOJ 
Another factor counseling against deference here is the DOJ's 
striking capitulation to Microsoft's view of an appropriate remedy, 
despite the unanimous affirmance of the core of DOJ's case. The 
insubstantial provisions of the RPFJ provide ample "reason to 
infer a sell-out by the Department," Massachusetts School of 
Law, 118 F.3d at 784.
    After prevailing on liability in the district court, DOJ sought 
and obtained not only structural relief--as is 
"common" in broad monopolization cases, see Microsoft 
III, 253 F.3d at 105--but also "interim" conduct 
restrictions that clearly could not stand alone as a monopolization 
remedy. DOJ earlier recognized that the interim conduct remedies 
were stopgaps to keep the competitive situation from continuing to 
decline in the year or so before divestiture jumpstarted 
competition. See Plaintiffs" Memorandum in Support of Proposed 
Final Judgment 30-31 (corrected version) (filed May 2, 2000). 
On remand, DOJ abandoned the structural relief that it formerly 
found necessary, even though liability on the monopolization 
claim--which alone could support structural relief in the first 
place--was affirmed with minor modifications. DOJ stated that 
it would pursue relief "modeled upon" the interim 
"conduct-related provisions," along "with such 
additional provisions as Plaintiffs may conclude are necessary to 
ensure that the relief is effective, given their decision not to 
seek a structural reorganization of the company." Joint Status 
Report 2 (filed Sept. 20, 2001).
    Instead of fortifying the proposed decree to compensate for the 
abandonment of structural relief, however, DOJ moved considerably 
backward from the interim remedies, narrowing Microsoft's duties and 
providing broad exceptions. Indeed, the RPFJ is weaker than the 
final proposal in the settlement negotiations that took place during 
Spring 2000, before any judgment of antitrust liability, much less 
appellate affirmance.\8\ Then, there was litigation risk as to 
liability. Now there is none. Nonetheless, the definitions and 
obligations in the current RPFJ fall short of those in the pre-
judgment offer.
---------------------------------------------------------------------------

    \8\ That final proposal, known as Draft 18, was formerly 
posted on a now-defunct website, www.contentville.com, in connection 
with a review of a book that detailed the progress of this case. The 
text of Draft 18 may now be viewed at www.ccianet.org/legal/ms/
draft18.php3. "[T]he government's virtual abandonment of the 
relief originally requested" is "a sufficient showing 
that the public interest was not * * * adequately represented" 
in the RPFJ. United States v. Associated Milk Producers, Inc., 534 
F.2d 113, 117 (8th Cir. 1976). It is precisely when DOJ appears to 
have "abruptly "knuckled under," id. at 118, as 
here, that judicial scrutiny under the Tunney Act should be most 
substantive and searching.
---------------------------------------------------------------------------

    3. The CIS Overstates The Terms Of The RPFJ, Reflecting The 
Indefensibility of the RPFJ Itself The CIS underscores the need for 
close scrutiny of the actual terms of the RPFJ and their 
effectiveness. The CIS seeks to convey an image of stringency by 
adding terms to provisions of the RPFJ that are absent from the RPFJ 
itself. But it is the RPFJ, not the CIS, that defines the 
enforceable bargain between the parties. As the Supreme Court has 
recognized, "any command of a consent decree * * * must be 
found within its four comers, and not by reference to any purposes 
of the parties." United States v. ITT Continental Baking Co., 
420 U.S. 223,233 (1975) (citations and internal quotation marks 
omitted). While the CIS may be useful in interpreting ambiguous 
terms in the RPFJ, the wording of the CIS is not independently 
enforceable. Only the RPFJ would be entered as a judgment, and 
"[t]he government cannot unilaterally change the meaning of a 
judgment." Bechtel, 648 F.2d at 665. It would be different, of 
course, if the CIS or its relevant refinements were "expressly 
incorporated in the decree." ITT Continental, 420 U.S. at 238.
    In particular, the CIS goes beyond the text of the RPFJ to paint 
a far stricter picture of Microsoft's disclosure obligations than 
the RPFJ supports. It is no wonder that DOJ seeks to defend a 
document--the CIS--to which Microsoft would not be bound, 
rather than the far weaker RPFJ that alone would be judicially 
enforceable. The CIS cannot transform the RPFJ into a better deal 
for competition and consumers than it is.
    II. THE RPFJ MUST MEET THE LEGAL STANDARDS NORMALLY APPLICABLE 
TO ANTITRUST REMEDIES
    The "public interest" standard in the Tunney Act is 
not without content. Rather, those "words take meaning from 
the purposes of the regulatory legislation," NAACP v. Federal 
Power Comm'n, 425 U.S. 662, 669 (1976). The well-developed 
jurisprudence of antitrust remedies provides sound guidance for the 
public interest determination.
    Although a district court should not "engage in an 
unrestricted evaluation of what relief would best serve the 
public," Microsoft I, 56 F.3d at 1458 (quoting Bechtel, 648 
F.2d at 666) (emphasis added), principled restrictions for that 
evaluation in this case arise from the extensive, unvacated Findings 
of Fact, the comprehensive opinion affirming

[[Page 29044]]

monopolization liability on appeal, and the long-standing remedial 
principles of antitrust law, principles that the DC Circuit 
instructed the District Court to apply to any proposed relief on 
remand. See Microsoft III, 253 F.3d at 103. The 
"appropriate" inquiry (Bechtel, 648 F.2d at 666) is 
"whether the relief provided for in the proposed judgment [i]s 
adequate to remedy the antitrust violations" that were proved 
at trial and affirmed on appeal, ld. at 665.
    The DC Circuit provided benchmarks rooted in Supreme Court 
jurisprudence to guide the evaluation whether a remedy is 
"adequate." A remedy in this case must serve "the 
objectives that the Supreme Court deems relevant," Microsoft 
III, 253 F.3d at 103. That is, a remedy must "seek to * * * 
[1] "terminate the illegal monopoly, [2] deny to the defendant 
the fruits of its statutory violation, and [3] ensure that there 
remain no practices likely to result in monopolization in the 
future." ld. at 103 (quoting Ford, 405 U.S. at 577, and United 
Shoe, 391 U.S. at 250).\9\
---------------------------------------------------------------------------

    \9\ It is telling that the CIS ignores the remedial 
standard that the DC Circuit set out. See CIS 24, 66 Fed. Reg. 
59,465. The CIS submerges the need to craft relief that tends to 
"terminate" the illegally maintained monopoly, despite 
the court of appeals" contrary instructions. See 253 F.3d at 
103. Rather, the CIS endorses a watered-down standard in order to 
set a lower bar for the RPFJ to clear, in tacit recognition that the 
RPFJ cannot satisfy the DC Circuit's standard. The CIS would require 
relief only to "[e]nd the unlawful conduct," to prevent 
recurrence of the violation "and others like it," and to 
"undo its anticompetitive effects." CIS 24, 66 Fed. Reg. 
59,465. The RPFJ falls short even of these modified, more modest 
objectives, however, particularly when measured by its failure to 
prevent future violations that work slight variations on the conduct 
condemned by two courts, and its failure to "undo" any 
of the "anticompetitive effects" of Microsoft's 
sweeping, coordinated, and successful anticompetitive campaign.
---------------------------------------------------------------------------

    A. The Relief Should "Terminate The Illegal 
Monopoly" In a monopolization case, the problem to be remedied 
is the monopoly itself. Because the RPFJ would leave the illegally 
maintained monopoly in place without making the market structure 
more competitive, to satisfy this criterion relief must exclude the 
possibility that Microsoft again will prolong its monopoly power by 
abusing it. At a minimum, however, a monopolist should emerge from a 
remedy facing competitive threats of similar scope and significance 
to those it illegally stamped out. The DC Circuit recognized that 
the illegal conduct in this case was aimed at increasing and 
hardening the applications barrier to entry that insulates 
Microsoft's OS monopoly. See ld. at 55-56, 79. The CIS 
similarly recognized that "[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." CIS 24, 66 Fed. Reg. 59,465. A remedy that does 
not literally terminate the monopoly accordingly must undermine the 
applications barrier to entry that was strengthened by the illegal 
conduct.
    B. The Relief Should Prevent "Practices Likely To Result 
In Monopolization In The Future" To satisfy this criterion, 
any remedy must both (1) prevent the monopolist from engaging in the 
same sorts of conduct that underlie the current finding of 
liability, and (2) prevent other types of conduct that could 
preserve the monopoly. The "monopolization in the 
future" that must be prevented includes both the simple 
maintenance of the current monopoly and the expansion of that 
monopoly's scope. Relief should make it impossible for the 
monopolist to continue its pattern of using current market power to 
foreclose imminent or contemplated competitive threats. Because 
Microsoft has been "caught violating the [Sherman] Act," 
it "must expect some fencing in." Otter Tail Power Co. 
v. United States, 410 U.S. 366, 381 (1973).
    A monopolist that has been litigating for years no doubt has 
developed anticompetitive techniques that achieve the same goals 
through slightly different means. Microsoft embarrassed DOJ by 
obtaining language in the 1995 consent decree that was tailored to 
exclude, at least arguably, the company's next planned 
anticompetitive initiative. Exemptions, provisos, and narrow 
definitions should be scrutinized on the assumption that Microsoft 
again has tried to ensure that the RPFJ will not impede currently 
planned anticompetitive acts.
    C. The Relief Should "Deny To The Defendant The Fruits Of 
Its Statutory Violation" Relief in an antitrust case not only 
must prevent "recurrence of the violation," but also 
must "eliminate its consequences." National Society of 
Professional Engineers v. United States, 435 U.S. 679, 697 (1978). 
Thus, a remedy should prevent a monopolist from retaining the 
accrued competitive benefits of its illegal conduct. These 
advantages may permit a monopolist to maintain its monopoly without 
additional antitrust violations. Relief that allows a wrongdoer the 
full benefit of its illegal activity fails the most basic test of 
any remedy under any branch of the law.
    In this case, the "fruits" of Microsoft's illegal 
conduct may be the most important target of a responsible remedy. 
One of the chief advantages that Microsoft gained by incorporating 
the Internet browser into the Windows monopoly was the ability to 
control not only the browser for its own sake, suppressing the 
possibility that the Internet browser would provide a source of 
alternate, OS-neutral APIs, but also the browser as the gateway to 
all Internet computing. As the Litan/Noll/Nordhaus Comment explains 
(at 5860), one of the most important fruits of monopolistic conduct 
is the suppressed development of competitive threats. That is why a 
forward-looking remedy must be rooted in current market conditions, 
and must seek to restore competition to where it likely would have 
been in the absence of the anticompetitive conduct. Litan/Noll/
Nordhaus Comment 35-36, 40-42, 58-59.
    D. Broader Principles Applicable To Injunctive Relief Also 
Should Inform The Analysis Of The RPFJ
    The remedial analysis here resembles other remedial 
undertakings. Although civil antitrust relief is not punitive, 
effective antitrust relief shares with criminal sentencing the broad 
goals of incapacitation and deterrence. As much as possible, an 
illegal monopolist should be flatly prevented from engaging in the 
same or similar suppression of competition in the future. In 
addition, the remedy should be enforceable with sufficient speed and 
certainty to make stiff contempt sanctions likely if the monopolist 
nonetheless manages to engage in anticompetitive conduct again.
    The point of antitrust relief after a finding of liability is to 
learn from history, not to permit the offender to repeat it. This 
consideration is particularly acute here, where the purposes of the 
expiring 1995 consent decree clearly have not been realized, but 
rather have been evaded or neutralized.
    Because antitrust relief necessarily is forward-looking, a 
remedy's effectiveness should be judged with respect to where the 
market is going, not where it has been. Microsoft has directed its 
efforts to destroy the competitive threat of Internet computing. The 
more functionality that is performed on the Web, the less 
significant the operating system on a particular client device 
connected to the Web. Thus, Internet computing represents the 
maturation of the competitive threat posed by the Internet browser 
and squelched by Microsoft's illegal conduct. The current industry-
wide focus on Web-based services reflects the realization that a 
competitive market still survives in this sector. The Court will 
have to consider whether the RPFJ in fact is "all about the 
past, not the future battle in Internet services[, and] doesn't 
touch the company's ability to use Windows XP to extend its monopoly 
to these new areas." Walter Mossberg, For Microsoft, 2001 Was 
.4 Good Year, WALL ST. J., Dec. 27, 2001, at B1. See Stiglitz/Furman 
Dec. 38-39.
    III THE RPFJ FALLS FAR SHORT OF PROVIDING A REMEDY FOR PROVEN 
OFFENSES UPHELD ON APPEAL
    The RPFJ lights upon narrowly defined practices and prohibits 
narrowly defined versions of them, in ways that might have 
mitigated, but would not have ended, the very conduct at issue in 
this case. The RPFJ does not measure up to the sweeping 
monopolization violations found by two courts. The RPFJ's provisions 
do not address Microsoft's ability and incentives to strengthen the 
applications barrier to entry, which was the underlying issue at the 
core of the case, instead focusing on techniques of monopolization 
that have been defined so narrowly that Microsoft's actual behavior 
need not change. And when addressing a precise technique that 
directly implicated the reinforcement of the applications barrier to 
entry--Microsoft's ability to stop porting its Office 
productivity suite to the Apple Macintosh platform--the RPFJ 
permits Microsoft to retain the ability to repeat that threat in 
slightly altered contexts.
    A. DOJ's Effort To Minimize The Scope Of The DC Circuit's 
Affirmance Cannot Obscure The Failure Of The RPFJ To Remediate 
Clear, Proven Violations
    DOJ has tried to lower the bar for approval of its proposal by 
minimizing the most significant appellate imposition of 
monopolization liability in the past half-century, and adopting 
Microsoft's crabbed view of its own liability. In Senate testimony,

[[Page 29045]]

Assistant Attorney General James made the remarkable assertion that 
the DC Circuit, despite affirming "the District Court's 
holding that Microsoft violated 2 of the Sherman Act in a variety of 
ways," 253 F.3d at 59, somehow precluded any consideration, 
for remedial purposes of Microsoft's astonishing anticompetitive 
campaign as a whole. See James Testimony 5. To the contrary, the 
court of appeals never rejected the common-sense notion that 
"Microsoft's specific practices could be viewed as parts of a 
broader, more general monopolistic scheme"; much less did the 
court of appeals insist (or even hint) that "Microsoft's 
practices must be viewed individually" for all purposes, ld. 
Rather, the court of appeals clearly considered some illegal acts in 
the context of others. Thus, the court held that Microsoft's 
exclusive contracts with ISVs, though affecting only "a 
relatively small channel for browser distribution," had 
"greater significance because * * * Microsoft had largely 
foreclosed the two primary channels to its rivals." 253 F.3d 
at 72.
    The DC Circuit's examination of the divestiture remedy is 
telling. If the many separately illegal monopolistic acts could not 
be viewed as cumulatively contributing to the illegal maintenance of 
Microsoft's monopoly, divestiture would have been an unthinkable 
remedy, since no specific act held illegal on appeal changed the 
structure of the company or of the market. But the court of appeals 
recognized that divestiture could be justified if the many separate 
illegal acts, taken together, were shown to have had a sufficiently 
certain causal connection to justify using structural relief to 
undermine, if not end, the monopoly. See 253 F.3d at 80, 
106-107.
    The court of appeals did "reverse [the] conclusion that 
Microsoft's course of conduct separately violates "2 of the 
Sherman Act." 253 F.3d at 78 (emphasis added). But the 
reversal occurred because the district court purported to find that 
a series of acts that did not constitute separate, free-standing 
antitrust violations had a "cumulative effect * * significant 
enough to form an independent basis for liability"--but 
never specified acts other than those that separately violated 
Section 2 that might be aggregated into such a violation, ld.
    It is a remarkable leap from this unremarkable holding to the 
absurd notion that Microsoft's extraordinary series of separate 
adjudicated antitrust violations cannot be considered together for 
any purpose. Even the CIS recognizes that those violations are part 
of one coordinated and "extensive pattern of conduct designed 
to eliminate the threat posed by middleware." CIS 11, 66 Fed. 
Reg. 59,462. They should be remedied as such.
    B. The RPFJ Simply Restates The Antitrust Laws At Critical 
Points And Thus Forfeits The Clarity And Efficiency Of The Contempt 
Process
    Another striking feature of the RPFJ is its repeated reliance on 
a reasonableness standard of conduct that simply imports full rule-
of-reason analysis under the antitrust laws. Antitrust remedies, 
like other injunctive decrees, are supposed to be amenable to swift 
and sure enforcement, according to standards that give warning of 
what is forbidden and what is permitted both to the wrongdoer and to 
its potential victims. But the RPFJ would regularly require the 
decree Court to determine whether Microsoft's conduct was 
"reasonable." For example, the Court would have to 
determine
    * whether volume discounts were "reasonable" or 
exclusionary (RPFJ III(B)(2));
    * whether technical requirements for the bootup sequence that 
Microsoft imposed on OEMs were "reasonable" (id. 
 III(C)(5));
    * whether the terms on which Microsoft makes Communications 
Protocols available are "reasonable" (id. 
 III(E));
    * whether exclusivity requirements imposed on ISVs were 
"reasonable" in "scope and duration" (id. 
 III(F)(2)); see also id.  (III(G)(2));
    * whether technical requirements designed to force the 
invocation of Microsoft Middleware despite contrary consumer or OEM 
preferences are "reasonable" (id. III(H)(2)[second]);
    * whether the licensing terms accompanying required disclosures, 
and terms of mandatory cross-licenses required for access to the 
disclosures, are "reasonable" (id. III(I)(1), 
III(I)(5));
    * and whether Microsoft's bases for excluding ISVs from access 
to security-related protocols are "reasonable" (id. 
 III(J)(2)(b)-(c)).
    It is telling that the RPFJ states so many of its provisions in 
terms that simply duplicate the antitrust rule of reason. Rule of 
reason disputes are notoriously difficult to litigate, see Arizona 
v. Maricopa County Medical Soc., 457 U.S. 332, 343 (1982) (noting 
"extensive and complex litigation" involving 
"elaborate inquiry" at "significant 
costs"),--and difficult for plaintiffs to win. These 
provisions add nothing to the antitrust laws themselves, either in 
clarity of obligation or in efficiency of enforcement. That is no 
remedy at all.
    C. The RPFJ Provides No Remedy For Microsoft's Suppression Of 
The Browser And Java. As noted above, perhaps the most glaring 
deficiency of the RPFJ is that it does nothing to restore the 
competitive threats to Windows posed by the Internet browser and 
cross-platform Java. That cannot be an oversight. The bulk of the 
evidence, and much of the opinion of the court of appeals affirming 
liability, focused on Microsoft's successful efforts to suppress 
these threats to the applications barrier to entry. See Microsoft 
III, 253 F.3d at 58-78. Even the CIS recognizes the primacy of 
these products in the case. See CIS 10-17, 66 Fed. Reg. 
59,462-463. Yet the RPFJ does not change the competitive 
picture for either product in the least. The RPFJ does not deprive 
Microsoft of these "fruits" of its illegal conduct, but 
instead takes that illegal conduct, and the advantages derived from 
it, as a tacit baseline for future competition. The RPFJ leaves 
Microsoft with the full benefit not only of the years of insulation 
from the competitive threats posed by those products, but also of 
the expanded power it has accumulated by incorporating Internet 
Explorer into the Windows monopoly. Microsoft thus has more, and 
stronger, weapons to suppress any middleware threats that it 
identifies in the future, since its monopoly control over the 
browser--now labeled part of the Windows monopoly 
product--provides Microsoft with complete control over the 
universal client for Internet computing. The RPFJ's approach is like 
sentencing a bank robber to probation, but letting him keep his 
weapons and the loot.
    But the RPFJ's failure to provide relief that restores the 
specific competitive threats that Microsoft illegally suppressed is 
worse than that. In a platform technology market like that for PC 
operating systems, single standards tend to prevail, so that only 
sweeping changes can dislodge the incumbent. Platform threats are 
very rare. It could easily be another five or ten years or more 
before a comparable threat arises again; certainly no threat of 
similar strength to the Internet browser or Java has surfaced in the 
nearly seven years since Microsoft began the course of illegal 
conduct condemned by the court of appeals. See Stiglitz/Furman Dec. 
35-36. That is what makes anticompetitive conduct directed at 
them so potentially profitable. The RPFJ makes that conduct 
profitable beyond any rational actor's wildest dreams, and greatly 
increases the incentives for its repetition. Having been caught 
illegally suppressing two related platform threats, Microsoft 
retains all the benefits that it sought through its illegal acts.
    By eliminating Navigator, Microsoft has not only eliminated 
consumer choice in browsers, but it also seized the power to control 
the interfaces and protocols through which an enormously valuable 
set of Internet applications--ranging from instant messaging 
and e-mail to streaming video and e-commerce--are delivered to 
desktop computers and other digital devices.
    Microsoft's Internet Explorer is now the bottleneck through 
which all Internet-related middleware must pass. Instant messaging 
and media player technology are equally dependent on browser 
software. Microsoft has also seized the power to decide whether that 
browser functionality will be ported to any competing operating 
system, and, if so, to which ones. Finally, in destroying Navigator, 
Microsoft has also destroyed an important alternative distribution 
channel, one free of Microsoft's control or influence, through which 
Microsoft's competitors could formerly distribute middleware 
runtimes and products to desktop consumers and application 
developers.
    Although Navigator has practically disappeared from the 
competitive scene, Java has not. But Java's importance has been 
limited to servers, where Microsoft has a leading share but not yet 
an operating systems monopoly. Microsoft's conduct appears to have 
assured that Java will not function as cross-platform middleware for 
client computers. Java thus poses no threat to the desktop OS 
monopoly. But the RPFJ lets Microsoft keep that anticompetitive 
benefit of its conduct.
    IV. THE ICON-FOCUSED OEM FLEXIBILITY PROVISIONS ARE INEFFECTIVE
    RPFJ  III(H)(1)-(2)[first] superficially allow 
OEMs and end users to rearrange icons

[[Page 29046]]

and menu entries relating to middleware.\10\ These provisions are 
hollow, however. Section III(H)(1) duplicates only what Microsoft 
unilaterally agreed to permit OEMs to do back on July 11, 2001.
---------------------------------------------------------------------------

    \10\ 10 See n.2, supra.
---------------------------------------------------------------------------

    And the end-user provisions simply restate and preserve end-
users" longstanding options to delete icons and menu entries 
if they right-click and delete or drag the icon or menu entry to the 
Recycle bin. The default provisions in Section III(H)(2) are so 
limited, and so fully subject to Microsoft's architectural control, 
as to be competitively meaningless as well.
    The icon provisions do not adequately address the competitive 
harms of Microsoft's adjudicated misconduct because Microsoft 
remains able to ensure that the Microsoft versions of middleware 
will appear, ready to be invoked by applications, on every PC. Even 
if the icon provisions had greater competitive significance in 
theory, they are unlikely to have any significance in fact, because 
few if any OEMs are likely to take advantage of the options 
provided. DOJ cannot claim to be unaware of this market reality. 
These provisions are mere window-dressing. See Stiglitz/Furman Dec. 
35.
    A. The PFJ Permits Microsoft's To Continue Illegally Commingling 
Middleware Code With The Code For The Monopoly Operating System
    The RPFJ capitulates on DOJ's most hard-fought and significant 
substantive victory: the finding that Microsoft illegally preserved 
its monopoly by commingling the middleware code with the operating 
system, foreclosing the competitive threat to Windows while 
effectively expanding the scope of the monopoly to encompass 
middleware. DOJ's inability to enforce the 1995 consent decree 
against the binding of IE to Windows, see United States v. 
Microsoft, 147 F.3d 935 (DC Cir. 1998) ("Microsoft"), 
was widely viewed as prompting this action. The conduct itself was 
viewed as the most successful in furthering Microsoft's 
anticompetitive goals.
    Rather than repeat and strengthen the prohibition in the 1995 
decree that failed to achieve its goals, the RPFJ does not even 
impose the type of superficial prohibition applied to other conduct 
condemned at trial and on appeal. To the contrary, under the RPFJ, 
the operating system is whatever Microsoft says it is, and Microsoft 
can commingle any new product to the monopoly 
product--foreclosing competition for the OS and the new product 
alike. See Stiglitz/Furman Dec. 34-37. Not only does Microsoft 
preserve its anticompetitive gains, but it obtains a green light to 
repeat the same conduct to destroy any new middleware threats. In a 
market characterized by serial dominance, an incumbent monopolist 
may need only to suppress one threat every few years in order to 
make its monopoly virtually permanent. Cf. id. at 35-36. A 
continued ability to commingle middleware gives Microsoft limitless 
tenure over the OS market. If Microsoft emerges from this case free 
to bind middleware to the OS, this action will be an exercise in 
futility.
    1. The DC Circuit Specifically Condemned Commingling Twice DOJ's 
victory on the commingling point was crystal clear, and repeatedly 
underscored by the court of appeals. The court of appeals recognized 
that "Microsoft's executives believed" that 
"contractual restrictions placed on OEMs would not be 
sufficient in themselves" and therefore "set out to 
bind" IE "more tightly to Windows 95 as a technical 
matter." Microsoft III, 253 F.3d at 64 (quoting Findings, 84 
F. Supp.2d at 50 (160)). In the CIS (and in Assistant Attorney 
General James" Senate testimony), DOJ appears to assume that 
icon-based relief that subjects some Microsoft Middleware Products 
to the Add/Remove utility equates with relief for commingling code. 
Thus, the CIS blends the two offenses in stating that Microsoft 
violated Section 2 when it "integrated Internet Explorer into 
Windows in a non-removable way while excluding rivals." CIS 7, 
66 Fed. Reg. 59,461. In affirming liability for both courses of 
conduct, however, the court of appeals clearly distinguished between 
Microsoft's "excluding IE from the "Add/Remove 
Programs" utility" and its "commingling code 
related to browsing and other code in the same files." 253 
F.3d at 64-65, 67. The court of appeals found no justification 
for commingling code or, indeed, more broadly, for 
"integrating the browser and the operating system." ld. 
at 66. One could hardly ask for a clearer statement. Microsoft 
argued bitterly against liability for commingling, and for a 
declaration that its product design decisions were beyond the reach 
of the antitrust laws. Instead, the DC Circuit pointedly rejected 
Microsoft's argument that it "should vacate Finding of Fact 
159 as it relates to the commingling of code." Microsoft III, 
253 F.3d at 66; see Findings, 84 F. Supp.2d at 49-50 
(159). And the court of appeals "conclude[d] that such 
commingling has an anticompetitive effect," because it 
"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." 253 F.3d at 66 
(emphasis added). See generally id. at 64-67. That is, 
commingling helps reinforce the applications barrier to entry that 
shields the Windows monopoly.
    The DC Circuit's holding reflected a principle of critical 
importance to the enforcement of the antitrust laws in the software 
industry, where the complementarity of different programs makes 
product design a potentially devastating weapon to foreclose 
competition: a "monopolist's product design decisions" 
can violate the antitrust laws just as any other economic conduct 
can.
    253 F.3d at 65. Product design decisions may be grossly 
anticompetitive, particularly in the software industry where lines 
of code can be packaged (and marketed) in many different ways 
without affecting the operation of programs once they are installed. 
As Microsoft's James Allchin recently acknowledged, software 
"code is malleable," so that "[y]ou can make it do 
anything you want." Microsoft Net Profit Fell 13% in Recent 
Quarter, Wall St. J. Europe, Jan. 18, 2002, 2002 WL-WSJE 3352885 
(quoting Allchin).
    Lest there be any doubt on the matter, the court of appeals 
flatly rejected Microsoft's rehearing petition aimed squarely at the 
remedial issue. Microsoft specifically sought to preclude relief 
that addressed the commingling violation, and instead to treat the 
commingling and the lack of add/remove functionality as the same. 
Microsoft's reheating petition made clear that the "ruling 
with regard to "commingling" of software code is 
important because it might be read to suggest that OEMs should be 
given the option of removing the software code in Windows 98 (if 
any) that is specific to Web browsing [as opposed to] removing end-
user access to Internet Explorer." Appellant's Petition for 
Reheating, at 1-2 (July 18, 2001). Microsoft argued that 
affirmance only on the ground of the add/remove issue would ensure 
that the remedy was tightly confined, because the "problem 
will be fully addressed by including Internet Explorer in the Add/
Remove Programs utility, which Microsoft has already announced it 
will do in response to the Court's decision." ld. at 2. The 
court of appeals rejected this argument out of hand, adding this 
remarkable sentence in a terse per curiam order denying reheating: 
"Nothing in the Court's opinion is intended to preclude the 
District Court's consideration of remedy issues." Order at 1 
(DC Cir. Aug. 2, 2001) (per curiam). Nonetheless, the RPFJ would 
settle this case as if rehearing had been granted, requiring 
Microsoft only to allow OEMs and end users to "add/
remove" the icons for middleware. This is insufficient to 
remedy technological binding--commingling [] since it does 
nothing to remove the underlying middleware code on which developers 
will continue to rely. If only the Internet Explorer icon is removed 
from the desktop, the IE middleware remains, and with it the same 
applications barrier issues that Microsoft preserved by stifling 
competition by Netscape and Java.
    It is true that the interim conduct relief in the vacated Final 
Judgment required only that Microsoft offer an operating system 
where OEMs and end-users were permitted to remove end-user access to 
the middleware components, United States v. Microsoft Corp., 97 F. 
Supp.2d 59, 68 (D.DC 2000), vacated, 253 F.3d 34 (DC Cir. 2001), a 
provision similar to that in RPFJ  III(H)(1)[first]. 
That transitional provision of course assumed the existence of 
structural relief that would remove Microsoft's economic incentive 
to bind middleware to the OS unless the binding was independently 
justifiable. Without a structurally more competitive market, those 
modest provisions would be meaningless, and would permit Microsoft 
to follow much the same course that triggered the lawsuit.
    There is no excuse for DOJ's failure to do anything about one of 
the principal, and most easily replicable, violations in the case. 
Even one of Microsoft's vocal, libertarian defenders, University of 
Chicago law professor Richard Epstein, recognized that the minimum 
plausible remedy after the DC Circuit decision would involve 
"undoing a few product-design decisions." Richard 
Epstein, Phew/, Wall. St. J., June 29, 2001, at Al0. But DOJ did not 
even insist on that. Instead, the RPFJ's omission of any relief for 
this violation gives Microsoft something the DC Circuit twice 
refused: a victory on the

[[Page 29047]]

hardest-fought legal issue in the case. Given the central importance 
of middleware to the theory of the case, failing to address the 
principal means by which Microsoft bundled browser middleware to 
Windows would be plainly inadequate.
    2. The Failure To Limit Commingling Is Critical Because Ubiquity 
Trumps Technology In Platform Software Markets
    The failure to prohibit commingling of middleware deprives the 
RPFJ of any significant procompetitive effect on the emergence and 
adoption of competing platform software. The critical competitive 
phenomenon in this case was not middleware in itself, but rather the 
potential, and deeply feared, development of particular middleware 
into a competing platform for software applications. Middleware can 
develop into a competing applications platform by attracting 
software developers to use its Application Programming Interfaces 
(APIs) in preference to, or at least in addition, to the APIs 
offered by Microsoft in Windows. Developers will write their 
applications to invoke particular APIs--i.e., to run on a 
particular platform--based on how widely available the APIs 
will be.
    Although potential platform software not distributed by 
Microsoft must attract users in order to achieve the widespread 
availability of their APIs that will attract developers, it is the 
expected presence of the APIs that matters, not how much consumers 
directly use the application exposing the APIs. Non-Microsoft 
middleware depends on the availability of the application in order 
to gain the critical mass of users that, in turn, may attract 
developers.
    The availability and prominence of the application's icon may be 
significant for the purpose of attracting end-users. In platform 
competition, however, the availability of the application is only a 
means to the desired end. Developers don't write to icons; they 
write to APIs. The inclusion of Microsoft Middleware functionality 
in every copy of Windows is determinative, regardless of how or 
whether the icons are featured, and regardless even of the presence 
of the user interface or shell.\11\ If developers know that the 
plumbing for a Microsoft version of middleware will be on every PC 
because it is commingled with Windows, then developers will write to 
the Microsoft version's APIs. Because the RPFJ permits Microsoft to 
include the APIs accompanying the software functionality that mimics 
middleware that is a potential platform threat, Microsoft will be 
able to defeat any middleware threat in exactly the same way it 
destroyed the threat of Netscape and Java on the PC desktop. See 
Stiglitz/Furman Dec. 36.
---------------------------------------------------------------------------

    \11\ The user interface is especially insignificant 
because the browser window already can serve as the user interface 
for many products, and could easily be adapted to serve as the user 
interface for many more.
---------------------------------------------------------------------------

    Under the RPFJ, developers will continue to assume that Windows 
Media Player, for example, is present on every computer. This will 
be true regardless of whether "end user access" is 
removed, because the remedy does not require Microsoft to remove the 
middleware. The result is that software developers will write 
applications to, for example, the Windows Media Player APIs, rather 
than to the APIs supplied by rival platforms. That is an advantage 
that no competitor can overcome.
    It is no answer to say that OEMs can offer rival middleware even 
if the code for a Microsoft version of the same product is 
commingled with Windows, so that the Microsoft version of middleware 
appears on every desktop PC. If Microsoft's version of a product is 
everywhere, few OEMs will go to the effort of providing another 
product that does largely the same thing. The district court and 
court of appeals alike recognized that OEMs faced strong 
disincentives to install two competing products with similar 
middleware functionality, disincentives arising largely from support 
costs and disk space. See 84 F.Supp.2d at 49-50, 60-61 
(159, 210); 253 F.3d at 61. If the Microsoft Middleware 
is there, the OEM will have to support it, even if--perhaps 
especially if--the end-user does not know that it is there.
    Thus, rival middleware cannot undermine Microsoft's monopoly 
unless (1) the rival middleware is ubiquitous, or (2) the Microsoft 
version is not ubiquitous. If developers do not feel compelled to 
write to the rival middleware as well as the Microsoft middleware, 
the rival middleware will not undermine the monopoly. And if 
Microsoft's version of particular middleware can be ubiquitous by 
virtue of its inclusion in the monopoly operating system, as the 
RPFJ plainly allows, there is virtually no likelihood that rival 
middleware will ever achieve the ubiquity needed to present a 
platform challenge. See Stiglitz/Furman Dec. 36-37; see 
generally Litan/Noll/Nordhaus Comment 44-47.
    3. The RPFJ Retreats From The 1995 Consent Decree Microsoft uses 
Windows as an instant, universal distribution channel for Microsoft 
software that represents a response to a threat to the dominance of 
Windows as a program development platform. As a consequence, 
"Windows" has become whatever bundle Microsoft needs it 
to be to forestall competition. The 1995 Consent Decree contained a 
prohibition on contractual tying of applications to the operating 
system in order to prevent anticipated conduct that would maintain 
the operating systems monopoly by anticompetitive means. That the 
earlier provision failed in its purpose suggests that the provision 
should be broader, not that it should be abandoned, particularly 
since this case began as a way to stop conduct that had escaped 
summary condemnation under the earlier decree. It would be senseless 
as a matter of enforcement policy to bring and win an action 
prompted by an evasion (if not a violation) of a monopolization 
consent decree, win the case on the monopolization theory most 
closely related to the object of the earlier consent decree, and 
then reward the violator by removing the relevant restriction upon 
the expiration of the earlier decree rather than broadening it as 
proposed here. Microsoft's monopoly gives it the power to make all 
systems integration and software bundle decisions, a power that 
Microsoft is exercising more broadly, as the breadth of the Windows 
XP bundles clearly illustrates. The RPFJ should not step back from 
the 1995 Consent Decree.
    4.The RPFJ Encourages Illegal Commingling By Placing The 
Critical Definition of Windows Under Microsoft's Exclusive Control.
    But the RPFJ does step back from the 1995 Decree, and makes 
matters still worse. Not only does the RPFJ completely fail to 
prevent future illegal commingling, but it effectively approves that 
conduct by permitting Microsoft "in its sole discretion" 
to "determine[]" exactly which "software code 
comprises [sic] a Windows Operating System Product." RPFJ 
VI(U). That provision permits Microsoft an unearned advantage in 
repelling any future challenges to illegal commingling of 
applications code with Windows. Were the Court to enter this 
provision as part of its judgment, Microsoft could point to DOJ's 
capitulation on this issue--and the Court's approval--as 
extraordinarily persuasive evidence that its monopoly product was as 
broad as it says it is, and that, despite the contrary holding of 
the DC Circuit, any commingling of an application with the operating 
system is per se legal.
    The Court can and should disapprove provisions that appear to 
endorse practices of apparent anticompetitive effect and dubious 
legality. Thomson Corp., 949 F. Supp. at 927-930 (refusing to 
approve fee schedule for mandatory license for legally dubious 
copyright). The Court should not approve this provision, which 
defangs many of the other obligations in the RPFJ.
    Rather than learning from the difficulties with the 
"integration proviso" in that Decree, DOJ has ceded the 
issue to Microsoft, permitting Microsoft to decide for purposes of 
the decree obligations where the OS stops and where middleware 
begins. Much of the RPFJ rests on the relationship between the 
Windows OS and middleware. But the RPFJ places Microsoft firmly in 
control of every technical aspect of the proposed decree by 
permitting Microsoft absolute control over the definition of 
"Windows
    Operating System Product." That subjects many of 
Microsoft's purported obligations to Microsoft's own discretion.
    No term is more important in the RPFJ than "Windows 
Operating System Product," which appears fully 46 times in the 
RPFJ: 26 times in the descriptions of substantive obligations, and 
20 times in the definitions that circumscribe those obligations. The 
definition of Application Programming Interfaces (APIs) is the 
starkest example. "Windows Operating System Product" 
appears three times among the 41 words of the API definition. See 
RPFJ VI(A.). Thus, Microsoft can determine "in its sole 
discretion" what an API is, and thus what must be disclosed.
    One would think that DOJ would do everything possible to ensure 
that a new decree did not contain an analogue to the 
"integration proviso" that nullified much of the anti-
tying provision of the 1995 decree. See generally Microsoft II, 147 
F.3d 935. Instead, Section VI(U) ensures that few, if any, of the 
technical provisions of the RPFJ will mean anything except what 
Microsoft wants them to mean, and that none can be enforced without 
lengthy litigation that will

[[Page 29048]]

further shrink the tightly limited duration of the proposed relief.
    B. Empirical Evidence Shows That The Icon Flexibility Provisions 
Will Not Be Used Not only do the icon flexibility provisions address 
the wrong problem, but the market already has tested their 
consequences. On July 11, 2001, Microsoft announced that OEMs and 
end users would be permitted to remove access to Microsoft's 
Internet Explorer browser, just as RPFJ III(H)(1) permits. As of 
this writing, not one OEM has availed itself of this new liberalized 
policy. Windows XP is shipping with Internet Explorer on every 
single personal computer shipped by every single OEM. This real-
world experience speaks volumes about the practical significance of 
this relief.
    C. The Icon Flexibility Provisions Require--And 
Accomplish--Little
    1. The icon flexibility provisions do not permit OEMs to swap 
out Microsoft Middleware Products and replace them with other 
products. Rather, the OEMs at most can hide the Microsoft icon, but 
need to be prepared to support the underlying Microsoft software 
when another software application invokes it. That means that these 
provisions do not address the added "product testing and 
support costs" that discourage OEMs from including more than 
one version of particular functionality. Microsoft III, 253 F.3d at 
66.
    This is a step backward from DOJ's settlement posture before 
liability was established. At that time, DOJ insisted that OEMs be 
allowed to alter or modify Windows, and that Microsoft provide OS 
development tools for that purpose. See Draft 18, 4(1)(d), 4(g). The 
RPFJ provisions, by contrast, only permit OEMs to display icons, 
shortcuts, and menu entries for Non-Microsoft Middleware. The RPFJ 
does not require Microsoft to permit OEMs to remove any Microsoft 
Middleware Products, although even current Microsoft practice 
permits this. The RPFJ requires Microsoft only to allow the removal 
of "icons, shortcuts, or menu entries." RPFJ 
III(H)(1)[first].
    2. Section III(H)(2)[first] seems to permit OEMs and end-users 
to choose default middleware for particular functions. Microsoft's 
obligations are far less than they appear.
    The provision applies only where a Microsoft Middleware Product 
would launch into a top-level display window (rather than operating 
within another interface) and would either display "all of the 
user interface elements" or the "Trademark of the 
Microsoft Middleware Product." RPFJ III(H)(2)(i)-(ii) 
(emphasis added). Thus, the provision does not apply if Microsoft 
designs the slightest variation on the interface elements that 
launch from within another application, so long as the trademark 
also is not displayed in the top-level window. These do not present 
serious programming challenges. Microsoft's ability to preclude OEM 
installation of desktop shortcuts that "impair the 
functionality of the [Windows] user interface" (RPFJ 
III(C)(2)) provides another, largely unreviewable set of 
opportunities to impede the use of innovative shortcuts to 
innovative software. Microsoft asserted similar reasons to defend 
some of the conduct condemned by the DC Circuit. See Microsoft III, 
253 F.3d at 63-64. The DC Circuit rejected Microsoft's 
approach, but the RPFJ adopts it.
    3. As explained above, the code beneath the surface is 
critically important to the success of middleware in undermining the 
applications barrier to entry in the OS market. The RPFJ contains 
exceptions that ensure that, however icons may be displayed on the 
surface, Microsoft Middleware will be firmly (and unchallengeably) 
established in the plumbing of each PC. Sections III(H)(1)-
(2)[second], undo what might be left of the obligations earlier in 
Section III(H). Section III(H)(1)[second] permits Microsoft to 
ensure that Microsoft Middleware Products are invoked whenever an 
end-user is prompted to use Microsoft Passport or the group of 
Microsoft web services now known as Hailstorm. Section 
III(H)(2)[second] ensures that Microsoft need only program in 
functions that invoke Active X or other similar Microsoft-
proprietary implementations of common functions, in order to ensure 
that Microsoft Middleware Products constantly appear regardless of 
an end-user's stated preferences. And none of the provisions in 
Section III(H) would apply unless the corresponding Microsoft 
Middleware Products existed seven months before the last beta 
version of a new Windows release. As with other provisions, 
Microsoft would be constrained by these requirements only if it paid 
no attention to them when it decided when and how to release its 
products.
    D. The 14-Day Sweep Provision Effectively Nullifies RPFJ 
 III(H) Even if these provisions otherwise might mean 
something, the RPFJ ensures that they will be competitively 
meaningless by permitting Microsoft to nag users to give permission 
for Microsoft to override any array of non-Microsoft icons and menu 
entries 14 days after the initial boot-up of a PC. See RPFJ 
III(H)(3). Thus, Microsoft only needs to prompt users with a dialog 
box inviting them to "optimize the Windows user 
interface" every time they boot up, or when they download the 
inevitable bug fixes and security patches among Windows updates, in 
order to undo any OEM's or end-user's customization of icons. 
Microsoft apparently provided DOJ with the name for this feature, 
which DOJ uses in the CIS: "Clean Desktop Wizard." CIS 
48, 66 Fed.
    Reg. 59,471. What user would not agree to have a cleaner 
desktop? No ISV is likely to pay an OEM a fee sufficient to cover 
the trouble of rearranging icons, and supporting additional 
software, for the privilege of having non-Microsoft software icons 
displayed advantageously for as little as two weeks.
    The CIS suggests that the ability of Microsoft to sweep away 
icons of competing middleware and other products 14 days after a 
computer first boots up (RPFJ III(H)(3)) applies only to 
"unused icons" (CIS 48, 66 Fed. Reg. 59,471), but the 
decree terms contain no such limitation. Once its "Clean 
Desktop Wizard" (id.) secures a click of user consent, 
Microsoft can hide any icons that offend it. Indeed, there is 
nothing in the RPFJ that would stop Microsoft from including similar 
"wizards" that would prompt users to reset middleware 
defaults, or even to remove Non-Microsoft Middleware," in 
order to "optimize performance" or to "take full 
advantage of powerful new Windows features."
    E. By Placing The Burden To Restore Competition On OEMs, The PFJ 
Leads To No Remedy At All For Much Of The Misconduct At Issue
    One of the most misguided elements of the RPFJ is its allocation 
to OEMs, ISVs and end-users of the primary responsibility for 
injecting competition into the OS market. The icon and default 
flexibility provisions of the RPFJ allocate to the OEMs almost all 
of the financial risk and responsibility for remediating Microsoft's 
antitrust violation, while the monopolist has no obligations except 
to allow others to make changes to hide (or add to) Microsoft's 
middleware.
    That approach ignores the fact that OEMs are motivated by their 
own fiduciary and economic considerations, not by the drive to 
remedy a monopolization offense. OEMs are risk-averse, as they 
operate in a low-margin, highly competitive environment in what has 
become a commodity-product market. In that environment OEMs are 
highly dependent on the good graces of Microsoft, not only for 
favorable pricing on Microsoft's monopoly software products [] 
Office as well as Windows [] but also for timely technical 
assistance, and access to technical information.
    The Stiglitz/Furman Declaration confirms (at 32-34) that 
the economics of the OEM industry--a commodity industry captive 
to a bottleneck monopolist--discourage expenditures of this 
kind. It is bizarre and counterproductive to place the burden to 
restore competition on the innocent, low-margin OEMs rather than the 
monopolist. The "hapless makers of PCs" still 
"aren't in any position to defy Microsoft," Walter 
Mossberg, For Microsoft, 2001 Was A Good Year, But At 
Consumers" Expense, Wall. St. J., Dec. 27, 2001, at B1, any 
more than they were when the illegal conduct in this case first 
occurred. See, e.g., Findings, 84 F. Supp.2d at 62 (214) 
(Hewlett-Packard observation to Microsoft that "[I]f we had a 
choice of another supplier, * * * I assure you [that you] would not 
be our supplier of choice"). But if OEMs choose not to 
exercise their new "flexibility" under the middleware 
provision [] a choice that seems likely in view of the demonstrated 
lack of a response to Microsoft's offer of July 11, 2001 ?? the \12\ 
government is left with no antitrust remedy for much of its case.
---------------------------------------------------------------------------

    \12\ Similarly, the RPFJ places no limits on Microsoft's 
conduct toward one of its largest current groups of 
licensees--direct corporate licensors of bulk Windows licenses. 
The corporate market has always been Microsoft's point of leverage, 
and those buyers now often buy direct. Microsoft has made clear its 
intention to make Windows and other software a renewable 
"service." Microsoft can undo all of the provisions 
applying to OEMs upon the first license renewal with an end-user.
---------------------------------------------------------------------------

    Nor can ISVs be expected to pay OEMs to take advantage of the 
limited flexibility provided by
    RPFJ III(C) and III(H). The RPFJ gives ISVs very slight 
incentives to subsidize OEM

[[Page 29049]]

alterations of Microsoft's preferred desktop display, since the ISVs 
who sell middleware that competes against a Microsoft offering 
cannot buy exclusivity on the desktop of any computer. Rather, at 
best an ISV can obtain parity in the availability to developers of 
its middleware's code. No matter what ISVs and OEMs do, Microsoft 
Middleware will be ubiquitous. And ISVs could buy only 14 days of 
advantageous icon display before a Microsoft "Clean Desktop 
Wizard" (CIS 48, 66 Fed. Reg. 59,471) would begin prompting 
users to undo the OEM's arrangement of icons and reinstate the 
arrangement favored by Microsoft. No ISV would pay more than a 
pittance for such a shallow and short-lived advantage on the 
desktop. F. The RPFJ Permits Microsoft To Control Consumers" 
Access To Innovation To Suit Its Monopolistic Aims The RPFJ allows 
Microsoft to exercise full control over the pace of innovation in 
middleware because Microsoft can ensure that consumers are denied 
access--or have only severely impeded access--to 
competitively threatening middleware products to which Microsoft has 
no analogue.
    Section III(C)(3) allows Microsoft to prohibit OEMs from 
configuring PCs to launch non-Microsoft middleware from any point 
unless Microsoft already has a competing product that launches from 
that point. Microsoft can prohibit OEMs from configuring non-
Microsoft middleware from launching automatically at the end of the 
boot sequence or upon the opening or closing of an Internet 
connection unless a Microsoft Middleware Product with similar 
functionality would launch automatically. RPFJ 
 III(C)(3).
    Even after this catch-up provision serves its delaying purpose, 
Microsoft can control how competing middleware products reach and 
serve consumers, so that products launch only in the way that best 
suits Microsoft. This provision appears designed to protect 
Microsoft from competition, and to give the monopolist a clear 
imprimatur to control the pace of innovation. See Stiglitz/Furman 
Dec. 28.
    V. THE API AND COMMUNICATIONS PROTOCOL DISCLOSURE PROVISIONS ARE 
INEFFECTIVE
    The API Provisions Require Little, If Anything, Beyond Current 
Disclosure Practices In Microsoft's Self-Interest
    The API and Communications Protocol disclosure provisions 
( III(D)-(E)) contain little in the way of hard, 
fast, enforceable obligations, and do not appear to add anything 
significant to Microsoft's current disclosure practices. As the CIS 
recognizes:
    Through its MSDN [Microsoft Developer's Network] service, 
Microsoft presently makes widely available on the Internet an 
extensive and detailed catalog of technical information that 
includes, among other things, information about most Windows APIs 
for use by developers to create various Windows applications. MSDN 
access is presently broadly available to developers and other 
interested third parties.
    CIS 34,66 Fed. Reg. 59,468.
    Microsoft already discloses literally thousands of APIs to 
software developers through MSDN for the good reason that it is in 
Microsoft's self-interest to promote the Microsoft Windows platform 
to software developers. The extent of information disclosure 
required by the RPFJ must be understood in the context of 
Microsoft's current information disclosure practices. A 
"requirement" that Microsoft disclose APIs for the most 
part simply "requires" that Microsoft do what it does 
voluntarily.
    Microsoft has a business incentive not only to disseminate 
Windows APIs but to assist ISVs in understanding and implementing 
Windows APIs in their products. Microsoft and other platform 
software vendors compete to attract developers by disclosing 
technical information, creating easy-to-use development tools, and 
"evangelizing" their development platforms. Attracting 
developers helps Microsoft perpetuate the substantial network 
effects that produce the applications barrier to entry protecting 
the Windows monopoly. Because the strength of the Windows monopoly 
and the power of the applications barrier to entry are directly 
related to the number of developers writing applications for 
Windows, it is in Microsoft's interest to provide a robust 
information disclosure program.
    By widely disclosing APIs, Microsoft ensures that applications 
will continue to be written for its platform software rather than 
for rival platforms. Properly understood, Section III(D) does not 
actually require Microsoft to provide any new disclosure of APIs and 
technical information to promote interoperability; Microsoft already 
engages in these disclosures. Rather, the incremental effect of the 
API disclosure provisions of the RPFJ is at most to prevent 
Microsoft from selectively withholding certain APIs from certain 
vendors. As explained below, however, the disclosure 
"requirements" in the RPFJ are too insubstantial and too 
easily manipulated to accomplish even that limited goal.
    B. The RPFJ Does Not Require Disclosure of Windows APIs, But 
Rather Lets Microsoft Determine The Scope of Disclosure Through The 
Design and Labeling of Its Operating System And Middleware
    To begin with, the API disclosure requirements aim at the wrong 
thing. The RPFJ defines APIs as the interfaces used by Microsoft 
Middleware to invoke resources from a Windows Operating System 
Product. RPFJ  VI(A). But innovative rival software 
vendors do not need APIs between Microsoft Middleware and Windows. 
The really threatening innovators are threatening precisely because 
their products perform functions that Microsoft's do not. In those 
cases, by definition, there will not be any fully analogous 
Microsoft middleware--just as Microsoft did not have an 
Internet browser when Netscape Navigator first appeared. Those 
developers need full access to Windows APIs--APIs for all 
functionalities enabled by the Windows platform, whether Microsoft 
calls them "internal" calls within Windows or external 
APIs that may be distributed to ISVs--not to the limited subset 
used by a Microsoft version of similar middleware.
    That is what Netscape needed in 1995; there was no Internet 
Explorer to speak of at that time, and certainly Microsoft's 
rudimentary browser did not perform anywhere near the range of 
functions performed by Netscape Navigator. See Findings, 84 F. 
Supp.2d at 31-32 (82-84), 33-34 
(91-92). The RPFJ provisions would not have helped 
Netscape then. See Letter from James L. Barksdale, former CEO of 
Netscape, to Chmn. Leahy & Sen. Hatch, Senate Comm. on the 
Judiciary, Attachment, Question 1 (Dec. 11, 2001)\13\ And they will 
not help any software developer whose products exceed the 
functionality of existing Microsoft middleware. The API disclosure 
provisions in the RPFJ thus ensure that Microsoft can control the 
pace of middleware innovation, providing another level of assurance 
that non-Microsoft products will not gain the type of head start 
that might result in ubiquity before a similar Microsoft product can 
be included That limitation on API disclosure is severe enough. But 
it is just a beginning. The disclosure obligation is further limited 
by the definition of APIs at RPFJ  VI(A): in the bundle 
of products sold with every Windows operating system.
---------------------------------------------------------------------------

    \13\ Mr. Barksdale's letter in lieu of hearing testimony 
is available at http://java.sun.com/features/2002.01.barksdale-
letter.html, and the attachment is available at http://java.sun.com/
features/2002.01.barksdale-attach.htm "Application Programming 
Interfaces (APIs)" means the interfaces, including any 
associated callback interfaces, that Microsoft Middleware running on 
a Windows Operating System Product uses to call upon that Windows 
Operating System Product in order to obtain any services from that 
Windows Operating System Product.
---------------------------------------------------------------------------

    Setting aside the circularity, the malleability of the two 
principal defined terms renders this definition (and the 
corresponding obligations) a practical nullity. The API definition 
depends on the relationship between two "products," each 
of which is defined solely by Microsoft. As noted above, Microsoft 
has "sole discretion" to identify software code as part 
of a "Windows Operating System Product." RPFJ 
 VI(U). Many APIs can disappear from view simply as a 
result of Microsoft's unreviewable decision to relabel certain 
interfaces as internal to Windows. If Microsoft says that an 
operation takes place entirely within Windows, rather than requiring 
the interaction of a middleware and Windows, then there is no API to 
disclose. \14\
---------------------------------------------------------------------------

    \14\ Moreover, the term "interfaces" is not 
defined in the RPFJ. The CIS explains that 
"'[i]nterfaces" includes, broadly, any interface, 
protocol or other method of information exchange between Microsoft 
Middleware and a Windows Operating System Product." CIS 
33-34, 66 Fed. Reg. 59,468. But that definition would not be 
part of the judgment.
---------------------------------------------------------------------------

    C. The Definition of "Microsoft Middleware" Gives 
Microsoft Further Leeway to Limit Its Disclosure Obligation
    The only APIs that need be disclosed are those used by 
"Microsoft Middleware." But "Microsoft 
Middleware," too, is defined in a way that gives Microsoft 
tight control over the scope of its own obligations. Remarkably, 
Assistant Attorney General James testified that this definition 
would have been difficult for DOJ to achieve in a litigated 
proceeding. Statement of Charles James to Senate Judiciary Committee 
8 (Dec. 12, 2001). But it is difficult to imagine what Microsoft 
would

[[Page 29050]]

have contested. Just as in the dispute whether Internet Explorer is 
part of Windows, Microsoft can simply relabel software as part of 
one product rather than another. The label does not affect the 
commands and operations in the software.
    1. The RPFJ Requires Microsoft To Disclose Only The APIs Used By 
The "User Interface" Or Shell Of Microsoft Middleware
    The APIs that must be disclosed are those that "Microsoft 
Middleware * * * uses to call upon [a] Windows Operating System 
Product." RPFJ  VI(A); see id. Ill(D). But 
Microsoft determines how much code performing a Microsoft Middleware 
function is part of the Middleware, and how much is part of the 
Windows Operating System Product, since the latter definition is 
within Microsoft's "sole discretion." Id. 
 VI(U). The only code in Microsoft Middleware that 
Microsoft must consider separate for the purposes of API disclosure 
is the user interface, or shell, of the Middleware--or, rather, 
"most" of the shell. Id.  VI(J)(4). The only 
limit is that "Microsoft Middleware" must 
"[i]nclude at least the software code that controls most or 
all of the user interface elements of that Microsoft 
Middleware." Id. Thus, the terms of the RPFJ permit Microsoft 
to provide only the APIs that go between 51% of the user interface 
elements of Microsoft Middleware and the rest of the Windows bundle 
of products. None of the APIs used by the Middleware's 
functionality--the APIs that permit the Middleware perform its 
functions while running on Windows--need be disclosed, so long 
as the shell APIs are disclosed. This definition appears to be 
designed to have nothing to do with developer preferences, or with 
the applications barrier to entry.
    2. The RPFJ Requires Microsoft To Disclose APIs Only For 
"Microsoft Middleware" That Is Distributed Separately 
From Windows, Yet Is Distributed To Update Windows
    To come within the disclosure obligation, Microsoft Middleware 
must be "distributed separately from a Windows Operating 
System Product." That restriction alone is enough to take 
Windows Media Player 8 outside the definition, as that product is 
available only as part of the Windows XP bundle. But not all 
separate distributions prompt the API obligations; Microsoft must 
characterize the distribution as one that "update[s] th[e] 
Windows Operating System Product." See RPFJ 
 VI(J)(1). Thus, the scope of the obligation depends 
entirely on the labeling of the product, which Microsoft can easily 
manipulate.
    3. The Limitation Of Microsoft Middleware To 
"Trademarked" Products Further Eviscerates The API 
Disclosure Provision But that is not all. At least equally 
significant is the restriction of the Microsoft Middleware 
definition, and thus the API disclosure obligation, to Middleware 
that is "Trademarked." RPFJ  VI(J)(2). The 
definition of "Trademarked" allows Microsoft to exclude 
current middleware from the API disclosure obligation, and to 
prevent future middleware from becoming subject to the API 
disclosure obligation, simply by manipulating its use of trademarks. 
a. Microsoft Easily Can Ensure That Middleware Is Not 
"Trademarked" By Using A Generic Or Descriptive Name 
Combined With Microsoft(r) or Windows(r) The definition of 
"Trademarked" does not include "[a]ny product 
distributed under * * * a name compris[ing] the Microsoft(r) or 
Windows(r) trademarks together with descriptive or generic 
terms." Id.  VI(T). That is how Microsoft has 
chosen to name some of its newest and most important products: the 
combination of a monopoly brand with a simple descriptive mark that 
helps identify an entire software function with the Microsoft 
implementation of it. Windows(r) Messenger instant messaging 
software is one example. Moreover, by the terms of the RPFJ 
Microsoft disclaims any rights in the use of such combinations of 
the Microsoft(r) or Windows(r) marks with generic or descriptive 
terms, and abandons any rights that may be acquired in the future. 
RPFJ  VI(T). These provisions suggest that Microsoft can 
change the scope of the definition of Middleware, and thus of the 
API disclosure obligation, by abandoning some marks it has 
registered as combinations of Microsoft(r) or Windows(r) with 
generic or descriptive terms--if the RPFJ does not accomplish 
that in itself. Windows Media Player is an example. Although 
Microsoft has registered the combination of Windows(r) and the 
generic term "Media" as Windows Media(r), at bottom the 
name Windows Media Player is a combination of the Windows(r) mark 
with the generic term "media player." Indeed, Microsoft 
could plausibly argue that the Windows Media(r) mark does not come 
within the "Trademarked" definition as it is, since even 
that mark consists of no more than the Windows(r) mark in 
combination with the generic term "media."15 RPFJ 
 VI(T) may therefore embody Microsoft's 
"disclaim[er of] any trademark rights in such descriptive or 
generic terms apart from the Microsoft(r) or Windows(r) 
trademarks." But even if Section VI(T) does not go so far, 
Microsoft could easily get Windows Media(r) Player outside of the 
"Trademarked" definition --and thus outside the 
scope of the disclosure obligations that apply only to 
"Microsoft Middleware"--simply by abandoning the 
registration mark and moving the registration symbol to the left. 
Thus, Microsoft can transform "Windows Media(r) Player," 
which might be subject to API disclosure requirements, into 
"Windows(r) Media Player," which clearly is exempt. 15. 
In this discussion we set aside the non-trivial question whether 
"Windows" itself is a generic, or at best descriptive, 
mark for the type of "windowing" graphical user 
interfaces invented at the Xerox Palo Alto Research Center in the 
1970s, popularized by the Apple Lisa and Macintosh in the 1980s, and 
since used by Microsoft and many other software vendors. b. The 
"Microsoft Middleware" Definition Governing Disclosure 
Obligations Is Far Narrower Than The "Microsoft Middleware 
Product" Definition Governing OEM Flexibility That this highly 
restrictive definition is no accident is clear from comparison with 
the "Microsoft Middleware Product" definition which 
governs the icon-display obligations. To provisions paralleling the 
"Microsoft Middleware" definition, the "Microsoft 
Middleware Product" definition adds several named current 
products, including "Internet Explorer, Microsoft's Java 
Virtual Machine, Windows Media Player, Windows Messenger, Outlook 
Express and their successors," RPFJ  VI(K)(1), 
although only to the extent that Microsoft "in its sole 
discretion" (id.  VI(U)) decides that those 
products are "in a Windows Operating System Product." 
Id.  VI(K)(1). Thus, Microsoft's icon display/removal 
obligations for those named products would not change merely because 
of a strategic product renaming or abandonment of a trademark that 
combines the Microsoft(r) or Windows(r) name with generic or 
descriptive terms. But none of those current products is named in 
the "Microsoft Middleware" definition that governs the 
disclosure obligations. That enables Microsoft to manipulate whether 
those products, although surely middleware, also satisfy the four 
subparts of RPFJ  VI(J).
    c. The CIS Broadens The "Trademarked" Definition 
Beyond Its Terms
    The CIS overstates the breadth of the "Trademarked" 
definition, contending that it "covers products distributed * 
* * under distinctive names or logos other than by the Microsoft?? 
or Windows?? names by themselves." CIS 22, 66 Fed. Reg. 
59,465. The CIS further claims that the exception for products known 
by combinations of generic terms with Microsoft?? or Windows?? does 
not cover marks that "are presented as a part of a distinctive 
logo or another stylized presentation because the mark itself would 
not be either generic or descriptive." CIS 23, 66 Fed. Reg. 
59,465 (emphasis added). To the contrary, the terms of the RPFJ 
definition of "Trademarked" focus entirely on 
"names," not "logos" or "marks" 
as a whole. RPFJ  VI(T). The distinction is striking: 
the word "name" appears five times in the definition, 
and "descriptive or generic terms" appears three times. 
Neither "logo" nor "mark" appears at all.
    Microsoft clearly appreciates the distinction. Although 
Microsoft apparently has not yet formally abandoned the mark 
"Internet Explorer" (U.S. Trademark Reg. No. 2277122), 
it does not assert that mark when it lists its trademarks as a 
warning to the public. See http://www.microsoft.com/misc/info/
cpyright.htm. Microsoft does list its trademark for the Microsoft 
Internet Explorer logo, however. Id.; see U.S. Trademark Reg. No. 
2470273.
    d. Microsoft Can Easily Manipulate Which Middleware Releases Are 
"New Major Versions" Indeed, even a "Microsoft 
Middleware Product" satisfying that four-part test may not be 
"Microsoft Middleware" subject to the disclosure 
obligation unless it is a "new major version" of the 
product, that is, if the release is "identified by a whole 
number or by a number with just a single digit to the right of the 
decimal point." RPFJ  VI(J). That has two 
implications. First, Microsoft can simply adopt a different method 
of naming new releases. Second, even under current practice a 
version with two digits to the right of the decimal point may fix 
significant errors, so that disclosure only of the prior version of 
the APIs might leave developers without the ability to invoke some 
needed functionality with the disclosed APIs.

[[Page 29051]]

    D. The Disclosure Provisions--Particularly Those concerning 
"Communications Protocols"--Depend On An Undefined 
And Thus Unenforceable Concept of "Interoperability"
    Both the API and Communications Protocol disclosure provisions 
define the scope of the data to be disclosed as that necessary to 
permit non-Microsoft products to "interoperate" with the 
Windows client OS and to "interoperate natively" with 
Microsoft server operating system products. See RPRJ 
 III(D), (E). The disclosure obligations are 
limited to "the sole purpose of interoperating with a Windows 
Operating system. Product." Id.
    The obligations depend on the meaning of 
"interoperate," but the RPFJ never defines that term, 
and there is no non-discrimination provision attached to this 
obligation. That is critical because interoperability is not 
something that can be achieved half way. Either two software 
products interoperate for all functions that they must perform 
together, or they do not. Any impediment in any aspect of the 
interoperation nullifies the interoperability. The CIS seems to 
equate "inteoperate" with "fully take advantage 
of," see CIS 36, 66 Fed. Reg. 59,468, but there is no such 
language in the RPFJ itself.
    The Communications Protocol disclosure provision (RPFJ 
 III(E)), outlines a seeming "obligation" 
that is entirely undefined. Section III(E) seems to require 
disclosure of Communications Protocols on Windows clients that are 
"used to interoperate natively * * * with a Microsoft server 
operating system product." But just as 
"interoperate" is not defined, neither does the RPFJ 
define "Microsoft server operating system product."
    One of the most important aspects of the Windows 2000 Server 
product bundle is Microsoft's web server, IIS. In the absence of a 
definition of "Microsoft server operating system 
product," however, it is unclear whether the disclosure 
obligation encompasses protocols used to interoperate with this and 
other aspects of the current server product. Cf. RPFJ 
 VI(U) (defining "Windows Operating System 
Product" as all software code "distributed commercially 
* * * as Windows 2000 Professional" and other named products, 
and "Personal Computer versions" of their successors).
    Again, the CIS attempts to provide assurances that go beyond the 
terms of the proposed judgment. The CIS states (at 37, 66 Fed. Reg. 
59469):
    The term "server operating system product" includes, 
but is not limited to, the entire Windows 2000 Server product 
families and any successors. All software code that is identified as 
being incorporated within a Microsoft server operating system and/or 
is distributed with the server operating system (whether or not its 
installation is optional or is subject to supplemental license 
agreements) is encompassed by the term. For example, a number of 
server software products and functionality, including Internet 
Information Services (a "web server") and Active 
Directory (a "directory server"), are included in the 
commercial distribution of most versions of Windows 2000 Server and 
fall within the ambit of "server operating system 
product."
    That definition would be appropriate. But no corresponding 
language--no enforceable definition--appears in the RPFJ. 
E. The Narrow Scope Of The Disclosure Provisions Contrasts Sharply 
With The Broader Definitions In DOJ's Earlier Remedy Proposals
    Before liability had been confirmed on appeal, DOJ took a far 
broader view of what should be disclosed. The interim remedies in 
the vacated judgment required disclosure of APIs, Communications 
Interfaces, and "technical information" needed to enable 
competing products "to interoperate effectively with Microsoft 
Platform Software." 97 F. Supp.2d at 67 (3(b)). That 
disclosure requirement was backed up by a requirement, absent from 
the RPFJ, that Microsoft create a secure facility so that developers 
could work with Windows source code to ensure that their 
applications worked properly on the Microsoft platform. See id
    The definition of "technical information," moreover, 
helped ensure that disclosure would be complete and not subject to 
many different methods of manipulative narrowing. The 
"technical information" definition encompassed the 
following items: 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.
    Technical information includes but is not limited to reference 
implementations, communications protocols, file formats, data 
formats, syntaxes and grammars, data structure definitions and 
layouts, error codes, memory allocation and deallocation 
conventions, threading and synchronization conventions, functional 
specifications and descriptions, algorithms for data translation or 
reformatting (including compression/decompression algorithms and 
encryption/decryption algorithms), registry settings, and field 
contents.
    97 F. Supp.2d at 73 ( 7(dd)).
    Indeed, DOJ's position was stronger even before liability had 
been imposed at all. Draft 18 from the Posner mediation imposed a 
disclosure obligation using this definition of "technical 
information": all information, regarding the identification 
and means of using APIs (or communications interfaces), that 
competent software developers require to make their products running 
on a personal computer, server, or other device interoperate 
satisfactorily with Windows platform software running on a personal 
computer. Technical information includes reference implementations, 
communications protocols, file formats, data formats, data structure 
definitions and layouts, error codes, memory allocation and 
deallocation conversions, threading and synchronization conventions, 
algorithms for data translation or reformatting (including 
compression/decompression algorithms and encryption/decryption 
algorithms), registry settings, and field contents.
    The RPFJ, by contrast, contains no analogue to these precise and 
inclusive definitions. Instead, the RPFJ relies solely on the 
circular (and completely manipulable) definition of API (RPFJ 
 VI(A)), a similarly narrow definition of 
"Communications Protocol" (id  VI(B)), and a 
definition of "Documentation" that is wholly dependent 
on the API definition (id.  VI(E)).
    F. The "Security" Exceptions in Section Ill(J) 
Permit Microsoft To Avoid Its Disclosure Obligations RPFJ 
 III(J) provides Microsoft with two additional lines of 
defense in the event that any competitively sensitive APIs 
nonetheless fall within the malleable definition of API. Section 
III(J)(1) severely undercuts the disclosure requirements to the 
extent they apply in the modem world where security protocols are 
critical to any communication between networked computers, 
particularly over the Internet. And Section III(J)(2) provides 
Microsoft with seemingly unfettered discretion to decide who is 
worthy to receive technical information necessary to make middleware 
function on the Internet.
    Microsoft can plausibly rely on Section III(J) to decline to 
comply with disclosure requests based on concerns with 
authentication and security that it will be able to assert with 
respect to any program that involves communication between a PC and 
a server on the Internet (or even within many private networks). 
Authentication, security, and similar protection mechanisms are and 
will continue to be integral parts of the functioning of those 
products. See, e.g., Comment, William A. Hodkowski, The Future of 
Internet Security." How New Technologies Will Shape the 
Internet and Affect the Law, 13 SANTA CLARA COMPUTER 8: HIGH TECH. 
L.J. 217 (1997). Indeed, security and rights-protection are 
particularly critical to Internet-based economic activity, which 
encompasses much of the computing on the Internet. As a consequence, 
the security mechanisms are critically important to any Internet-
based middleware threat to the Windows OS monopoly.
    For example, digital rights management ("DRM") has 
become a principal part of Windows Media Player. Allowing Microsoft 
to withhold data needed to permit rivals to interoperate with the 
DRM specifications in Windows Media Player--specifications that 
Microsoft is making universal by including Windows Media Player on 
every PC -may well end effective competition for media players 
within the next upgrade cycle for Windows. Similarly, any distant 
remaining possibility of Internet browser (or even e-mail client) 
competition should be squelched by the RPFJ's approval for Microsoft 
to withhold parts of encryption-related protocols (again, as 
distinct from the customer-specific keys that make use of those 
protocols). For another example, Secure Socket Layer (SSL) is an 
open standard that has been critical to the open development of a 
relatively secure Internet. As Microsoft implements a proprietary 
version of SSL--one that others will have to follow given the 
ubiquity of the Microsoft browser as a result of the misconduct at 
issue in this case--it will be able to conceal critical layers 
of that altered protocol from rivals, essentially ending the 
possibility of competition for client software for Internet 
computing. And by giving Microsoft a basis to conceal authentication

[[Page 29052]]

protocols (not merely data), the RPFJ frees Microsoft Passport from 
scrutiny and permits Microsoft to bind a proprietary universal 
password and identity utility to its monopoly operating system 
without hope of interoperation.
    By permitting Microsoft to withhold key parts of encryption, 
digital rights management, authentication, and other security 
protocols, the RPFJ effectively allocates Web-based computing to the 
monopolist of the desktop. A decree could hardly try to place a 
clearer stamp of approval on an expansion of the scope of an 
illegally maintained monopoly.
    1. The Exclusions for Security-Related APIs and Protocols in 
RPFJ(J)(1) Permit Microsoft To Hobble Disclosures That Are Critical 
in Internet Computing
    It is no coincidence that Bill Gates has now emphasized the 
centrality of security concerns in Microsoft's future software 
offerings. See, e.g., John Markoff, Stung by Security Flaws, 
Microsoft Makes Software Safety a Top Goal, N.Y. TIMES, Jan. 17, 
2002, at C1. That is no more than an acknowledgment of market and 
technical realities that have been widely known throughout the 
industry for years as Internet computing has taken hold. That market 
reality should have been sufficient to make clear that an indistinct 
exception of the type in RPFJ  III(J)(1) would allow 
Microsoft to disclose "crippled" versions of APIs and 
Communications Protocols. Microsoft's sudden dedication to security 
leaves no doubt that it will inject security aspects into its 
proprietary APIs and its proprietary, extended implementations of 
Communication Protocols. Under the terms of Section III(J)(1), 
Microsoft can easily argue that disclosure of those 
aspects--necessary for one machine to communicate with 
another--will compromise the security from any installation or 
group of installations. See also Stiglitz/Furman Dec. 30.
    The CIS maintains that Section III(J)(l) simply protects 
Microsoft and its customers from disclosure of customer-specific 
"keys, authorization tokens, or enforcement criteria," 
and states that the exception "does not permit [Microsoft] to 
withhold any capabilities that are inherent in the Kerberos and 
Secure Audio Path features as they are implemented in a Windows 
Operating System Product." CIS 52, 66 Fed. Reg. 59,472. But 
that reading does not square with the text of the exemption. The 
quoted examples are specifically presented "without 
limitation." RPFJ  III(J)(1). The RPFJ language 
easily permits Microsoft to contend that any release of the way, its 
proprietary security protocols work "would compromise the 
security of a particular installation."
    Most important, Section III(J)(1) clearly permits Microsoft to 
withhold portions of APIs or Communications Protocols, but the 
examples given of keys and authorization codes are not parts of APIs 
or Communications Protocols. They may be part of customer-specific 
Documentation, rather than the Documentation used by customers, 
consultants, and developers to create or identify and implement 
particular keys, tokens, or enforcement criteria.) The APIs and 
Communications Protocols for security-related applications are not 
customer-specific, nor does their disclosure compromise security. To 
the contrary, the most powerful encryption and other security-
related software is openly disclosed, as is the Kerberos standard, 
or even open source, as is the federal government's new encryption 
standard. See, e.g., Watch your AES: A new encryption standard is 
emerging, Red Herring (Dec. 1, 1999) (open source government 
standard). Unless RPFJ  III(J)(1) refers to a null set, 
however, Microsoft will have a basis to withhold some parts of 
Communications Protocols and APIs. The CIS states that 
Communications Protocols "must be made available for third 
parties to license at all layers of the communications stack," 
(CIS 36-37, 66 Fed. Reg. 59,468 (emphasis added)) but the RPFJ 
to which Microsoft agreed--and which alone is potentially 
enforceable -says no such thing. To the contrary, Section III(J)(1) 
explicitly relieves Microsoft from the obligation to license some 
"portions or layers of Communications Protocols" (and 
some "[p]ortions of APIs")--not just client-
specific data. If part of a Communications Protocol is withheld, not 
"all layers of the communications stack" are 
"available * * * to license." And if part of a 
Communications Protocol is unavailable, interoperation is 
impossible; at certain points, the interaction between two computers 
will break down.
    Limited withholding of APIs or Communications Protocols (rather 
than merely withholding customer-specific data) will render 
middleware non-functional, since software cannot interoperate with 
other software partially. Carving off some aspects of 
interoperability means that there is no interoperability, thwarting 
the premise of the disclosure provisions altogether.
    The CIS also describes other limits that do not exist in the 
text of the RPFJ. The CIS claims that the RPFJ requires disclosure 
of the Communications Protocols used for the Microsoft-proprietary 
implementation of the Kerberos security standard--a 
"polluted" Kerberos that is the strict analogue to the 
"pollute[d]" Java that figured prominently at trial. See 
Microsoft III, 253 F.3d at 76-77 (quoting 22 J.A. 14,514). But 
Section III(J) explicitly relieves Microsoft of the obligation to 
disclose "portions" of APIs or Communications Protocols 
that would "compromise the security of a particular 
installation or group of installations of" security software. 
That is an open invitation to withhold some part of the Microsoft-
proprietary variation of Kerberos.
    The type of customer-specific information that the CIS claims is 
all that can be withheld could and should be described much more 
accurately and specifically in the RPFJ, not as [p]ortions of APIs 
or * * * portions or layers of Communications Protocols," but 
rather as "customer-specific or installation-specific data 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." But that is not 
the approach the RPFJ takes. Rather, the RPFJ makes clear that 
Microsoft is entitled to withhold, not merely customer- or 
installation- specific data, but some "portions" of APIs 
and some "portions or layers" of Communications 
Protocols. All communication of substance between desktops (or other 
client computers) and server computers over the Internet 
increasingly involves layers of security protocols, anti-virus 
routines, and the like. And one of Microsoft's principal current 
efforts is to foist its own version of digital rights management 
(DRM) upon providers of copyrighted content over the Internet.
    When Microsoft asserts a right to withhold information, it will 
be difficult indeed for the Technical Committee, DO J, or the Court 
to exclude the possibility that particular "portions or layers 
of Communications Protocols," or "[p]ortions" of 
the APIs that permit middleware programs to operate atop Microsoft 
operating systems, in fact "compromise the security of a 
particular installation or group of installations." RPFJ 
 III(J)(1). Any such determination is likely to be time-
consuming, and related enforcement therefore would be slow. It 
should be a simple matter for Microsoft to delay disclosures of this 
type long enough to disadvantage competitors.
    2. RPFJ III(J)(2) Permits Microsoft To Refuse Effective 
Disclosure To A Range Of Potentially Effective Competitors
    While RPFJ  III(J)(1) allows Microsoft to refuse to 
disclose portions of APIs, RPFJ  III(J)(2) permits 
Microsoft to withhold all of any "API, Documentation, or 
Communications Protocol" having to do with "anti-piracy 
systems, anti-virus technologies, license enforcement mechanisms, 
authentication/authorization security, or third party intellectual 
property protection mechanisms of any Microsoft product." The 
RPFJ allows Microsoft to select to whom it will disclose this 
information by imposing several tests that may be based on standards 
apparently committed to Microsoft's sole discretion as much as is 
the definition of Windows Operating System Product.
    Thus, RPFJ  III(J)(2)(b) permits Microsoft to 
evaluate whether a competitor has a "reasonable business 
need" for the desired information. What Microsoft is likely to 
consider a "reasonable" business need by a competitor 
may be narrow indeed. As the DC Circuit observed, Microsoft viewed 
its desire "to preserve its" monopoly "power in 
the operating system market" as a procompetitive justification 
for exclusionary conduct. Microsoft III, 253 F.3d at 71. No doubt 
Microsoft will view direct or indirect efforts to undermine its 
hammerlock on the OS market as unreasonable efforts to confuse 
consumers or impair the "Windows experience."
    Even bona fide attempts by a monopolist to objectively evaluate 
a potential competitor's "reasonable business need" can 
scarcely be expected to produce consistent or foreseeable results.
    Rather, that amorphous standard is likely to produce a flood of 
disputes--each of which will delay the competitor's receipt of 
technical information while Microsoft gains more time to respond (by 
legal or illegal means) to the competitive threat. Moreover, the 
"reasonable business need" must be for

[[Page 29053]]

a "planned or shipping product." If the product is 
already "shipping," it may be too late for disclosure to 
be helpful in the market. How fully "planned" a product 
must be raises further questions that Microsoft will be able to 
resolve to its own disadvantage.
    In addition, Microsoft need not provide security-related APIs, 
protocols, or documentation to any vendor that does not 
"meet[] reasonable, objective standards established by 
Microsoft for certifying the authenticity and viability of its 
business." RPFJ  III(J)(2)(c) (emphasis added).
    That provides Microsoft with a basis for excluding almost all 
nascent competitors except for those associated with established, 
profitable companies. It would not be difficult to craft 
"reasonable, objective standards" for "viability 
of [a] business" that would exclude any Internet-focused 
startup, including Netscape in 1995. Indeed, the history of the 
software industry both before and after the dot-com bubble shows 
that very few software companies have had "viable" 
businesses. Certainly Section III(J)(2)(c) would give Microsoft at 
least a debatable basis for withholding the APIs and Communications 
Protocols needed to interoperate with Microsoft software over the 
Internet from all open source ISVs--who are more interested in 
constantly improving the quality of software than in obtaining 
licensing profits. Although open source software is widely 
recognized as a major threat to Microsoft's monopoly power, the 
business models even of the leading Linux providers might fail any 
number of "reasonable, objective standards" for 
"viability." Indeed, Microsoft's CEO Steve Ballmer 
describes open source software as a "cancer" that 
threatens the viability of any software business. See Mark Boslet, 
Open Source: Microsoft Takes Heat, INDUSTRY STANDARD, July 30, 2001; 
Dave Newbart, Microsoft CEO Takes Launch Break with the Sun-Times, 
CHI. SUN-TIMES, June 1, 2001, at 57. For that matter, it is not 
entirely unreasonable to regard head-to-head competition with 
Microsoft in platform software as a less than viable business plan; 
certainly most venture capitalist and other investors hold that 
view. It would not be difficult for Microsoft to craft 
"objective" standards of business viability that would 
exclude Corel and Novell, to name two examples. Microsoft should be 
able to exclude many sources of potential cross-platform middleware 
threats through RPFJ  III(J)(2)(c) alone.
    Yet RPFJ  III(J)(2) contains yet another method for 
screening competitors from access to technical information needed by 
Internet-centric middleware applications. Any ISV that clears the 
hurdles and receives the information nonetheless must submit its 
implementation of the APIs, Documentation or Communications 
Protocols for review by a Microsoft-approved third party (likely a 
captive commercial ally) "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." RPFJ  III(J)(2)(d). 
"[P]roper" no doubt will mean "the way Microsoft 
does it," making this provision into yet another way in which 
Microsoft can control the pace of innovation to ensure that the 
market has no or limited access to products that improve upon 
Microsoft's offerings. This mechanism means that vendors who tried 
to adapt APIs to function as bridges to other platforms would have 
to give Microsoft the ammunition to defeat that function--if 
not simply disapprove it and await the slow operation, if any, of 
the RPFJ enforcement mechanism.
    The CIS suggests that there are strict limits on Microsoft's 
discretionary ability to deny access to security-related aspects of 
Communications Protocols and APIs, CIS 53, 66 Fed. Reg. 59,473, but 
those limits are absent from the decree language. The CIS contends 
that these exceptions "are limited to the narrowest scope of 
what is necessary and reasonable, and are focused on screening out 
individuals or firms that * * * 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 mechanisms to which they relate." 
Id. Setting aside the opportunity for Microsoft to argue, as it has 
in other contexts, that the injection of competing software 
"threatens the proper operation and integrity" of its 
products, see Microsoft III, 253 F.3d at 63-64, the CIS simply 
does not address the broadest basis for withholding APIs and 
Communications Protocols under Section III(J)(2): Microsoft's 
ability to decide, based on criteria within its own discretion, that 
an ISV is not "authentic[]" and "viab[le]." 
RPFJ  III(J)(2). That provision could provide a basis 
for excluding all but a handful of other software companies.
    G. RPFJ  III(1) Would Place A Judicial Imprimatur On 
Microsoft's Use Of Technical Information As A Lever To Extract 
Competitors" Intellectual Property
    The RPFJ would actually increase Microsoft's bargaining power by 
explicitly placing a judicial imprimatur on demands by Microsoft 
that recipients of APIs cross-license any intellectual property 
developed using the APIs. Section III(I) of the RPFJ permits 
Microsoft to use intellectual property licensing terms to impede 
whatever competitive benefits otherwise might have arisen from its 
disclosure obligations. Microsoft's licenses "need be no 
broader than is necessary to ensure" the licensee's ability to 
"exercise the options or alternatives expressly 
provided" by the RPFJ. RPFJ 111(I)(2). A welter of litigation 
over the breadth that is "necessary"--and the 
collateral restrictions that are permissible--is certain to 
continue through the life of the decree.
    Similarly, Microsoft should have no difficulty delaying the use 
of any option for which it is entitled to charge a royalty, simply 
by setting a "reasonable" royalty (RPFJ 
 (I)(1)) beyond what any OEM could afford to pay in that 
competitive, low-margin business. If OEMs have to pay Microsoft to 
exercise any of their icon-shuffling options--a state of 
affairs clearly envisioned in RPFJ  III(I)--the 
slim likelihood that any OEM will take advantage of those provisions 
will be lessened still further. Microsoft need not permit transfers 
or sublicenses of API rights, imposing yet another barrier to entry. 
Id. III(I)(3). And Microsoft could ensure, through licenses, that 
end-users could not make competitively significant alterations to 
the Microsoft-approved package.
    Most important, however, the RPFJ specifically permits Microsoft 
to use its monopoly as a means to force access to others" 
intellectual property. Microsoft can assert a right to license 
"any intellectual property rights" a competitor 
"may have relating to the exercise of their options or 
alternatives provided by" the RPFJ. RPFJ 
 III(J)(5). Thus, to take advantage of a competitive 
option, an ISV will need to license its product to Microsoft, and 
hope that Microsoft does not use that license as a means to produce 
a copycat program and bundle it into Windows. Many companies long 
since departed the software industry after entering into what they 
thought were limited exchanges of intellectual property with 
Microsoft. \16\
---------------------------------------------------------------------------

    \16\ See, e.g., Testimony of Mitchell Kertzman before the 
Sen. Jud. Comm., July 23, 1998 (detailing Sybase's difficulties in 
this regard); Statement of Michael Jeffress before the Sen. Jud. 
Comm., July 23, 1998 (after TVHost revealed its intellectual 
property to Microsoft in failed negotiations to sell the company, 
Microsoft imitated the product).
---------------------------------------------------------------------------

    Although the CIS states that Microsoft could demand only any IP 
rights it would need to comply with its own disclosure obligations 
under the RPFJ, CIS 50-51, 66 Fed. Reg. 59,472, the broad 
"relating to" language does not compel that narrow 
reading, and may not support it at all. The vague limitations in 
Section III(I)(5) are unlikely to reassure ISVs that Microsoft will 
not use its license to analyze the ISV's IP rights well enough to 
design around it and bundle a copycat program into Windows or 
Office, as has happened many times before. This weapon should give 
Microsoft additional ability to prevent industry participants from 
taking advantage of the superficially appealing provisions of the 
RPFJ.
    VI. BUILT-IN DELAYS EXACERBATE THE DECREE'S UNJUSTIFIABLY BRIEF 
DURATION
    It is remarkable that the RPFJ would reward Microsoft for 
litigating and losing broadly on liability with a consent decree 
that is shorter than other such decrees, and may be the shortest 
ever. DOJ antitrust consent decrees now routinely last ten 
years.\17\ Section V of the RPFJ provides for a term of only five 
years, however, less time even than Microsoft has engaged in the 
illegal conduct that was the subject of this litigation. The decree 
plainly should be longer than the period between the initiation of 
the misconduct and the imposition of relief, and at least as long as 
the typical

[[Page 29054]]

relief.\18\ Microsoft has enjoyed the benefits of its misconduct for 
at least seven years. The RPFJ not only would allow Microsoft to 
retain those benefits, but would subject Microsoft to its light and 
uncertain obligations for no more than five years, and scarcely four 
and one-half years for the many obligations that are delayed.
---------------------------------------------------------------------------

    \17\ As of 1998 it was the policy of the Antitrust 
Division that consent decrees last for at least 10 years. See 
ANTITRUST DIVISION MANUAL, at IV:54 (3d ed. Feb. 1998); see also V 
VON KALINOWSKI ET AL., ANTITRUST LAWS AND TRADE REGULATION 96.0112], 
at 96-4; 96.0211] at 96-10 (2d ed. 2000).
    \18\ If Microsoft actually and convincingly lost its 
monopoly before the expiration of a decree of appropriate length, it 
could, of course, move for modification or termination of the decree 
under Rufo v. Inmates of Suffolk County Jail, 502 U.S. 367 (1992).
---------------------------------------------------------------------------

    The RPFJ further abbreviates its already brief duration, and 
undermines its already insubstantial requirements, by building in 
long delays before Microsoft must comply with its limited duties. 
Thus, Microsoft need not comply with the icon-related requirements 
until November 2002, see RPFJ  III(H)(1), although 
Microsoft needed only two weeks after the DC Circuit decision to 
offer OEMs roughly the same flexibility with icon display as the 
RPFJ requires, and needed no more than three additional months to 
implement that flexibility on Windows XP. See Microsoft Announces 
Greater OEM Flexibility for Windows (Microsoft press release July 
11, 2001).
    Similarly, Microsoft need not comply with its API disclosure 
requirements or the OEM flexibility provisions until November 2002, 
RPFJ  III(D), (H), and need not comply with the 
Communications Protocol disclosure requirements until August 2002. 
Id.  III(E). See also Stiglitz/Furman Dec. 30. These 
built-in delays cut far into the unusually brief term of the decree. 
The "Timely Manner" governing Microsoft's disclosure 
obligations in RPFJ  III(D)-(E)--after the 
initial delay--permits Microsoft to withhold that disclosure 
until a product version has been distributed to 150,000 beta 
testers. See RPFJ  VI(R). "Beta testers" in 
undefined. Until recently, Microsoft, like other vendors, 
distinguished between "beta testers" who agreed to 
provide substantial feedback to the software manufacturer, and 
"beta copies" of a program that might be distributed 
without such obligations or expectations. Few, if any, beta testing 
programs involved 150,000 beta testers under that usage. A return to 
the former terminology could postpone the "Timely 
Manner" until commercial release. And in any event, it should 
be a simple matter for Microsoft to delay distribution of any beta 
version to 150,000 testers, however defined.
    Here again, the contrast with the interim remedies of the 
original decree is striking. The "Timely Manner" 
definition in that judgment required Microsoft to disclose 
"APIs, Technical Information and Communications Interfaces * * 
* at the earliest of the time that" those items were (1) 
disclosed to Microsoft's applications developers, (2) used by 
Microsoft's own Platform Software developers in software released by 
Microsoft in alpha, beta, release candidate, final or other form, 
(3) disclosed to any third party, or (4) within 90 days of a final 
release of a Windows Operating System Product, no less than 5 days 
after a material change is made between the most recent beta or 
release candidate version and the final release.
    97 F. Supp.2d at 73-74 ( 7(ff)) (emphasis 
added). While the vacated judgment made a strong effort to place 
outside developers on the same footing as Microsoft's applications 
developers throughout the development process, the RPFJ permits 
Microsoft to delay disclosure until the last minute, without any 
analogue to the requirement that Microsoft promptly update changes 
made in the final pre-release stage.
    Another significant built-in delay results from the definition 
of "Non-Microsoft Middleware Product" to include only 
products that have one million users. RPFJ  VI(N) (ii). 
That definition governs the extent of the anti-retaliation 
provisions in RPFJ  III(A)(1), III(C), and III(H).
    Moreover, the icon flexibility and information disclosure 
provisions apply only to Microsoft Middleware and Microsoft 
Middleware Products, each of which must have functionality similar 
to a Non-Microsoft Middleware Product. See RPFJ 
 VI(J)(3), VI(K)(2)(b)(ii). By restricting all of 
these protections to middleware products that have distributed more 
than one million copies, the RPFJ encourages Microsoft to crush new 
middleware threats at the earliest stages. That is, the RPFJ puts a 
premium--indeed, a judicial imprimatur--on the 
monopolistic exclusion of nascent threats before the innovations in 
those products reach a sizable mass of consumers. That flies in the 
face of the concerns behind the judgments of liability in this case. 
See Microsoft III, 253 F.3d at 54, 79.
    VII. ADDITIONAL WEAKNESSES UNDERCUT THE RPFJ
    A. The Anti-Retaliation Provisions Are Deeply Flawed
    Although anti-retaliation provisions are clearly necessary, the 
provisions in the RPFJ proceed from a misguided premise that 
retaliation by the monopolist--abuse of monopoly power--is 
permitted unless squarely forbidden. The well-meaning restrictions 
in the RPFJ leave Microsoft with ample recourse to use its monopoly 
power to retaliate against those who aid competitive threats. See 
Stiglitz/Furman Dec. 31-32.
    Most important, the anti-retaliation provisions permit Microsoft 
to withdraw the Windows license of any OEM (or other licensee) that 
does not serve Microsoft's anticompetitive bidding. The CIS (at 27, 
66 Fed. Reg. 59,466) suggests that the provision of RPFJ 
 III(A) requiring notice and opportunity to cure a 
violation provides some kind of protection to OEMs. But the 
protection is evanescent, disappearing entirely after two notices 
within a license term. See RPFJ Ill(A). See also Stiglitz/Furman 
Dec. 31-32.
    Such notices will become routine, quickly and completely 
nullifying this provision. In the rough-and-tumble of everyday 
business, parties frequently diverge in minor respects from the 
terms of their agreements. The CIS admits that "Windows 
license royalties and terms are inherently complex." CIS 28, 
66 Fed. Reg. 59,466. Given that complexity, it would be surprising 
if most OEMs did not transgress some term of their Windows licensing 
agreements every year or so, if not more often. Such transgressions 
would provide ample basis for Microsoft to retaliate without fear of 
interference from the RPFJ.
    There is no limit on what Microsoft can invoke as a reason for 
termination, that is, there is no requirement that terminations be 
for cause, much less for a material breach of the license agreement. 
Indeed, the sudden termination that Microsoft may impose after two 
notices--even notices of purported violations that were 
promptly and completely cured--need not even be based on 
something the OEM could cure.
    The anti-retaliation provisions for software and hardware 
vendors contain another weakness. Section III(F)(1)(a) forbids 
retaliation against hardware and software vendors who support 
software that competes with Microsoft Platform Software or that runs 
on other platforms. But that provision therefore permits Microsoft 
to use its Windows monopoly to crush middleware vendors if Microsoft 
does not yet have competing middleware (see RPFJ 
 VI(K)-(L)) and whose middleware applications are 
used on the Windows platform--where any middleware would have 
to start in order to be a practical bridge to another platform.
    Moreover, when prohibiting a specific type of retaliation would 
also help undermine the applications barrier to entry, the RPFJ hews 
to a general approach rather than focusing on precise adjudicated 
conduct. For example, Microsoft threatened to discontinue its port 
of Microsoft Office for the Macintosh unless Apple ceased supporting 
Netscape Navigator. See Microsoft III, 253 F.3d at 73-74. Yet 
the RPFJ does not require Microsoft to continue to offer Mac Office 
(much less to keep the port current)--an expedient that would 
take away Microsoft's weapon rather than merely admonishing it to 
behave well, and would tend to undermine the applications barrier to 
entry as well.
    B. Microsoft Can Evade The Price Discrimination Restrictions
    The uniform pricing provisions in RPFJ  III(B) have 
too narrow a reach to provide significant limits on Microsoft's 
ability to engage in price discrimination in order to force OEMs to 
eschew non-Microsoft products that may threaten Microsoft's OS 
monopoly. Microsoft's well-known market position in other products 
permits easy evasion of these limits. For example, nothing prevents 
Microsoft from discriminating in the pricing of its monopoly suite 
of desktop productivity applications, Microsoft Office, to which 
every OEM of any size needs access. Moreover, the leading PC OEMs 
all build server computers using Intel-based hardware, and 
increasingly rely on revenue from servers to make up for the 
exceptionally low margins on desktop PCs. To continue in the Intel-
based server business, PC OEMs must license Microsoft's server 
operating systems, which are dominant on the Intel-based platform. 
The RPFJ places no limits on Microsoft's pricing of server operating 
systems, providing another outlet for the nullification of RPFJ 
 III(B).
    Even on their own terms, however, the RPFJ pricing provisions 
contain a substantial loophole. Microsoft can reward an OEM for an 
"absolute level * * * of promotion" of Microsoft 
products. RPFJ  III(A). That

[[Page 29055]]

provides a means for Microsoft to distinguish between OEMs who make 
sure that Microsoft software dominates their offerings, and OEMs who 
either promote competing software or simply do not interfere with 
consumers" choices.
    C. Microsoft Can Enforce De Facto Exclusivity
    Despite a superficial prohibition, Sections III(F)(2) and III(G) 
permit Microsoft to impose practical, effective exclusivity 
obligations on ISVs and others who need access to Windows to develop 
their products. Microsoft need do no more than recast its agreements 
with ISVs as contracts to "use, distribute, or promote * * * 
Microsoft software" or "to develop software for, or in 
conjunction with, Microsoft," RPFJ  III(F)(2), or 
as a "joint venture," joint development * * * 
arrangement" or "joint services arrangement." Id. 
 III(G). New "joint development agreements" 
or "joint services arrangements" likely will supersede 
the current licenses for use by ISVs of Microsoft software 
developments tools and perhaps also the current arrangements for 
preferential access under MSDN. At best, a decree court would have 
to undertake a full antitrust analysis of whether the joint venture 
was "bona fide." Id.  III(G). To nullify 
RPFJ  III(F)(2), Microsoft could simply change its 
development tools agreements to require use of Microsoft software -
which literally would be "a bona fide contractual obligation * 
* * to use * * * Microsoft software." Since any ISV that wants 
its software to run on Windows almost certainly would need to use 
Microsoft's development tools, the anti-exclusivity provision, like 
so many others in the RPFJ, would have no practical effect.
    DOJ has defended this provision as necessary to permit 
legitimate "procompetitive collaborations." CIS 44, 66 
Fed. Reg. 59,470. But the broad terms of the RPFJ itself provide 
little basis for hope that the objects of joint ventures permitting 
exclusivity will not include a variety of "new" products 
that amount to little more than routine alterations to Windows and 
other Microsoft products in conjunction with requests from other 
industry participants. It is not uncommon for an ISV to ask for a 
new API, or for an IHV to ask for some other specification in 
Windows. These exercises soon may become objects of "joint 
ventures" or "joint development agreements" under 
RPFJ  III(G).
    RPFJ  III(G)(1) undercuts its superficial 
prohibition on contracts that would require participants at 
different levels of the market to install or promote Microsoft 
Platform Software to a "fixed percentage" of those 
participants" own customers. Section III(G)(1) permits 
Microsoft to impose such contracts so long as it "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." Such representations should be easy to come by, so 
long as Microsoft pays enough. There is nothing to require a single 
party making such a representation actually to carry out the 
parallel distribution that it told Microsoft was "commercially 
practicable." And it should be easy enough for Microsoft, 
through a wink and a nod, to ensure that any such representations 
were not accompanied by efforts to prove that commercial 
practicability to Microsoft's detriment.
    VIII. THE RPFJ'S ENFORCEMENT MECHANISMS ARE FUNDAMENTALLY 
INADEQUATE.
    As we have shown above, the RPFJ fails adequately to prevent 
Microsoft from engaging in illegal and anticompetitive practices, 
and allows it to continue the patterns of behavior that led to this 
litigation in the first place. The RPFJ suffers from an important 
secondary flaw, however: the enforcement mechanisms contained in 
Section IV are fundamentally inadequate. The RPFJ commits much of 
the practical enforcement responsibility to a "Technical 
Committee," RPFJ IV(B), that would monitor "enforcement 
of and compliance with" the RPFJ. Id. IV(B)(1). The Technical 
Committee is likely to impede enforcement rather than aid it. First, 
Microsoft--the antitrust violator--could exert 
inappropriate control over the membership of the Technical 
Committee. Rather than creating a special master or an independent 
review committee to monitor compliance with the consent decree, the 
RPFJ allows Microsoft to have an equal voice with the plaintiffs in 
choosing the members of the Technical Committee; indeed, Microsoft 
may choose one of the three members outright. Id. IV(B)(3). Although 
appointing a special master with real (though reviewable) power 
might make sense as a matter of judicial administration, allowing 
Microsoft to choose its own monitor makes no sense at all. The 
composition of the Technical Committee suffers from a second defect. 
The RPFJ provides that "[t]he Technical Committee members 
shall be experts in software design and programming." RPFJ 
IV(B)(2) (emphasis added). The interpretation of the RPFJ is largely 
a legal matter, however, dependent on adequate knowledge of the 
antitrust Section after section of the RPFJ is extraordinarily 
vague.\19\ Experts in software design simply will not have any basis 
adequately to review complaints that Microsoft's behavior fails to 
comply with the RPFJ. However, that is the entire purpose of the 
Technical Committee.
---------------------------------------------------------------------------

    \19\ For example, as we discussed above the RPFJ relies 
heavily on a "reasonableness" standard of conduct that 
simply reproduces a full analysis under the antitrust laws. 
Antitrust remedies, like other injunctive decrees, are supposed to 
be amenable to swift and sure enforcement, according to standards 
that give warning of what is forbidden and what is permitted both to 
the wrongdoer and to its potential victims. But again and again, the 
RPFJ would require both the Technical Committee and eventually the 
decree court to determine whether Microsoft's conduct was 
"reasonable."
---------------------------------------------------------------------------

    Not only is the selection and composition of the Technical 
Committee problematic; the RPFJ's restrictions on how the Technical 
Committee can go about its business are equally inadequate. For 
example, it is likely that all third-party allegations of misconduct 
by Microsoft will be reviewed by the Technical Committee.\20\ But 
the Technical Committee lacks any real power, and operates almost 
entirely in secrecy. Even if the Technical Committee finds Microsoft 
to be violating the RPFJ, its sole recourse is to "advise 
Microsoft and the Plaintiffs of its conclusion and its proposal for 
cure." Id. IV(D)(4)(c). If DOJ or the settling State 
plaintiffs proceed with a complaint, none of the "work 
product, findings or recommendations by the Technical Committee may 
be admitted in any enforcement proceeding before the Court for any 
purpose, and no member of the Technical Committee shall testify by 
deposition, in court or before any other tribunal regarding any 
matter related to [the RPFJ]." Id. IV(D)(4)(d). Enforcement 
would have to start over from scratch.
---------------------------------------------------------------------------

    \20\ While third parties have the right to raise 
complaints with the Internal Compliance Officer, see RPFJ 
IV(C)(3)(g), the RPFJ gives them no incentive to do so; such 
complaints would merely allow a proven antitrust violator itself to 
determine whether it has violated the RPFJ or again violated the 
antitrust laws. Although the RPFJ also allows third parties to 
submit complaints directly to the plaintiffs, see id. IV(D)(1), the 
plaintiffs can thereafter at their sole discretion refer any such 
complaints to the Technical Committee, id. IV(D)(4)(a), or to the 
Internal Compliance Officer, id. IV(D)(3)(a).
---------------------------------------------------------------------------

    In effect, the Technical Committee's investigation is simply a 
waste of time. Even were the plaintiffs to decide, based on a 
Technical Committee report, that Microsoft had violated the RPFJ, 
the plaintiffs would need independently to investigate that 
violation under Section IV(A)(2). Indeed, the Technical Committee's 
reports to the plaintiffs will be secret. See RPFJ IV(B)(8)(e), (9). 
Ultimately, the Technical Committee simply injects delay into the 
process. But delay is indisputably in Microsoft's interest; 
Microsoft's monopolies bring it $1 billion each month in free cash 
flow, see Rebecca Buckman, Microsoft Has the Cash, and Holders 
Suggest a Dividend, WALL ST. J., Jan 18, 2002, at A3. Microsoft not 
only can afford to contest enforcement vigorously, but would not 
have to postpone enforcement for long before the RPFJ expires.
    Finally, the "crown jewel" provision in the RPFJ is 
grossly inadequate. If at any point the court were to find that 
Microsoft had "engaged in a pattern of willful and systematic 
violations," RPFJ V(B) (emphasis added), the RPFJ provides 
only one remedy for plaintiffs or the court: to extend the 
inadequate, and already overly-short, consent decree by "up to 
two years." But that is no deterrent. Willful and systematic 
violations should result in divestiture that terminates the 
illegally maintained monopoly once and for all. See Microsoft III, 
253 F.3d at 103; United Shoe, 391 U.S. at 250. Slightly prolonging a 
failed decree makes no sense at all.
    CONCLUSION
    The Revised Proposed Final Judgment should be rejected as 
contrary to the public interest.
    Respectfully submitted.
    Donald M. Falk
    Mayer, Brown & Platt
    555 College Avenue
    Palo Alto, California 94306
    (650) 331-2030
    (650) 331-2060 facsimile
    David M. Gossett
    Mayer, Brown & Platt

[[Page 29056]]

    1909 K Street, NW
    Washington, DC 20006
    (202) 263-3000
    Edward J. Black
    Jason M. Mahler
    Computer and Communications
    Industry Association
    666 11th Street NW Washington, DC 20001 (202) 783-0070
    Dated: January 28, 2002



MTC-00030611

    IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
    UNITED STATES OF AMERICA, Plaintiff, v. Civil Action No. 
98-1232 (CKK) MICROSOFT CORPORATION, Defendant.
    SIWTE OF NEW YORK, et al., Plaintiffs, v. Civil Action No. 
98-1233 (CKK) MICROSOFT CORPORATION, Defendant.
    DECLARATION OF EDWARD ROEDER
    Edward Roeder declares under penalty of perjury as follows:
    I. INTRODUCTION
    1. I am a Washington journalist, author, lecturer, and editor, 
expert on the U.S. Congress, elections and efforts to influence the 
U.S. government. My byline has appeared in most major U.S. 
newspapers, many top magazines, and on all major wires and networks. 
I have written, edited, produced and reported on money in politics, 
Congressional ethics and the American political economy for more 
than three decades. My experience includes work as a Senate 
subcommittee counsel, House select committee chief investigator, 
United Press International editor, publisher, White House 
speechwriter, government aide at level GS-15, freelance reporter and 
publisher.
    I founded Sunshine Press Services, Inc., a Washington news 
service and publishing house specializing in "Casting Light on 
Money and Politics." Sunshine has developed References to Use, 
Not Just Peruse TM, computer-based reference works on U.S. politics. 
As National Political/Finance Editor for United Press International, 
I produced the nation's first weekly state-by-state computer-
generated reports on federal election financing.
    In 1974, I became the first freelance correspondent fully 
accredited to U.S. House & Senate Press Galleries. As a 
freelance print and broadcast reporter, I specialized in covering 
elections and election financing. In Roeder v. FEC, I successfully 
sued Federal Election Commission under the federal Freedom of 
Information Act, forcing a reduction in fees for records and release 
of computerized data.
    My experience includes lecturing about covering influences on 
government at the graduate schools of journalism at Columbia, 
Northwestern (Medill), American, Maryland and other universities, 
and at the Hastings Center, the Heritage Foundation, and many other 
forums, and testifying before U.S. House and Senate committees. I 
also taught a public affairs course, Shadow Government in the 
Sunshine State, for three terms at Florida State University. I have 
appeared on ABC's Nightline, the CBS Evening News, World News 
Tonight (ABC), NBC Nightly News, All Things Considered (NPR), John 
McLaughlin, and many other broadcast outlets. My reference 
publications include PACs Americana, the 1,150-page authoritative 
reference on political action committees and their interests, 
Congress On Disk TM, the pioneer diskette publication on politics, 
PAC-Track TM, covering all transactions by political action 
committees and party committees, FatCat-Track TM, covering 
"soft money" and all contributions of $200-and-up from 
individuals to any federal party, campaign or PAC, and Ready Money 
Reports TM, comparing relative financial standings of each federal 
campaign. A partial list of news clients is attached as Appendix B.
    2. I was commissioned by the Computer & Communications 
Industry Association to conduct a review of publicly available 
documents, news reports, and commentary regarding Microsoft's 
lobbying and political contributions since the United States 
Department of Justice and 19 States filed suit against Microsoft in 
1998.\1\
---------------------------------------------------------------------------

    \1\ I am aware that Microsoft has undertaken an effort to 
use the Court discovery process to build a political case against 
its competitors. The relevancy of Microsoft's strategy will have to 
be determined by the Court since Microsoft--and not its 
competitors--have been found to be liable under the antitrust 
laws. I took input and advice from a broad range of sources in 
conducting this research, including CCIA and its members. This 
research is nonetheless based on the extraordinary public record of 
Microsoft's political activities during the timeframe of this case. 
I have also undertaken extensive original review of the records of 
the Federal Election Commission regarding election finance. These 
records covering all election cycles since 1970-80 have been 
available in computerized format since the court-ordered settlement 
of Roeder v. FEC, a Freedom of Information lawsuit I filed in this 
very courthouse two decades ago.
---------------------------------------------------------------------------

    3. My review of the available documents has led me to conclude 
that over the past five years Microsoft has engaged in a 
"pattern and practice" of political influence peddling 
in many ways unprecedented in modem political history.\2\ What makes 
Microsoft's lobbying efforts so unique is not necessarily the size 
(i.e. level of political contributions) but the scope of its efforts 
and the speed at which Microsoft went from having almost no 
political presence in Washington DC to having one of the largest and 
most sophisticated political operations in history.
---------------------------------------------------------------------------

    \2\ "Microsoft Targets Funding for Antitrust 
Office." Dan Morgan and Juliet Eilperin. Washington Post 
October 15, 1999. "Pro-Microsoft lobbying to limit antitrust 
funding irks top lawmakers." The Wall Street Journal October 
15, 1999. "Microsoft Paid For Ads Against DoJ Case." 
Madeleine Acey. TechWeb September 20, 1999. "Microsoft Paid 
For Ads Backing Its Trial Position." David Bank. The Wall 
Street Journal September 20, 1999. "Microsoft Paid For Ads 
Backing It In Trial." Seattle Times September 19, 1999. 
"Pro-Microsoft Ads Were Funded by Software Giant." Greg 
Miller. Los Angeles Times September 18, 1999. "Microsoft Paid 
for Ads About Trial." Associated Press September 18, 1999. 
"Microsoft Covered Cost of Ads Backing It in Antitrust 
Suit." Joel Brinkley. New York Times September 18, 1999. 
"Rivals fear Microsoft will cut a deal." John Hendren. 
The Seattle Times June 21, 2001. "Bush's Warning: Don't Assume 
Favors Are Due." Gerald F. Seib The Wall Street Journal 
January 17, 2001. "Bounty Payments are offered for pro-
Microsoft letters and calls." The Wall Street Journal October 
20, 2000. "Microsoft is Source of 'Soft Money" 
Funds Behind Ads in Michigan's Senate Race." John R. 
Wilke. The Wall Street Journal October 16, 2000. "Microsoft 
leans creatively on levers of political power as breakup decision 
looms, 'stealth" lobbying efforts aim for 
survival." Jim Drinkard and Owen Ulmann. USA Today May 30, 
2000. "Microsoft's All-Out Counterattack." Dan 
Carney, Amy Borrus and Jay Greene. BusinessWeek May 15, 2000. 
"Aggressiveness: It's Part of Their DNA." Jay Greene, 
Peter Burrows and Jim Kerstetter. BusinessWeek May 15, 2000. 
"The Unseemly Campaign of Microsoft." Mike France. 
Business Week April 24, 2000. "Microsoft's Lobbying 
Abuses." Editorial. New York Times November 1, 1999 
"Awaiting Verdict, Microsoft Starts Lobbying Campaign." 
Joel Brinkley. New York Times November 1, 1999. "Microsoft 
Seeks Help Of Holders." John R. Wilke. The Wall Street Journal 
November 1, 1999. "Microsoft's Bad Lobbying." Editorial. 
Washington Post October 24, 1999. "Microsoft Attempt To Cut 
Justice Funding Draws Fire." David Lawsky. Reuters October 17, 
1999. "Microsoft Targets Funding for Antitrust Office." 
Dan Morgan and Juliet Eilperin. Washington Post October 15, 1999. 
"Pro-Microsoft lobbying to limit antitrust funding irks top 
lawmakers." The Wall Street Journal October 15, 1999. 
"Microsoft Paid For Ads Against DoJ Case." Madeleine 
Acey. TechWeb September 20, 1999. "Microsoft Paid For Ads 
Backing Its Trial Position." David Bank. The Wall Street 
Journal September 20, 1999. "Microsoft Paid For Ads Backing It 
In Trial." Seattle Times September 19, 1999. "Pro-
Microsoft Ads Were Funded by Software Giant." Greg Miller. Los 
Angeles Times September 18, 1999. "Microsoft Paid for Ads 
About Trial." Associated Press September 18, 1999. 
"Microsoft Covered Cost of Ads Backing It in Antitrust 
Suit." Joel Brinkley. New York Times September 18, 1999.
---------------------------------------------------------------------------

    4. By "scope" I am referring to the breadth of 
Microsoft's efforts. Microsoft has not merely established one of the 
largest Political Action Committees, or leapt to the top of the 
corporate contributor list in "soft money," unregulated 
corporate contributions. Over the past five years Microsoft has also 
assembled a large lobbying office and retained dozens of high-
powered consultants; Microsoft has created numerous 
"front" groups and has contributed heavily to a variety 
of think tanks and other organizations willing to espouse 
Microsoft's view of antitrust policy and this case; and Microsoft 
has created a variety of grassroots capabilities that appear to be 
directed at state-level government.
    5. Two key factors indicate that Microsoft's lobbying efforts 
were designed and directed to try to minimize the impact of its 
lawsuit and try to achieve a result in the political process that it 
is apparent it could not achieve in the legal process. First, 
Microsoft's efforts are new. Their onset coincides with the time the 
government sued Microsoft and they have continued and escalated ever 
since. Second, Microsoft's efforts are completely out of proportion 
to the rest of the high-technology industry. There is not one other 
example of a software, computer hardware, or Internet firm that 
comes anywhere near Microsoft's level of campaign contributions.
    6. I am not a lawyer, an expert on antitrust or an expert on the 
Tunney Act. My substantive views of of the Proposed Final Judgment 
are based primarily on the analysis of Nobel economist Joseph 
Stiglitz, whose declaration also supports the CCIA submission.
    7. The Tunney Act was enacted after the ITT scandal during the 
Watergate affair. As

[[Page 29057]]

the court is aware, Watergate spurred a number of political reforms 
requiring "sunshine" on the political activities of 
special interests, in particular. But the Tunney Act was also 
enacted during a different political era, when political influence 
peddling was far less sophisticated than it has become after a 
quarter-century of efforts to circumvent the "reforms" 
of the 1970s. By necessity, political influence peddling is no 
longer necessarily marked by a single "transaction" or a 
single "meeting," or even an overt "quid pro 
quo." In fact, one of the effects of the modern reforms has 
been to legalize many activities--especially the transfer of 
funds from corporate to political coffers--that had long been 
illegal under laws in effect since 1907 or 1934. Lobbying today is 
marked by incrementalism, where there may not be any single meeting, 
or any single contribution, or any single agreement. Rather, over 
time, what may develop is an "understanding" of the 
respective parties" interests, objectives, and desired 
outcomes. Instead of corruptly influencing politicians to buy a 
discreet government decision, the money exerts far broader influence 
over appointments, policy frameworks or positions, and ultimately, 
decisions. Much of it may be legal, but it's far more corrupting 
than simple bribery.
    The simple matter of paying off a corrupt politician to obtain a 
favorable government decision is certainly offensive and unfair to 
the voters and those who are disadvantaged by the decision. Yet such 
petty or grand corruption, if isolated, does not seriously threaten 
the American system. What Microsoft has accomplished over the past 
half decade, however, presents a far darker prospect. By pouring 
money into America's institutions of political pluralism, rewarding 
those organizations and individuals that do its bidding and denying 
or limiting funding to its opponents, Microsoft has in some ways 
corrupted American political discourse itself.
    Newspapers that have run an editorial or opinion article 
sympathetic to a Microsoft position, reporters who have interviewed 
a professor, politician, or pundit about this antitrust action, and 
anyone who has hosted or observed public discourse on the subject 
must now wonder: Were the views expressed independent and sincere, 
or were they purchased by an unseen hand, smothering the American 
marketplace of ideas?
    As is detailed below, Microsoft's efforts to subvert democratic 
institutions such as political campaigns and debates, party 
organizations, news outlets, think tanks and government offices have 
been so vast as to be a new phenomenon, unenvisioned and unaddressed 
by existing political mechanisms intended to check the influence of 
special interests. Limited campaign contributions can serve the 
purpose of encouraging, facilitating, extending and opening 
political discussion. But political money in such vast amounts is a 
substitute for politics, not a means of undertaking political 
action. While the modem-day political pressure brought to bear by 
Microsoft in the last decade may not be precisely the same as that 
undertaken by ITT in the 70%, it is no less objectionable to the 
Court's charge of acting on behalf of the "public 
interest."
    8. Based on my review of the public record and the declaration 
provided by Dr. Stiglitz, it is apparent that the Department of 
Justice undertook a major "change in policy" at a 
critical moment this past fall. My belief- again based largely on 
Dr. Stiglitz" analysis and substantiated by a wide array of 
antitrust experts and scholars--is that the Proposed Final 
Judgment cannot be reconciled with the government's extensive court 
victory. The public record suggests a Microsoft strategy that 
appears to defeats in the legal process, but which focuses on 
winning an acceptable outcome through the political process. It 
appears to be working. Indeed, if it weren't working, such vast 
expenditures might give rise to a shareholder suit for breach of 
fiduciary duty. If Microsoft's money has had the desired effect of 
inducing the U.S. government to throw in the towel on the biggest 
antitrust suit in history, such a suit could be easily defended. But 
to argue that Microsoft had no such intent is tantamount to 
suggesting that its corporate spending it in the control of 
squandering fools.
    9. I have also reviewed Microsoft's lobbying disclosures filed 
before the court as part of the Tunney Act. Again, while I am not a 
lawyer, my review of public documents, press reports and the plain 
language of the statute leads me to believe that disclosures made to 
the court can not possibly be reconciled with Microsoft's lobbying 
activities surrounding both this case and this settlement.
    10. Various press reports indicate that Microsoft is trying to 
convince the court and the public that the litigating states have 
been "put up to this" (i.e. continuing to litigate 
through the remedy phase) by Microsoft's competitors, and therefore 
cannot be acting in the public interest. My review of public 
documents suggests this theory is backwards and should be 
particularly alarming to the Court. The far more likely scenario, 
into which the Court must inquire, is whether the Department of 
Justice has executed Administration policy in response to the 
unprecedented campaign to influence the new Administration's 
antitrust policy generally, and as antitrust policy applies to the 
high-technology sector and Microsoft, in particular.
    11. In fact, with the benefit of hindsight, various Justice 
Department actions make perfect sense in the context of my research. 
The Department went to great lengths to create the appearance they 
were going to be "tough" with Microsoft, beginning with 
enlisting President Bush's renowned litigator, Phillip Beck. What 
actually occurred, however, is they systematically appear to have 
given away their hard-fought court victory. First, the Department 
unilaterally abandoned its pursuit of structural relief, and 
informed the court it would not seek a review of the Sherman Act 
Section 1 tying claim on remand. Then the Department suggested it 
would base its remedy on the interim conduct remedies ordered by 
Judge Jackson. Then the Department began speaking of the extensive 
litigation risk involved in pursuing a remedy based on the need for 
immediate relief. Finally, the Department--outside of public 
scrutiny--emerges with the Proposed Final Judgment, which based 
on Dr. Stiglitz" analysis appears to be woefully inadequate.
    12. I declare to the court that where "there is smoke 
there is typically fire." Even if the "fire" in 
the context of modem day political influence peddling is very 
subtle, it nonetheless does not serve the public interest. My view 
is that Microsoft's political campaign has been so extensive the 
court should take immediate notice. In modem political influence-
peddling and purchasing, Microsoft has set a new bar. South Korea's 
spreading cash throughout Washington in the 1970s Tongsun Park 
scandal paled in comparison.
    13. During the course of my research I was struck by the 
similarities between Microsoft and the current scandal involving 
Enron Corporation. While Enron, of course, is in an entirely 
different business, it seems the core issue--from a public 
disclosure perspective--is its campaign contributions and its 
ability to influence the nation's energy policy. Microsoft's 
campaign contributions significantly surpassed those of Enron; 
Microsoft was a defendant in a major governmental lawsuit; and it 
appears Microsoft may have successfully influenced the 
Administration's antitrust policy, with major implications for legal 
antitrust precedent.
    14. My recommendation to the court is to undertake an immediate 
review of Microsoft's lobbying activities surrounding this 
settlement, with particular attention to meetings with the Justice 
Department or the White House by Microsoft or its agents. Included 
in this review should also be contacts made on Microsoft's behalf to 
the Justice Department or the White House by Members of Congress, 
their official staff, and campaign staff. The court should also 
interview Department of Justice staff who do not operate within the 
sphere of political appointees. And the court should interview the 
political appointees of the Attorney General and their staff. 
Moreover, the court should review any contacts or communications 
between the Republican National Committee, the National Republican 
Senatorial Committee, the Republican Congressional Campaign 
Committee, and the White House or the Justice Department. Lastly, 
the court should review any contacts or communications between 
Microsoft and the settling states. Anything less would clearly not 
vindicate the public interest.
    II. REVIEW OF PUBLIC RECORD
    15. Since May 1998, Microsoft has fought strenuously in the 
courtroom to defend its "freedom to innovate" and to 
continue with business as usual. In fact, plugging in 
"Microsoft + trial" into the Google search engine 
produces more than 697,000 article hits. When "Microsoft + 
politics" is entered into the search engine, Google produced 
nearly 448,000 articles and links. But as hard as it fought inside 
the courtroom, Microsoft fought far harder--often 
secretly--outside the courtroom to influence the outcome of the 
trial. In a campaign unprecedented in its size, scope, and cost, 
Microsoft used campaign contributions, phony front groups, intensive 
lobbying, biased polling, and other creative, if not possibly 
unethical, pressure and public relations tactics to escape from the 
trial with its monopoly intact. According to media accounts, 
experts, and my own research,

[[Page 29058]]

Microsoft spent tens of millions of dollars to attempt to create an 
aura outside the courtroom of what it could not prove 
inside--innocence. According to Business Week Magazine: 
"Even seasoned Washington hands say they have never seen 
anything quite as flamboyant as the Microsoft 
effort." \3\
---------------------------------------------------------------------------

    \3\ BusinessWeek, May 15, 2000, Carney
---------------------------------------------------------------------------

    16. In late 2001, when the Department of Justice and a group of 
state Attorneys General agreed to the currently proposed settlement, 
it appeared as if Microsoft's efforts were successful. Fortunately, 
two obstacles stand in the way of Microsoft and the continued 
monopolization of the software industry: the remaining state 
Attorneys General who are continuing to litigate for a more 
effective remedy and the Tunney Act, which--among other 
things--requires Microsoft to divulge all of its dealings with 
the Administration and Congress in conjunction with the antitrust 
trial.
    A. Campaign Contributions
    17. In 1995, before the United States Department of Justice and 
state Attorneys General from 19 states and the District of Columbia 
brought an antitrust case against it, Microsoft had virtually no 
presence in Washington, DC The company had only one lobbyist working 
out of a Chevy Chase, Maryland sales office and had contributed less 
than $50,000 in the previous election cycle.\4\ Its lobbyist, Jack 
Krumholtz, had no secretary and its PAC was financed by only 
$16,000. In those days, the Microsoft lobbying operation was 
affectionately referred to in press reports as "Jack and his 
Jeep."
---------------------------------------------------------------------------

    \4\ "The Microsoft Playbook" Common Cause
---------------------------------------------------------------------------

    18. However, since the beginning of the antitrust case against 
Microsoft, the company has become a major political contributor and 
was the fifth largest during the 2000 election cycle,\5\ alongside 
the giants of the tobacco, telecommunications, pharmaceuticals and 
insurance industries. Microsoft's political contributions to elected 
leaders in a position to help the software giant in this election 
cycle when the trial was at its peak, was greater than all previous, 
cumulative campaign contributions. In the history of American PACs, 
only three companies that have raised at least $50K in one election 
cycle have increased receipts by 500% in the next. In 1984-86, 
Drexel Burnham Lambert, the corrupt and now-defunct securities 
brokerage, increased its receipts from just under $67,000 to more 
than $446,000, a 567% jump. In that same cycle, AT&T, facing 
antitrust divestiture, increased its PAC receipts by 745%, from 
$215,000 to $1.8 million.
---------------------------------------------------------------------------

    \5\ San Francisco Chronicle, July 1,2001, Wildermuth
---------------------------------------------------------------------------

    In the history of corporate PACs, only 68 have increased their 
spending by half in one election cycle after reaching a level of a 
quarter of a million dollars. Only 15 have doubled their spending in 
one election cycle after reaching that level. Only 
one--Microsoft--has approached tripling its spending after 
reaching that threshold. Microsoft increased its spending almost 
fivefold, from $267,000 to more than $1.2 million, between the 
1997-98 and 1999-2000 election cycles. (Table 5.)
    20. Every year, Microsoft tops itself. The company's political 
giving in the 2000 cycle--the time leading up to its day of 
judgment in federal court--was again more than it contributed 
in all previous cycles combined. Campaign money to candidates and 
political parties in just one state was greater than Microsoft's 
contributions from 1990 through 1996 to every state and federal 
candidate combined. (Note that the government first levied antitrust 
charges against Microsoft in 1995.)
    Except for Microsoft, no corporate PAC sponsor in American 
history has increased its PAC receipts by an order of magnitude, 
starting from a base of $50,000 or more. Since 1986, the only such 
firm that has increased its PAC receipts by as much as 500% in one 
election cycle is Microsoft. Receipts for Microsoft's PAC rose a 
record-setting 903%, from $59,790 in 1995-96 to just under 
$600,000 in 1997-98. (Table 1.)
    Microsoft followed this by another jump of 165% in 
1999-2000, to $1.59 million. (Table 2.) In the history of 
corporate PACs, only 15 have had as much as a 300% rise in receipts 
after achieving a base of $50,000. (That requires rising from at 
least $50,000 to at least $200,000.) None has ever followed such a 
rise with another three-digit percentage increase in receipts, 
except Microsoft. (That would require a subsequent rise to at least 
$400,000.)
    21. Between 1995 and 2000, Microsoft donated more than $3.5 
million to federal candidates and to the national parties, about 
two-thirds of which was contributed during the 2000 election cycle 
alone.\6\ Including company and employee donations to political 
parties, candidates and PACs in the 2000 election cycle, Microsoft's 
giving (that of the company, its PAC and its employees) amounted to 
more than $6.1 million, far more than has been previously 
reported.\7\ Nearly $1 million came in the 40 days immediately 
before the November 7th election. As most political operatives know, 
these late contributions often are made by donors who don't want 
their participation known until after the election, when financial 
reports for the final days of a campaign are due, and public and 
news media attention are no longer focused upon the election. The 
effect of delaying contributions until very near the election is to 
thwart efforts by the news media and the political opposition to 
make disclosures meaningful to voters before they vote.
---------------------------------------------------------------------------

    \6\ Common Cause
    \7\ Independent analysis of giving to elective office 
candidates and political parties and PACs federally and in all 50 
states.
---------------------------------------------------------------------------

    i. Federal Contributions
    (a) "Soft" Money
    22. Comprising the majority of Microsoft's campaign 
contributions was soft money.\8\ Like their overall presence in 
Washington, Microsoft's soft money donations grew substantially 
since the beginning of the antitrust trial. In fact, in the seven 
days preceding Judge Thomas Penfield Jackson's ruling against 
Microsoft, the company donated more in soft money to the national 
political parties than it gave to federal candidates and political 
parties between 1989 and 1996.
---------------------------------------------------------------------------

    \8\ "Soft" money is the term generally applied 
to unregulated, unlimited corporate and individual contributions 
that can not go to candidates but typically goes to political 
parties in support of party "efforts."
---------------------------------------------------------------------------

    23. During the 1999-2000 election cycle, Microsoft and its 
executives accounted for some $2,298,551 in "soft money" 
contributions, according to FEC records. For context, consider that 
this was two-thirds more than the $1,546,055 in soft money 
contributed by the now-bankrupt Enron and its executives during the 
same period.
    As one business commentator put it: "...there's something 
quite disturbing about watching the world's richest man trying to 
buy his way out of trouble with Uncle Sam... Gates's actions 
undermine the legal system itself."\9\
---------------------------------------------------------------------------

    \9\ BusinessWeek, April 24, 2000, France
---------------------------------------------------------------------------

    (b) Political Action Committee (PAC) Money
    24. Microsoft's PAC donations also grew substantially in the 
years since the beginning of the antitrust trial. In 1998, the 
company made a concerted effort to increase the size of its PAC. 
Within a matter of days, the company grew its PAC from $31,000 to 
$326,000.\10\ Employees contributed $1.6 million to Microsoft's PAC 
for the 2000 election cycle which allowed the PAC to contribute more 
than $1.2 million.
---------------------------------------------------------------------------

    \10\ ibid.
---------------------------------------------------------------------------

    The PAC began the 2002 election cycle with an impressive 
$772,000 cash-on-hand--more than any other American corporate 
PAC. Microsoft's unprecedented rise as a political player took its 
PAC from just under $60,000 in 199596 receipts to just under $1.6 
million in 1999-2000. In the history of corporate PACs, only 
two have had a rise of more than 1,000% in receipts over four years 
(two election cycles), after attaining $50,000. Only one, Microsoft, 
has had an increase of more than 2,000%. From 1995-96 through 
1999-2000, Microsoft's PAC increased in size by more than 
2,500%. (Table 4.)
    (c) Party Breakdown
    25. While Microsoft has donated to both national political 
parties, the company has tended to favor Republicans, who have been 
more vocal in their defense of the company. Between 1995 and 1998, 
72% of Microsoft's contributions went to Republicans, while the GOP 
received only 55% of the company's donations during the 2000 
election cycle.\11\ Republicans received a total of $3.2 million, 
about half of which--$1.69 million--went to the national 
Republican Party.
---------------------------------------------------------------------------

    \11\ ibid.
---------------------------------------------------------------------------

    26. Yet, when analyzing Microsoft's campaign contributions by 
donating entity, some stark disparities emerge. Virtually all of the 
money donated by individual Microsoft employees ($222,750) benefited 
Democratic 527s, groups that raise and spend money independent of 
political campaigns During this same period Microsoft employees gave 
$15,000 to Republican affiliated 527s. Democratic PACs also 
benefited from Microsoft's employees largesse, receiving $222,100 
compared to just $42,875 for Republican PACs.
    27. But Republicans enjoyed an edge in every other category; the 
majority of

[[Page 29059]]

donations to leadership PACs, state parties and candidates went to 
the Republican Party. The following table illustrates the disparity.

------------------------------------------------------------------------
                                            Republican    Democrat
------------------------------------------------------------------------
Leadership PACs...............................     $162,000      $41,500
State Parties.................................     $255,025      $38,887
Candidates....................................   $1,053,792     $818,951
------------------------------------------------------------------------

    (ii) State Contributions
    28. Along with the Department of Justice, 19 states and the 
District of Columbia initially prosecuted Microsoft. Naturally, 
then, Microsoft concentrated a good deal of its campaign 
contributions on state races.
    29. Candidates and political parties in all 50 states received 
contributions from Microsoft, but none more so than the company's 
home state of Washington, which received $830,478. Republicans 
received $359,000 while $458,000 went to Democrats. Nearly all of 
the $100,000 edge for the Democrats came from contributions to the 
State Democratic Party, which totaled $85,387.
    30. One of the original states participating in the suit was 
South Carolina, whose attorney general, Charles Condon, was facing 
re-election in 1998. Shortly before the election, Microsoft 
contributed $25,000 to the South Carolina Republican Party. 
According to the Chairman of the South Carolina Republican Party 
this was the largest unsolicited donation ever received. Three weeks 
after he won,
    Attorney General Condon withdrew from the antitrust case. Two 
years ago, Condon solicited and received a $3,500 donation from 
Microsoft.\12\
---------------------------------------------------------------------------

    \12\ USA Today, 5-30-00, Ullman, Drinkard
---------------------------------------------------------------------------

    31. In California, a state represented by Attorney General Bill 
Lockyer, Microsoft contributed $25,000 to the 1998 election campaign 
for challenger Dave Stirling, a Republican; a contribution made nine 
days before election day. The company contributed an additional 
$10,000 to gubernatorial democratic candidate Gray Davis, whose 
opponent was among the original 19 state attorneys general to bring 
the antitrust suit against Microsoft.
    32. Within weeks of the 2000 election, Microsoft CEO Steve 
Ballmer made late contributions of $50,000 each to two state 
Republican Parties, Michigan and Washington, where Microsoft found 
its defenders under fire. Then U.S. Senator Spencer Abraham, a 
Michigan Republican who is now Secretary of Energy, had been an 
outspoken supporter of Microsoft. Former U.S. Senator Slade Gorton, 
a Washington state Republican, who proudly called himself "the 
Senator from Microsoft" had even sought to cut the funding of 
the Justice Department's Antitrust Division while the court case was 
ongoing.
    33. Microsoft used back channels to direct even more undisclosed 
soft money into the 2000 Michigan Senate race. According to The Wall 
Street Journal, Microsoft "funneled" soft money into the 
race by secretly making undisclosed contributions to the Michigan 
Chamber of Commerce to fund negative ads aimed at Abraham's 
opponent, now U.S. Senator Deborah Stabenow. Some close to the 
Chamber have estimated that the contributions, while legal and not 
requiring reporting, may have amounted to more than $250,000.\13\ 
Such contributions are usually made to organizations to support the 
organization's activities, not political ads--which is why 
there is no disclosure requirement. Microsoft knew this and took 
advantage of the loophole in Michigan. Political operatives 
throughout the country reported similar occurrences in other 
political races considered "top targets" by both 
national parties, but efforts to gain access to contributor lists 
from some of the "independent" groups believed to be 
accepting the contributions have unsuccessful.
---------------------------------------------------------------------------

    \13\ Wall Street Journal, Oct. 16, 2000, Wilke
---------------------------------------------------------------------------

    34. Significant contributions were also made in Missouri by 
Microsoft to help re-elect Senator John Ashcroft, the current U.S. 
Attorney General. Missouri was another state where independent 
groups without significant resources of their own suddenly were 
flush with money to run ads defending Ashcroft and attacking his 
opponent. Ashcroft, whose campaign benefited greatly from 
Microsoft's disclosed campaign contributions--$19,000 in 
reported donations--lost his election bid. He now runs the 
federal executive department responsible for proposing the 
settlement offer, and his office is now staffed with political 
operatives who played a role in raising the $19,000 from Microsoft, 
coordinating his campaign efforts with those of Microsoft in 
Missouri, and in one case, directing the entire Republican National 
Committee fundraising and political campaign operation in the 2000 
election cycle.
    35. Deborah Senn, the Democratic primary opponent of Washington 
State Senator Cantwell, received $15,000 more from Microsoft than 
did Cantwell who received $30,150. This total, however, dwarfs the 
money poured into now-former Senator Gorton's 
campaign--$131,160. Only Democratic Congressman Jay Inslee's 
total of $126,850 comes close to that of former Senator Gorton. 
Congressman Inslee represents Microsoft's home district, and defends 
the company vigorously in Washington, DC
    36. In addition to those in Washington State, candidates or 
parties in three other states received contributions totaling six 
figures. California was second at $174,900 with virtually the entire 
amount going to Leadership PACs--Members" PACs that 
contribute money to other allied candidates--and directly to 
Members of Congress. Texas was third at $107,250 although this 
amount does not include contributions to the Bush/Cheney campaign. 
This was an unusually large amount for the state when compared to 
previous giving patterns.
    37. While Microsoft contributed $100,000 to the Bush/Cheney 
Inaugural Committee in January 2001, virtually all contributions to 
presidential campaigns were made prior to July 3 1st, with the 
exception of contributions to Libertarian Party candidate Harry 
Browne's campaign. (This is presumably because, to be eligible for 
federal matching funds for the primaries and federal funding for the 
general election, major party candidates receiving are not allowed 
to solicit or receive campaign contributions after they are 
nominated at their conventions.) Only four primary presidential 
candidates received contributions greater than $10,000: Bill 
Bradley, $33,400; George Bush, $57,300; A1 Gore, $28,000, John 
McCain $39,448.
    Table 1. Candidates & Organizations Receiving $10,000 or 
more from Microsoft
    Following is a breakdown of Microsoft's contributions of more 
than $10,000 to candidates and organizations during the 2000 
election cycle.
    Abraham for Senate $24,650.00
    Kerrey for US Senate $10,000.00
    Adam Smith for Congress $31,750.00
    Leadership PAC 2000 (Oxley) $10,000.00
    American Success PAC (Drier) $11,750.00
    Majority Leader's Fund (Armey) $11,000.00
    Ashcroft (combined) $19,250.00
    McCain 2000 $39,448.00
    Bill Bradley for President $33,400.00
    Mcntosh for Governor $25,000.00
    Brian Baird for Congress $38,400.00
    Michigan Republican State Cite. $50,000.00
    Bush for President $57,300.00
    Montana Republican State Ctte. $10,000.00
    Bush/Cheney Inaugural $100,000.00
    NDN $38,750.00
    California FriendsLatino PAC $10,000.00
    New Majority Project $15,000.00
    California Women Vote $10,000.00
    New York Senate 2000 $40,000.00
    Cantwell 2000 $30,150.00
    NW Leadership PAC (Gorton) $17,000.00
    Citizens for Rick Larsen $35,600.00
    Republican Party $1,691,090.50
    DASHPAC $10,000.00
    Republican Campaign Committee of New Mexico $33,492.48
    Democratic Party $1,300,892.00
    Republican Majority Fund Don Nickles) $15,000.00
    Democratic Party of Georgia $20,000.00
    Republican Party of Virginia $12,000.00
    Dooley for Congress $10,500.00
    Republican Senate Council $15,000.00
    EMILY's List $176,600.00
    Santorum 2000 $11,000.00
    Ensign for Senate $10,000.00
    Senn 2000 $45,651.00
    Feinstein 2000 $12,000.00
    Snowe for Senate $10,000.00
    Friends for Slade Gorton $131,160.00
    TechNet $10,000.00
    Friends of Conrad Bums $15,250.00
    Utah Republican Party $29,383.00
    Friends of Heidi $16,300.00
    Washington State Democratic Central Committee $30,387.00
    Friends of Jennifer Dunn $14,700.00
    Washington State Republican Party $104,150.00
    Gore for President $28,000.00
    Washington Victory Committee 1999 $35,500.00
    Inslee for Congress $126,850.00
    Washington Victory Fund $55,000.00

[[Page 29060]]

    Jim Davis for Congress $17,250.00
    Washington Women Vote $11,000.00
    Jon Kyl for Senate $11,000.00
    Western Republican PAC $10,000.00
    Kennedy for Senate $12,000.00
    Women Vote 2000 $100,000.00
    B. "Strategic" Philanthropy
    38. Microsoft has also contributed money to the causes of 
politicians as yet another method to use donations, political in 
nature, to garner support and ultimately influence the outcome of 
the trial.
    39. According to USA Today, Microsoft and the philanthropic arm 
of its founder and chairman, the Bill and Melinda Gates Foundation, 
"donate millions of dollars to causes and projects that are 
dear to the hearts of government policymakers, such as a $50,000 
gift to the Congressional Black Caucus Foundation.\14\ Shortly after 
the donation to the CBC, according to Business Week, Microsoft 
gained an unlikely ally in the Caucus chairman, Representative James 
E. Clyburn (DSC), "who represents one of the least technology-
rich districts in the country."\15\ In addition, a timely $10 
million gift to the U.S. Capitol Visitor's Center further endeared 
Microsoft to many Members of Congress.
---------------------------------------------------------------------------

    \14\ USA Today, May 30, 2000, Drinkard, Ullman
    \15\ BusinessWeek, May 15, 2000, Carney, Borrus, Greene
---------------------------------------------------------------------------

    40. Yet the strategic philanthropy began long before the 2000 
election cycle. According to the Gates Foundation web site, there 
was a three-year hiatus in philanthropic giving between 1995 and 
1998. Curiously, the last donation in 1995 occurred just prior to 
the signing of the 1995 consent decree and the first donation in 
1998 occurred the day prior to the Department of Justice filing its 
antitrust suit against Microsoft.
    c. Lobbying
    41. In addition to the millions Microsoft spent on campaign 
contributions, the company spent millions more lobbying Congress, 
the Administration and state officials to influence the outcome of 
the antitrust trial. Much like its campaign contributions, the 
company's lobbying presence in Washington has grown significantly in 
the last few years, its growth accelerating rapidly at the outset of 
the antitrust trial. Once just Jack Krumholtz, the company's 
lobbying group now employs 40 people in Redmond and Washington. The 
company has hired a dozen lobbying firms and counts among its 
consultants and lobbyists some of the most prominent figures in 
politics. A company with 30,000 employees, Microsoft has more 
lobbyists on retainer than the handful of U.S. companies with more 
than 300,000 employees. According to USA Today, "in 1996, the 
company spent $1.2 million on its Washington lobbying operations. 
[In 1999], that figure topped $4.6 million." According to 
Business Week in reference to the company's political spending, 
"These days, Microsoft money flows like champagne at a 
wedding." \16\ Some of the biggest names in Washington 
going back 30 years represent Microsoft--many are former bosses 
of the people they lobby. There are more than a half-dozen former 
Members of Congress, four former White House Chief Counsels, 
countless dozens of former senior aides from the Congress, Justice 
Department and elsewhere throughout the highest levels of 
government.
---------------------------------------------------------------------------

    \16\ ibid.
---------------------------------------------------------------------------

    i. Lobbying the Administration
    42. Since the inauguration of George W. Bush in January 2001, 
Microsoft has made a concerted effort to strengthen its ties to the 
Administration. The Administration's decision to agree to a 
settlement widely accepted to be ineffective calls into question the 
nature of such ties.
    43. Prior to the announcement of the settlement, for example, it 
has been reported there was an inappropriate, if not illegal, 
discussion between a senior aide to Attorney General John Ashcroft 
and a lobbyist for AOL-Time Warner.
    44. According to the account in the New York Times, the senior 
aide to General Ashcroft is David Israelite. Israelite was the 
political director of the Republican National Committee which 
received more than a million dollars from Microsoft during the 2000 
presidential campaign. In that role, Mr. Israelite directed 
fundraising operations and coordinated campaign activities between 
entities like Microsoft and the national party apparatus. Now 
General Ashcroft's deputy chief of staff in the Office of the 
Attorney General, Mr. Israelite recused himself from the case as a 
result of his ownership of 100 shares of Microsoft stock.
    45. The Times wrote, "According to the notes of a person 
briefed about the conversation on Oct. 9, the day it is said to have 
occurred, Mr. Israelite called [AOL lobbyist] Mr. [Wayne] Berman. 
"Are you guys behind this business of the states hiring their 
own lawyers in the Microsoft case?" Mr. Israelite asked Mr. 
Berman in the predawn conversation, according to the notes. 
'Tell your clients we wouldn't be too happy about 
that."
    46. Israelite allegedly said on that call that the Supreme Court 
was soon to deny Microsoft's appeal, which would prompt the 
Department of Justice to seek a settlement. He was reported to have 
complained that AOL was "radicalizing" the states.\7\ 
While the conversation was confirmed, the participants denied the 
content of the conversation. Still, it was enough to provoke angry 
responses from the technology industry and an accusation of 
"inappropriate and possibly illegal" conduct from a key 
House Democrat, Congressman John Conyers, Ranking Democratic Member 
of the House Judiciary Committee. In a letter to Attorney General 
Ashcroft, Rep. Conyers asked for more information about Israelite's 
alleged contacts with Berman, specifically asking for a list of 
contacts between Israelite and AOL officials. "If the 
allegations reported by the media are true, such active involvement 
by a recused public official could violate federal conflict of 
interest laws," Conyers wrote.\18\
---------------------------------------------------------------------------

    \17\ New York Times, Nov. 2, 2001
    \18\ The Kansas City Star, Nov. 8, 2000, Kraske
---------------------------------------------------------------------------

    ii. Lobbying on the Campaign Trail
    47. Mirroring its political giving strategy, Microsoft's 
lobbying strategy has focused mainly on Republicans, while hedging 
its bets and simultaneously courting Democrats to a slightly lesser 
extent.
    48. During the campaign, Microsoft Chairman Bill Gates was asked 
if a Republican administration would be a positive development for 
the company. It would "help," he said \19\ After 
all, before Judge Jackson ruled against Microsoft, then Governor 
Bush was quoted as saying that he stood "on the side of 
innovation, not litigation."
---------------------------------------------------------------------------

    \19\ Common Cause, "The Microsoft Playbook"
---------------------------------------------------------------------------

    49. In fact, according to Newsweek Magazine, Bill Gates's visit 
to then Governor Bush in Austin was "part of a delicate 
political dance between the software giant and the Republican Party 
.... Dollar signs in their eyes, GOP leaders covet big political 
contributions from Microsoft's coffers. In turn, Microsoft 
executives, plagued by the Clinton Justice Department's lawsuit, 
hope that a Republican president and Congress might shut down the 
efforts to punish the company."
    50. A number of other Microsoft executives, lobbyists and other 
paid counsel lead back to the Bush camp. The company's Chief 
Operating Officer, Steve Ballmer, served then Governor Bush as a 
technology adviser. Tony Feather, former Bush political director, is 
a partner with a Republican consulting firm Microsoft hired to 
manage grassroots lobbying efforts. And Microsoft has paid lobbyist 
and former head of the Republican Party Haley Barbour hundreds of 
thousands of dollars to assist the company in Washington. The 
company has also hired Vin Weber, a former Republican Congressman, 
and Michael Deaver, the former White House chief of staff and 
trusted adviser credited with crafting President Ronald Reagan's 
image and campaign advertisements in the 1980s.
    51. In addition, Microsoft retained the services of Ralph Reed's 
Century Strategies "for the stated purpose of improving the 
company's public image." \20\ Reed's firm--a paid 
consultant to the Bush campaign--aimed itself at mobilizing 
Bush supporters to express to the candidate their dissatisfaction 
with the antitrust trial. Once it was reported in the New York 
Times, the firm issued an apology. The Wall Street Journal later 
reported more on Ralph Reed's lobbying efforts on Microsoft's 
behalf:
---------------------------------------------------------------------------

    \20\ ibid.
---------------------------------------------------------------------------

    "BOUNTY PAYMENTS are offered for pro- Microsoft letters 
and calls.
    Republican Ralph Reed's lobbying firm coordinates a network of 
public-relations and lobbying partners that generates grass-roots 
comments for cash. Payments are for letters, calls and visits to 
lawmakers and policy makers. An e-mail offers sample letters 
opposing a Microsoft breakup. A letter to a member of Congress from 
a mayor or local Republican Party official is worth $200, the 
guidelines say. A "premier" letter or visit by a fund-
raiser known to the lawmaker or a family member can be worth up to 
$450 apiece. An op-ed piece in local papers fetches 
$500." \21\
---------------------------------------------------------------------------

    \21\ WSJ, Oct. 20, 2000
---------------------------------------------------------------------------

    52. Microsoft was lobbying the Democratic side as well. Like its 
team of Republican all-

[[Page 29061]]

stars, Microsoft's team of Democrats had very close ties to its 
party as well. The team included "super lobbyist" Tommy 
Boggs, a top Washington insider with deep Democratic ties, Tom 
Downey, a former Democratic Congressman with close ties to former 
Vice President A1 Gore, and Craig Smith, former campaign manager for 
Gore and board member of the Microsoft front group, Americans for 
Technology Leadership. As a board member of the ATL, Smith wrote to 
the Democratic National Committee urging his fellow party members to 
abandon support for the antitrust case, citing that support 
"would make us vulnerable to attack in the general 
election." \22\
---------------------------------------------------------------------------

    \22\ Common Cause, "The Microsoft Playbook"
---------------------------------------------------------------------------

    53. The company also hired Ginny Terzano, former Gore press 
secretary, and tobacco industry ad man Carter Eskew, a former Gore 
adviser-cum-Microsoft image consultant who helped craft the 
company's 1999 advertising campaign aimed at bolstering its 
reputation as a "good corporate citizen." Also retained 
by Microsoft was super-lobbyist Jack Quinn, former Chief of Staff to 
Vice President A1 Gore and White House Counsel.
    iii. Lobbying Capitol Hill
    54. But Microsoft did not focus solely on lobbying those who 
would soon be in control of the Department of Justice. Microsoft 
also waged a massive lobbying campaign aimed at Congress.
    55. Alongside its Administration-oriented team, Microsoft 
recruited more lobbyists and consultants with ties to Members of 
Congress on both sides of the aisle. Republican hires included 
Allison McSlarrow, former deputy chief of staff to Senate Majority 
Leader Trent Lott, Ed Kutler, former assistant to then Speaker of 
the House Newt Gingrich, Mitch Bainwol, former chief of staff to the 
Senate Republican Caucus and the Republcian National Committee, 
Kerry Knott, former chief of staff to House Majority Leader Richard 
Armey, Ed Gillespie, former Armey and Republican National Committee 
communications director, and Mimi Simoneaux, former legislative 
director to House Commerce Committee Chairman Billy Tauzin, who was 
then-chairman of the House subcommittee with jurisdiction over the 
technology industry.
    56. Among the Democrats lobbying on behalf of Microsoft were 
Jamie Houton, former associate director of the Senate Democratic 
Steering Committee, former Democratic Representative Vic Fazio, the 
third-highest ranking House Democrat, and his former top staffer Tom 
Jurkovich.
    57. Despite Microsoft's assertion in its mere three-page Tunney 
Act disclosure filing, the company has incessantly used its 
tremendous resources to contact and influence Members of Congress. 
Over the course of a 16-month period beginning in 1999, Microsoft 
flew at least 130 Members of Congress or their staff to the 
company's headquarters in Redmond, Washington to lobby on a number 
of issues, including the antitrust case.
    58. Perhaps the most egregious example of its heavy-handed 
largesse came in late 1999, when Microsoft lobbied Congress to cut 
$9 million from the budget for the Department of Justice's Antitrust 
Division, the very body that was leading the prosecution against 
Microsoft. Pilloried industries like the gun and tobacco had 
considered and rejected the strategy as overly bold.
    59. According to the Washington Post, "Nonprofit 
organizations that receive financial support from [Microsoft] have 
also urged key congressional appropriators to limit spending for the 
division .... The non profits made their request in a letter last 
month after an all-expenses-paid trip to Microsoft headquarters in 
Redmond, Washington, where they were entertained and briefed on an 
array of issues facing the company." Further discussion 
follows in the next section entitled "Front Groups."
    60. After the previously secret letters from these non-profit 
groups were exposed, news of the attempts received widespread 
bipartisan criticism from media and politicians alike. House 
Judiciary Committee Chairman Henry Hyde (R-IL), called the 
division "one of the best-run departments in the 
government." Senator Herb Kohl, a Democrat on the Senate 
Judiciary Committee's antitrust subcommittee, said "it would 
set [a] terrible precedent to alter the division's budget based on 
one case alone." \23\ "It's like the Mafia trying 
to defund the FBI," said a prominent member of the Washington 
antitrust bar? According to Jan McDavid, a lawyer with the 
Washington firm of Hogan & Hartson and chairperson of the 
American Bar Association antitrust section, the section's policy 
states that it "opposes the use of the congressional budget 
and appropriations process to intervene in or influence ongoing 
antitrust enforcement matters." \24\One congressional 
GOP staffer went as far as to say that Microsoft's lobbying had 
"the odor of obstruction." \25\
---------------------------------------------------------------------------

    \23\ Reuters, Oct. 17, 1999, Lawsky
    \24\ ibid.
    \25\ WSJ, Oct. 15, 1999
---------------------------------------------------------------------------

    61. Not surprisingly, Senator Slade Gorton, a Republican from 
Microsoft's home state of Washington, was adamantly supportive of 
the idea. Between 1997 and 1999, he received more than $50,000 from 
Microsoft and its employees. During the 2000 election cycle, 
Gorton's PAC received $17,000 while the Washington State Republican 
Party received more than $100,000. iv. Lobbying the States
    62. Because 19 state attorneys general initiated the antitrust 
case alongside the Department of Justice, Microsoft initiated a 
state lobbying campaign aimed at influencing those attorneys general 
to back away from the case. Microsoft even hired former Iowa House 
Speaker Donald Avenson to lobby the state's Attorney General, who 
was leading the group of states prosecuting the company. While 
Microsoft has retained professional "grassroots 
consultants" and others in many states, according to published 
reports, it is their efforts in the 19 states with Attorneys General 
who brought suit against them where the real pressure has occurred. 
In those states they have retained former lawmakers, law partners of 
the Attorneys General, their predecessors in that same office, 
business associates, and their own trusted political consultants. 
Microsoft has also hired those on whom the AGs are often most 
politically dependent, such as union leaders and activists in states 
with Democratic Attorneys General, and fiscally conservative 
activists in state with Republican AGs.
    63. Perhaps the company's most successful effort to influence 
the state attorneys general came in 1998, when, three days after a 
$25,000 contribution to the South Carolina Republican Party, the 
state's Attorney General, Charles Condon, announced that he would 
withdraw from the case.
    64. Yet, a few of its grassroots efforts targeted at the states 
have done more harm than good. Because of the unprecedented size, 
scope and cost of Microsoft's campaign, a number of high profile 
gaffes have exhibited the true nature of Microsoft's "public 
support" and the depths to which the company will go to 
influence the outcome of the trial.
    65. In August 2001, the Los Angeles Times reported that two 
letters received by the Utah Attorney General's office, one of the 
prosecuting states, were sent by dead men. The campaign was funded 
by Craig Smith's Americans for Technology Leadership. Despite its 
claims to represent "thousands of small and mid-sized 
technology companies," news reports have repeatedly 
characterized ATL and its counterpart, the Association for 
Competitive Technology (ACT) as essentially wholly-owned 
subsidiaries of Microsoft Corp., whose funding launched and sustains 
both groups.\26\ Other characteristics of the letter writing 
campaign to the Attorneys General included similar phrases popping 
up again and again, invalid return addresses, and even masses of 
identical letters with different signatories.
---------------------------------------------------------------------------

    \26\ "Microsoft's All-Out Counterattack." Dan 
Carney, with Amy Borrus. BusinessWeek May 15, 2000; 
"Microsoft's Lobbying Largess Pays Off; Back-Channel Effort 
Wins Support for Case." James V. Grimaldi. Washington Post May 
17, 2000; "Microsoft leans creatively on levers of political 
power as breakup decision looms, 'stealth" lobbying 
efforts aim for survival." Jim Drinkard and Owen Ullmann. USA 
Today May 30, 2000
---------------------------------------------------------------------------

    66. In one news story, Jim Prendergast, director of ATL, 
initially admitted only to providing letter writers with 
"message points." "We gave them a few bullet 
points, but that's about the extent of it," he said. 
When asked why identical phrases were popping up again and again, he 
confessed that sometimes ATL did indeed provide whole letters for 
the citizens to sign and send. "We'd write the letter and then 
send it to them," he admitted.
    67. According to the same article, other states, like Minnesota 
and Iowa, were subjected to Microsoft's full-press grassroots 
lobbying campaign. Both states are participants in the antitrust 
case. In the case of Iowa, Attorney General Tom Miller received more 
than 50 letters in a month's time calling on him to drop the case. 
While none of the letters were identical, several phrases were 
similar. In four of the letters, for example, the following sentence 
appeared: "Strong competition and innovation have been the 
twin hallmarks of the technology industry." Three others 
contained this sentence: "If the future is going to be as

[[Page 29062]]

successful as the recent past, the technology sector must remain 
free from excess regulation." \27\
---------------------------------------------------------------------------

    \27\ Los Angeles Times, August 23, 2001
---------------------------------------------------------------------------

    68. Minnesota Attorney General Michael Hatch, who received 300 
identical letters, characterized the campaign as 
"sleazy." Many of the letter writers were misled by 
Microsoft and one even wrote by hand to Attorney General Hatch to 
say so and to apologize for his previous letter. "I sure was 
misled," he wrote. "It's time for you to get out there 
and kick butt." \28\
---------------------------------------------------------------------------

    \28\ Los Angeles Times, August 23, 2001
---------------------------------------------------------------------------

    vi. Tying Up the Lobbyists and Lawyers
    69. A frequently employed tactic of Microsoft is to retain all 
major lobbying firms in key states so that its opposition cannot. 
Similarly, the company has hired many Washington, DC-based law firms 
with antitrust expertise to work on issues not related to the 
antitrust case. "They've got the whole town conflicted 
out," said one attorney. "They've sucked out all the 
oxygen." \29\
---------------------------------------------------------------------------

    \29\ Business Week, May 15, 2000, Borrus, Carney, Greene
---------------------------------------------------------------------------

    D. Front Groups
    70. Supporting its political contributions and lobbying 
campaign, Microsoft undertook an aggressive public relations 
campaign aimed at "creating the appearance of a groundswell of 
public support for the company." \30\
---------------------------------------------------------------------------

    \30\ "Trust Us, We're Experts" Sheldon Rampton 
and John Stauber, p. 8
---------------------------------------------------------------------------

    71. In April 1998, a reporter for the Los Angeles Times received 
a package of confidential materials created by Edelman Public 
Relations for its client, Microsoft. Among the documents was a media 
relations strategy for a "multi-million dollar" campaign 
aimed at stemming the rash of antitrust investigations being 
undertaken by a number of states in conjunction with the federal 
government's investigation. According to the reporters, Greg Miller 
and Leslie Helm, "the elaborate plan ... hinges on a number of 
unusual--and some say unethical--tactics, including the 
planting of articles, letters to the editor and opinion pieces to be 
commissioned by Microsoft's top media handlers but presented by 
local firms as spontaneous testimonials." \31\ While 
Microsoft contends that this strategy was never implemented, a 
number of the company's activities since the outset of the trial 
clearly indicate that most of the elements have been employed, at 
times repeatedly.
---------------------------------------------------------------------------

    \31\ 31 ibid.
---------------------------------------------------------------------------

    72. Throughout the antitrust trial, Microsoft relied heavily on 
many "independent" groups to support the company and to 
oppose the suit publicly. Some groups they created themselves out of 
whole cloth during the trial. Others sullied their long, 
distinguished backgrounds by trading hard cash for the use of their 
good names. Many denied any involvement with Microsoft, claiming 
that their passion came from concern for the economy or 
"innovation"--only to later be unmasked by the news 
media when evidence of their financial dealings with Microsoft came 
to light. One account suggests Microsoft has harnessed at least 15 
advocacy groups and think tanks that use Microsoft donations to 
spread the company's message through polls, news conferences, Web 
sites, letters to the editor, research papers, opinion pieces and 
letter-writing campaigns aimed at lawmakers. \32\
---------------------------------------------------------------------------

    \32\ USA TODAY, "Microsoft leans creatively on 
levers of political power as breakup decision looms, 
'stealth" lobbying efforts aim for survival" by 
Jim Drinkard and Owen Ullmann, May 30, 2000
---------------------------------------------------------------------------

    73. Groups with names like Americans for Technology Leadership 
and the Association for Competitive Technology had the veneer of 
genuine independence, but were actually founded by Microsoft, 
launched with Microsoft dollars, and work on few other issues than 
the defense of Microsoft in its antitrust trial.
    74. Even well known Washington, DC organizations with strong 
ties to the Administration and to Congress were well funded by 
Microsoft--respected fiscally conservative groups like Grover 
Norquist's Americans for Tax Reform, former White House 
Counsel C. Boyden Grey's Citizens for a Sound Economy, the National 
Taxpayers Union and Citizens Against Government Waste. But upon 
closer scrutiny, the true ties of these groups to Microsoft became 
apparent. By paying for pro-Microsoft advertisements, by sponsoring 
publications, by donating money outright, Microsoft both ensured and 
devalued their support.
    75. According to Business Week, Microsoft "secretly funds 
those that do its public-relations work and pulls funding from those 
that dare question its positions." \33\ On one such 
occasion, Microsoft pulled funding from the American Enterprise 
Institute once one of its fellows, Robert Bork, came out in favor of 
the antitrust trial even though the institute itself has no position 
on the trial and many of its technical and antitrust experts have 
expressed their opposition to the case. In another case, they quit a 
technology industry trade group, the Software and Information 
Industry Association, because a majority of its members supported 
the antitrust case.
---------------------------------------------------------------------------

    \33\ Business Week, May 15, 2000, Carney, Borrus, Greene
---------------------------------------------------------------------------

    i. Independent Institute
    76. In one instance, Microsoft paid for the placement of 
newspaper advertisements by the California-based Independent 
Institute. Published in June 1999 in the New York Times and the 
Washington Post, the full-page ads featured a pro-Microsoft letter 
signed by 240 academics. Nothing in the ad's copy indicated to 
readers who--other than the Institute itself- was paying for 
the ads. Apparently, no one at the Independent Institute indicated 
to the letter's 240 signatories who was paying for the ad either. 
One signatory, Professor Simon Hakim of Temple University, stated 
that he would not have signed on to the advertisement had he known 
who was behind it.\34\
---------------------------------------------------------------------------

    \34\ I am aware there have been allegations that material 
relating to the Independent Institute was uncovered by Investigative 
Group International (IGI), allegedly retained by Oracle Corporation. 
My understanding of the circumstances indicates that employees of 
IGI's were terminated as a result of their actions. I have not 
reviewed those allegations specifically, since the subject of my 
review was defendant, Microsoft Corporation. Regardless, neither the 
Independent Institute nor Microsoft ever denied the validity of the 
claims after they were exposed.
---------------------------------------------------------------------------

    77. At a Washington, DC press conference unveiling the ads, 
Independent Institute president David Theroux answered a reporter's 
specific question about whether Microsoft had anything to do with 
the ads, including paying for them, with a resounding 
"no." When questioned months later by the New York 
Times, Theroux again denied that Microsoft paid for the ads. He 
said, instead, that the ads "were paid for out of our general 
funds." He also said the "implication that Microsoft had 
any influence is ridiculous." \35\ But, according to a 
front-page article later written in the New York Times, "among 
the institute's internal documents is a bill from Mr. Theroux sent 
to John A. C. Kelly of Microsoft for the full costs of the ads, plus 
his travel expenses from San Francisco to Washington for the news 
conference, totaling $153,868.67. Included was a $5,966 bill for 
airline tickets for himself (Theroux) and a colleague. 
Unfortunately, he wrote Mr. Kelly, 'the airlines were heavily 
booked" and 'we had to fly first class to DC and 
business class on the return."' Furthermore, despite 
additional statements from its president that it "adheres to 
the highest standards of independent scholarly inquiry," 
internal institute documents have shown that, having contributed 
more than $200,000, or 20% of the institute's total outside 
contributions, Microsoft "secretly served as the institute's 
largest outside benefactor [in 1999]." \36\ It wasn't 
until September that the institute finally admitted the extent of 
Microsoft's support.
---------------------------------------------------------------------------

    \35\ Associated Press, September 18, 1999
    \36\ New York Times, Sept. 19, 1999
---------------------------------------------------------------------------

    78. In these instances, as in others, Microsoft's behavior 
outside the courtroom had a direct impact on the proceedings inside 
the courtroom. According to the New York Times, the ads prompted not 
only more news stories but also courtroom discussion.\37\ Microsoft 
also covered the costs of the publication of the institute's book, 
"Winners, Losers and Microsoft: Competition and Antitrust in 
High Technology," which Microsoft's economic witness in the 
trial then used to support his own testimony.
---------------------------------------------------------------------------

    \37\ New York Times, Sept. 19, 1999
---------------------------------------------------------------------------

    ii. Biased Polling
    79. According to Business Week, Microsoft has also commissioned 
polls to help foster an image of great public support for the 
company. At the outset of the 2000 presidential campaign, around the 
time of the Iowa caucus and the New Hampshire primary, Microsoft 
funded polls aimed at demonstrating the public's opposition to the 
antitrust case. Once the results were in, Microsoft distributed the 
results to the media in order to compel the candidates to 
incorporate their opposition to the case into their platform.
    80. In addition, while the state Attorneys General were working 
through the spring on formulating a remedy, Microsoft front group 
Americans for Technology Leadership conducted and issued the results 
of a poll, which concluded that the public wanted the

[[Page 29063]]

Attorneys General to focus their time and energy on other issues. In 
this case, Microsoft failed to disclose the nature of its 
relationship with ATL and the source of funding for the poll.
    iii. Targeting the Antitrust Division of the Department of 
Justice
    81. As stated above, one of Microsoft's most egregious attempts 
to use lobbying to influence the outcome of the antitrust trial came 
when the company lobbied to cut funding for the Antitrust Division 
of the Department of Justice. Microsoft funded a host of third 
parties to push forth its agenda.
    82. In September 1999, the company flew representatives from 
about 15 major Washington, DC-based think tanks to Microsoft's 
Redmond, Washington headquarters "for three days of briefings 
that included tickets to a Seattle Mariners game and dinner and 
entertainment at Seattle's Teatro ZinZani, according to an 
itinerary." \38\ Among the groups were Citizens for a 
Sound Economy, the National Taxpayers Union and Americans for Tax 
Reform, whose president, Grover Norquist, received $40,000 in 
lobbying payments from Microsoft during the second half of 1998.
---------------------------------------------------------------------------

    \38\ The Washington Post, Oct. 15, 1999, Morgan, Eilperin
---------------------------------------------------------------------------

    83. Two days after returning from the trip, those three groups 
and three others secretly sent a letter to House appropriators 
urging that the Antitrust Division receive the lowest amount of 
funding proposed. In a coordinated effort, on the same day one of 
Microsoft's own lobbyists, Kerry Knott, met with Rep. Dan Miller of 
Florida to urge him to grant the Antitrust Division the lower amount 
of funds. That meeting prompted Rep. Miller to write to the chairman 
of the House Appropriations Commerce, Justice, State and Judiciary 
Subcommittee that "it would be a devastating blow to the high-
tech industry and to our overall economy if the federal government 
succeeds in its efforts to regulate this industry through 
litigation." According to the Washington Post, "Miller 
said that while he objects to the funding on fiscal grounds, he had 
not focused on it until Knott and Citizens for a Sound Economy 
spokeswoman Christin Tinsworth, a former Miller staffer, made their 
pitch just off the House floor." \39\
---------------------------------------------------------------------------

    \39\ ibid.
---------------------------------------------------------------------------

    84. A Washington Post editorial summarized the propriety of the 
incident this way: "[T]he fact that Microsoft has the right to 
lobby ... doesn't make the lobbying any less unseemly. If Microsoft 
has a gripe, it should make its complaint to the court hearing its 
case." \40\
---------------------------------------------------------------------------

    \40\ Washington Post, Oct. 24, 1999
---------------------------------------------------------------------------

    III. CONCLUSIONS
    85. The end result of Microsoft's unprecedented political 
campaign seems to have been rewarded by the weak settlement 
presented by the Department of Justice.
    Respectfully Submitted,
    Edward Roeder
    January 28, 2002
    APPENDIX A: Selected Tables
    Table 1. Rapid Rises in Corporate PAC Fundraising, 
1979-2002 (After Raising More than $50,000)
    Microsoft Corporation Formed: 1987-88
    Total Raised, 1995-96: $59,750
    Total Raised, 1997-98: $599,568
    Difference: $539,818 903 46% Rank: 1
    American Telephone & Telegraph Co. Formed: 1983-84
    Total Raised, 1983-84: $215,423
    Total Raised, 1985-86: $1,820,621
    Difference: $1,605,198 = 745 14% Rank: 2
    Drexel Burnham Lambert Group, Inc. Formed: 1981-82
    Total Raised, 1983-84: $66,844
    Total Raised, 1985-86: $446,279
    Difference: $379,435 = 567 64% Rank: 3
    Safari Club International Formed: 1979-80
    Total Raised, 1993=94: $94,149
    Total Raised, 1995-96: $545,915
    Difference: $451,766 = 479 84% Rank: 4
    Fluor Corporation Formed: 1979-80
    Total Raised, 1987-88: $87,236
    Total Raised, 1989-90: $494,417
    Difference: $407,181 = 466 76% Rank: 5
    Dow Chemical, USA--HQ Formed: 1979-80
    Total Raised, 1995-96: $60,290
    Total Raised, 1997-98: $331,286
    Difference: $270,996 = 449 49% Rank: 6
    Lucent Technologies, Inc. Formed: 1995-96
    Total Raised, 1995-96: $87,568
    Total Raised, 1997-98: $464,592
    Difference: $377,024 = 430 55% Rank: 7
    Nat'l Star Route Mail Contractors Ass'n Formed: 1981-82
    Total Raised, 1995-96: $63,512
    Total Raised, 1983-84: $313,609
    Difference: $250,097 = 393 78% Rank: 8
    Eastern Airlines, Inc. Formed: 1979-80
    Total Raised, 1985-86: $53,309
    Total Raised, 1987-88: $243,529
    Difference: $190,220 = 356 83% Rank: 9
    Pacific Telesis Group Formed: 1979-80
    Total Raised, 1981-82: $65,538
    Total Raised, 1983-84: $280,183
    Difference: $214,645 = 327 51% Rank: 10
    Henley Group/Wheelabrator Technologies, Inc. Formed: 
1979-80
    Total Raised, 1985-86: $89,255
    Total Raised, 1987-88: $380,102
    Difference: $290,847 = 325 86% Rank: 11
    Firstar (First Wisconsin) Corp. Formed: 1979-80
    Total Raised, 1997-98: $113,743
    Total Raised, 1999-00: $480,239
    Difference: $366,496 = 322 21% Rank: 12
    U.S. West, Inc. Formed: 1983-84
    Total Raised, 1987-88: $123,767
    Total Raised, 1989-90: $521,886
    Difference: $398,119 = 321 67% Rank: 13
    CSX Corp.--Jeffboat Formed: 1981-82
    Total Raised, 1997-98: $74,125
    Total Raised, 1999-00: $303,763
    Difference: $229,638 = 309 80% Rank: 14
    J. P. Morgan & Company, Inc. Formed: 1979-80
    Total Raised, 1983-84: $68,569
    Total Raised, 1985-86: $274,515
    Difference: $205,946 = 300 35% Rank: 15
    Source: Computer analysis by Sunshine Press Services of Federal 
Election Commission data, Jan. 1, 1979 through Dec. 31, 2000.
    Table 2. Continued Rises in Corporate PAC Fundraising, 
1979-2002 Following Rapid Rise of
    More than 300% from a base of $50,000+(Ranked by Percentage Rise 
in Next Election Cycle)
    Microsoft Corporation Formed: 1987-88
    Total Raised, 1995-96: $59,750
    Total Raised, 1997-98: $599,568
    Difference: $539,818 = 903.46%
    Next Cycle: 1999-88
    Total Raised: $1,589,684
    Difference: $990,116 = 165.14% Rank: 1
    J. P. Morgan & Company, Inc. Formed: 1979-80
    Total Raised, 1983-84: $68,569
    Total Raised, 1985-86: $274,515
    Difference: $205,946 = 300.35%
    Next Cycle: 1987-88
    Total Raised: $514,285
    Difference: $239,770 = 87.34% Rank: 2
    American Telephone & Telegraph Co. Formed: 1983-84
    Total Raised, 1983-84: $215,423
    Total Raised, 1985-86: $1,820,621
    Difference: $1,605,198 = 745.14%
    Next Cycle: 1987-88
    Total Raised: $3,043,510
    Difference: $1,222,889 = 67.17% Rank: 3
    U.S. West, Inc. Formed: 1983-84
    Total Raised, 1987-88: $123,767
    Total Raised, 1989-90: $521,886
    Difference: $398,119 = 321.67%
    Next Cycle: 1991- 88
    Total Raised: $734,130
    Difference: $212,244 = 40.67% Rank: 4
    Pacific Telesis Group Formed: 1979-80
    Total Raised, 1981-82: $65,538
    Total Raised, 1983-84: $280,183
    Difference: $214,645 = 327.51%
    Next Cycle: 1985-86
    Total Raised: $364,113
    Difference: $83,930 = 29.96% Rank: 5
    Fluor Corporation Formed: 1979-80
    Total Raised, 1987-88: $87,236
    Total Raised, 1989-90: $494,417
    Difference: $407,181 = 466.76%
    Next Cycle: 1991-92
    Total Raised: $610,142
    Difference: $115,725 = 23.41% Rank: 6
    Nat'l Star Route Mail Contractors Ass'n Formed: 1981-82
    Total Raised, 1995-96: $63,512
    Total Raised, 1983-84: $313,609
    Difference: $250,097 = 393.78%
    Next Cycle: 1985-86
    Total Raised: $43,468
    Difference: $2,269 = 5.51% Rank: 7
    Firstar (First Wisconsin) Corp. Formed: 1979-80
    Total Raised, 1997-98: $113,743
    Total Raised, 1999-00: $480,239
    Difference: $366,496 = 322.21%
    Next Cycle: (data incomplete, cycle now in progress)
    CSX Corp.--Jeffboat Formed: 1981-82
    Total Raised, 1997-98: $74,125
    Total Raised, 1999-00: $303,763
    Difference: $229,638 = 309.80%
    Next Cycle: (data incomplete, cycle now in progress)
    Dow Chemical, USA--HQ Formed: 1979-80
    Total Raised, 1995-96: $60,290
    Total Raised, 1997-98: $331,286
    Difference: $270,996 = 449.49%
    Next Cycle: 1999-00
    Total Raised: $279,618
    Difference: $-51,668 = -15.60% Rank: 10

[[Page 29064]]

    Lucent Technologies, Inc. Formed: 1995-96
    Total Raised, 1995-96: $87,568
    Total Raised, 1997-98: $464,592
    Difference: $377,024 = 430.55%
    Next Cycle: 1999-00
    Total Raised: $343,462
    Difference: $-121,130 = -26.07% Rank: 11
    Drexel Burnham Lambert Group, Inc. Formed: 1981-82
    Total Raised, 1983-84: $66,844
    Total Raised, 1985-86: $446,279
    Difference: $379,435 = 567.64%
    Next Cycle: 1987-88
    Total Raised: $310,188
    Difference: $-136,091 = -30.49% Rank: 12
    Safari Club International Formed: 1979-80
    Total Raised, 1993=94: $94,149
    Total Raised, 1995-96: $545,915
    Difference: $451,766 = 479.84%
    Next Cycle: 1997-98
    Total Raised: $378,078
    Difference: $-167,837 = -30.74% Rank: 13
    Eastern Airlines, Inc. Formed: 1979-80
    Total Raised, 1985-86: $53,309
    Total Raised, 1987-88: $243,529
    Difference: $190,220 = 356.83%
    Next Cycle: 1989-90
    Total Raised: $105,734
    Difference: $-137,795 = -56.58% Rank: 14
    Henley Group/Wheelabrator Technologies, Formed: 1979-80
    Total Raised, 1985-86: $89,255
    Total Raised, 1987-88: $380,102
    Difference: $290,847 = 325.86%
    Next Cycle: 1989-90
    Total Raised: $141,072
    Difference: $-239,030 = -62.89% Rank: 15
    Source: Computer analysis by Sunshine Press Services of Federal 
Election Commission data, Jan. 1, 1979 through Dec. 31, 2000.
    Table 3. Largest Cash Balances at end of 1999-2000 
Election Cycle American Corporate PACs
    Rank PAC Sponsor Cash on Hand
    1 Microsoft Corporation $712,874
    2 Southern Bell Telephone & Telegraph Co. $617,922
    3 Crawford Group / Enterprise Leasing $611,442
    4 Southwestern Bell Corporation $550,841
    5 Chrysler / Gulfstream Aerospace Corp. $481,068
    6 Federal Express Corporation $424,739
    7 NationsBank $413,663
    8 First Union Corporation $410,242
    9 First Bank System, Inc. $405,187
    10 Stone Container Corporation $368,973
    11 General Electric Company $359,469
    12 National Health Corporation $340,205
    13 Exxon Corporation $328,559
    14 Outback Steakhouse, Inc. $325,977
    15 Columbia / HCA Healthcare $284,827
    16 American Family Corporation $283,963
    17 Cooper Industries, Inc. $281,054
    18 Suntrust Banks, Inc. $275,779
    19 Winn-Dixie Stores, Inc. $273,232
    20 Jacobs Engineering Group, Inc. $272,982
    21 Ford Motor Company $264,914
    22 U.S. West, Inc. $261,289
    23 Compass Bancshares, Inc. $253,625
    Source: Computer analysis by Sunshine Press Services of Federal 
Election Commission data.
    Table 4. Largest Percentage Increases in Receipts Over Two 
Election Cycles American Corporate
    PACs With More Than $50,000
    Microsoft Corporation Formed:1987-88
    Total Raised, 1995-96: $59,750
    Total Raised, 1999-00: $1,589,684
    Difference: $1,529,934 = 2,560 56% Rank: 1
    American Telephone & Telegraph Co. Formed:1983-84
    Total Raised, 1983-84: $215,423
    Total Raised, 1987-88: $3,043,510
    Difference: $2,828,087 = 1,312 81% Rank: 2
    Firstar (First Wisconsin) Corp. Formed:1979-80
    Total Raised, 1995-96: $59,437
    Total Raised, 1999-00: $480,239
    Difference: $420,802 = 707 98% Rank: 3
    J. P. Morgan & Company, Inc. Formed:1979-80
    Total Raised, 1983-84: $68,569
    Total Raised, 1987-88: $514,285
    Difference: $445,716 = 650 03% Rank: 4
    U.S. West, Inc. Formed:1983-84
    Total Raised, 1985-86: $69,588
    Total Raised, 1989-90: $521,886
    Difference: $452,298 = 649 97% Rank: 5
    Bell Atlantic Corp. Formed:1983-84
    Total Raised, 1993=94: $146,949
    Total Raised, 1997-98: $1,046,617
    Difference: $899,668 = 612 23% Rank: 6
    Fluor Corporation Formed:1979-80
    Total Raised, 1987-88: $87,236
    Total Raised, 1991-92: $610,142
    Difference: $522,906 = 599 42% Rank: 7
    Dow Chemical, USA--HQ Formed:1979-80
    Total Raised, 1993=94: $53,297
    Total Raised, 1997-98: $331,286
    Difference: $277,989 = 521 58% Rank: 8
    GA Technologies, Inc. Formed:1987-88
    Total Raised, 1987-88: $51,702
    Total Raised, 1991-92: $320,081
    Difference: $268,379 = 519 09% Rank: 9
    U.S. West, Inc. Formed:1983-84
    Total Raised, 1987-88: $123,767
    Total Raised, 1991-92: $734,130
    Difference: $610,363 = 493 15% Rank: 10
    American Information Technologies Corp. Formed:1983-84
    Total Raised, 1989-90: $233,266
    Total Raised, 1993=94: $1,370,945
    Difference: $1,137,679 = 487 72% Rank: 11
    Allied-Signal, Inc. Formed:1979-80
    Total Raised, 1981-82: $65,703
    Total Raised, 1985-86: $384,530
    Difference: $318,827 = 485 25% Rank: 12
    Glaxo, Inc. Formed:1985-86
    Total Raised, 1989-90: $106,192
    Total Raised, 1993=94: $607,224
    Difference: $501,032 = 471 82% Rank: 13
    Nynex Corporation Formed:1983-84
    Total Raised, 1991-92: $62,304
    Total Raised, 1995-96: $346,809
    Difference: $284,505 = 456 64% Rank: 14
    Pacific Telesis Group Formed:1979-80
    Total Raised, 1981-82: $65,538
    Total Raised, 1985-86: $364,113
    Difference: $298,575 = 455 58% Rank: 15
    Philip Morris, Inc. Formed:1979-80
    Total Raised, 1979-80: $93,291
    Total Raised, 1983-84: $499,938
    Difference: $406,647 = 435 89% Rank: 16
    American Electric Power Company, Inc. Formed:1979-80
    Total Raised, 1995-96: $106,155
    Total Raised, 1999-00: $545,295
    Difference: $439,140 = 413 68% Rank: 17
    Waste Management, Inc. Formed:1979-80
    Total Raised, 1981-82: $76,738
    Total Raised, 1985-86: $391,637
    Difference: $314,899 = 410 36% Rank: 18
    Cigna Corporation Formed:1979-80
    Total Raised, 1979-80: $56,174
    Total Raised, 1985-86: $286,319
    Difference: $230,145 = 409 70% Rank: 19
    LDDS Communications, Inc. Formed:1987-88
    Total Raised, 1993=94: $63,542
    Total Raised, 1997-98: $323,680
    Difference: $260,138 = 409 40% Rank: 20
    Safari Club International Formed:1979-80
    Total Raised, 1991-92: $107,314
    Total Raised, 1995-96: $545,915
    Difference: $438,601 = 408 71% Rank: 21
    Michigan Bell Telephone Company Formed:1979-80
    Total Raised, 1983-84: $53,326
    Total Raised, 1987-88: $266,944
    Difference: $213,618 = 400 59% Rank: 22
    E1 Paso Company Formed:1979-80
    Total Raised, 1995-96: $75,920
    Total Raised, 1999-00: $379,370
    Difference: $303,450 = 399 70% Rank: 23
    Merrill Lynch & Company, Inc. Formed:1979-80
    Total Raised, 1979-80: $56,895
    Total Raised, 1983-84: $282,297
    Difference: $225,402 = 396 17% Rank: 24
    Federal Express Corporation Formed:1983-84
    Total Raised, 1983-84: $230,478
    Total Raised, 1987-88: $1,139,978
    Difference: $909,500 = 394 61% Rank: 25
    MBNA Corporation Formed:1991-92
    Total Raised, 1991-92: $184,764
    Total Raised, 1995-96: $903,599
    Difference: $718,835 = 389 06% Rank: 26
    MCI Telecommunications Corporation Formed:1983-84
    Total Raised, 1993=94: $104,688
    Total Raised, 1997-98: $510,195
    Difference: $405,507 = 387 35% Rank: 27
    Smith Barney & Company Formed:1979-80
    Total Raised, 1995-96: $128,843
    Total Raised, 1999-00: $627,332
    Difference: $498,489 = 386 90% Rank: 28
    Chrysler / Gulfstream Aerospace Corp. Formed:1979-80
    Total Raised, 1981-82: $77,152
    Total Raised, 1985-86: $373,792
    Difference: $296,640 = 384 49% Rank: 29
    American Information Technologies Corp. Formed:1983-84
    Total Raised, 1987-88: $105,465
    Total Raised, 1991-92: $501,210
    Difference: $395,745 = 375 24% Rank: 30
    Waste Management, Inc. Formed:1979-80
    Total Raised, 1983-84: $138,076
    Total Raised, 1987-88: $653,361
    Difference: $515,285 = 373 19% Rank: 31
    Texas Air Corp. Formed:1979-80
    Total Raised, 1981-82: $53,560
    Total Raised, 1985-86: $252,847
    Difference: $199,287 = 372 08% Rank: 32
    Federal Express Corporation Formed:1983-84
    Total Raised, 1985-86: $334,334
    Total Raised, 1989-90: $1,561,744
    Difference: $1,227,410 = 367 12% Rank: 33
    Drexel Burnham Lambert Group, Inc. Formed:1981-82

[[Page 29065]]

    Total Raised, 1983-84: $66,844
    Total Raised, 1987-88: $310,188
    Difference: $243,344 = 364 05% Rank: 34
    Dow Chemical, USA--HQ Formed:1979-80
    Total Raised, 1995-96: $60,290
    Total Raised, 1999-00: $279,618
    Difference: $219,328 = 363 79% Rank: 35
    General Telephone & Electronics Corp. Formed:1979-80
    Total Raised, 1987-88: $169,871
    Total Raised, 1991-92: $779,782
    Difference: $609,911 = 359 04% Rank: 36
    NationsBank Formed:1979-80
    Total Raised, 1987-88: $238,405
    Total Raised, 1991-92: $1,094,012
    Difference: $855,607 = 358 89% Rank: 37
    CSX Corp.--Jeffboat Formed:1981-82
    Total Raised, 1995-96: $66,789
    Total Raised, 1999-00: $303,763
    Difference: $236,974 = 354 81% Rank: 38
    Sears Roebuck & Co. (Allstate) Formed:1979-80
    Total Raised, 1981-82: $50,277
    Total Raised, 1985-86: $223,313
    Difference: $173,036 = 344 17% Rank: 39
    First Union Corporation Formed:1983-84
    Total Raised, 1995-96: $119,980
    Total Raised, 1999-00: $525,262
    Difference: $405,282 = 337 79% Rank: 40
    Brown & Williamson Tobacco Corp. Formed:1979-80
    Total Raised, 1991-92: $117,271
    Total Raised, 1995-96: $512,562
    Difference: $395,291 = 337 07% Rank: 41
    Coca-Cola Enterprises, Inc. Formed:1991-92
    Total Raised, 1993=94: $54,312
    Total Raised, 1997-98: $232,861
    Difference: $178,549 = 328 75% Rank: 42
    Mutual of Omaha Insurance Company Formed:1979-80
    Total Raised, 1989-90: $74,612
    Total Raised, 1993=94: $319,846
    Difference: $245,234 = 328 68% Rank: 43
    Chase Manhattan Bank Formed:1979-80
    Total Raised, 1983-84: $64,813
    Total Raised, 1987-88: $274,828
    Difference: $210,015 = 324 03% Rank: 44
    Raytheon Company Formed:1979-80
    Total Raised, 1979-80: $54,158
    Total Raised, 1983-84: $228,899
    Difference: $174,741 = 322 65% Rank: 45
    Manufacturers Hanover Corporation Formed:1979-80
    Total Raised, 1979-80: $69,178
    Total Raised, 1983-84: $291,068
    Difference: $221,890 = 320 75% Rank: 46
    Tenneco, Inc. Formed:1979-80
    Total Raised, 1991-92: $208,019
    Total Raised, 1995-96: $866,590
    Difference: $658,571 = 316 59% Rank: 47
    Loral Systems Group Formed:1985-86
    Total Raised, 1989-90: $86,215
    Total Raised, 1993=94: $358,895
    Difference: $272,680 = 316 28% Rank: 48
    Koch Industries, Inc. Formed:1989-90
    Total Raised, 1993=94: $202,392
    Total Raised, 1997-98: $831,184
    Difference: $628,792 = 310 68% Rank: 49
    Koch Industries, Inc. Formed:1989-90
    Total Raised, 1991-92: $104,401
    Total Raised, 1995-96: $428,074
    Difference: $323,673 = 310 03% Rank: 50
    Bellsouth Corporation Formed:1983-84
    Total Raised, 1985-86: $70,383
    Total Raised, 1989-90: $287,836
    Difference: $217,453 = 308 96% Rank: 51
    Rockwell International Corporation Formed:1979-80
    Total Raised, 1979-80: $123,700
    Total Raised, 1983-84: $497,473
    Difference: $373,773 = 302 16% Rank: 52
    Safari Club International Formed:1979-80
    Total Raised, 1993=94: $94,149
    Total Raised, 1997-98: $378,078
    Difference: $283,929 = 301 57% Rank: 53
    RJR Nabisco, Inc. Formed:1979-80
    Total Raised, 1981-82: $64,199
    Total Raised, 1985-86: $256,498
    Difference: $192,299 = 299 54% Rank: 54
    American Information Technologies Corp. Formed:1983-84
    Total Raised, 1985-86: $58,487
    Total Raised, 1989-90: $233,266
    Difference: $174,779 = 298 83% Rank: 55
    Southern Company Formed:1981-82
    Total Raised, 1995-96: $125,656
    Total Raised, 1999-00: $497,118
    Difference: $371,462 = 295 62% Rank: 56
    Lucent Technologies, Inc. Formed:1995-96
    Total Raised, 1995-96: $87,568
    Total Raised, 1999-00: $343,462
    Difference: $255,894 = 292 22% Rank: 57
    Fluor Corporation Formed:1979-80
    Total Raised, 1985-86: $126,081
    Total Raised, 1989-90: $494,417
    Difference: $368,336 = 292 14% Rank: 58
    Central & South West Services, Inc. Formed:1979-80
    Total Raised, 1993=94: $57,841
    Total Raised, 1997-98: $226,201
    Difference: $168,360 = 291 07% Rank: 59
    HSBC Americas / Marine Midland Banks Formed:1981-82
    Total Raised, 1983-84: $52,071
    Total Raised, 1987-88: $200,106
    Difference: $148,035 = 284 29% Rank: 60
    Jacobs Engineering Group, Inc. Formed:1981-82
    Total Raised, 1995-96: $127,472
    Total Raised, 1999-00: $488,875
    Difference: $361,403 = 283 52% Rank: 6!
    Banc One Corporation Formed:1979-80
    Total Raised, 1989-90: $270,704
    Total Raised, 1993=94: $1,037,361
    Difference: $766,657 = 283 21% Rank: 62
    Archer-Daniels-Midland Company Formed:1979-80
    Total Raised, 1979-80: $50,369
    Total Raised, 1983-84: $192,426
    Difference: $142,057 = 282 03% Rank: 63
    Aetna Life and Casualty Company Formed:1983-84
    Total Raised, 1983-84: $88,329
    Total Raised, 1987-88: $333,008
    Difference: $244,679 = 277 01% Rank: 64
    Outback Steakhouse, Inc. Formed:1991-92
    Total Raised, 1993=94: $230,022
    Total Raised, 1997-98: $865,042
    Difference: $635,020 = 276 07% Rank: 65
    Lockheed Corporation Formed:1979-80
    Total Raised, 1979-80: $136,127
    Total Raised, 1983-84: $511,131
    Difference: $375,004 = 275 48% Rank: 66
    Duke Power Company Formed:1979-80
    Total Raised, 1995-96: $69,970
    Total Raised, 1999-00: $261,562
    Difference: $191,592 = 273 82% Rank: 67
    TRW, Inc. Formed:1979-80
    Total Raised, 1979-80: $69,121
    Total Raised, 1983-84: $256,296
    Difference: $187,175 = 270 79% Rank: 68
    United Telecommunications, Inc. Formed:1979-80
    Total Raised, 1983-84: $66,922
    Total Raised, 1987-88: $247,495
    Difference: $180,573 = 269 83% Rank: 69
    Loral Systems Group Formed:1985-86
    Total Raised, 1987-88: $55,311
    Total Raised, 1991-92: $202,887
    Difference: $147,576 = 266 81% Rank: 70
    American General Corporation Formed:1979-80
    Total Raised, 1995-96: $182,254
    Total Raised, 1999-00: $668,062
    Difference: $485,808 = 266 56% Rank: 71
    Phillips Petroleum Company Formed:1979-80
    Total Raised, 1983-84: $99,365
    Total Raised, 1987-88: $364,141
    Difference: $264,776 = 266 47% Rank: 72
    Entergy Operations, Inc. Formed:1989-90
    Total Raised, 1993=94: $64,650
    Total Raised, 1997-98: $236,109
    Difference: $171,459 = 265 21% Rank: 73
    American Information Technologies Corporation 
Formed:1979-80
    Total Raised, 1983-84: $68,916
    Total Raised, 1987-88: $249,574
    Difference: $180,658 = 262 14% Rank: 74
    Sea-Land Corporation Formed:1979-80
    Total Raised, 1987-88: $52,291
    Total Raised, 1991-92: $189,284
    Difference: $136,993 = 261 98% Rank: 75
    First City Bancorporation of Texas, Inc. Formed:1979-80
    Total Raised, 1979-80: $85,372
    Total Raised, 1983-84: $307,649
    Difference: $222,277 = 260 36% Rank: 76
    Banc One Corporation Formed:1979-80
    Total Raised, 1987-88: $173,949
    Total Raised, 1991-92: $622,458
    Difference: $448,509 = 257 84% Rank: 77
    E1 Paso Company Formed:1979-80
    Total Raised, 1993=94: $74,169
    Total Raised, 1997-98: $264,338
    Difference: $190,169 = 256 40% Rank: 78
    Dow Chemical, USA Formed:1979-80
    Total Raised, 1985-86: $77,017
    Total Raised, 1989-90: $274,424
    Difference: $197,407 = 256 32% Rank: 79
    Timken Company Formed:1995-96
    Total Raised, 1995-96: $79,717
    Total Raised, 1999-00: $277,044
    Difference: $197,327 = 247 53% Rank: 80
    Southern Bell Telephone & Telegraph Co. Formed:1979-80
    Total Raised, 1981-82: $54,650
    Total Raised, 1985-86: $189,822
    Difference: $135,172 = 247 34% Rank: 81
    National City Corporation Formed:1981-82
    Total Raised, 1983-84: $59,921
    Total Raised, 1987-88: $207,361
    Difference: $147,440 = 246 06% Rank: 82
    Wal-Mart Stores, Inc. Formed:1979-80
    Total Raised, 1989-90: $56,535
    Total Raised, 1993=94: $195,579
    Difference: $139,044 = 245 94% Rank: 83
    Eastern Airlines, Inc. Formed:1979-80
    Total Raised, 1983-84: $70,676
    Total Raised, 1987-88: $243,529
    Difference: $172,853 = 244 57% Rank: 84
    Heublein, Inc. Formed:1979-80
    Total Raised, 1985-86: $52,292
    Total Raised, 1989-90: $178,944
    Difference: $126,652 = 242 20% Rank: 85
    Salomon Brothers, Inc. Formed:1981-82
    Total Raised, 1981-82: $106,250

[[Page 29066]]

    Total Raised, 1985-86: $363,500
    Difference: $257,250 = 242 12% Rank: 86
    First Bank System, Inc. Formed:1979-80
    Total Raised, 1995-96: $85,349
    Total Raised, 1999-00: $290,311
    Difference: $204,962 = 240 15% Rank: 87
    Goodyear Tire & Rubber Company Formed:1979-80
    Total Raised, 1993=94: $54,504
    Total Raised, 1997-98: $185,093
    Difference: $130,589 = 239 60% Rank: 88
    North Carolina National Bank Corp. Formed:1979-80
    Total Raised, 1979-80: $79,627
    Total Raised, 1983-84: $269,718
    Difference: $190,091 = 238 73% Rank: 89
    Caterpillar Tractor Company Formed:1981-82
    Total Raised, 1985-86: $65,232
    Total Raised, 1989-90: $219,844
    Difference: $154,612 = 237 02% Rank: 90
    Lehman Brothers Kuhn Loec, Inc. Formed:1979-80
    Total Raised, 1979-80: $51,400
    Total Raised, 1983-84: $171,973
    Difference: $120,573 = 234 58% Rank: 91
    Northrop Corporation Formed:1979-80
    Total Raised, 1979-80: $86,250
    Total Raised, 1983-84: $288,361
    Difference: $202,111 = 234 33% Rank: 92
    GMC Electronic Data Systems Corporation Formed:1979-80
    Total Raised, 1987-88: $116,315
    Total Raised, 1991-92: $388,257
    Difference: $271,942 = 233 80% Rank: 93
    Textron, Inc. Eormed:1979-80
    Total Raised, 1981-82: $116,552
    Total Raised, 1985-86: $388,852
    Difference: $272,300 = 233 63% Rank: 94
    Southern Bell Telephone & Telegraph Co. Formed:1979-80
    Total Raised, 1987-88: $203,554
    Total Raised, 1991-92: $678,024
    Difference: $474,470 = 233 09% Rank: 95
    United Parcel Service of America, Inc. Formed:1979-80
    Total Raised, 1983-84: $272,659
    Total Raised, 1987-88: $905,482
    Difference: $632,823 = 232 09% Rank: 96
    Gun Owners of America (gun control foes) Formed:1991-92
    Total Raised, 1995-96: $93,086
    Total Raised, 1999-00: $309,050
    Difference: $215,964 = 232 00% Rank: 97
    Dun & Bradstreet Corporation Formed:1979-80
    Total Raised, 1981-82: $51,577
    Total Raised, 1985-86: $169,954
    Difference: $118,377 = 229.52% Rank: 98
    J. C. Penney Company, Inc. Formed:1979-80
    Total Raised, 1981-82: $91,484
    Total Raised, 1985-86: $301,185
    Difference: $209,701 = 229.22% Rank: 99
    United Parcel Service of America, Inc. Formed:1979-80
    Total Raised, 1985-86: $567,328
    Total Raised, 1989-90: $1,865,785
    Difference: $1,298,457 = 228.87% Rank: 100
    Source: Computer analysis by Sunshine Press Services of Federal 
Election Commission data, Jan. 1, 1979 through Dec. 31, 2000.
    Table 5. Rapid Rises in Corporate PAC Spending, 1979-2002 
(After Spending More than
    $250,000) Microsoft Corporation Formed: 1987-88
    Total Spent, 1997-98: $267,500
    Total Spent, 1999-00: $1,221,730
    Difference: $954,230 = 356 72% Rank: 1
    Federal Express Corporation Formed: 1983-84
    Total Spent, 1985-86: $392,441
    Total Spent, 1987-88: $1,093,998
    Difference: $701,557 = 178 77% Rank: 2
    Compass Bancshares, Inc. Formed: 1983-84
    Total Spent, 1991-92: $363,617
    Total Spent, 1993=94: $974,893
    Difference: $611,276 = 168 11% Rank: 3
    Metropolitan Life Insurance Company Formed: 1979-80
    Total Spent, 1997-98: $310,633
    Total Spent, 1999-00: $815,624
    Difference: $504,991 = 162 57% Rank: 4
    Bell Atlantic Corp. Formed: 1983-84
    Total Spent, 1995-96: $388,073
    Total Spent, 1997-98: $1,006,783
    Difference: $618,710 = 159 43% Rank: 5
    Planned Parenthood Action Fund, Inc. Formed: 1995-96
    Total Spent, 1997-98: $359,408
    Total Spent, 1999-00: $914,501
    Difference: $555,093 = 154 45% Rank: 6
    RJR Nabisco, Inc. Formed: 1979-80
    Total Spent, 1987-88: $348,897
    Total Spent, 1989-90: $872,626
    Difference: $523,729 = 150 11% Rank: 7
    Southern Bell Telephone & Telegraph Co. Formed: 
1979-80
    Total Spent, 1989-90: $265,096
    Total Spent, 1991-92: $650,905
    Difference: $385,809 = 145 54% Rank: 8
    American Information Technologies Corp. Formed: 1983-84
    Total Spent, 1991-92: $518,442
    Total Spent, 1993=94: $1,207,881
    Difference: $689,439 = 132 98% Rank: 9
    Tenneco, Inc. Formed: 1979-80
    Total Spent, 1993=94: $380,688
    Total Spent, 1995-96: $860,515
    Difference: $479,827 = 126 04% Rank: 10
    Banc One Corporation Formed: 1979-80
    Total Spent, 1991-92: $421,467
    Total Spent, 1993=94: $934,434
    Difference: $512,967 = 121 71% Rank: 11
    American General Corporation Formed: 1979-80
    Total Spent, 1997-98: $291,488
    Total Spent, 1999-00: $634,510
    Difference: $343,022 = 117 68% Rank: 12
    Boeing Company Formed: 1981-82
    Total Spent, 1995-96: $370,105
    Total Spent, 1997-98: $759,495
    Difference: $389,390 = 105 21% Rank: 13
    MBNA Corporation Formed: 1991-92
    Total Spent, 1993=94: $403,796
    Total Spent, 1995-96: $825,974
    Difference: $422,178 = 104 55% Rank: 14
    Compass Bancshares, Inc. Formed: 1983-84
    Total Spent, 1995-96: $729,612
    Total Spent, 1997-98: $1,468,094
    Difference: $738,482 = 101 22% Rank: 15
    Southtrust Corporation Formed: 1979-80
    Total Spent, 1995-96: $266,593
    Total Spent, 1997-98: $530,794
    Difference: $264,201 = 99 10% Rank: 16
    FirstEnergy Corp. (Ohio Edison) Formed: 1981-82
    Total Spent, 1997-98: $253,675
    Total Spent, 1999-00: $502,890
    Difference: $249,215 = 98 24% Rank: 17
    Koch Industries, Inc. Formed: 1989-90
    Total Spent, 1995-96: $428,664
    Total Spent, 1997-98: $807,318
    Difference: $378,654 = 88 33% Rank: 18
    Northrop Corporation Formed: 1979-80
    Total Spent, 1993=94: $422,969
    Total Spent, 1995-9G: $794,880
    Difference: $371,911 = 87 93% Rank: 19
    J. P. Morgan & Company, Inc. Formed: 1979-80
    Total Spent, 1985-86: $262,250
    Total Spent, 1987-88: $492,681
    Difference: $230,431 = 87 87% Rank: 20
    Philip Morris, Inc. Formed: 1979-80
    Total Spent, 1983-84: $403,699
    Total Spent, 1985-86: $754,949
    Difference: $351,250 = 87 01% Rank: 21
    Eli Lilly & Company Formed: 1979-80
    Total Spent, 1995-96: $375,583
    Total Spent, 1997-98: $700,580
    Difference: $324,997 = 86 53% Rank: 22
    Southwestern Bell Corporation Formed: 1979-80
    Total Spent, 1993=94: $365,700
    Total Spent, 1995-96: $674,857
    Difference: $309,157 = 84 54% Rank: 23
    Rockwell International Corporation Formed: 1979-80
    Total Spent, 1981-82: $266,688
    Total Spent, 1983-84: $490,541
    Difference: $223,853 = 83 94% Rank: 24
    United Parcel Service of America, Inc. Formed: 1979-80
    Total Spent, 1991-92: $1,835,231
    Total Spent, 1993=94: $3,350,884
    Difference: $1,515,653 = 82 59% Rank: 25
    General Telephone & Electronics Corp. Formed: 1979-80
    Total Spent, 1989-90: $420,131
    Total Spent, 1991-92: $765,805
    Difference: $345,674 = 82 28% Rank: 26
    United Parcel Service of America, Inc. Formed: 1979-80
    Total Spent, 1985-86: $522,514
    Total Spent, 1987-88: $943,815
    Difference: $421,301 = 80 63% Rank: 27
    Waste Management, Inc. Formed: 1979-80
    Total Spent, 1985-86: $341,975
    Total Spent, 1987-88: $615,059
    Difference: $273,084 = 79 85% Rank: 28
    Houston Industries, Inc. Formed: 1979-80
    Total Spent, 1983-84: $256,353
    Total Spent, 1985-86: $460,684
    Difference: $204,331 = 79 71% Rank: 29
    Cigna Corporation Formed: 1979-80
    Total Spent, 1997-98: $352,512
    Total Spent, 1999-00: $624,736
    Difference: $272,224 = 77 22% Rank: 30
    United Parcel Service of America, Inc. Formed: 1979-80
    Total Spent, 1987-88: $943,815
    Total Spent, 1989-90: $1,658,366
    Difference: $714,551 = 75 71% Rank: 31
    Black America's PAC Formed: 1995-96
    Total Spent, 1995-96: $1,899,486
    Total Spent, 1997-98: $3,337,602
    Difference: $1,438,116 = 75 71% Rank: 32
    Chase Manhattan Corporation Formed: 1979-80
    Total Spent, 1989-90: $274,760
    Total Spent, 1991-92: $481,894
    Difference: $207,134 = 75 39% Rank: 33
    Barnett Banks of Florida, Inc. Formed: 1979-80

[[Page 29067]]

    Total Spent, 1985-86: $304,230
    Total Spent, 1987-88: $532,509
    Difference: $228,279 = 75 04% Rank: 34
    Bankamerica Corporation Formed: 1981-82
    Total Spent, 1993=94: $311,633
    Total Spent, 1995-96: $535,516
    Difference: $223,883 = 71 84% Rank: 35
    NationsBank Formed: 1979-80
    Total Spent, 1997-98: $607,578
    Total Spent, 1999-00: $1,041,837
    Difference: $434,259 = 71 47% Rank: 36
    United Technologies Corporation Formed: 1979-80
    Total Spent, 1993=94: $263,300
    Total Spent, 1995-96: $450,078
    Difference: $186,778 = 70 94% Rank: 37
    Southwestern Bell Corporation Formed: 1979-80
    Total Spent, 1997-98: $961,990
    Total Spent, 1999-00: $1,642,657
    Difference: $680,667 = 70 76% Rank: 38
    Lockheed Corporation Formed: 1979-80
    Total Spent, 1991-92: $422,512
    Total Spent, 1993=94: $708,346
    Difference: $285,834 = 67 65% Rank: 39
    Union Pacific Corporation Formed: 1979-80
    Total Spent, 1985-86: $296,938
    Total Spent, 1987-88: $495,482
    Difference: $198,544 = 66 86% Rank: 40
    Household Finance Corporation Formed: 1979-80
    Total Spent, 1989-90: $270,795
    Total Spent, 1991-92: $444,889
    Difference: $174,094 = 64 29% Rank: 41
    Sierra Club (environmentalist) Formed: 1979-80
    Total Spent, 1997-98: $441,208
    Total Spent, 1999-00: $721,429
    Difference: $280,221 = 63 51% Rank: 42
    Westinghouse Electric Corp. Formed: 1979-80
    Total Spent, 1987-88: $264,890
    Total Spent, 1989-90: $431,697
    Difference: $166,807 = 62 97% Rank: 43
    American Telephone & Telegraph Co. Formed: 1983-84
    Total Spent, 1985-86: $1,744,301
    Total Spent, 1987-88: $2,841,464
    Difference: $1,097,163 = 62 90% Rank: 44
    General Motors Corporation Formed: 1979-80
    Total Spent, 1993=94: $477,782
    Total Spent, 1995-96: $777,521
    Difference: $299,739 = 62 74% Rank: 45
    Keycorp Formed: 1979-80
    Total Spent, 1995-96: $376,200
    Total Spent, 1997-98: $611,975
    Difference: $235,775 = 62 67% Rank: 46
    Union Pacific Corporation Formed: 1979-80
    Total Spent, 1989-90: $731,974
    Total Spent, 1991-92: $1,188,407
    Difference: $456,433 = 62 36% Rank: 47
    Sierra Club (environmentalist) Formed: 1979-80
    Total Spent, 1987-88: $299,891
    Total Spent, 1989-90: $486,795
    Difference: $186,904 = 62 32% Rank: 48
    Chrysler / Gulfstream Aerospace Corp. Formed: 1979-80
    Total Spent, 1993=94: $417,015
    Total Spent, 1995-96: $659,369
    Difference: $242,354 = 58 12% Rank: 49
    Pfizer, Inc. Formed: 1979-80
    Total Spent, 1997-98: $536,471
    Total Spent, 1999-00: $844,132
    Difference: $307,661 = 57 35% Rank: 50
    Chase Manhattan Bank Formed: 1979-80
    Total Spent, 1989-90: $269,299
    Total Spent, 1991-92: $423,632
    Difference: $154,333 = 57 31% Rank: 51
    Sierra Club (environmentalist) Formed: 1979-80
    Total Spent, 1993=94: $431,725
    Total Spent, 1995-96: $677,883
    Difference: $246,158 = 57 02% Rank: 52
    Banc One Corporation Formed: 1979-80
    Total Spent, 1989-90: $269,833
    Total Spent, 1991-92: $421,467
    Difference: $151,634 = 56 20% Rank: 53
    Raytheon Company Formed: 1979-80
    Total Spent, 1995-96: $385,863
    Total Spent, 1997-98: $601,994
    Difference: $216,131 = 56 01% Rank: 54
    Eli Lilly & Company Formed: 1979-80
    Total Spent, 1997-98: $700,580
    Total Spent, 1999-00: $1,089,599
    Difference: $389,019 = 55 53% Rank: 55
    Chrysler / Gulfstream Aerospace Corp. Formed: 1979-80
    Total Spent, 1995-96: $659,369
    Total Spent, 1997-98: $1,021,714
    Difference: $362,345 = 54 95% Rank: 56
    Amsouth Bancorporation Formed: 1983-84
    Total Spent, 1997-98: $304,524
    Total Spent, 1999-00: $470,782
    Difference: $166,258 = 54 60% Rank: 57
    Glaxo, Inc. Formed: 1985-86
    Total Spent, 1997-98: $716,634
    Total Spent, 1999-00: $1,104,801
    Difference: $388,167 = 54 17% Rank: 58
    Crawford Group / Enterprise Leasing Formed: 1987-88
    Total Spent, 1993=94: $253,769
    Total Spent, 1995-96: $391,094
    Difference: $137,325 = 54 11% Rank: 59
    Associates Corp. (Ford Motor Co.) Formed: 1989-90
    Total Spent, 1995-96: $342,269
    Total Spent, 1997-98: $526,937
    Difference: $184,668 = 53 95% Rank: 60
    Morgan Stanley & Company, Inc. Formed: 1979-80
    Total Spent, 1985-86: $303,919
    Total Spent, 1987-88: $465,992
    Difference: $162,073 = 53 33% Rank: 61
    Houston Industries, Inc. Formed: 1979-80
    Total Spent, 1995-96: $470,646
    Total Spent, 1997-98: $720,544
    Difference: $249,898 = 53 10% Rank: 62
    Outback Steakhouse, Inc. Formed: 1991-92
    Total Spent, 1997-98: $636,741
    Total Spent, 1999-00: $974,275
    Difference: $337,534 = 53 01% Rank: 63
    Household Finance Corporation Formed: 1979-80
    Total Spent, 1997-98: $512,016
    Total Spent, 1999-00: $782,819
    Difference: $270,803 = 52 89% Rank: 64
    General Motors Corp. / Hughes Aircraft Formed: 1979-80
    Total Spent, 1985-86: $271,290
    Total Spent, 1987-88: $412,181
    Difference: $140,891 = 51 93% Rank: 65
    American Airlines Formed: 1979-80
    Total Spent, 1991-92: $282,647
    Total Spent, 1993=94: $426,852
    Difference: $144,205 = 51 02% Rank: 66
    Cooper Industries, Inc. Formed: 1979-80
    Total Spent, 1989-90: $264,213
    Total Spent, 1991-92: $397,960
    Difference: $133,747 = 50 62% Rank: 67
    Flowers Industries, Inc. Formed: 1979-80
    Total Spent, 1993=94: $254,819
    Total Spent, 1995-96: $383,269
    Difference: $128,450 = 50 41% Rank: 68
    Source: Computer analysis by Sunshine Press Services of Federal 
Election Commission data,
    Jan. l, 1979through Dec. 31, 2000.
    APPENDIX B: Publication List
    The news organizations listed below have published news reports 
or commentary
    by Edward Roeder
    Daily Newspapers
    Albuquerque Journal
    Arizona Republic
    Arkansas Gazette-Democrat
    Atlanta Constitution *
    Austin American-Statesman
    Baltimore Sun *
    Boston Globe *
    Chicago Sun-Times *
    Chicago Tribune *
    Cleveland Plain Dealer
    Dallas Morning News
    Denver Post
    Deseret News
    Detroit Free Press*
    Detroit News *
    Florida Today
    Fort Lauderdale News & Sun-Sentinel
    Greensboro News & Record *
    Kansas City Star
    Los Angeles Times
    Louisville Courier-Journal *
    Miami Herald *
    Nashville Tennessean
    New Orleans Times-Picayune
    New York Daily News
    New York Newsday
    New York Times *
    Orlando Sentinel *
    Philadelphia Inquirer *
    Portland Oregonian
    Providence Journal
    Richmond Times-Dispatch
    Sacramento Bee *
    San Jose Mercury News
    Seattle Post-Intelligencer
    Seattle Times *
    St. Louis Post-Dispatch *
    St. Petersburg Times *
    Tampa Tribune
    USA Today
    Washington Post *
    Washington Times
    Articles ran on page 1 or led Sunday section
    Periodicals
    American Banker *
    Capital Style
    Conservative Digest *
    Free Inquiry *
    Monthly Business Review *
    Ms. *
    New Republic *
    New Times *
    Newsweek
    Playboy *
    Politics Today *
    Rolling Stone *
    Saturday Review *
    Sierra *
    Space Business international *
    The Nation *
    Time

[[Page 29068]]

    Village Voice *
    Washington Monthly *
    Washingtonian *
    Bylined feature magazine articles
    Broadcast
    ABC News (TV) *
    CBS News (TV) *
    CNN *
    Canadian Broadcast'g Co. (Radio) *
    KABC-TV (Hollywood, CA) *
    National Public Radio *
    Nightline (ABC News-TV) *
    NBC News (TV & Radio)
    20-20 (ABC News--TV)
    WBAL-TV (Baltimore, MD)
    WDIV-TV (Detroit, Mich.) *
    WJLA-TV (Washington, DC) *
    WJXT-TV (Jacksonville, Fla.) *
    WJZ-TV (Baltimore, MD)
    WPLG-TV (Miami, Fla.) *
    WRC-TV (Washington, DC)
    WTVT-TV (Tampa, Fla.) *
    WUSA-TV (Washington, DC) *
    Paid on-air appearanc(s)



MTC-00030612

    BEFORE THE UNITED STATES DEPARTMENT OF JUSTICE
    UNITED STATES OF AMERICA, Plaintiff, V. Civil Action No. 
98-1232 (CKK) MICROSOFT CORPORATION, Defendant.
    STATE OF NEW YORK ex rel.
    Attorney General Eliot Spitzer, et al., Plaintiffs, V. Civil 
Action No. 98-1233 (CKK) MICROSOFT CORPORATION, Defendant.
    DECLARATION OF JOSEPH E. STIGLITZ AND JASON FURMAN
    TABLE OF CONTENTS
    I. QUALIFICATIONS 1
    II. PURPOSE 2
    III. INTRODUCTION 2
    IV. THE MODERN ECONOMIC THEORY OF COMPETITION AND MONOPOLY. 6
    A. Acquisition of a monopoly 7
    B. Potential for competition 10
    C. Consequences of monopoly 12
    D. Monopolies and innovation 14
    V. FACTS AND LEGAL CONCLUSIONS RELATING TO MICROSOFT 16
    A. Monopoly power 16
    B. Anticompetitive behavior 17
    C. Effectiveness of anticompetitive behavior in maintaining the 
monopoly 19
    VI. OUTLINE OF AN EFFECTIVE CONDUCT REMEDY 20
    A. Creating more choices for consumers 22
    B. Reducing the applications barrier to entry 23
    C. Preventing Microsoft from strengthening its operating system 
monopoly by bringing new products within its scope 23
    VII. ANALYSIS OF THE PROPOSED FINAL JUDGMENT 24
    A. Creating more choices for consumers 26
    1. Ensuring that OEMs and potentially ISVs have the right to 
modify fundamental aspects of the computer experience in any way 
they choose 27
    2. Ensuring that OEMs and ISVs have adequate information and 
technical access to develop applications for, or even modifications 
to, Windows 29
    3. Ensuring that OEMs and ISVs are protected from retaliation by 
Microsoft for providing alternatives to consumers 31
    4. Ensuring that OEMs have financial incentives to make changes 
that benefit consumers 32
    B. Reducing the applications barrier to entry 34
    1. Middleware and the applications barrier to entry 34
    2. Microsoft Office and the applications barrier to entry 37
    C. Preventing Microsoft from strengthening its operating system 
monopoly by extending it to encompass additional products 38
    VIII. STEPS TO IMPROVE THE PROPOSED FINAL JUDGMENT: THE 
LITIGATING STATES" ALTERNATIVE 39
    A. Fostering competition through OEMs and reducing the 
applications barrier to entry 40
    B. Internet Explorer browser open source and Java distribution 
41
    C. Cross-platform porting of Office 42
    D. Mandatory disclosure to ensure interoperability 42
    IX. CONCLUSION 43
    I. QUALIFICATIONS
    Our names are Joseph Stiglitz and Jason Furman. Dr. Stiglitz is 
a Professor at Columbia Business School, Columbia's Graduate School 
of Arts and Sciences (in the Department of Economics), and 
Columbia's School of International and Public Affairs. In 2001, Dr. 
Stiglitz was awarded the Nobel Prize in Economic Sciences. In 
addition, Dr. Stiglitz serves as a Senior Director and Chairman of 
the Advisory Committee at Sebago Associates, Inc., an economic and 
public policy consulting firm.
    Dr. Stiglitz previously served as the World Bank's Chief 
Economist and Senior Vice President for Development Economics. 
Before joining the Bank, he was the Chairman of the President's 
Council of Economic Advisers. Dr. Stiglitz has also served as a 
professor of economics at Stanford, Princeton, Yale, and All Souls 
College, Oxford.
    As an academic, Dr. Stiglitz helped create a new branch of 
economics--"The Economics of 
Information"--which has received widespread application 
throughout economics. In the late 1970s and early 1980s, Dr. 
Stiglitz helped revive interest in the economics of technical change 
and other factors that contribute to long-run increases in 
productivity and living standards. Dr. Stiglitz is also a leading 
scholar of competition policy.
    In 1979, the American Economic Association awarded Dr. Stiglitz 
its biennial John Bates Clark Award, given to the economist under 40 
who has made the most significant contributions to economics. His 
work has also been recognized through his election as a fellow to 
the National Academy of Sciences, the American Academy of Arts and 
Sciences, and the American Philosophical Society, as well as his 
election as a corresponding fellow of the British Academy. He has 
also been awarded several honorary doctorates.
    Jason Furman is a Lecturer in economics at Yale University. In 
addition, Mr. Furman is a Director at Sebago Associates. Mr. Furman 
previously served as Special Assistant to the President for Economic 
Policy at the White House, where his responsibilities included tax 
policy, the Federal budget, Social Security, anti-poverty programs, 
and other economic policy issues.
    II. PURPOSE
    This Declaration was commissioned by the Computer & 
Communications Industry Association (CCIA) as an independent 
analysis of the competitive effects of the Proposed Final Judgment. 
The views and opinions expressed in this Declaration are solely 
those of the authors based on their own detailed study of the 
relevant economic theory and court documents; they do not 
necessarily reflect the views and opinions of CCIA. In addition, the 
views and opinion expressed in this Declaration should not be 
attributed to any of the organizations with which the authors are or 
have previously been associated.
    III. INTRODUCTION
    Competition is the defining characteristic of a market economy. 
It provides the incentive to produce new products that consumers 
want, to improve efficiency and lower the costs of production, and 
to pass on these innovations in the form of lower prices for 
consumers. In a competitive market, a firm that does not act in the 
best interests of consumers will be punished and, ultimately, will 
fail. But when competition is imperfect--or when it is 
nonexistent as in the limiting case of monopoly--the incentives 
to undertake these beneficial actions may be attenuated. In fact, a 
firm may even face incentives to behave in ways which do not serve 
the interests of consumers or the economy more generally. Monopoly 
power may lead a firm to underinvest in innovation, misdirect its 
investments, or undertake other activities in order to stifle 
competition rather than to improve products. Costs of production may 
be excessive because the monopolist has insufficient incentives for 
efficiency, has incentives to undertake costly measures to deter 
competition, or undertakes measures to raise rivals" costs. 
And consumers will face higher prices and fewer choices in the short 
run; in the long run, the losses to consumers may be even more 
severe.
    In a unanimous decision, the full Court of Appeals for the DC 
Circuit upheld the District Court finding that Microsoft was guilty 
of violating  2 of the Sherman Act through its illegal 
maintenance of a monopoly in the market for Intel-compatible 
personal computer (PC) operating systems.\1\ The Court of Appeals 
also affirmed numerous findings of fact concerning the consequences 
of this illegal monopolization for misdirecting innovation, raising 
rivals" costs, and limiting consumer choice.
---------------------------------------------------------------------------

    \1\ United States v. Microsoft Corp., 253 F.3d 34 (DC Cir. 
2001).
---------------------------------------------------------------------------

    The desire to maintain this monopoly, even against potentially 
superior products, creates a powerful incentive for Microsoft to 
eliminate or weaken competition that could erode or even eliminate 
its monopoly. In the mid-1990s, the principal threat to Microsoft's 
Windows operating system came from the development of the Netscape 
browser and Java technologies,\2\ which allowed

[[Page 29069]]

programmers to write applications to Netscape and Java, meaning that 
such programs would then work on any operating system that would run 
Netscape or Java. By reducing or even eliminating the cost of 
producing applications for different operating systems, these 
technological rivals reduced the barriers to entry for a new 
operating system and threatened, over the longer run, to erode 
Microsoft's monopoly in Intel-compatible PC operating systems by 
allowing competitors to provide superior products at a lower cost.
---------------------------------------------------------------------------

    \2\ "The Java technologies include: (1) a 
programming language; (2) a set of programs written in that 
language, called the 'Java class libraries," which 
expose APIs; (3) a compiler, which translates code written by a 
developer into 'bytecode'; and (4) a Java Virtual 
Machine ('JVM'), which translates bytecode into 
instructions to the operating system." See 253 F.3d at 74, 
citing Findings of Fact 73, United States v. Microsoft Corp., 
84 F. Supp. 2d 9, 29 (D.DC 1999).
---------------------------------------------------------------------------

    Microsoft's conduct has effectively eliminated the threat posed 
by Netscape and Java. Given ongoing rapid technological progress, it 
is impossible to predict with certainty where the next challenge to 
Microsoft Windows will come from. The experience in this area, 
however, suggests that it is likely to come from rivalry at the 
borders of operating systems, in particular from 
"middleware" that makes it possible for programmers to 
write to the "middleware" rather than to the underlying 
operating system. One such example comes from the increasingly 
important area of multimedia: streaming media players. Whether the 
next challenge to Microsoft's operating systems monopoly comes from 
a multimedia package or another technology, Microsoft will continue 
to have the same incentives and ability to stifle competition as it 
displayed against Netscape and Java in the mid-1990s.
    The principal goal of any remedy for Microsoft's illegal 
behavior in this case should be to foster competition and expand 
choices for consumers. The key to achieving this goal is changing 
Microsoft's incentives and taking steps to increase competition. A 
structural remedy, such as splitting up the company, would most 
directly alter incentives. Where such structural changes are not 
possible, the remedy should prohibit and regulate the conduct that 
Microsoft has used in the past and will have an incentive to use in 
the future to eliminate threats from "middleware" 
products that threaten to limit its monopoly power by usurping some, 
and perhaps eventually all, of the important functions of the 
Windows operating system.
    The Revised Proposed Final Judgment (PFJ) of November 6, 2001 
does not change Microsoft's incentives to undertake anticompetitive 
acts to stifle consumer choice by thwarting potentially superior 
products.\3\ Furthermore, the PFJ provides few effective 
prohibitions against future anticompetitive conduct: It 
alternatively ratifies Microsoft's existing conduct, contains 
sufficient loopholes to allow Microsoft to circumvent the 
legislation, and suffers from toothless enforcement procedures that 
would allow Microsoft to reap the fruits of its monopoly for a 
significant, and potentially even indefinite, period. In our view, 
the PFJ would leave intact Microsoft's ability to maintain, and 
benefit from, its Windows operating system monopoly, while allowing 
it to continue to limit choices for consumers and stifle innovation.
---------------------------------------------------------------------------

    \3\ United States v. Microsoft Corp., Revised Proposed 
Final Judgment, in the U.S. District Court for D.C, November 6, 
2001.
---------------------------------------------------------------------------

    The PFJ does not even accomplish the limited remedial goals 
articulated in the U.S. Department of Justice's Competitive Impact 
Statement (CIS).\4\ Specifically, in addition to its loopholes and 
its inadequate enforcement mechanism, the PFJ is entirely silent on 
several key findings of the Court of Appeals, including the 
commingling of applications and operating systems code, the 
pollution of Java, and the applications barrier to entry more 
broadly.
---------------------------------------------------------------------------

    \4\ U.S. Department of Justice (November 15, 2001), 
Competitive Impact Statement in United States vs. Microsoft Corp.
---------------------------------------------------------------------------

    The PFJ should be rejected and replaced with a remedy that 
changes Microsoft's incentives to unfetter the market for 
competition. At a minimum, a remedy in this case needs to restrain 
Microsoft's conduct, by restricting the means through which 
Microsoft can illegally maintain and benefit from its monopoly.
    The goal of this Declaration is to analyze the PFJ. It does not 
propose a detailed alternative remedy. It is important to note, 
however, that the proposal by the litigating States, while 
imperfect, is clearly superior to the PFJ in all of these regards. 
We do not address more aggressive remedies--such as structural 
changes to break up Microsoft or impose more extensive limitations 
on its intellectual property rights--but we note that such 
broader measures may well be necessary and desirable in order to 
alter Microsoft's incentives for anti-competitive behavior.\5\ We 
are convinced, however, that the PFJ fails to meet the minimum 
requirement of an acceptable remedy--that is, it is unlikely to 
substantially increase competition in the relevant market.
---------------------------------------------------------------------------

    \5\ Restrictions on intellectual property rights have been 
used as a remedy in past antitrust cases, for example IBM's 1956 
tabulating machines case, in a manner that is both effective and 
largely without adverse effects.
---------------------------------------------------------------------------

    The remainder of this Declaration contains five sections. First, 
it presents a brief discussion of the modem theory of competition, 
focusing on its relation to innovation. Second, it summarizes the 
relevant facts and legal conclusions relating to Microsoft. Third, 
it outlines what an effective remedy in this case should entail. 
Fourth, it examines the PFJ and highlights its deficiencies in 
comparison to this effective remedy. Finally, the paper concludes 
with a brief discussion of practical measures that could provide a 
more effective remedy.
    IV. THE MODERN ECONOMIC THEORY OF COMPETITION AND MONOPOLY
    This section presents a brief overview of the modem economic 
theory of competition and monopoly. The theory of competition has 
evolved rapidly in the last few decades, due in part to the natural 
evolution of economic thought and in part to the issues raised by 
the "new economy" (such as the importance of network 
effects and rapid innovation). Given the vast literature on the 
topic, this discussion is necessarily selective and focuses on the 
most relevant issues for Microsoft's monopoly of the market for 
operating systems for Intel-compatible PCs. This theoretical 
background motivates the conclusions about the PFJ.
    A. Acquisition of a monopoly
    The traditional view of monopoly is that in specific industries, 
like public utilities, increasing returns to scale create a 
situation in which luck or initial success will eventually lead to 
one firm that can maintain its monopoly by controlling an entire 
market and thus benefiting from the lower average costs of 
production that result from the larger scale of production. This 
aspect of the traditional view is still salient in the software 
market. Producing a software program has high fixed costs in the 
form of investments in research and development but, once this 
investment has been made, virtually no marginal cost from producing 
additional units. As a result, the larger the scale of production, 
the lower the average cost. By itself, these increasing returns to 
scale will provide a powerful force for consolidation.
    The modem view of monopoly has added an additional effect that 
can strengthen the advantages enjoyed by the lucky or initially 
successful firm: network effects.\6\ Network effects arise when the 
desirability of a product depends not just on the characteristics of 
the product itself but also on how many other people are using it.
---------------------------------------------------------------------------

    \6\ For an overall survey, see Michael Katz and Carl 
Shapiro (1994), "Systems Competition and Network 
Effects." Journal of Economic Perspectives, 8:2, 93-115. 
For a specific application to Microsoft, see Timothy Bresnahan 
(2001), "The Economics of the Microsoft Case." Mimeo 
available at http://www.stanford.edu/tbres/Microsoft/The Economics 
of The Microsoft Case.pdf.
---------------------------------------------------------------------------

    Network externalities may be direct: as a user of Microsoft 
Word, I benefit when many other people also use the program because 
it is easier to share Word files. Network externalities may also be 
indirect: I am more likely to purchase a computer and operating 
system if I know that more software choices are currently available 
(and will be available in the future) for this system. An operating 
system with a larger set of existing (and expected) compatible 
applications will be more desirable. This indirect network effect 
has been called the "applications barrier to 
entry." \7\ The main reason that consumers demand a 
particular operating system is its ability to run the applications 
that they want. In developing applications, Independent Software 
Vendors (ISVs) incur substantial sunk costs and thus face increasing 
returns to scale. This motivates ISVs to first write to the 
operating system with the largest installed base. Because 
"porting" an application to a different operating system 
will result in substantial additional fixed costs, a firm will have 
less incentive to produce the application for operating systems with 
a smaller installed base, and may do so with a delay or forgo 
porting completely.
---------------------------------------------------------------------------

    \7\ Franklin Fisher, "Direct Testimony of Franklin 
Fisher" in United States v. Microsoft Corp.
---------------------------------------------------------------------------

    The applications barrier to entry can skew competition for an 
extended period of time and ensure that any monopoly power, once 
established, will tend to persist. In choosing

[[Page 29070]]

a PC and an operating system, consumers make a large fixed 
investment. In addition, because a considerable amount of learning 
is associated with the use of operating systems and associated 
applications, and because files created under one applications 
software program may not be easily or perfectly transferable to 
others, there are large costs associated with switching. As a 
result, consumers will evaluate, among other factors, the current 
existence of compatible applications and the likely number of future 
compatible applications.\8\ The current number of compatible 
applications is likely to depend directly on the past and current 
market share of the operating system. A consumer's reasonable 
evaluation of the prospects for the continued support of his or her 
favorite applications and the development of new applications is 
also likely to be based on current market share. As a result, 
increased market share indirectly increases the desirability of an 
operating system.
---------------------------------------------------------------------------

    \8\ Nicholas Economides (1996), "The Economics of 
Networks." International Journal of Industrial Organization, 
14:2.
---------------------------------------------------------------------------

    Empirically, this applications barrier to entry is dramatic. At 
its peak in the mid-1990s, IBM's operating system, OS/2 Warp, had 10 
percent of the market for operating systems for Intel-compatible PCs 
and ran approximately 2,500 applications. In contrast, Windows 
supported over 70,000 applications.\9\ Establishing a new operating 
system that effectively competes head-to-head with Windows would 
require the hugely expensive task of attracting ISVs to port 
thousands or even tens of thousands of programs to the new operating 
system, a process with a substantial fixed cost and, in the absence 
of a large guaranteed market, little scope to benefit from economies 
of scale. Particularly important to the applications barrier to 
entry is the availability of applications providing key 
functionalities, such as office productivity. Microsoft's dominance 
in this area, and its choice about whether or not to port its 
Microsoft Office program to alternative operating systems, can add a 
new and even higher level to the applications barrier to entry.
---------------------------------------------------------------------------

    \9\ Findings of Fact, 40 and 46, 84 F. Supp. 
2d at 20, 22.
---------------------------------------------------------------------------

    With this barrier to entry, a monopoly once established may be 
hard to dislodge. Anticompetitive practices early in the competitive 
struggle can lead to a market dominance that can persist, even if 
the anticompetitive practices which gave rise to the monopoly 
position are subsequently prohibited. These hysteresis effects are 
reinforced by switching costs. Learning a language or a program 
interface may involve significant costs. Users must therefore be 
convinced that an alternative program is substantially superior if 
they are to be induced to incur the learning and other costs 
associated with switching to an alternative product. These 
"lock in" effects make it more difficult to dislodge a 
firm that has established a dominant position, even when it is 
technically inferior to rivals.
    This perspective has two important policy implications. First, 
it is imperative to address anticompetitive practices as quickly as 
possible. Delay is not only costly, but it impedes the restoration 
of competition even in the longer run. Second, prohibiting the 
practices that gave rise to the monopoly may not suffice to restore 
competition. Stronger conduct, and possibly structural, remedies may 
be required.
    B. Potential for competition
    In the most simplistic view, a monopoly once attained is 
permanent. Increasing returns to scale and network externalities 
make the monopolist impregnable--any new entrant can be priced 
out of business by the monopolist--which can then go back to 
charging the monopoly price for the product.
    In contrast to this simplistic static view, the economist Joseph 
Schumpeter presented a dynamic vision of technological change giving 
rise to a series of temporary monopolies. In his vision, the most 
successful firm in a winner-take-all contest would become a 
temporary monopolist, benefiting from the rents that this monopoly 
confers--a process necessary to justify incurring the sunk 
costs in research and development required to obtain the monopoly in 
the first place. But, in the Schumpeterian vision, this monopoly 
would eventually be toppled by entry as a newly innovative entrant 
displaced the monopolist with a superior product, thus reaping the 
benefits of increasing returns to scale and network 
externalities.\10\
---------------------------------------------------------------------------

    \10\ Joseph Schumpeter (1942 / 1984), Capitalism, 
Socialism and Democracy. Harper Collins, New York.
---------------------------------------------------------------------------

    The real world likely lies somewhere between these two views. A 
monopoly is not a fixed part of the economic landscape. But the 
downfall of a monopoly is not inevitable. In fact, more recent 
economic research strongly indicates that Schumpeter's conclusion 
was wrong; when restraints on anticompetitive conduct are absent, a 
monopoly can take steps to ensure that it is likely to be 
perpetuated.\11\ These steps can suppress the overall level of 
innovation and have other high social costs.\12\ Significant network 
effects combined with switching costs, as discussed above, represent 
one way in which a firm can perpetuate its market power.
---------------------------------------------------------------------------

    \11\ See, among other references, Richard Gilbert and 
David Newbery (1980), "Preemptive Patenting and the 
Persistence of Monopoly." American Economic Review 72(3), pp. 
514-526 and Partha Dasgupta and Joseph Stiglitz (1980), 
"Uncertainty, Market Structure and the Speed of 
R&D," Bell Journal of Economics, 11 (1), pp. 1-28.
    \12\ Joseph Stiglitz (1987). "Technological Change, 
Sunk Costs, and Competition." Brookings Papers on Economic 
Activity, 3, pp. 883-937.
---------------------------------------------------------------------------

    Understanding this point is central to understanding what 
motivated the actions of Microsoft in promoting Internet Explorer 
and restraining Netscape and Java, and also to understanding the 
motivations of a conduct remedy to improve competition. Network 
externalities are not a "fixed factor" in the economic 
landscape. They depend, at least in part, on decisions by the 
monopolist. A monopolist has substantial resources at its disposal 
to strengthen barriers to entry and thus to maintain and strengthen 
its monopoly power. Exclusionary conduct by the monopoly can be used 
to prevent a reduction in the barriers to entry or even 
affirmatively to raise them even higher. Java and Netscape would 
have reduced the monopoly power of Windows by allowing a greater 
variety of programs to function on a greater variety of operating 
systems. The social benefits from such innovation were likely 
significant, but Microsoft would have experienced significant losses 
from the innovation through the erosion of its monopoly power.
    Similarly, this same point can provide the rationale for 
structural or conduct remedies that can potentially reduce barriers 
to entry and thus increase competition in part, or all, of the 
market. The fundamental idea is that Microsoft acted as it did 
because it was afraid that Netscape and Java would reduce the 
applications barrier to entry and thus undermine its operating 
systems monopoly. By preventing this anticompetitive behavior, and 
indeed promoting competition, a conduct remedy could have precisely 
the opposite effect, creating the conditions for the dynamic, 
innovative Schumpeterian competition that would otherwise be absent 
in this market. In understanding the monopoly in the operating 
systems market, and how it fits into the overall PC platform, it is 
useful to introduce some issues specific to this area. Timothy 
Bresnahan, a Professor of Economics at Stanford University and a 
former Deputy Assistant Attorney General and Chief Economist at the 
U.S. Department of Justice Antitrust Division, formulated the 
concept of "Divided Technical Leadership." \13\ 
The concept is that although each aspect of the platform is 
dominated by a single company, different companies dominate 
different "layers" of the platform: "At one stage, 
all of IBM and Compaq (computer), Microsoft (OS), Intel (CPU), 
Netware (networking OS), WordPerfect and Lotus (near-universal 
applications) participated in technological leadership of the PC 
platform." \14\ In a situation of divided technical 
leadership, according to Bresnahan, competition comes from two 
sources: "(1) firms in one layer encouraging entry and epochal 
change in another layer and (2) rivalry at layer 
boundaries." \15\ To the degree that divided technical 
leadership is absent, because for example Microsoft controls many of 
the layers (operating system, office applications, networking, 
browsers, etc.), competition will be restricted. Any measures to 
facilitate divided technical leadership, even if they leave the 
monopoly at any given layer intact, will facilitate competition and 
thereby benefit consumers in the form of greater innovation, more 
choices, and lower prices.
---------------------------------------------------------------------------

    \13\ Timothy Bresnahan and Shane Greenstein (1999), 
"Technological Competition and the Structure of the Computer 
Industry." Journal of Industrial Economics, 47(1): pp. 
1-40 and Bresnahan (2001).
    \14\ Bresnahan (2001), p. 5.
    \15\ Bresnahan (2001), p. 6.
---------------------------------------------------------------------------

    C. Consequences of monopoly
    Traditional economic theory suggests that the principal 
consequence of a monopoly is to raise prices and restrict 
production. This combination has two consequences. First, higher 
prices allow the monopolist to capture some of the surplus 
previously enjoyed by

[[Page 29071]]

consumers. Second, restricted production results in a deadweight 
loss for society, the so-called "Harberger triangle," to 
the extent that the value placed on the forgone consumption by 
consumers exceeds its cost to producers.\16\
---------------------------------------------------------------------------

    \16\ Arnold Harberger (1954), "Monopoly and Resource 
Allocation," AEA Papers and Proceedings, 44: 77-87.
---------------------------------------------------------------------------

    Over the last few decades, economists have substantially 
enhanced this traditional theory and explored other ways in which 
market power imposes social costs. The modem view is that when 
competition is imperfect, firms try to maintain and extend their 
market power by taking actions to restrict competition. In the world 
of perfect competition, the source of success for firms is producing 
innovations that benefit consumers and reduce prices. In the world 
of imperfect competition, an additional--and perhaps 
paramount--source of success is the effort to reap monopoly 
profits, capture rents, deter entry into the market, restrict 
competition, and raise rivals" costs.\17\
---------------------------------------------------------------------------

    \17\ Partha Dasgupta and Joseph Stiglitz (1998), 
"Potential Competition, Actual Competition and Economic 
Welfare." European Economic Review, 32: 569-577. For an 
extended discussion and additional references see Joseph Stiglitz 
(1994), Whither Socialism, MIT Press, Cambridge.
---------------------------------------------------------------------------

    Under the new view, the social costs of monopolies go well 
beyond the "Harberger triangles" that result from higher 
prices and restricted output. In fact, even if the monopolist is not 
currently restricting output, the steps taken to maintain the 
monopoly will result in substantial economic inefficiencies and 
costs to society. These costs may be far larger than the monopoly 
profits and far larger than the Harberger triangles. These social 
losses reflect higher costs of production (both for the firm and its 
rival), limited or distorted investment in innovation, a restricted 
set of potentially inferior choices for consumers, and, in the long 
run, higher prices.
    D. Monopolies and innovation
    The information technology industry is characterized by a rapid 
rate of technological change. As the modem theory of competition and 
monopoly underscores, it is important to focus not just on the 
static issues that affect consumers today, but also on how the 
mixture of monopoly, competition, and the intellectual property 
regime affects the pace and direction of innovation. Schumpeter 
emphasized that monopolies would provide both the incentives and the 
means for innovation. According to Schumpeter, the fear of losing 
monopoly rents would drive a monopolist to continue innovating and 
these monopoly rents--or the promise of further monopoly rents 
in the future--would provide the financing for these 
innovations. Schumpeter's vision contains elements of truth: the 
threat of competition may induce monopolists to invest more in 
innovation than it otherwise might. But the pace of innovation may 
be even higher if the incumbent's monopoly power were curtailed. 
Monopoly power could lower the pace of innovation for four reasons.
    First, previous innovations are inputs into any subsequent 
innovation. Monopoly power can be thought of as increasing the cost 
of one of the central inputs into follow-on innovations. Standard 
economic theory predicts that as the cost of inputs into any 
activity increases, the level of that activity falls.
    Second, with more substantial barriers to entry, the threat of 
Schumpeterian competition and therefore the incentives to innovate 
are diminished. In the extreme case, if a monopoly could ensure that 
there were no threat of competition, it would no longer have to 
innovate. A monopolist's anticompetitive actions to raise barriers 
to entry will reduce its future incentives to innovate; similarly 
measures that increase competition will increase the Schumpeterian 
incentive.
    Third, innovation itself may be misdirected in order to secure a 
monopoly by deterring entry and raising rivals" costs. In 
operating systems, for example, the development of alternative 
proprietary standards and the construction of non-interoperable 
middleware are examples of innovations that could potentially 
strengthen monopoly power.
    Fourth, the incentives of a monopoly to innovate are 
limited.\18\ Since a monopolist produces less than the socially 
optimal output, the savings from a reduction in the cost of 
production are less than in a competitive market. Also, a 
monopolist's incentives to undertake research will not lead it to 
the socially efficient level. Rather, its concern is only how fast 
it must innovate in order to stave off the competition--a level 
of innovation that may be markedly lower than socially optimal. 
Consider, for example, a simple patent race in which a monopoly 
incumbent can observe the position (at least partially) of potential 
rivals. The monopolist's incentive is to move out in front of the 
potential rivals by just enough to convince them that they cannot 
beat the monopolist. Given those beliefs, the rivals do not engage 
in research, and the monopolist can then slow down its research to a 
lower level (since it no longer faces a viable threat).
---------------------------------------------------------------------------

    \18\ Kenneth Arrow (1962), "Economic Welfare and the 
Allocation of Resources for Invention." In The Rate and 
Direction of Inventive Activity, Princeton University Press, 
Princeton: pp. 609-625.
---------------------------------------------------------------------------

    In short, monopolization not only harms consumers by raising 
prices and reducing output in the short run, but may reduce 
innovation in the long run. These long-run harms, which are 
especially important in innovative industries, may substantially 
exceed the short-run costs to consumers.
    V. FACTS AND LEGAL CONCLUSIONS RELATING TO MICROSOFT
    In its decision, the Court of Appeals affirmed the District 
Court's overall judgment, albeit on a narrowed factual and legal 
basis. The Court of Appeals concluded that "Microsoft violated 
 2 of the Sherman Act by employing anticompetitive means 
to maintain a monopoly in the operating system 
market." \19\ In addition, the Court of Appeals 
overturned the lower court's judgment that Microsoft violated 
 2 of the Sherman Act by attempting to monopolize the 
web browser market. The Court of Appeals remanded the decision on 
whether the tying of Internet Explorer to Windows violated 
 1 of the Sherman Act and indicated that tying should be 
evaluated under the rule of reason, rather than under a per se rule; 
the U.S. Department of Justice chose not pursue this issue further. 
The Court of Appeals also vacated the District Court's Final 
Judgment, in part because of the narrowed scope of the judgment on 
the conclusions of law.
---------------------------------------------------------------------------

    \19\ 253 F.3d at 46
---------------------------------------------------------------------------

    The current task in this case is to develop a remedy that 
addresses the central finding of the Court of Appeals: the 
monopolization of the operating systems market. This judgment was 
based on findings of fact and conclusions of law in three areas: 
Microsoft has monopoly power in the relevant market, Microsoft 
behaved anticompetitively, and Microsoft's anticompetitive behavior 
contributed to the maintenance of its monopoly. These are briefly 
discussed in turn.
    A. Monopoly power
    Monopoly power is the power to set prices without regard to 
competition. It can be inferred by the combination of market share 
in the relevant market and significant barriers to entry. The 
District Court found that Microsoft's share of the worldwide market 
for Intel-compatible PC operating systems exceeded 90 percent in 
every year of the 1990s and has risen to more than 95 percent in 
recent years. Microsoft did not dispute these facts, but instead 
argued that the relevant market was broader and should include all 
platform software (e.g., servers, handheld devices, Macintosh 
computers, etc.). The Court of Appeals, however, rejected 
Microsoft's attempt to broaden the definition of the market, 
agreeing with the District Court that these other platforms were not 
"reasonably interchangeable by consumers for the same 
purposes." \20\
---------------------------------------------------------------------------

    \20\ 253 F.3d at 52, quoting United States v. E.I. du Pont 
de Nemours & Co., 351 U.S. 377, 395 (1956).
---------------------------------------------------------------------------

    In addition, the Court of Appeals affirmed the finding that 
Microsoft's dominant market share was likely to persist. This 
conclusion was based on the substantial barriers to entry, including 
increasing returns to scale and the applications barrier to entry 
discussed above. As a result, according to the Court of Appeals, 
"Because the applications barrier to entry protects a dominant 
operating system irrespective of quality, it gives Microsoft the 
power to stave off even superior new rivals. The barrier is thus a 
characteristic of the operating systems market, not of Microsoft's 
popularity." \21\
---------------------------------------------------------------------------

    \21\ 253 F.3d at 56.
---------------------------------------------------------------------------

    B. Anticompetitive behavior
    The Court of Appeals found numerous instances where Microsoft 
behaved anticompetitively through exclusionary conduct that harmed 
consumers, had an anticompetitive effect, and had either no 
"procompetitive justification" or an insufficient 
"procompetitive justification" to outweigh the harm. 
These actions, according to the Court of Appeals, had the intention 
and effect of preserving or increasing the applications barrier to 
entry. The Court of Appeals upheld most of the general categories of 
anticompetitive behavior originally found by the District Court, but 
overturned some of the District Court's

[[Page 29072]]

specific findings in these areas. The key instances of this 
anticompetitive behavior found by the Court of Appeals include:
    . Restrictive Licenses to Original Equipment Manufacturers 
(OEMs).\22\ Microsoft's Windows license placed restrictions on OEMs 
that limited their ability to change the look of the Windows 
desktop, the placement or removal of icons for browsers, or the 
initial boot sequence. The result was to increase the user share of 
Internet Explorer, not because of its merits, but because Microsoft 
limited the crucial OEM channel of distribution for Explorer's chief 
rival, Netscape.
---------------------------------------------------------------------------

    \22\ The Court of Appeals narrowed the scope of this 
anticompetitive behavior slightly, rejecting the District Court's 
finding that Microsoft's restrictions on alternative interfaces was 
anticompetitive, arguing that the "marginal anticompetitive 
effect" of Microsoft's license restrictions was outweighed by 
the alternative, the "drastic alteration of Microsoft's 
copyrighted work." See 253 F.3d at 63.
---------------------------------------------------------------------------

    . Integration of Internet Explorer into Windows.\23\ Microsoft 
discouraged OEMs from installing other browsers and deterred 
consumers from using them by not including Internet Explorer in the 
Add/Remove programs list for Windows 98 and commingling the 
operating system and browser code.
---------------------------------------------------------------------------

    \23\ The Court of Appeals, however, overruled the District 
Court in one instance, finding a sufficient justification for the 
fact that in certain situations Internet Explorer will override user 
defaults and launch, for example when alternative browsers do not 
provide the functionality required by Windows Update. See 253 F.3d 
at 67.
---------------------------------------------------------------------------

    . Agreements with Internet Access Providers (IAPs).\24\ 
Microsoft engaged in exclusionary conduct to restrict the second 
main distribution channel for Netscape by offering IAPs, including 
America Online, the opportunity to be prominently featured in 
Windows in exchange for using the Internet Explorer browser 
exclusively.
---------------------------------------------------------------------------

    \24\ The Court of Appeals found that several inducements 
offered by Microsoft to encourage IAPs to use Internet Explorer were 
not anticompetitive. See 253 F.3d at 68.
---------------------------------------------------------------------------

    . Dealings with ISVs and Apple.\25\ Microsoft further restricted 
additional outlets for Netscape by providing ISVs with preferential 
access to information about forthcoming releases of Windows 98 in 
exchange for their writing to Internet Explorer rather than 
Netscape. In addition, Microsoft negotiated with Apple to restrict 
the ability of Macintosh consumers to use Netscape in exchange for 
continuing to develop and support Microsoft Office for the Macintosh 
operating system.
---------------------------------------------------------------------------

    \25\ The Court of Appeals overturned the finding that 
Microsoft's deals with Internet Content Providers were 
anticompetitive. See 253 F.3d at 71.
---------------------------------------------------------------------------

    . Polluting Java. The Court of Appeals also found that much of 
Microsoft's behavior visa-vis Java was an attempt to limit a threat 
to its operating system monopoly rather than benefit consumers. 
These illegal actions included entering into contracts requiring 
ISVs to write exclusively to Microsoft's Java Virtual Machine, 
misleading ISVs into thinking that Microsoft's Java tools were 
cross-platform compatible, and forcing Intel to terminate its work 
with Sun Microsystems on Java.\26\
---------------------------------------------------------------------------

    \26\ See 253 F.3d at 74-78. The Court of Appeals, 
however, found a sufficient procompetitive justification for 
Microsoft's development of its own version of a Java virtual 
machine. See id. at 74-75.
---------------------------------------------------------------------------

    C. Effectiveness of anticompetitive behavior in maintaining the 
monopoly
    Finally, the Court of Appeals found that Microsoft's 
anticompetitive efforts to increase usage of Internet Explorer and 
Microsoft's Java Virtual Machine at the expense of Netscape and 
Sun's Java had the effect of increasing the applications barrier to 
entry and thus helping to maintain Microsoft's monopoly of the 
market for operating systems for Intel-compatible PCs. This finding 
is the crucial link to the economics of the case; a monopoly is 
neither automatically permanent nor automatically transient. Rather, 
its persistence depends, in part, on the barriers to entry which, in 
turn, depend on the actions of the monopolist and the regulation of 
the government. This finding is also crucial to the development of 
proposed remedies.
    Specifically, the Court of Appeals found that although neither 
Netscape nor Java posed an imminent threat of completely replacing 
all the functions of the operating system (and thus should be 
excluded from the definition of the relevant market for the test of 
monopoly power), they did pose a nascent threat to Microsoft's 
future dominance of the operating system market. Though not part of 
the "operating systems market," they clearly affected 
the nature of competition in this market. Both Netscape and Java 
established Applications Programming Interfaces (APIs) that allowed 
developers to write some programs to Netscape and Java. These 
programs would then be able to run on any operating system that runs 
Netscape or Java. The result would be, at least in one segment of 
applications, a dramatic reduction in the applications barrier to 
entry. No longer would software developers have to incur additional 
costs to run on additional operating systems. As a result, Netscape 
and Java had the potential to act as a crucial level of 
"middleware" between the operating system and the 
programs, and eventually could "commoditize the underlying 
operating system," to use the memorable words of then-
Microsoft Chairman and CEO Bill Gates in an internal memo.\27\
---------------------------------------------------------------------------

    \27\ United States v. Microsoft Corp., Government Exhibit 
20.
---------------------------------------------------------------------------

    The Court of Appeals wrote:
    We may infer causation when exclusionary conduct is aimed at 
producers of nascent competitive technologies as well as when it is 
aimed at producers of established substitutes... the question in 
this case is not whether Java or Navigator would actually have 
developed into viable platform substitutes, but (1) whether as a 
general matter the exclusion of nascent threats is the type of 
conduct that is reasonably capable of contributing significantly to 
a defendant's continued monopoly power and (2) whether Java and 
Navigator reasonably constituted nascent threats at the time 
Microsoft engaged in the anticompetitive conduct at 
issue." \28\
---------------------------------------------------------------------------

    \28\ 253 F.3d at 79.
---------------------------------------------------------------------------

    The court answered in the affirmative on both issues.
    VI. OUTLINE OF AN EFFECTIVE CONDUCT REMEDY
    The Court of Appeals was clear that the District Court has 
"broad discretion" to fashion a remedy that is 
"tailored to fit the wrong creating the occasion for the 
remedy." \29\ In the CIS, the Department of Justice 
appears to take a minimal view of the goals of a remedy, writing 
that it should "eliminate Microsoft's illegal practices, 
prevent recurrence of the same or similar practices, and restore the 
competitive threat that middleware products posed prior to 
Microsoft's unlawful undertakings." \30\ We believe that 
the PFJ fails even within the narrow terms that the Department of 
Justice set for itself.
---------------------------------------------------------------------------

    \29\ 253 F.3d at 105, 107.
    \30\ CIS, p. 3.
---------------------------------------------------------------------------

    The Court of Appeals appears to provide guidance for a broader 
remedy, quoting the Supreme Court in saying that the role of a 
remedies decree in an antitrust case is to "unfetter a market 
from anticompetitive conduct" and "terminate the illegal 
monopoly, deny the defendant the fruits of its statutory violation, 
and ensure that there remain no practices likely to result in 
monopolization in the future." \31\
---------------------------------------------------------------------------

    \31\ 253 F.3d at 103, quoting Ford Motor Co. v. United 
States, 405 U.S.562, 577 (1972).
---------------------------------------------------------------------------

    One type of potential remedy, imposed by the District Court but 
vacated by the Court of Appeals, is structural. Such a structural 
remedy would involve breaking Microsoft into two or more companies 
with the goal of establishing a new set of incentives that foster 
competition. Although potentially disruptive in the short run, the 
goal of a structural remedy is to terminate the monopoly and create 
the structural conditions to prevent it from re-emerging, without 
requiring ongoing regulation or supervision by the court or the 
government. Such structural remedies are particularly suitable when 
there have been a wide variety of anticompetitive practices in the 
past and when changing market conditions (such as innovation) 
provide opportunities for new types of anticompetitive conduct in 
the future. Structural remedies have the further advantage of 
fundamentally altering incentives.
    A second type of potential remedy relates to conduct or 
licensing, seeking to prevent anticompetitive conduct and foster 
competition. A conduct remedy has the advantage of avoiding the 
dramatic and potentially deleterious changes associated with a 
structural remedy, but suffers from the defect that it is 
necessarily complicated and requires at least some involvement of 
the court and the government in regulating private enterprise. 
Ideally, a conduct remedy would also be structured to affect 
incentives: in particular, such a remedy should raise the costs of 
acting in an exclusionary manner.
    The remainder of this section discusses an outline of the 
elements of an effective conduct remedy that seeks to achieve three 
goals: creating more choices for consumers, reducing the 
applications barrier to entry, and preventing Microsoft from 
strengthening

[[Page 29073]]

its operating systems monopoly by bringing new products within its 
scope.
    A. Creating more choices for consumers
    A conduct remedy should empower rival computer companies to 
modify their own versions of the computer experience to appeal to 
consumers. Not only will consumers benefit from the greater product 
choice, but entry and competition may be enhanced as consumers learn 
how to interact with a variety of interfaces. At a minimum, 
empowering OEMs and possibly ISVs to create more choices for 
consumers would involve: (1) the right to modify the desktop, the 
start menu, or other fundamental aspects of the computer experience 
so that OEMs can market PCs with alternative overall 
"looks", different software packages (including 
supplementing, replacing, or removing Microsoft middleware), and to 
offer lower-priced options with reduced features; (2) adequate 
information and technical access to develop applications for, and 
even modifications to, functionalities included with Windows, which 
would allow ISVs to develop their own bundle of the Windows 
operating system plus applications (and/or minus Microsoft 
middleware) that could be marketed either to OEMs or directly to end 
users; (3) protection from retaliation by Microsoft for engaging in 
this conduct; and (4) financial incentives to make changes that 
benefit consumers.
    B. Reducing the applications barrier to entry
    The central goal of Microsoft's illegal conduct was to preserve 
and strengthen the applications barrier to entry so that the Windows 
operating system continued to be essential to desktop computing. An 
effective conduct remedy in this case should take steps to reduce 
the applications barrier to entry, by creating conditions conducive 
to more competition and by requiring Microsoft to undertake actions 
that would lower that barrier. Reducing the applications barrier to 
entry is consistent with the findings of the Court of Appeals and is 
central to an effective remedy in this case. Although the Court of 
Appeals rejected or remanded the District Court's findings of 
liability for tying and for monopolization of the browser market, 
both of these actions were central to the Court's finding of 
liability on the  2 Sherman Act violation for 
monopolizing the market for operating systems. The Court found that 
Microsoft used commingling of code and other exclusionary measures 
to increase the market share for Internet Explorer and reduce the 
distribution of Netscape and Java in order to strengthen the Windows 
monopoly.
    There are two specific aspects to reducing the applications 
barrier to entry: (1) encouraging competition in middleware in a 
manner that makes it easier for developers to write programs that 
run on a variety of operating systems, and (2) requiring Microsoft 
to port its dominant applications to alternative operating systems.
    C. Preventing Microsoft from strengthening its operating system 
monopoly by bringing new products within its scope
    Microsoft's ability to leverage its Windows monopoly to control 
other aspects of computing that then reinforce the Windows monopoly 
is a key part of its strategy of anticompetitive conduct that formed 
the foundation for the Court of Appeals ruling. To deal with the 
anticompetitive practices that are "likely to result in 
monopolization in the future" requires a remedy that addresses 
not just areas of past misconduct, but emerging areas as well.
    The next section compares the actual agreement to these 
elements.
    VII. ANALYSIS OF THE PROPOSED FINAL JUDGMENT
    The PFJ fails to fulfill even the minimal goals set by the CIS. 
It does not address many of the proven illegal practices, including 
commingling, polluting Java, and strengthening the applications 
barrier to entry more broadly. Furthermore, in our judgment the PFJ 
would not "restore the competitive threat that middleware 
products posed prior to Microsoft's unlawful 
undertakings." \32\ Nothing in the PFJ would be likely 
to resuscitate the conditions of greater "divided technical 
leadership" that prevailed in the mid-1990s when Netscape and 
Java both presented a serious threat to Microsoft, which Microsoft 
suppressed through anticompetitive actions.
---------------------------------------------------------------------------

    \32\ CIS, p. 3.
---------------------------------------------------------------------------

    The PFJ also falls dramatically short of all three elements of 
the guidelines that appear to have been endorsed by the Court of 
Appeals for the DC Circuit: it allows Microsoft's illegal monopoly 
in operating systems to continue and perhaps even be strengthened, 
it allows Microsoft to keep the fruits of its statutory violation, 
and it leaves intact all of the incentives and many of the 
means--for Microsoft to maintain and extend its monopoly in the 
future, especially in the important emerging areas of web services, 
multimedia, and hand-held computing.
    The main impact of the PFJ is to codify much of Microsoft's 
existing conduct. Where the agreement limits Microsoft's conduct, 
there are often sufficient exceptions, loopholes, or alternative 
actions that Microsoft could undertake to make the initial conduct 
limits meaningless.
    Even where the limits are binding, Microsoft could still flout 
the conduct restrictions without fear of a timely enforcement 
mechanism. Because the Technical Committee \33\ is essentially 
advisory and only has expertise in software design, not law and 
marketing, the only enforcement of the PFJ is through a full legal 
proceeding--which would provide enough time for Microsoft to 
inflict irreversible harm on competition. The time issues are 
especially important because in a market characterized by increasing 
returns to scale and network externalities, once a dominant position 
is established it will be hard to reverse, even if the original 
abusive practices are subsequently circumscribed.
---------------------------------------------------------------------------

    \33\ The Technical Committee consists of three experts in 
"software design and programming"--one appointed by 
Microsoft, one by the plaintiffs, and the third by these previous 
two. The Committee would have broad access to internal Microsoft 
documents, source code, etc. It would be responsible for reporting 
any violations of the PFJ to the plaintiffs. They would not, 
however, be able to rely on the work of the Technical Committee in 
Court proceedings. See PFJ, Section IV.B.
---------------------------------------------------------------------------

    The fundamental problem with the agreement is that it does not 
change the incentives that Microsoft faces. All of the illegal 
anticompetitive actions identified by the District Court and 
affirmed by the Court of Appeals were the result of rational 
decisions by Microsoft about how best to enhance its value by 
maintaining and expanding its monopoly. These same incentives will 
persist under the PFJ; given these incentives, it impossible to 
foresee--let alone effectively prohibit--the wide variety 
of potentially anticompetitive conduct that may result. Indeed, the 
reason that many economists have argued for the more drastic 
structural settlement (such splitting up Microsoft) is that such 
structural changes would alter incentives.\34\ Though the Court of 
Appeals has determined that such a remedy might be too drastic, the 
imperative in evaluating any remedy is to ascertain its impact on 
incentives.
---------------------------------------------------------------------------

    \34\ See, for example, Robert Litan, Roger Noll, and 
William Nordhaus (2002), "Comment of Robert E. Litan, Roger D. 
Noll, and William D. Nordhaus on the Revised Proposed Final 
Judgment." United States v. Microsoft Corp., Before the 
Department of Justice. The point is simple: now strategy with 
respect both to applications and the operating system is designed to 
maximize total profits, including the monopoly profits. With 
structural separation, applications would be designed and marketed 
to maximize their own profits, with no regard to how this might 
affect the profitability of the operating system.
---------------------------------------------------------------------------

    The following analyzes the details of the PFJ by comparing it to 
the principles outlined in the previous section. Our discussion does 
not aim to be comprehensive, but instead to focus on areas that 
illustrate or represent important economic aspects of the PFJ. 
Although the enforcement aspects of the PFJ, in particular the 
powers of the Technical Committee, are essential to understanding 
the limitations of the agreement, we only briefly discuss these 
issues.
    A. Creating more choices for consumers
    In developing a remedy, the court is well aware of its technical 
shortcomings in deciding exactly what should or should not be 
included as part of an operating system today--or in the 
future. Neither should these determinations be made solely by a 
monopolist. These choices should be made by consumers through the 
choices they have between different OEMs and ISVs. Stanford Law 
Professor Lawrence Lessig described this strategy as follows: 
"To use the market to police Microsoft's monopoly... by 
assuring that computer manufacturers and software vendors remain 
free to bundle and support non-Microsoft software without fear of 
punishment by Microsoft." \35\ We agree with Professor 
Lessig that this should be among the goals of a final judgment and 
that the current agreement is woefully inadequate in meeting this 
objective. In our view, this is in fact a minimal objective that 
mitigates some of the harms to consumers from Microsoft's monopoly 
position but, by itself, would do little to reduce the applications 
barrier to entry or facilitate competition in the operating systems 
market itself.
---------------------------------------------------------------------------

    \35\ Lawrence Lessig (December 12,2001). "Testimony 
before the Senate Committee on the Judiciary."
---------------------------------------------------------------------------

    As noted above, a remedy that turns this overall strategy into a 
reality requires four

[[Page 29074]]

different elements: (1) ensuring that OEMs and potentially ISVs have 
the right to modify the desktop, the start menu, or other 
fundamental aspects of the computer experience in any way they 
choose; (2) ensuring that OEMs and ISVs have adequate information 
and technical access to develop applications for, and even 
modifications to, Windows; (3) ensuring that they are protected from 
retaliation by Microsoft for providing alternatives to consumers; 
and (4) ensuring that they have financial incentives to make changes 
that benefit consumers. The PFJ is deficient in all four.
    1. Ensuring that OEMs and potentially ISVs have the right to 
modify fundamental aspects of the computer experience in any way 
they choose
    The PFJ codifies several new rights for OEMs to modify the 
desktop or the computer experience, some of which were already 
voluntarily announced by Microsoft on July 11, 2001 and implemented 
with the release of Windows XP on October 25, 2001. Specifically, 
Section III.C of the PFJ prohibits Microsoft from restricting OEMs 
from "Installing or displaying icons, shortcuts, or menu 
entries for, any Non-Microsoft Middleware... distributing or 
promoting NonMicrosoft Middleware by installing and displaying on 
the desktop shortcuts of any size or shape..." among other 
actions.
    This new required latitude, however, is unduly limited in 
several respects:
    --New flexibility is quite narrow. OEMs can only modify the 
initial boot screen to market IAPs to users, but cannot modify it to 
uninstall Microsoft middleware or to market middleware that competes 
with Microsoft middleware (Section III.C.5). Nothing in the PFJ 
would allow ISVs to acquire licenses to create their own bundles of 
Windows plus applications to market to consumers or OEMs, a measure 
that could enhance competition by bringing additional participants 
with substantial experience in software development into the market. 
While the benefits to consumers and competition of allowing ISVs to 
acquire such licenses are evident, Microsoft would only be harmed to 
the extent that it reduces its monopoly power. There is no other 
convincing explanation for these restrictive trade practices.
    --It contains several limitations that limit the overall 
look of Non-Microsoft Middleware and pace of innovation. For 
example, the PFJ requires that the user interface on automatically 
launched Non-Microsoft Middleware \36\ must be "of 
similar size and shape to the user interface displayed by the 
corresponding Microsoft Middleware Product", can only be 
launched when a similar Microsoft product would have been launched, 
and Microsoft can impose non-discriminatory bans on icons (Section 
III.C.3). In addition to the fact that these limitation are 
frivolous, asymmetric, and would seem to serve no purpose other than 
restricting competitive threats--no such limitations apply to 
Microsoft--they could also have a severe impact in limiting 
competition. Specifically, it allows Microsoft to control the pace 
of innovation in the computer experience, letting Microsoft delay 
the effective launch of a new type of product until it is ready to 
compete in that area. Thus both competition and innovation may be 
impeded.
---------------------------------------------------------------------------

    \36\ As defined in Section VI.M.
---------------------------------------------------------------------------

    It is unnecessarily delayed. Specifically, Section III.H gives 
Microsoft up to 12 months or the release of Service Pack 1 for 
Windows XP, whichever is sooner, to provide end users and OEMs a 
straightforward mechanism to remove icons, shortcuts, or menu 
entries for Microsoft Middleware Products or to allow OEMs or end 
users to designate alternative Non-Microsoft Middleware 
Products \37\ to be invoked by the Windows operating system in 
place of Microsoft Middleware Products.\38\ There is certainly no 
economic or legal justification for this delay and our understanding 
is that it is technically feasible to carry out these changes in a 
few weeks time, as demonstrated by Microsoft's July 11, 2001 
voluntary agreement to implement elements of this provision. As we 
have emphasized, there can be significant long-run consequences for 
competition from even short delays.
---------------------------------------------------------------------------

    \37\ As defined in Section VI.N.
    \38\ As defined in Section VI.K.
---------------------------------------------------------------------------

    Microsoft could encourage users to undo changes after 14 days. 
The value of the new contractual freedoms is limited by Microsoft's 
ability to encourage the user to undo all OEM changes after 14 days 
by allowing a user-initiated "alteration of the OEM's 
configuration... 14 days after the initial boot up of a new Personal 
Computer." (Section III.H.3) This provision, in effect, would 
allow Microsoft to present a message to end users (e.g., 
"Press 'yes" to optimize your computer for 
multimedia") that could bias choices toward Microsoft 
products, regardless of what the OEM had chosen. This provision 
could therefore greatly reduce the scope and value of the changes 
that OEMs make.\39\
---------------------------------------------------------------------------

    \39\ This provision would allow Microsoft to run the 
"Desktop Cleanup Wizard" that removes unused shortcuts 
from the desktop in a non-discriminatory manner. Nothing in our 
reading of the language of Section III.H.3, however, would limit the 
power of Microsoft to remove all user access to non-Microsoft 
middleware or restore access to Microsoft middleware.
---------------------------------------------------------------------------

    2. Ensuring that OEMs and ISVs have adequate information and 
technical access to develop applications for, or even modifications 
to, Windows
    The right to make modifications to Windows will only work 
effectively if OEMs and ISVs have the knowledge to exercise this 
right. Microsoft currently releases an enormous quantity of 
information on the Windows operating system and its APIs, through 
the Microsoft Developer Network (MSDN) and other means. Indeed, the 
indirect network externalities supporting the Windows monopoly 
provide a strong incentive for Microsoft to ensure that as many 
applications as possible run well on its system. But Microsoft also 
has an incentive to bolster its operating system monopoly by 
selectively withholding timely information to impede or delay the 
development of products that threaten to reduce the applications 
barrier to entry.\40\ In addition, Microsoft has also required 
anticompetitive actions in exchange for information, as in the 
"first wave" agreements found illegal by the Court of 
Appeals.\41\
---------------------------------------------------------------------------

    \40\ For example, the District Court found that Microsoft 
withheld the "Remote Network Access" API from Netscape 
for more than three crucial months in mid-1995. Findings of Fact, 
 90-91, 84 F. Supp. 2d at 33.
    \41\ These agreements, which were entered into between the 
Fall of 1997 and Spring of 1998 between Microsoft and several ISVs, 
provided preferential early access to Windows 98 and Windows NT 
betas and other technical information in exchange for using Internet 
Explorer as the default browser. See See 253 F.3d at 71-72.
---------------------------------------------------------------------------

    The PFJ requires disclosure of "the APIs and related 
Documentation that are used by Microsoft Middleware to interoperate 
with a Windows Operating System Product" (Section III.D) and 
specified Communications Protocols (Section III.E).
    These requirements, however, are deficient in several ways:
    Windows APIs are not covered. In particular, the PFJ does not 
require the disclosure of the APIs used by Windows. Although 
Microsoft already has an incentive to disclose Windows APIs, there 
are circumstances where delay could be more profitable. The 
consequences of this omission are aggravated by the definition in 
Section VI.U: "the software code that comprises a Windows 
Operating System Product shall be determined by Microsoft in its 
sole discretion." Thus, as middleware gets blended in the 
operating system, the scope of disclosures could be narrowed.
    Internet Explorer and other middleware APIs are not covered. 
Furthermore, the agreement does not require the disclosure of the 
APIs used by Internet Explorer. Although the government did not 
prove that Microsoft was guilty of monopolizing the browser market, 
dominating this market played a key role in shoring up its monopoly 
in the operating systems market. As a result, requiring disclosure 
of the APIs for Internet Explorer and other middleware could play a 
role both in denying the fruits of that monopoly and reducing this 
barrier to entry in its operating systems market.
    Definitions could limit disclosure even further. The scope of 
APIs required to be disclosed under the agreement could be 
potentially limited even further by the control Microsoft has over 
what is "Microsoft Middleware" and what is the 
"Windows Operating System Product."
    Additional loopholes further limit disclosure and ability of 
non-Microsoft middleware to fully interoperate with Windows. Section 
III.J. 1 provides a substantial loophole that exempts from the 
disclosure requirements anything that "would compromise the 
security of a particular installation,... digital rights management, 
encryption or authorization systems..." These are all very 
important technologies for Windows Media Player, Passport, the 
Internet Explorer browser, and any of the many programs that rely 
increasingly on security and encryption. In addition to giving 
Microsoft substantial discretion and blurring the disclosure

[[Page 29075]]

requirements further, these exceptions would make it impossible for 
competitors to design middleware that fully interoperated with the 
Windows operating system, leaving certain features only accessible 
to Microsoft middleware.
    Disclosures are not timely. The disclosures are not very timely, 
allowing Microsoft enough time to ensure that its products--and 
products by favored OEMs and ISVs enjoy a substantial "first 
to market" benefit in taking advantage of the functionality of 
the operating system. Microsoft has up to 9-12 months to 
disclose the APIs and communications protocols. In the case of a new 
version of the Windows Operating System Product, the PFJ bases the 
timing of the disclosure on the number of beta testers, effectively 
giving Microsoft substantial discretion over the timing of the 
required disclosures through its definition of the term "beta 
tester" and its control over their number. (Sections III.D and 
VI.R)
    Microsoft could cripple rival products. The PFJ does nothing to 
prevent Microsoft from deliberately making changes in Windows with 
the sole or primary purpose of disabling or crippling 
competitors" software products.
    3. Ensuring that OEMs and ISVs are protected from retaliation by 
Microsoft for providing alternatives to consumers
    The right to make alterations to the Windows desktop will only 
be effective if companies are protected from retaliation for 
exercising it. The PFJ provides some protection against retaliation 
(Section III.A) and requirements for uniform licensing and pricing 
for Microsoft Windows (Section III.B). The protections, however, are 
only partial, in that they omit several important behaviors, still 
leave substantial scope for Microsoft to retaliate, and contain a 
very large loophole.
    First, the prevention against retaliation only applies to a very 
specific set of actions that are specified in the PFJ, such as 
altering the icons on the desktop or promoting an IAP in the initial 
boot sequence. This rule does not apply to other actions by OEMs, 
such as the inclusion of third party software that does not fall 
under the definition of Non-Microsoft Middleware.
    Second, there may still be some scope for discrimination and 
retaliation. Section III.B.3 of the PFJ explicitly gives Microsoft 
the right to use "market development allowances," for 
example to provide a pre-license rebate to selected OEMs on the 
basis of potentially ambiguous joint ventures. Although these 
incentives would have to be offered uniformly, there still could be 
some scope for defining them in an exclusionary manner. Furthermore, 
the relationships between Microsoft and computer companies are very 
complex and multifaceted, leaving substantial scope for retaliation 
in aspects not covered by the PFJ, including potentially the pricing 
of Microsoft Office and the server business.
    Finally, Section III.A allows Microsoft to terminate the 
relationship with an OEM without cause and within a brief span of 
time simply by delivering two notices of termination. With no ready 
substitutes for Windows available, this power would give Microsoft 
substantial leverage in its relationships with OEMs. Although the 
OEM would have the option of litigating Microsoft's denial of 
a Windows license, the text of Section III.A and the lack of 
"bright line" rules in the PFJ would make this 
litigation costly and uncertain--and thus an imperfect means of 
protection against this threat.
    4. Ensuring that OEMs have financial incentives to make changes 
that benefit consumers Even if the three previous conditions were 
met, they would be economically irrelevant if OEMs did not have 
financial incentives to take advantage of the new licensing 
freedoms. The production of PCs is a highly competitive industry 
with very low profit margins.\42\ PCs are virtually a commodity that 
can be priced based on a limited set of characteristics like 
processor speed and hard drive size. All of the steps allowed by the 
PFJ--including installing nonMicrosoft middleware or removing 
user access to Microsoft middleware--entail higher costs for 
the OEMs both in the costs associated with the initial configuration 
of the system and in the added costs of end user support.\43\ In 
addition, OEMs may perceive that Microsoft would take additional 
steps to raise their costs through forms of retaliation either 
permitted by the PFJ or imperfectly banned. These costs may explain 
why, to our knowledge, no major computer manufacturer has yet taken 
Microsoft up on its July 11, 2001 offer to remove access to 
Microsoft middleware and replace it with non-Microsoft 
middleware.\44\
---------------------------------------------------------------------------

    \42\ For example, the Washington Post recently noted that 
profit margins are in "single digits." See Rob Pegoraro 
and Dina El Boghdady (January 20, 2002), "Building Creativity 
Into the Box" Washington Post.
    \43\ In the Microsoft trial numerous industry witnesses 
testified to the user confusion and added support costs associated 
with having alternative browsers pre-installed on a computer. See 
253 F.3d at 71-72.
    \44\ Microsoft Press Release (July 11, 2001), 
"Microsoft Announces Greater OEM Flexibility for 
Windows."
---------------------------------------------------------------------------

    As a result, the key source of greater competition and consumer 
choice in the computer experience--OEMs--would have 
limited economic basis for promoting such choice. In part this is 
because the value of some of the new freedoms obtained by the OEMs 
in the PFJ are limited by loopholes. For example, by allowing 
Microsoft to bar OEMs from marketing non-Microsoft middleware in the 
initial boot sequence, the PFJ removes one source of revenue and 
choice. In addition, allowing Microsoft to encourage users to 
"voluntarily" revert to the Microsoft-preferred 
configuration of icons, the Desktop, and the Start Menu after 14 
days may reduce substantially the value of this screen "real 
estate." As a result, the PFJ precludes some of the principal 
means by which OEMs could be remunerated for providing additional or 
alternative functionality desirable to consumers.
    The more fundamental problem is that OEMs continue to be 
required to license a version of Windows that includes middleware 
like Internet Explorer, Windows Media Player, and Windows Messenger. 
By not requiring Microsoft to sell a cheaper, stripped-down version 
of the operating system--excluding many of these added 
features--the PFJ in effect would require OEMs to pay 
twice--once for Microsoft's version of the product (as bundled 
into the price of Windows) and once for the alternative. Such 
bundling is a particularly invidious way of undermining competition. 
In effect, it implies that the marginal cost of any item in the 
bundle is zero, making competitive entry, even for a superior 
product, impossible. The fact that such entry has occurred is 
testimony to the superiority of the rival products--consumers 
are willing to pay substantial amounts for the alternatives. In 
addition, forced bundling can have adverse effects on consumers, 
because it uses up memory and storage space, and there is always the 
possibility that the commingled code will interfere with the 
performance of other applications.
    In summary, under the PFJ, OEMs are not provided the rights, 
means, protections, or incentives to create alternative choices for 
consumers. As a result, the lynchpin of the PFJ's strategy for 
promoting competition would be greatly attenuated.
    B. Reducing the applications barrier to entry
    The applications barrier to entry was central to the Court of 
Appeals" understanding of this case. It is the principal 
barrier to entry that protects Microsoft's overwhelming dominance of 
the market for operating systems for Intel-compatible PCs. 
Furthermore, the court found that Microsoft engaged in illegal acts 
to increase the applications barrier to entry, principally by 
suppressing Netscape and Java at the expense of Internet Explorer 
and Microsoft's version of Java. Thus, any remedy that is 
"tailored to fit the wrong creating the occasion for the 
remedy" must necessarily take affirmative steps to reduce the 
applications barrier to entry and also prevent Microsoft from 
engaging in anticompetitive actions to increase this barrier. 
Unfortunately, the PFJ barely addresses this central issue.
    The following discusses two key aspects of the applications 
barrier to entry: the use of anticompetitive means to reduce the 
market share of rival middleware (and thus its potential to reduce 
the cost of porting applications to different operating systems) and 
the use of decisions about Microsoft Office to influence the 
prospects of rival operating systems.
    1. Middleware and the applications barrier to entry
    The CIS states that under the PFJ, "OEMs have the 
contractual and economic freedom to make decisions about 
distributing and supporting non-Microsoft software products that 
have the potential to weaken Microsoft's personal computer operating 
system monopoly without fear of coercion or retaliation by 
Microsoft." \45\ Even if the PFJ did give OEMs this 
contractual and economic freedom without fear of retaliation, and 
the previous subsection expressed severe doubts on this point, it 
still would do little if anything to weaken Microsoft's operating 
system monopoly.
---------------------------------------------------------------------------

    \45\ CIS, p. 25.
---------------------------------------------------------------------------

    Enhancing competition by allowing OEMs and ISVs to provide 
consumers with a greater

[[Page 29076]]

variety of choices, the subject of the previous subsection, is in 
some sense literally superficial. It involves the ability of firms 
in the computer industry to change the outer appearance of a 
computer and the way it is perceived and used by users, including 
the ability and ease of accessing programs that are included with 
the Windows operating system or added by the OEM or end user. The 
issues raised by the applications barrier to entry go deeper, to the 
underlying code in Windows. In particular, although the PFJ allows 
end users or OEMs to remove user access to Microsoft Middleware, it 
also allows Microsoft to leave in place all of the programming 
underlying this middleware. This code could still be accessed by 
other programs that write to the APIs exposed by the middleware.
    The Court of Appeals explicitly rejected Microsoft's explanation 
for commmingling the code of Windows 98 and Internet Explorer, 
concluding that it deterred users from installing Netscape, had no 
substantive purpose, and thus that "such commingling has an 
anticompetitive effect." \46\ Despite this strong 
finding, no provision in the PFJ addresses this issue.\47\
---------------------------------------------------------------------------

    \46\ See 253 F.3d at 66.
    \47\ The Court of Appeals rejected, per curiam, 
Microsoft's petition for a rehearing on this point. Order (DC Cir. 
Aug. 2,2001).
---------------------------------------------------------------------------

    Netscape and Java represented a very rare challenge to 
Windows--they offered the opportunity to develop middleware 
that would allow a wide range of applications to be costlessly 
transferred between different systems. It is difficult to imagine 
when, if ever, there will be a challenge of this magnitude again. 
Nonetheless, some existing middleware--and future middleware 
that we may not even be able to forecast today--will continue 
to present challenges to Windows. For example, there is still 
substantial competition in the market today for multimedia players, 
with Windows Media Player, RealNetworks RealOne player, and Apple's 
QuickTime, among others, all offering different versions of similar 
functionality.
    The treatment of middleware is crucial because the market for 
middleware, like the market for operating systems, is subject to 
substantial network externalities. These externalities mean that the 
desirability of a middleware package increases as the installed user 
base increases. As with operating systems, such externalities arise 
for direct reasons (e.g., users can share files in a particular 
media format) and indirect reasons (writing a program to different 
middleware, so the dominant middleware will have the most programs 
associated with it). With regard to indirect network effects, the 
key point is that the installed base is not the number of computers 
with shortcuts to the given middleware, but the number of computers 
with the underlying code permitting the middleware to be invoked by 
a call from another program. A programmer that wanted to develop, 
for example, an interactive TV program could still use Windows Media 
Player regardless of whether or not an OEM or end user had removed 
the icons or shortcuts that allow easy user access to this program.
    By providing no means for OEMs or end users to undo the 
commingling of code that ties Microsoft middleware to the operating 
system, the PFJ ensures that Microsoft middleware will have an 
installed base, in the relevant sense, of nearly the entire PC 
market. As a result, programmers will find it cheaper to write to 
Microsoft middleware rather than to rival programs. In this case, 
ubiquity could trump quality--because the size of a 
middleware's installed base could be more important than the quality 
of the middleware program. Microsoft middleware thus increases the 
applications barrier to entry in the same manner that promoting 
Internet Explorer and restricting the distribution of Netscape do. 
By allowing Microsoft to continue to commingle the code for 
middleware and its operating system, and preventing OEMs or end 
users from making real choices, the PFJ contributes to Microsoft's 
ability to restrict the market share of its rivals in neighboring 
"layers" to the operating system, reducing the main form 
of potential future competition at "layer boundaries."
    2. Microsoft Office and the applications barrier to entry
    As noted above, in the mid-1990s, Microsoft Windows was 
compatible with more than twenty times as many programs as IBM's OS/
2 Warp. This offers a dramatic example of the applications barrier 
to entry. One crucial feature of Microsoft is that in addition to 
producing the Windows operating system, it is also a leader in many 
other applications. Network externalities work here to help create 
and maintain market dominance. Thus, for a rival operating system to 
succeed it would need not only to persuade "neutral" 
software companies to write to it, but also persuade Microsoft 
itself to port some of its leading applications to the operating 
system. To the degree that Microsoft produces leading or essential 
applications, they can use their refusal to port these applications 
to reinforce their Windows monopoly.
    One application, in particular, is especially important to 
users: Microsoft Office and its associated programs, including Word 
(for word processing), Outlook (for e-mail and scheduling), Excel 
(for spreadsheets), and PowerPoint (for presentations). Indeed, 
Microsoft Office has about 95 percent of the market for business 
productivity suites.\48\
---------------------------------------------------------------------------

    \48\ Richard Poynder (October 1, 2001). "The Open 
Source Movement." Information Today, 9:18.
---------------------------------------------------------------------------

    The Court of Appeals affirmed the District Court's finding that 
the desire by Apple to ensure that Microsoft continued to maintain 
and update Mac Office was central to its motivation to enter into an 
illegal, anticompetitive deal with Microsoft to suppress Netscape 
and promote Internet Explorer. In addition, Microsoft does not 
currently have a version of Office that operates on Linux, the 
primary alternative to Windows in the PC operating system market. 
Withholding or simply threatening to withhold Microsoft Office from 
other operating systems is a powerful way in which Microsoft can use 
anticompetitive means to reduce the desirability of rivals while 
also extracting concessions or exchanges that help support the 
Windows monopoly of PC operating systems.
    The PFJ, however, does not address any issues relating to the 
pricing, distribution, or porting of Microsoft Office. This 
considerable loophole has been used by Microsoft in the past. In the 
future, Microsoft will have the same incentives to use this loophole 
again. In addition, it may be necessary to examine additional 
Microsoft applications that can be used to reinforce the Windows 
monopoly. Given the difficulty of undoing a monopoly of this sort, 
once established, it is particularly appropriate to reach beyond 
remedies that are narrowly circumscribed.
    C. Preventing Microsoft from strengthening its operating system 
monopoly by extending it to encompass additional products
    The Court is charged with fashioning a remedy that 
"ensure[s] that there remain no practices likely to result in 
monopolization in the future." Some of the most important 
newly emerging areas are multimedia, networking, web services, and 
hand-held computing. Microsoft is already making substantial 
investments in these areas with its .NET strategy, Microsoft 
Passport, MSN, Windows Messenger, Windows Media Player, and the 
Pocket PC operating system. The recently released Windows XP is 
characterized by substantial integration between all of these 
features; indeed the seamless integration is one of Microsoft's 
chief selling points for Windows XP. Microsoft has marketed Windows 
XP (standing for "experience") on the basis of its 
seamless integration between the Internet, multimedia, and the 
computer. For example, on the day it was released, a Microsoft press 
release announced, "Windows XP Home Edition is designed for 
individuals or families and includes experiences for digital photos, 
music and video, home networking, and 
communications." \49\
---------------------------------------------------------------------------

    \49\ Microsoft Press Release, "Windows XP is 
Here!" 10/15/01.
---------------------------------------------------------------------------

    Like Internet Explorer, these new areas present new 
opportunities for Microsoft to leverage its monopoly in the 
operating system to dominate other markets. In addition, Microsoft 
could use its strong or dominant position in these new markets to 
erect new barriers to entry that prevent potential competitors from 
offering products and services with part or all of the functionality 
provided by Windows. For example, if Passport is successful then a 
rival operating system would not just need to persuade other 
developers to write for it, but would also need to develop its own 
version of Passport and convince numerous e-commerce sites to use 
it. If the rival operating system failed in any of these steps, its 
attempts to establish itself could be seriously curtailed. The PFJ, 
however, does not address any aspects of these important emerging 
barriers to entry.
    VIII. STEPS TO IMPROVE THE PROPOSED FINAL JUDGMENT: THE 
LITIGATING STATES" ALTERNATIVE
    The goal of this Declaration is to explain why we believe that 
the PFJ is deficient and why the Court should exercise its 
discretion to fashion a remedy in this case that would promote 
competition and benefit consumers.

[[Page 29077]]

We do not propose an alternative remedy or provide an exhaustive 
analysis of any other proposals. Our analysis of the shortcomings of 
the PFJ, however, can be illustrated and strengthened by a selective 
comparison of some of the provisions in the PFJ with the proposal 
transmitted to the court by the nine litigating States and the 
District of Columbia on December 7, 2001.\50\
---------------------------------------------------------------------------

    \50\ United States v. Microsoft Corp., "Plaintiff 
Litigating States" Remedial Proposals," in the U.S. 
District Court for D.C, December 7, 2001.
---------------------------------------------------------------------------

    Many of the issues in the "Plaintiff Litigating 
States" Remedial Proposals" are technical and involve 
loopholes, some of which were discussed above including stronger 
anti-retaliation provisions and a broader definition of middleware 
that could not be manipulated by Microsoft. In addition, this 
proposed remedy makes an important change in enforcement: it 
proposes a Special Master, rather than requiring new legal 
proceedings to enforce the judgment. None of these important issues 
are discussed here. Instead, we focus on selected areas in which the 
litigating States" proposal illustrates some of the principal 
economic points identified in the preceding analysis.
    A. Fostering competition through OEMs and reducing the 
applications barrier to entry The litigating States proposal would 
require Microsoft to license a cheaper version of Windows that does 
not include commingled code from added middleware.\51\ In addition, 
the proposal would require Microsoft to continue to license older 
versions of its operating system without raising its prices. This 
would have two effects. First, it would more effectively promote 
competition and consumer choice by allowing OEMs to ship computers 
with a wide range of alternative middleware, thereby allowing 
consumers to choose between different versions or different price-
feature combinations. The lack of financial incentives for OEMs to 
take advantage of the more liberalized licensing rules is one of the 
principal deficiencies in the PFJ.
---------------------------------------------------------------------------

    \51\ The Court of Appeals overturned the District Court, 
finding that Microsoft could not be held liable for the fact that in 
certain situations, like updating Windows or accessing help files, 
Internet Explorer overrides the user's default browser settings and 
opens automatically. This implies that the complete removal of HTML-
reading software is impossible. But Windows could be shipped with, 
for example, a stripped-down browser that performs essential system 
functions. Most of the functionality of Internet Explorer, however, 
is not necessary for the examples Microsoft invoked. This is 
analogous to the way in which Windows is shipped with a stripped-
down text editor, Notepad, but not with a full-fledged word 
processor.
---------------------------------------------------------------------------

    Moreover, such a provision would provide Microsoft with better 
incentives; only if it produced an operating system which performed 
substantially better would it be able to sell its new releases. It 
would at least attenuate its ability to use new releases as a way of 
extending its market power. Some have advocated even stronger 
measures to ensure Microsoft faces proconsumer, pro-competition 
incentives, including requiring Microsoft to release all of its 
Windows source code and requiring the free distribution of its 
operating system after 3 to 5 years. Second, this provision would 
directly address the Court of Appeals finding that Microsoft's 
commingling of code was anticompetitive. By disentangling the 
middleware from the operating system, this proposal would allow 
greater competition in middleware--and thus ultimately in 
operating systems--by reducing the network externalities that 
benefit Microsoft middleware at the expense of potentially superior 
products.
    B. Internet Explorer browser open source and Java distribution
    Two of the fruits of Microsoft's monopolization of the operating 
systems market are the dominance of the Internet Explorer browser 
and the destruction of Java as a viable competitor. The 
anticompetitive measures that helped achieve these goals protected a 
crucial "chink in the armor" of the Windows operating 
system. The PFJ does nothing to "deny the defendant the fruits 
of its statutory violation." \52\ Furthermore, it does 
not enhance the ability of competitors to interoperate with Internet 
Explorer because it includes no disclosure requirement for the 
Internet Explorer APIs.
---------------------------------------------------------------------------

    \52\ 253 F.3d at 103, quoting United States v. United Shoe 
Mach. Corp., 391 U.S. 244, 250 (1968).
---------------------------------------------------------------------------

    The litigating States propose to remedy these deficiencies by 
requiring Microsoft to publish the source code and APIs for Internet 
Explorer and freely license them to competitors. In addition, their 
proposal would require Microsoft to distribute a Sun-compatible 
version of Java Virtual Machine with all future operating systems. 
The result would be to decrease the applications barrier to entry 
and promote competition.
    C. Cross-platform porting of Office
    As discussed in the previous section, Microsoft Office is one of 
the most crucial applications for many users. The existence of this 
application for a particular operating system is one key factor in 
the demand for the operating system. The litigating States" 
proposal would remove the ability of Microsoft to either threaten to 
withhold Office or actually withhold Office by requiring Microsoft 
to continue to port Office to Macintosh. In addition, the proposal 
would require Microsoft to auction off licenses to ISVs that would 
provide them with the entire source code and documentation for 
Office in order for them to port the product to alternative 
operating systems. Although we draw no conclusions about the 
particular rules proposed by the litigating States, this proposal 
would clearly reduce Microsoft's ability to deliberately raise the 
applications barrier to entry.
    D. Mandatory disclosure to ensure interoperability
    The PFJ requires some disclosure to ensure that Microsoft is not 
able to withhold certain information to illegally benefit Microsoft 
Middleware at the expense of Non-Microsoft Middleware. The 
disclosures are limited in scope and timing. The litigating 
States" proposal is substantially broader.
    Of particular importance, the litigating States" proposal 
recognizes that "nascent threats to Microsoft's monopoly 
operating system currently exist beyond the middleware platform 
resident on the same computer" and thus the States" 
proposal requires timely disclosure of technical information to 
facilitate "interoperability with respect to other 
technologies that could provide a significant competitive platform, 
including network servers, web servers, and handheld 
devices." \53\ In doing this, the proposal would reduce 
the ability of Microsoft to use its dominant position in operating 
systems to eliminate emerging threats at the boundary of this 
"layer" of computing.
---------------------------------------------------------------------------

    \53\ Litigating States, pp. 10-11.
---------------------------------------------------------------------------

    IX. Conclusion
    The Revised Proposed Final Judgment agreed to by the U.S. 
Department of Justice, the Attorneys General of nine States, and 
Microsoft Corporation is critically deficient. The overall aims of 
the PFJ are laudable--to increase competition and reduce 
Microsoft's ability to maintain its monopoly at the expense of 
consumers. But the PFJ will not succeed in achieving these goals. It 
does not change any of the incentives faced by Microsoft to 
undertake anticompetitive actions. It restrains these 
anticompetitive actions only with highly specific and exception-
ridden conduct requirements. And it has an insufficient enforcement 
mechanism.
    The interest of consumers in a greater range of choices, lower 
prices, and greater innovation would be served by rejecting the PFJ 
and replacing it with a more effective conduct remedy. A remedy for 
this case should recognize that the monopoly power created by 
Microsoft's past anticompetitive, illegal practices is likely to 
persist, and that it will therefore be likely to continue to enjoy 
the fruits of its illegal behavior, unless there are far stronger 
remedies than those in the PFJ. The new remedy should change 
Microsoft's incentives. It should restrict Microsoft's ability to 
repeat its past, or develop new, anticompetitive practices. It 
should provide OEMs and ISVs with the means and incentives to 
stimulate genuine competition in the provision of platforms. And it 
should take whatever steps are possible to reduce the applications 
barrier to entry so that there is greater scope for genuine 
competition in the market for PC operating systems.
    I, Joseph E. Stiglitz, declare under penalty of perjury that the 
foregoing declaration is true and correct. Executed on January 28, 
2002.
    Joseph E. Stiglitz
    I, Jason Furman, declare under penalty of perjury that the 
foregoing declaration is true and correct. Executed on January 28, 
2002.
Jason Furman
Joseph E. Stiglitz
Columbia University
Uris Hall Room 814
New York, NY 10027
212-854-0671
jes322 @ columbia.edu
Jason Furman
Yale University
28 Hillhouse Ave. Rm 311
New Haven, CT 06511
203-432-3054
jason, furman @ yale.edu

[[Page 29078]]



MTC-00030613

    Comments To The Revised Proposed Final Judgment In United States 
v. Microsoft Corporation, No. 98-1232
    State of New York, et al. v. Microsoft Corporation, No. 
98-1233
    Submitted By Palm, Inc.
    Pursuant To The Tunney Act, 15 U.S.C.  16
    January 28, 2002
    TABLE OF CONTENTS Page
    I. Summary Of Objections 1
    II. Background On Palm And Its Interest In This Matter 4
    III. The RPFJ's Deficiencies 5
    A. Under The RPFJ, Microsoft Will Obstruct The Critical 
Interoperability Between Microsoft's Software Products And Non-
Microsoft Products 5
    B. The RPFJ's Toothless Definitions Will Enable Microsoft To 
Break Interoperability Without Recourse 8
    C. The RPFJ Does Not Stop Microsoft From Using Its Control Over 
Development Tools To Protect The Applications Barrier To Entry 11
    D. The RPFJ Does Not Prohibit Microsoft From Unlawfully Bundling 
Its Products Or Using Anticompetitive Pricing Schemes 12
    E. The RPFJ Does Not Remedy Microsoft's Ability To Use The 
Installation Of Drivers For Peripheral Hardware As A Chokehold 12
    F. The RPFJ Does Not Remedy Microsoft's Ability To Use Internet 
Explorer As A Chokehold 13
    G. The RPFJ's Disclosure Delays Render It Ineffective 13
    H. The RPFJ Does Not Restrict Knowing Interference With 
Performance 14
    I. The RPFJ Fails To Provide OEMs And Consumers The Flexibility 
Necessary To Facilitate Competition 14
    J. The RPFJ's Enforcement Provisions Are Insufficient 15
    IV. Conclusion 16
    I.SUMMARY OF OBJECTIONS
    Pursuant to the Antitrust Procedures and Penalties Act, 15 
U.S.C. ï¿½ 16(b)-(h), Palm, Inc. ("Palm") hereby 
submits its comments and objections to the Revised Proposed Final 
Judgment ("RPFJ") filed by Plaintiffs United States of 
America ("DOJ") and the States of New York, Ohio, 
Illinois, Kentucky, Louisiana, Maryland, Michigan, North Carolina 
and Wisconsin, and Defendant Microsoft Corporation 
("Microsoft") on November 6, 2001.
    Palm, a leader in mobile computing,\1\ respectfully submits that 
the RPFJ will not ensure vigorous competition in this important 
industry. Microsoft is already engaging in actions designed to 
unfairly extend its personal computing operating system ("PC 
OS") monopoly into the mobile computing market by eliminating 
competition and preventing free customer choice.\2\ The RPFJ fails 
to address Microsoft's current actions, and will not constrain it 
from repeating in the mobile computing market the same tactics it 
used against Netscape and Java.
---------------------------------------------------------------------------

    \1\ Mobile computers are small computers designed to be 
carried by the user in a pocket or purse. They perform a wide 
variety of tasks. Mobile computers include handheld computers and 
the new, emerging category of smart phones (cell phones that have 
handheld computing functionality built into them). Mobile computers 
are also sometimes referred to as Personal Digital Assistants 
("PDAs").
    \2\ Microsoft, of course, also manufactures the Pocket PC 
operating system ("Pocket PC OS") a rival OS to the Palm 
operating system ("Palm OS").
---------------------------------------------------------------------------

    Mobile computing is an emerging threat to Microsoft's PC OS 
business. Handhelds are already displacing some notebook and desktop 
PCs for storing, accessing and managing information, including 
Interact information.\3\ That competition will increase over time. 
If an open competitive environment exists, the convenience and 
simplicity of handheld devices will increasingly cause an evolution 
away from desktop and laptop PCs to handheld computers for accessing 
and managing information. The growth of handheld devices not based 
on Microsoft technology is a threat to Microsoft's PC OS monopoly, 
as were the competitive inroads being made by non-Microsoft Internet 
browsers.
---------------------------------------------------------------------------

    \3\ As Microsoft admitted in its filings before the Court: 
"...[A] range of devices other than personal computers such as 
handheld computers, television set-top boxes and game machines are 
becoming increasingly capable, providing functionality that 
consumers used to obtain exclusively from personal computers." 
(Defendant Microsoft Corporation's Revised Proposed Findings of 
Fact, at 5 (submitted Sept. 10, 1999) (emphasis supplied)). See also 
id. at 227, 230 and 235.
---------------------------------------------------------------------------

    Microsoft has the ability and incentive to take additional 
actions to forestall competition in the handheld industry. Palm's 
products--both the software products it manufactures as an 
independent software vendor ("ISV") and the hardware 
products it manufactures as an independent hardware vendor 
("IHV")--must be compatible with PCs and the 
software that runs on them. Microsoft has a unique position as the 
PC OS monopolist and also the dominant vendor of related software 
products such as the Internet Explorer browser, the Office 
productivity suite, the Outlook e-mail and calendaring program, the 
Exchange server software and the Visual Studio developer tools. 
Palm's ability to offer innovative handheld solutions to consumers 
is, in significant part, reliant on full and timely interoperability 
with Microsoft's software products. Absent compatibility, consumers 
will be unable to obtain a fully functional handheld running 
anything other than Microsoft software.
    As noted above, Microsoft is already taking actions to forestall 
competition in the mobile computing industry. In particular:
    1. Microsoft has refused Palm access to information and software 
interfaces necessary to enable Palm to make its products 
interoperable with certain Microsoft products and technologies, 
including some elements of Microsoft's .NET software;
    2. Microsoft has prevented Palm from working with Microsoft's 
software development tools (Microsoft Visual Studio);
    3. Microsoft has refused to make Microsoft Internet Explorer 
operate on Palm OS handhelds; and
    4. In exchange for addressing some of these issues, Microsoft 
has attempted to coerce Palm into deploying Microsoft .NET software 
on Palm handhelds under terms that would put the Palm OS business at 
a prohibitive disadvantage.
    Microsoft has also already exhibited its intent to foreclose 
companies such as Palm by breaking interoperability with its 
products. Bill Gates himself directed his staff to alter Microsoft 
products to ensure that Microsoft's "PDA will connect to 
Office in a better way than other PDAs even if that means changing 
how we do flexible schema in Outlook and how we tie some of our 
audio and video advanced work to only run on our PDAs." 
(Remedy Exhibit GX1 attached to this submission). As the DOJ argued 
previously:
    ... on July 11, 1999, less than thirty days after the conclusion 
of the trial in this action, Bill Gates wrote an e-mail directing 
that Microsoft redesign its software in order to harm competitors. 
This time, the products in question were the Personal Digital 
Appliances that Microsoft heralded at trial as one of the products 
that might someday undo its monopoly.
    Plaintiffs' Memorandum In Support Of Proposed Final 
Judgment, filed April 28, 2000 (corrected as of May 2, 2000) (citing 
Remedy Exhibit GX1). Microsoft's anticompetitive incentive is 
obvious. Its anticompetitive conduct will enable it to monopolize 
the emerging handheld industry and, at the same time, eliminate the 
threat handhelds pose to its PC OS monopoly.
    As delineated more fully below, it is Palm's belief that the 
RPFJ, if adopted, would fail to protect competition in the handheld 
industry for at least the following reasons:
    1. It does not appear even to attempt to address handheld 
industry competition; 2. It enables Microsoft to withhold interface 
information that is critical to the competitiveness of Microsoft's 
rivals such as Palm;\4\
---------------------------------------------------------------------------

    \4\ As discussed below, this "information" 
could come in the form of APIs, data formats, commands and 
protocols.
---------------------------------------------------------------------------

    3. It enables Microsoft to continue to disadvantage ISVs and 
IHVs that work with companies other than Microsoft, especially given 
the network effects that pervade this industry;
    4. It fails to ensure that Microsoft will not use distributed 
Internet-based (.NET) applications to eradicate the competitive 
threat of non-Microsoft platforms;
    5. It either does not define or improperly defines key terms of 
the RPFJ, thereby enabling Microsoft to circumvent the RPFJ's 
intended boundaries;
    6. It enables Microsoft to commingle or technologically bundle 
its OS with other dominant Microsoft software;
    7. It enables Microsoft to use anticompetitive pricing tactics 
such as bundled pricing;
    8. It fails to provide OEMs with the freedom to promote software 
products competing with Microsoft's products;
    9. The enforcement mechanisms of the RPFJ are too weak to ensure 
Microsoft's compliance; and
    10. It contains other deficiencies described below.
    If the above RPFJ shortcomings are not addressed, Microsoft will 
be able to dictate customer decisions regarding computing models and 
standard technologies for the indefinite future, rather than having 
those decisions made by consumers on the competitive merits. 
Competition, and the

[[Page 29079]]

innovative solutions that emerge from that competition, will suffer. 
Any settlement with Microsoft must address these issues now, 
because, as the industry has learned from the Internet browser war, 
competition can be lost in the blink of an eye.
    II. BACKGROUND ON PALM AND ITS INTEREST IN THIS MATTER
    Palm develops and markets, among other products, a line of 
handheld computers that operates proprietary and non-proprietary 
applications using its Palm OS. Based on the Palm OS platform, 
Palm's handheld solutions allow consumers to store and access their 
most critical information and communications, including from the 
Internet. Palm handhelds address the needs of individuals, 
enterprises and educational institutions through thousands of 
application solutions that ISVs create. The Palm OS platform is also 
the foundation for products from Palm's licensees and strategic 
partners (also known as the Palm Economy), such as Acer, AlphaSmart, 
Franklin Covey, HandEra (formerly TRG), Garmin, Handspring, IBM, 
Kyocera, Samsung, Sony and Symbol Technologies, as well as a 
multitude of ISVs and IHVs.
    Palm competes with numerous companies in its software and 
hardware businesses. Microsoft's Pocket PC OS is one of Palm's most 
direct competitors in operating systems designed for handheld 
devices. Microsoft licenses the Pocket PC OS to OEMs, including 
Compaq and Hewlett Packard, that install the OS in their handheld 
products. It markets these products as "Windows 
Powered"--suggesting deceptively, Palm believes, that the 
Pocket PC product is a direct extension of its monopoly Windows PC 
OS product, and thereby leveraging the Windows monopoly to extend 
its market control into handhelds.
    Plaintiff States that have opted not to join in the Microsoft 
settlement ("the Litigating States") approached Palm in 
an effort to remedy through their own proposed relief Microsoft's 
potential anticompetitive conduct that, under the RPFJ, could 
eliminate the threat posed by the handheld industry. Palm has agreed 
to testify in Track 2 in support of the Litigating States" 
proposed relief ("the Litigation States" 
Remedies"). Palm respectfully submits that the Litigating 
States" Remedies, unlike the RPFJ, protect competition in 
mobile computing industry as well as the competition that industry 
will provide to the PC OS monopoly.
    III. THE RPFJ'S DEFICIENCIES
    The RPFJ fails to create the market conditions necessary for 
competition to thrive. The structure and terms of the RPFJ are 
rooted in the computing industry as it existed in the mid-1990s, 
when the Internet was only beginning to gain widespread consumer use 
and software development was still focused on the PC.
    To be effective, the remedy must take into account the industry 
as it exists today, and the new emerging threats against which 
Microsoft could (and, if left unchecked, will) repeat its pattern of 
anticompetitive behavior. The focus of competition in computing has 
shifted from the PC to the Internet, the server and to new devices 
such as handhelds. Microsoft's .NET initiative is an acknowledgement 
of this change, and the fact that it is being driven into virtually 
every Microsoft product highlights its significance. The RPFJ 
completely ignores this, and other, crucial dynamics.
    A. Under The RPFJ, Microsoft Will Obstruct The Critical 
Interoperability Between Microsoft's Software Products And Non-
Microsoft Products.
    As products that manage users" information, handhelds must 
interface with the OS and applications on a customer's PC. When that 
PC is part of a larger network (as it is in nearly every corporate 
or "enterprise" scenario), handhelds must also interface 
with the software on the network, typically resident on a server,\5\
---------------------------------------------------------------------------

    \5\ As we discuss more fully below, this is particularly 
true where the software that has traditionally resided on the PC is 
increasingly being distributed, by design, to various locations over 
the networked environment.
---------------------------------------------------------------------------

    In order to interoperate effectively with Microsoft products, 
handhelds must, at the very least, be able to:
    (1) read and write data to and from the consumer's PC and/or 
server;
    (2) interpret and format the data so it can be properly stored 
in the handheld, PC or server;
    (3) run communication software, called conduits, that facilitate 
such interfaces with the PC and server; \6\ and
---------------------------------------------------------------------------

    \6\ A conduit is a piece of software that interoperates 
with the handheld and the target PC or server, managing the 
communication between them.
---------------------------------------------------------------------------

    (4) install the software drivers necessary to attach the cradle 
or other communication mechanism to the PC through which the 
handheld communicates with the PC and server.
    In short, Palm and other handheld manufacturers must know the 
"commands" (to access the data) and the "data 
formats" (to understand the data) with respect to the target 
PC or server in order to develop the necessary conduits to 
interoperate with the target. In most cases (and nearly all business 
situations), in addition to interacting with the PC OS, the handheld 
device interoperates with Outlook or Exchange information (such as 
e-mails, contact information, and calendars), Word and Excel 
documents on the PC or other databases on the server. The RPFJ fails 
to ensure that anyone other than Microsoft will be able to interface 
with Outlook, Exchange, software on corporate servers, other PC 
applications such as Office, middleware for distributed or web-based 
applications or even the PC OS itself. Specifically, Sections III.D 
and III.E of the RPFJ do not address the potential threat (as 
articulated by Mr. Gates in his e-mail cited supra) that Microsoft 
can constrain or eliminate competition in and from the handheld 
industry by regulating the access to technical information necessary 
for interoperability.\7\ In general, the RPFJ does not require any 
disclosure of technical information regarding the interface between 
Microsoft's PC or server products and handheld products. For 
example, the section neither requires disclosure of server APIs, nor 
information regarding the interfaces between PC OS or middleware and 
server applications.
---------------------------------------------------------------------------

    \7\ We note that the RPFJ requires even less disclosure 
than the parallel provision in the Interim Order, which was intended 
to serve as a remedial bridge pending the previously ordered 
divestiture. United States v. Microsoft. Final Judgment (D.DC 2000) 
("Interim Order"). For instance, Section III(b)(iii) of 
the Court's Interim Order required Microsoft to disclose all APIs, 
Communications Interfaces and Technical Information (i.e., any and 
all possible technical dependencies) between (a) software installed 
on any device (including servers and handhelds) and (b) any 
Microsoft Operating System or Middleware installed on a PC.
---------------------------------------------------------------------------

    Moreover, the RPFJ also permits Microsoft to foreclose access to 
critical interfaces that it migrates from the PC OS to the 
applications or "distributed" environment on a network 
(and in the case of .NET services, to the Internet) by limiting the 
disclosure requirements to the APIs between the PC OS and 
middleware, and the communication protocols between the PC OS and 
the server OS.\8\ The RPFJ does not require disclosure of the 
commands and data formats necessary to interface with the critical 
applications on the PC, such as Outlook, Office or Internet 
Explorer. In addition, Microsoft can create proprietary .NET APIs 
that work only with the Pocket PC OS, bundle them with Microsoft's 
Visual Studio software development environment, discussed infra, and 
encourage the development of web services and applications that can 
be accessed only through Microsoft's OS products.\9\
---------------------------------------------------------------------------

    \8\ Microsoft defines .NET as its "platform for XML 
web services." .NET Defined, available at http://www. 
Microsoft.corn/net/whatis.asp. The services that .NET offers are a 
combination of pre-designed applications, some of which come under 
the rubric .NET My Services or "Hailstorm," and a set of 
tools designed to allow developers to create web applications which 
rely on the all-important APIs exposed by Microsoft programs (see 
discussion of "VSIP" infra).
    \9\ It is Palm's understanding that, absent being forced 
to by the Court, Microsoft will not make certain of these APIs 
available at all. Others will be available on terms that essentially 
force Palm to exit the OS business, thereby reducing it to a device 
manufacturer implementing Microsoft software.
---------------------------------------------------------------------------

    At the core of .NET stands the .NET Framework (for PCs) and .NET 
Compact Framework (for handhelds). The Framework is Microsoft's 
answer to the Java runtime environment, with a key difference: It 
lacks the freedom from reliance on Microsoft's APIs. .NET is 
important because it extends Microsoft's program interface (that is, 
Microsoft's APIs) to provide the underpinnings necessary for web-
based services and distributed applications that do not reside on 
the PC and/or handheld.
    Finally, the RPFJ is silent regarding the interfaces between 
handhelds and software that resides on the servers. In a networked 
environment, such as corporate networks, handhelds need to exchange 
data particularly with software on servers.\10\ For example, without 
access to data on Microsoft Exchange (the server application product 
that

[[Page 29080]]

complements the client e-mail and calendar application Microsoft 
Outlook), non-Microsoft handhelds cannot offer features offered by 
Pocket PC products.
---------------------------------------------------------------------------

    \10\ The interface between the handheld and server 
products can be designed to be "through" the cradle and 
the PC via the network connection between the PC and the server, or 
a wireless link directly with the server as in the case of 
Microsoft's Mobile Information Server ("MIS") 
technology, to which Palm lacks unhindered access.
---------------------------------------------------------------------------

    B. The RPFJ's Toothless Definitions Will Enable Microsoft To 
Break Interoperability Without Recourse.
    The Definitions of "Operating System," 
"Windows Operating System Product" And "Personal 
Computer" Are Fatally Flawed. The definition of 
"operating system" specifies code that executes on a PC. 
Microsoft can evade this definition simply by moving code off of the 
PC and onto a server or other device. Microsoft's .NET architecture 
even facilitates this scheme.
    The definition of "Windows Operating System Product" 
determines the scope of Microsoft's disclosure obligation. The 
definition itself, however, leaves Microsoft free to determine in 
its sole discretion what software code comprises a "Windows 
Operating System Product." In other words, Microsoft's 
disclosure obligation is subject entirely to its own discretion.
    The RPFJ is also undermined by the interaction between the 
definitions of PC and OS. The definition of PC explicitly excludes 
almost every new category of device that may compete with PCs in the 
future, including set top boxes, handhelds, and servers. Because an 
OS is defined as software running on a PC, competing operating 
systems running on anything other than a PC appear to be excluded 
from the RPFJ's coverage.
    The Definitions Of "Non-Microsoft Middleware" And 
"Microsoft Middleware" Are Too Narrow. To qualify as 
competing middleware protected by the RPFJ, software in question 
must run on the Windows PC OS and must be distributed in at least 
one million copies per year. The requirement that covered middleware 
run on the Windows PC OS leaves Microsoft free to retaliate against 
middleware software that runs on other devices, such as servers and 
handhelds. The million unit restriction allows Microsoft to target 
newly-developed middleware that does not yet sell a million units 
per year. In fact, Microsoft has an incentive to target such 
middleware before it can grow to a million units and enjoy the 
protections of the RPFJ. This restriction will stifle innovation by 
focusing Microsoft's competitive activity against smaller, younger 
companies--the companies least able to protect themselves 
against Microsoft's tactics. Furthermore, as more and more software 
becomes network-based, the whole concept of "distributing 
copies of software" becomes irrelevant. It is now possible for 
very popular software to exist only in a single copy.
    For example, the Yahoo web service is intensely popular even 
though it is not copied onto any user's computer. As Microsoft's 
.NET initiative indicates, the industry is moving towards a web-
based services model where consumers access software applications on 
the Internet. The RPFJ ignores this crucial change in the 
marketplace.
    Moreover, to qualify as a middleware product, software must 
either provide the functionality contained in a short list of 
products (Explorer, Java, Media Player, Messenger, Outlook Express), 
or must first be sold separately, have a trademarked name and 
compete with qualifying non-Microsoft middleware. Missing from the 
list are a large number of Microsoft monopoly products which have 
already become "platforms" with which Microsoft 
competitors have to interoperate. These products include Microsoft 
Office, full Microsoft Outlook (as opposed to just the Express 
version), Microsoft Exchange, Microsoft Visual Studio, and Microsoft 
.NET.
    Because the RPFJ excludes these products from the middleware 
definition, Microsoft is left free to manipulate its interfaces and 
APIs to exclude competitors. This gap alone is enough to render the 
RPFJ almost completely ineffective.
    Under the RPFJ, Microsoft can avoid the provision regarding 
middleware simply by not trademarking the product name. According to 
this definition, many Microsoft products currently in the market 
would fail to qualify as middleware. Furthermore, to qualify as 
middleware software must include user interface code; Microsoft can 
avoid this by simply distributing the user interface code 
separately. Version numbers are also used to determine which 
software updates are covered; if the whole number or first decimal 
of the version number does not change, the software does not 
qualify. It appears that Microsoft could evade the middleware 
definition simply by changing its software numbering scheme (for 
example, moving to letters--version a, version b, etc.).
    The RPFJ's Failure To Define "Interoperate" Creates 
A Significant Loophole. Neither Section III.E nor any other 
provision of the proposal defines "interoperate." This 
omission invites Microsoft to enable non-Microsoft products to 
continue to function but in a much less robust way than Microsoft's 
handheld products, to the detriment of consumers.
    The Definition Of ISV Is Too Narrow. The definition of ISV 
covers only companies creating software that runs on the Windows PC 
OS. Many current and future Microsoft competitors create software 
that needs to access information on PCs but does not run on the PC 
itself. As more and more software development becomes web-based, it 
will be the norm for competing software not to run on the PC. The 
RPFJ does not protect these emerging competitors.
    The Definition Of APIs Is Too Narrow. Under Section III.D of the 
RPFJ, the disclosure is narrowly limited to "APIs and related 
Documentation." Microsoft can circumvent this provision by 
hard-wiring links to its applications and through other 
anticompetitive coding schemes.
    C. The RPFJ Does Not Stop Microsoft From Using Its Control Over 
Development Tools To Protect The Applications Barrier To Entry.
    The RPFJ ignores Microsoft's control over application 
development tools, and how Microsoft can use that control to 
foreclose competition from third parties. The applications barrier 
to entry was the linchpin of this case and the RPFJ ignores how 
Microsoft can use development tools to perpetuate it.
    For example, Microsoft's Visual Studio product has, as a result 
of Microsoft's PC OS monopoly, become the software development tools 
standard for most corporate and commercial application programmers, 
including prospective developers of software for mobile devices. As 
handheld technology increasingly displaces PC functionality, more 
and more PC OS developers have been seeking to create mobile 
software. Nevertheless, Microsoft has, up to this point, denied Palm 
access to the Visual Studio Integration Program,\11\ despite Palm's 
significant position in the handheld space.\12\
---------------------------------------------------------------------------

    \11\ The Visual Studio Integration Program 
("VSIP") is a Microsoft licensing program which enables 
companies outside of Microsoft to "host" their software 
development within the Visual Studio tool. Many companies other than 
Palm have been given entry to the VSIP. If Palm is denied entry to 
the VSIP, Visual Studio users will find it much more difficult to 
create software for Palm OS handhelds.
    \12\ Microsoft first engaged in stall tactics by simply 
not responding to Palm's request for participation in the VSIP. 
Then, Microsoft told Palm that the Visual Studio team lacked the 
resources for Palm to participate (even as it added other companies 
to VSIP, Palm believes). Next, Microsoft told Palm that it could 
participate in the VSIP under the condition that Palm adopt 
Microsoft's proprietary .NET APIs under unacceptable terms that 
would have "commoditized" Palm's products. This would 
have extended the applications barrier to entry to the handheld 
industry by ensuring that applications developers designed their 
products not for the Palm platform but for Microsoft's. Ultimately, 
Microsoft's conduct would have eliminated Palm as a competitive 
platform. Only recently has Palm received an "offer" to 
join the Visual Studio without adopting .NET, which Palm believes is 
due to Microsoft teaming that Palm is testifying in the Track 2 
proceedings, i.e., only when Microsoft concluded that its behavior 
would be subject to judicial scrutiny (and after 18 months of 
delay). Palm is currently evaluating the terms offered by Microsoft.
---------------------------------------------------------------------------

    Microsoft's exclusion of third parties such as Palm from Visual 
Studio has the following adverse effects. Exclusion makes it 
impossible for Visual Studio users (the vast majority of PC ISVs) to 
create Palm OS applications without changing the programming tools 
they use--an unlikely proposition. This, in turn, makes it more 
difficult for Palm to recruit software developers.
    Exclusion also makes it very difficult to sell Palm OS handhelds 
to corporations, because Visual Studio is very often the standard 
for their in-house developers. Lastly, exclusion allows Microsoft to 
claim that Palm OS handhelds are incompatible with corporate 
standards. The net effect of these restrictions discourages PC ISVs 
from supporting non-Microsoft operating systems, and reduces the 
selection of software available to users of non-Microsoft OS 
handhelds.
    Reduced to its essence, Microsoft's predatory developer tool 
strategy: (1) leverages its PC OS monopoly to create a software 
"standard"; (2) prevents competitors from accessing that 
standard; (3) "informs" customers that the competitive 
products are incompatible with the very same products that Microsoft 
used to create the incompatibility; and thereby most importantly, 
(4) limits consumer choice and experience by foreclosing non-
Microsoft products as competitive alternatives.

[[Page 29081]]

    D. The RPFJ Does Not Prohibit Microsoft From Unlawfully Bundling 
Its Products Or Using Anticompetitive Pricing Schemes.
    The RPFJ is notably deficient in its failure to address the 
potential for Microsoft to bundle or commingle its products with 
other dominant Microsoft software. The RPFJ also fails to prevent 
Microsoft from engaging in anticompetitive pricing to the ultimate 
detriment of the consumer (e.g., charging less for its Pocket PC OS 
only when it is licensed as part of a larger bundle). The royalty 
schedule restrictions in particular appear to be a major threat to 
legitimate competition.
    For example, under the RPFJ Microsoft will be able to offer 
discounts on Windows to a PC OEM that also agrees to sell Pocket PC 
handhelds, so long as Microsoft offers this same subsidy to all 
OEMs. This gives Microsoft enormous coercive power to prevent any PC 
OEM from selling non-Microsoft based devices.
    E. The RPFJ Does Not Remedy Microsoft's Ability To Use The 
Installation Of Drivers For Peripheral Hardware As A Chokehold.
    The RPFJ does not address Microsoft's ability to obstruct the 
interoperability of a nonMicrosoft handheld by limiting the 
consumer's or OEM's ability to install drivers that must sit on top 
of the OS so that the handheld can communicate with the PC.
    F. The RPFJ Does Not Remedy Microsoft's Ability To Use Internet 
Explorer As A Chokehold. Website developers specifically develop 
their products to be compatible with Internet Explorer because of 
Microsoft's monopolization of the browser market. Thus, Internet 
Explorer itself has become the ultimate test of Web compatibility 
for all computing devices, including handhelds. The RPFJ does not 
remedy Microsoft's ability to use this interoperability with 
Internet Explorer as a weapon. Microsoft has refused to even 
consider porting Internet Explorer to Palm OS, despite requests from 
Palm. Microsoft has, though, ported Internet Explorer to Pocket PC 
in the form of Pocket Internet Explorer.
    G. The RPFJ's Disclosure Delays Render It Ineffective.
    The disclosure requirements under the RPFJ do not become 
operative for up to twelve months in the case of interfaces relating 
to middleware and operating systems, and nine months in the case of 
interfaces between the PC OS and the server OS. In light of the 
speed with which the industry moves, these delays will continually 
undermine the competitive vitality of Microsoft's competitors, which 
will of course only result in further consumer harm.
    The timing of the disclosure requirements under the RPFJ is also 
deficient. When Microsoft releases an OS, the disclosure 
requirements do not become effective until Microsoft releases a beta 
test version to 150,000 or more beta testers. Under this standard, 
Microsoft will not have to disclose the relevant technical 
information until very close to the public release date of the 
product, whereas Microsoft's in-house developers working on 
peripheral software (such as the Pocket PC OS) will have immediate 
access to the relevant information. Software development can take a 
year or longer, whereas the last beta cycle may be only a few weeks 
or months before release. If disclosure does not happen until the 
last beta cycle, non-Microsoft products will be at a substantial 
disadvantage relative to Microsoft products. Also, the definition of 
"timely manner" specifies a beta cycle of at least 
150,000 people. Microsoft apparently could evade all OS pre-
disclosure requirements by limiting its beta programs to 149,999 
participants.
    H. The RPFJ Does Not Restrict Knowing Interference With 
Performance.
    The RPFJ contains no prohibition against Microsoft's intentional 
interference with the performance of non-Microsoft products by 
manipulating the interfaces with non-Microsoft products.
    Without such a restriction, Microsoft can eliminate the 
effectiveness of the disclosure requirements by altering the 
interfaces or other information on which non-Microsoft products 
rely.
    I. The RPFJ Fails To Provide OEMs And Consumers The Flexibility 
Necessary To Facilitate Competition.
    Microsoft Retains Control of Desktop Innovation. Because of the 
RPFJ's restrictive definitions of middleware, Microsoft retains 
control of desktop innovation by being able to prohibit OEMs from 
installing or displaying icons or other shortcuts to non-Microsoft 
software, products and/or services, if Microsoft does not provide 
the same software, products and/or services. This undermines the 
OEMs" ability to differentiate their products, and stifles the 
emergence of new competitors to Microsoft.
    The RPFJ's Non-Retaliation Restrictions Are Ineffective. Section 
III.F attempts to prohibit retaliation against companies working 
with competing products, but the narrow definitions of 
"operating system" and "personal computer" 
make it unclear whether Microsoft is prohibited from retaliating 
against companies that work with competing handhelds, set-top boxes, 
servers or Internet software infrastructure. This ambiguity, plus 
Microsoft's ability to threaten retaliation even when it is 
prohibited from carrying out the threats, will make it extremely 
uncomfortable for any PC OEM to contemplate working with any non-
Microsoft product.
    Under Section III.A, Microsoft is free to "threaten" 
to retaliate in any form. Further, Microsoft is constrained only 
from the specified forms of actual retaliation, a remedy further 
weakened by the fact that the protected OEM activities are narrowly 
and specifically defined. Retaliation against an OEM for installing 
a non-Microsoft application that does not meet the middleware 
definition is not prohibited; nor is retaliation against an OEM for 
removing a Microsoft application that does not meet the middleware 
definition. As noted above, the definitions are so narrowly drawn 
that the protection of the RPFJ will not apply in most competitive 
situations Microsoft is likely to encounter in the future. Microsoft 
could, for example, retaliate against a PC OEM for selling handhelds 
based on the Palm OS.
    Add/Remove Provisions Relate Only To Icons. Not The Middleware 
Itself. The add/remove provisions in the RPFJ only allow for removal 
of end user access to Microsoft middleware, not the middleware 
itself. If Microsoft's middleware remains on PCs, then applications 
developers will continue to write applications that run on that 
middleware, reinforcing the applications barrier to entry that is at 
the heart of this litigation.
    Non-Microsoft Icons Should Not Be Subject To Add/Remove. The 
RPFJ allows Microsoft to demand inclusion of non-Microsoft icons in 
the add/remove utility, which does not make sense in the absence of 
any finding that the permanence of non-Microsoft middleware icons on 
the desktop is anticompetitive. Microsoft's competitors should not 
be treated as if they are equally guilty of Microsoft's 
anticompetitive behavior.
    Desktop Most Favored Nation Requirements. Nothing in the RPFJ 
forbids Microsoft from requiring, especially where the product fails 
to meet the definition of middleware, most favored nation agreements 
from the OEMs. These agreements tax OEM efforts to promote Microsoft 
rivals by requiring that equal promotion or placement be given to 
Microsoft products, often without compensation.
    Notification To Developers Only When They Ask. Microsoft can 
disable competing middleware that fails to meet its requirements 
without any notice to the middleware developer. The developer is 
expected to discover the disablement and then request an 
explanation. Microsoft should be required to disclose in advance any 
conditions that would cause a competing product to be disabled.
    J. The RPFJ's Enforcement Provisions Are Insufficient.
    Technical Committee And Compliance Officer. As stated above, a 
Technical Committee of three experts, one of whom will be selected 
by Microsoft, will monitor Microsoft's compliance with the RPFJ. The 
RPFJ also obligates Microsoft to have an internal Compliance 
Officer. However, the RPFJ fails to provide this Committee and the 
Compliance Officer with effective oversight power. For example, 
Microsoft employees do not have a confidential mechanism to report 
violations to the Committee, the Compliance Officer, the Court or 
the Plaintiffs. Nor does the RPFJ require Microsoft to retain 
documents regarding topics relating to the business issues in this 
case.
    Sanctions. In light of Microsoft's violations so far and the 
potential for continued serious harm to competition, the RPFJ is 
deficient in not including a "crown jewel" provision 
requiring Microsoft to incur substantial liability or divestiture of 
certain assets in the event of future violations of the RPFJ.
    IV. CONCLUSION
    For the reasons articulated above, Palm submits that the Court 
should reject the RPFJ as insufficient to remedy Microsoft's past 
unlawful conduct and to ensure vigorous competition in the future. 
In the alternative, this Court should defer ruling on the RPFJ until 
after the Track 2 proceedings conclude.
ATTACHMENT
From: Bill Gates;
Sent: Sunday. July 11, 1999 5:46 PM
To: Harel Kodesh
CC: Bob Mugia (Exchange); Jim Allchin

[[Page 29082]]

(Exchange): Mats Wennberg; Thomas Koll; Greg
Faust;
Jonathan Kobetrs; Bill Mitchell
Subject: Nokia
While I was at the Allen and CO conference I met with Jurma Oillie 
CEO of Nokia.
    I was totally confused by them licensing their WAP browser to 
Spyglass. It's a disaster for us to have an effort that is 
duplicative that we give away while the leaders in the industry move 
in their own direction.
    I think the PDA group needs some better strategic think in this 
whole cheap browse area. How come we don't merge our effort with 
Nokia? Why do we let Spyglass undermine us IN so many areas? Who 
keeps paying money Spyglass?
    I am also completely confused about why we aren't doing more due 
diligence on GPRS with Nokia and others. Jurma seemed very surprised 
when I told him our goal was to fund someone to roll out a 
nationwide wireless network using HDR or GPRS as quickly as possible 
to create something a based on Windows CE. He said his people need 
to explain to use how GPRS is a much better choice. They would love 
to help get involved in rolling this out with some partners. He rays 
HDR or another fraud from Qualcomm where exaggeration sways people 
who don't hear both sides of the story.
    Jurma was asking about our strategy for voice recognition 
servers to make PDAs work a lot better. He sees all networked PDAs 
as needing. a voice recognition, server infrastructure (like phones) 
and that this changes the UI quite a bit I said I agreed with his 
view and that we had not factored that into our plans right now. We 
talked about how voice and screens will come together. l said there 
were a lot of key scenarios that we our PDA group was parenting 
around (I wish our activity level here was really as high as I 
suggested to him7.
    Jurma also wanted to know what sort of strategy we had to bring 
Hotmail Contact lists/Schedules together with Exchange. They use 
Exchange internally but a lot of their people use Hotmail and don't 
understand what we are doing.,
    Jurma told me their Fenix project is delayed because of a key 
chip so it won't ship until March 2000 so they don't want to 
announce at Telcom where I am going. He talked about how much money 
people spend on their booths at Telcom.
    I am a bit confused about what we should be doing on witless 
data/pbx with various vendors. Why wouldn't we want to have a 
Windows PDA to work with each of their wirless PBX solutions?
    Jurma talked about how he is thinking perhaps Cisco or Lucent 
may buy Ericsson if it doesn't get straightened out fairly soon. He 
also thinks someone will buy 3Corn. We talked about how we view Palm 
as a competitor. I was amazed at the number of Palm Pilots I saw at 
this conference. We really need to follow up with them on GPRS 
rapidly and get their best thinking given our goals.
    We really need to demonstrate to people like Nokia why our PDA 
will connect to Office in a better way than other PDAs even if that 
means changing how we do flexible schema in Outlook and how we tie 
some of our audio and video advanced work to only run on our PDAs.
GOVERNMENT EXHIBIT
Remedy 1
MSCE 0097924 CONFIDENTIAL
From: Harel Kodesh
Sent: Sunday, July 11.1999 10:25 PM
To: Bill Gates
CC: Bob Muglia (Exchange); Jim Allchin (Exchange); Mats Wennberg; 
Thomas Koll; Greg
Faust;
Jonathan Roberts; Bill Mitchell
Subject: RE; Nokia
    There is a lot of stuff here. I will try to answer line by line.
    1. Our microbrowser needs a WAP stack. There are 3 Possible 
places we can like it from: Nokia is willing to SELL it to us, 
Ericsson is willing to give it to me wee, and MotoroLa is still 
undecided what they want to do. So right now we are working with 
Ericsson on getting the browser. It is a better deal than the Nokia 
one. We told Nokia that We do not need more than one stack, and the 
stack that Ericsson gives us is good. This is for V2 of the 
microbrowser and we do not plan to give that away. Our browser will 
be better in XML than the Nokia one.
    2. HDR vs GPRS--we are going through the analysis now. I 
don't understand where the fraud is. As we and Sprint talk more 
about R we will do me analysis, Ericsson and Nokia in me past 
claimed that CDMA is a loser, but at the end 3G is CDMA based. I am 
not saying that the HDR is the winner and we will do more to 
understand GPRS--I will take the action item there.
    3. the server based scenarios look very compelling, but we are 
missing some work items to make it really cool. Palm is the clearest 
threat right now and this is where we spent most of the efforts. I 
think the effors is bearing fruits: finally We got the sync 
technology to the point where it is much better man palm. Casio 
demonstrated the Video and Audio are huge sellers. (and with MSAudio 
we do have the tie back to our technology). Unfortunately we do not 
have enough inventory to reach parity and that will be the case 
until early 2000).
    4. There are hotmail/exchange convergence issues here. as well 
as connectivity back to office. I think we are doing a good job in 
rapier time frame, but we will have problems with hardware 
availability and this is what we are trying to fix now. I will work 
with bobmu on these issues.
--Original Message--
From: Bill Gates
Sent: Sunday, July 11, 1999 5:46 PM
To: Harel Kodesh
Cc: Bob Muglia (Exchange); Jim Allchin (Exchange); Mats Wennberg; 
Thomas Koll: Greg
Faust; Jonathan
Roberts; Bill Mitchell
Subject: Nokia
    While I was at the Allen and Co conference I met with Jurma 
Ollila CEO of Nokia. I was totally confused by them licensing their 
WAP browser to Spyglass. It's a disaster for us to have an effort 
that is duplicative that we give away while the leaders in the 
industry move in their own direction. I think the PDA group needs 
some better strategic thinking in this whole cheap browser area. How 
come we don't merge our effort with Nokia? Why do we let Spyglass 
undermine us in so many areas? Who keeps paying money Spyglass? I am 
also completely confused about why we aren't doing more due 
diligence on GPRS with Nokia and others. Jurma seemed very surprised 
when I told him our goal was to fund someone to roll out a 
nationwide wireless network using HDR or GPRS as quickly as possible 
to create something a based on Windows CE He said his people need to 
explain to use. how GPRS is a much better choice. They would love to 
help get involved in roiling this out with some partners. He says 
HDR is another fraud from Qualcomm where exaggeration sways people 
who don't hear both sides of the story.
    Jurma was asking about our strategy for voice recognition 
servers to make PDAs work a lot better. He sees all now voice PD as 
needing a voice, recognition server infrastructure (like phones) and 
it this changes the UI quite a bit. I said I agreed with his yew and 
that we had not factored that into our plans night now. We talked 
about how voice and screens will come together. I raid there were a 
lot of Key scenarios that we our PDA group was parenting around (I 
wish our activity level here was really as high as I suggested to 
him).
    Jurma also wanted to know what sort of strategy we had to bring 
Hotmail Contact lists/Schedules together with Exchange. They use 
Exchange internally but a lot of their people use Hotmail and don t 
understand what we are doing.
    Jurma told me their Fenix project is delayed because of a key 
chip so it won't ship until March 2000 so they don't want to 
announce at Telcom where I am going. He talked about how much money 
people spend on their booths at Telcom.
    I am a bit confused about what we should be doing on witless 
data/pbx with various vendors. Why wouldn't we want to have a 
Windows PDA to work with each of their wirless PBX solutions? MSCE 
OO97925
CONFIDENTIAL
    Jurma talked about how he is thinking perhaps Cisco or Lucent 
may buy Ericsson if it doesn't get straightened out fairly soon. He 
also thinks someone will buy 3Corn. We talked about how we view Palm 
as a competitor. I was amazed at the number of Palm Pilots I saw at 
this conference, We really need to follow up with them on GPRS 
rapidly and get their best thinking given our goats. We really need 
to demonstrate to people like Nokia why our PDA will connect to 
Office in a better way than other PDAs even if that means changing 
now we do flexible schema in Outlook and how we tie some of our 
audio and video advanced work to only run on our PDAs. MSCE 0097926
CONF IDENTIAL
From:. Harel Kodesh
Sent: Sunday. July 11, 1999 10:45 PM
To: Harel Kodesh; Bill Gates
CC: Bob Muglia (Exchange); Jim Allchin (Exchange); Mats Wennberg; 
Thomas Koll; Grog
Faust; Jonathan Roberts; Bill Mitchell
Subject: RE: Nokia
    Forgot one thing: We absolutely need to go after other PBX 
manufacturers and develop

[[Page 29083]]

the market independently of what Nokia can or cannot do. I really 
would like to see us announcing an effort to provide, campus 
communication (ideally .with Nokia and others) even though they may 
fall behind in terms of schedule. The whole offering is not a 
consumer offering and we will need some lead time to sell it to the 
enterprise.
--Original Message--
From:Harel Kodesh
Sent: Sunday, July 11, 1999 10:25 PM
To: Bill Gates
Cc: Bob Muglia (Exchange); Jim Allchin (Exchange; Mats Wennberg; 
Thomas Koll; Grog
Faust; Jonathan Roberts; Bill Mitchell
Subject: RE: Nokia
    There is a lot of stuff here, I will try to answer line by line.
    1. Our microbrowser needs a WAP stack. There are 3 possible 
places we can take it from: Nokia is willing to--SELL it to us, 
Ericsson is willing to give it to me free, and Motorola is still 
undecided what they want to do. So right now we are working with 
Ericsson on going the browser. It is a better deal than the Nokia 
one. We told Nokia that. We do not need more than one stack, and the 
stack that Ericsson gives us is good. This is for V2 of the 
microbrowser and we do not plan to give that away. Our browser will 
be better in XML than the Nokia one.
    2. HDR vs GPRS--we are going through the analysis now. I 
don't understand where the fraud is. As we and Sprint talk more 
about it we will do the analysis. Ericsson and Nokia in the past 
claimed that CDMA is a loser, but at the end 3G is CDMA based. I am 
not saying that the HDR is the winner and we will do more to 
understand GPRS--I will lake the action item them.
    3. the server based scenarios look very compelling, but we are 
missing some work items to make it really cool. Palm is the clearest 
threat right now and this is where we spent most of the efforts. I 
think the effors is bearing fruits: finally we got the sync 
technology to the point where it is much better than palm. Cask) 
demonstrated the Video and Audio are huge sellers (and with MSAudio 
we do have the tie back to technology). Unfortunately we do not have 
enough inventory to reach parity and that will be the case until 
early 2000).
    4. There are hotmail/exchange convergence issues here, as well 
as connectivity back to office. I think we are doing a good job in 
rapier time frame, but we will have problems with hardware 
availability and this is what we are trying to fix now. I will work 
with bobmu on these issues.
--Original Message--
From: Bill Gates
Sent: Sunday. July 11.1999 5:46 PM
To: Harel Kodesh
Co: Bob Muglia (Exchange); Jim Allchin (Exchange); Mats Wennberg; 
Thomas Koll; Grog
Faust; Jonathan Roberts: Bill Mitchell
Subject: Nokia
    While I was at the Allen and Co conference I met with Jurma 
Ollila CEO of Nokia. I was totally confused by them licensing their 
WAP browser to Spyglass. It's a disaster for us to have an effort 
that is duplicative that we give away while the leaders in the 
industry move in their own direction. I think the PDA group needs 
some better strategic thinking in this whole cheap browser area. How 
come we don't merge our effort with Nokia? Why do we let Spyglass 
undermine us in so many areas? Who keeps paying money Spyglass? I am 
also completely confused about why we aren't doing more due 
diligence on GPRS with Nokia and others. Jurma seemed very surprised 
when I told him our goal was to fund someone to roll out a 
nationwide wireless network using HDR or GPRS as quickly as possible 
to create something a based on Windows CE. He said his people need 
to explain to use how GPRS is a much better choice. They would love 
to help get involved in rolling this out with some partners. He says 
HDR is another fraud more MSCE 0097927
CONFIDENTIAL
    Qualcomm where exaggeration sways people who don't hear both 
sides of the story. Jurma was asking about our strategy for voice 
recognition servers to make PDAs work a lot better. He sees all 
networked PDAs as needing a voice recognition server infrastructure 
(like phones) and that this changes the UI quite a bit. I said I 
agreed with his view and that we had not factored that into our 
plans fight now. We talked about how voice and screens will come 
together. I said there were a lot of key scenarios that we our PDA 
group was patenting around (1 wish our activity level here was 
really as high as I suggested to him). Jurma also wanted to Know 
what sort of strategy we had to bring Hotmail Contact lists/
Schedules together with Exchange. They use Exchange internally but a 
lot of their people use Hotmail and don't understand what we are 
doing.
    Jurma told me their Fenix project is delayed because of a key 
chip so it won't ship until March 2000 so they don't want to 
announce at Telcom where I am going. He talked about how much money 
people spend on their booths at Telcom. I am a bit confused about 
what we should be doing on witless data/pbx with various vendors. 
Why wouldn't we want to have a Windows PDA to work with each of 
their witless PBX solutions?
    Jurma talked about how he is thinking perhaps Cisco or Lucent 
may buy Ericsson if it doesn't get straightened out fairly soon. He 
also thinks someone will buy 3Corn. We talked about how we view Palm 
as a competitor. I was amazed at the number of Palm Pilots I saw at 
this conference.
    We really need to follow up with them on GPRS rapidly and get 
their best thinking given our goals. We really need to demonstrate 
to people like Nokia why our PDA will connect to Office in a better 
way than other PDAs even if that means changing how we do flexible 
schema in Outlook and how we tie some of our audio and video 
advanced work to only run on our PDAs. MSCE 0097928
CONFIDENTIAL



MTC-00030614

    IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
    UN??) STATES OF AMERICA, Plaintiff, Civil Action No. 
98-121 CKK, ??FT CORPORATION, Defendant
    STATE?? NEW YORK: et al., Plaintiffs, Civil Action No. 
98-123 ??KK, MICRDN??FT CORPORATION, Defendant
    COMMENTS OF SOFTWARE & INFORMATION INDUSTRY ASSOCI?? ION ON 
PROPOSED FINAL JUDGMENT
Ken Wasch, President (Bar No. 93,4984) I Software and Information
Industry Associa?? 1090
Vermont Avenue, N W
6th Floor
Washington, DC 20005
(202) 289-7442
Douglas L. Hilleboe (Bar No. 386091)
Steptoe & Johnson LLP
1330 Connecticut Avenue, NW
Washington, DC 20036
(202) 429-3000
Dated: January 28, 2002
COMMENTS OF SOFTWARE & INFORMATION INDUSTRY ASSO?? ON PROPOSED 
FINAL JUDGMENT
    Pursuant to Section 2(b) of the Antitrust Procedures and 
Penalties Act (the "??nney Act") 15 U.S.C. 
 16(b)-(h) (2000), the Software & Information 
Industry Associati?? ("SIIA") submits those comments on 
the Proposed Finn Judgmenet ("PFJ") filed by the Unite 
?? Department of Justice ("DOJ") on November 6, 2001.
    SHA is the principal trade association of the software code and 
information?? tent corp?? SHA provides global services in government 
relations, business development corporate education and intellectual 
property protection to more than 800 leading s ??are and ?? company. 
Our member develop and market software and electronic ??tent for 
business education, consumers, and the Internet. SIIA's membership 
is compiled ??arge and small ?? companies, e-business and 
information companies, as well as many traditional and electronic 
commerce complies of varying sizes.
    Among SIIA's key public policy issues is the promotion of 
competition in th??ftware industry. SIIA has promoted these 
principles of competition in a variety of fora, inc??g the federal 
courts.
    The PFJ proffered by DOJ represents a remarkable change of 
heart- or, per?? more accurately, a loss of heart. For whatever 
reason, DOJ proposes to end one of its m?? important and successful 
monopolization case a with a settlement that reflects neither its 
litiga?? ??position nor the decisions it won at trial and on appeal. 
A settlement as weak as this would ?? been disapp??, but perhaps 
understandable, at it had been reached before trail. In ?? is 
uncertain, and sometimes DOJ must take a bird in the hand. But in 
this ?? of the ??giation is past, and the new Administration 
arrivals are dot free to decide ?? the?? to this case. The law of 
this case is settled. The trial and appeals ?? have alre?? finding 
of fact and conclusions of law. These findings and conclusi?? 
proceeding whose raison ?? is protecting against an improperly ?? or 
expedient compromise of the public's interest in enforcement of the 
antitrust laws.
    Appropriate relief in an antitrust case should end the unlawful 
conduct, ?? competition, avoid a recurrence of the violation and 
others like it, and ?? anticompetitive consequences. Unfortunately, 
SIIA submits that the PFI does

[[Page 29084]]

not a?? these ?? and ignores significant parts of the Court of 
Appeals's decision regarding ?? an?? and their consequences. Ever 
where it seems to address the ?? identified by the Court, the PFJ is 
so porous that it provides little or no protection a ?? a repetition 
of Microsoft's past anticompetitive acts.
    Flaws in the PFJ's Remedies. The two most salient remedies 
imposed?? Microsoft under?? PFJ concern flexibility for OEMs to 
install competing middleware and A?? DOJ's Competitive Impact 
Statement ("CIS") stresses the importance of preventing 
future??ses in these ?? The theme of the CIS and PFJ is that 
competition was injured in this?? prin?? because Microsoft's illegal 
conduct maintained the applications barrier?? personal computer 
operating system market by thwarting the success of middleware ?? 
would have ?? competing operating systems gain access to 
applications and other need?? complements. The PFJ is intended to 
restore competition. In fact, however, the PF?? so loosely written 
it is likely to have only the most modest effect on Microsoft's 
actions- ?? all on its ability to monopolize new sectors of the 
information technology market.
    a. Middleware. Middleware was at the heart of the case. Impelled 
by enth??asm for the Intr??, PC users embraced Netscape's browser, 
and Netscape (particularly in c?? ??ination with JAVA) was able to 
provide developers with a new, non-Microsoft?? h to the des?? This 
is not simply an academic observation on the part of S??A and its ?? 
For ?? every one of our members, the rise of independent middleware 
opened ?? that were the objects of intense strategic focus. The 
reason for this ?? was that our ?? programs suddenly could use 
Netscape and JAVA as mediators to ?? launch and ?? the desktop. For 
the first time in year it seemed possible that independs?? software 
venders (ISVs) would have a way to reach the great majority of 
computer users ind??dent of Microsoft. Indeed, because they could 
run on other operating systems. JAVA and?? cape's browser suddenly 
offered these ISVs an even broader market than they could obtain 
developing for the Microsoft operating system.
    The CIS describes how this competitive threat struck at the 
heart of Microso?? monopoly, and Microsoft's counterattack used 
every possible weapon, including?? ??lawful tactical?? 
"leveraging" its operating system monopoly. The PFJ 
seeks to prevent Mi?? soft from repeating these tactics by ensuring 
that future middleware vendors are not denied ac??to the desktop. 
But the measures chosen are unlikely to have that effect. As a 
matter of ?? they are family weak. Microsoft itself is expressly 
granted nearly complete control over ?? meaning of 
"middleware" under the PFJ.
    Equally important, these measures are written for a world that 
no longer exis?? The market ?? has moved on. The PFJ grants to 
hardware makers the right to add middle wa??cons to their ?? but 
these companies simply lack the financial strength and the 
motivation??levelop new software that might threaten Microsoft. To 
take one example, OEMs have been ??ured by Microsoft for several 
monks that they may customize their desktops by uninstalling?? 
??soft's Internet Explorer; not one has actually done so. Meanwhile, 
the PFJ does not give i?? endent software vendors who might 
challenge Microsoft the one thing that would tempt then?? a channel 
to users that is not subject to exclusionary practices by Microsoft. 
On the ?? trary, the PFJ pro??ects middleware only after Microsoft 
has launched a similar product, by w??time it is too late. 
Developers of applications will always develop first and most 
enthusiastical?? or the most w??dely deployed platform, because that 
platform offers them the largest marke ?? the most users Users, in 
turn, will typically choose the most widely deployed platform beca?? 
it offers ?? threatened Microsoft in 1995-98 because it could 
offer developers an even bigger m "Microsoft plus" 
market.
    ??u Microsoft cannot be seriously challenged in that way again 
because no n??enact to the middleware market can hope to equal the 
ubiquity of Microsoft in that market, l??:one achieve the 
"Microsoft plus" market that Netscape and JAVA offered 
in 1995-98.
    b. APIs. The PFJ also requires that Microsoft disclose the APIs 
used by Mi?? soft middleware to interoperate with the Microsoft 
operating system. Here, too, the PFJ?? ??ers both from porous 
drafting, and #ore a curious blankness regarding the sources of 
Micros?? dom?? of the market.. The provision is replete with terms 
that are not defined (?????? is rimed or distributed 
("Microsoft Middleware") or, most remarkably. are left 
to be defined ?? Microsoft's "sole discretion" 
("Windows Operating system Product").
    In any event, the PFJ does little more than throw Microsoft into 
a briar patch?? as long ??called to?? Microsoft's ?? application 
developers writing for its users. To write programs for Microsoft 
users, ?? developers must have access to Microsoft's APIs. The APIs 
are their air supply, an ?? who are too independent or too 
successful, it has every incentive to provide extensi?? inf?? about 
its APIs. And the PFJ leaves the valve firmly in Microsoft's?? 
allowing 'Microsoft to impose royalties and other restrictions 
on developers who on, access to the APIs. The PFJ thus requires 
little or nothing more than Microsoft would provid?? its own. Unless 
developers can be guaranteed an air supply that does not depend on 
Microso?? hey wi11 not ?? the company that can unilaterally cut them 
off.
    2. Backward-Looking Remedies. In short, when all is said and 
done, this?? wagers everything on a series of measures that might 
have prevented Microsoft from unlaws?? y destroying Netscape in the 
browser wars. Even this is open to question, but the real ?? lem 
with the PFJ lies deeper, for there is not the slightest chance that 
these measures will ??ow a new competitor on the order of Netscape 
to emerge. The market has moved on. Focusin?? ??y on prever??ing a 
repetition of the unlawful actions Microsoft took in 1995-98 
is like neg?? ling an end to World War II by letting the Germans 
keep Paris as long as they promise to rel?? d the Mag??st Line. Such 
a limited focus is not just improvident, it ignores the instructions 
of the ??art of ??? "fruits" of its unlawful conduct. 
This cannot be accomplished by relying on the emer??ce of some yet 
to-be-identified middleware challenger. To the contrary, Microsoft 
has alre?? solid find its unlawful victory into a browser monopoly, 
and it now bids fair to make?? entire Interne?? into a proprietary 
Microsoft environment. Any remedy that seeks to deny M??soft the 
fruits of its unlawful conduct must at a minimum prevent Microsoft 
from using the?? conduct to extend its control or services that rely 
on Internet Explorer.
    For that reason, SIIA urges that the PFJ be expanded to address 
present and?? conditions, and not just the dead past. The PFJ must 
take steps to reduce the massiv?? tructural advantage that Microsoft 
has achieved by unlawfully leveraging is opiating systen?? into 
Internet-access These steps include opening the code of Inwrn?? 
restricting exclusionary uses of Windows XP and the tools that make 
up Mic?? .NET in tiative, preventing Microsoft from 
"polluting" standards by adding?? extensions, and 
inclusion of Microsoft's productivity applications in any 
relief.
    3. Missing Principle. One further gap in the PFJ deserves 
mention. If the?? changes required by the PFJ are of very dubious 
force, the only provisions likely to ?? continuing value are those 
that spell out broad principles of conduct. Here too thee?? room for 
disappointment. The PFJ does not prohibit Microsoft from 
intentionally di??,ling or adver?? affecting the operation of 
competing products. No explanation is offered ??
    4. Procedure. Finally, SIA wishes to address one procedural 
point. At the?? this proceeding are the decisions of the Court of 
Appeals and the District Court.?? about Microsoft's conduct and 
about the appropriate remedies are an essential?? interest analysis. 
But they are also at the heart of the case between the remaining 
liti?? and Microsoft. It may be difficult to reach a conclusion 
about this PFJ without Pref?? decision on the yew issues that the 
parties intend to litigate before the Court in the ?? To do so on 
the basis of a few Tunney Act filings rather than a full record 
might do a?? to the parties to that litigation. SIIA therefore 
respectfully requests that this Court ?? the PFJ and in terms under 
advisement until the conclusion of the litigation. In sum, the PFJ, 
as written, represents a failure of will and technological wis??m 
that canh?? approved by this court consistent with the unanimous 
liability decision o??3 Court of Appeals, traditional standards of 
antitrust remedy law, or the Tunney Act.
    II. ARGUMENT
    A. Standard of Review
    Under the Tunney Act, this Court is required to review a 
proposed settlemen?? Deter??e whether it serves the "public 
interest." In most instances Tunney Act pr?? occur prior or to 
trial and without any judicial findings of liability. The Act was 
pass?? stage if the proceedings to the sunlight of public scrutiny. 
In the unique?? this case, however, where the Court of Appeals 
issued an opinion on the merits prio?? inition?? ?? consistent with 
the Court of Appeals opinion. The Court of Appeals ruled, 
"[t]he Su?? has expl??red that a remedies decree in an 
antitrust case must seek to "unfetter a ??

[[Page 29085]]

conduct," Ford Motor Co., 405 U.S. at 577, to terminate the?? 
deny in the defendant the fruits of its statutory violation, and 
ensure that there remain?? practices likely to result in 
monopolization in the future. Thus, this Court must ??ider each of 
these factors in its public interest analysis.
    Ordinarily, the Department of Justice is given prosecutorial 
discretion in de??ng whether to bring a civil antitrust action. As a 
result, courts generally require that a ??posed settlement only be 
"within the reaches of the public interest'," which 
approval "even if it falls short of the remedy the court would 
impose on its own." Thus, in?? Tunney Act cases, courts have 
permitted entry of consent decrees which were mere?? with the 
government's general theory of liability as manifested in its 
complaint" ?? "gran??] relief to which the government 
might not be strictly entitled" under the ?? Ben??. 648 F.2d 
at 660.
    In this case, after trial and with the benefit of an extensive 
factual record, the?? App?? held specifically that relief must seek 
to "terminate" Microsoft's operating. tem?? monopo?? 
"unfetter" barriers to competition to the OS market, and 
"deny" Microsc?? he "fruit" of its statutory 
violations. DOJ itself has emphasized to this Court that "b?? 
the applical?? remedial legal standard and the liability 
determination of the Court of A??als are clear ?? Here, there is no 
question that the Court of Appeals is binding on this Co?? as well 
as the ??itigins. Consequently, the Court of Appeals" mandate 
is the "public interest as?? pressed in the ?? laws." 
"[A] remedies decree in an antitrust case must seek to 
"unfetter a market ?? antico?? e??itive conduct," to 
"terminate the illegal monopoly, deny to the defendant t?? 
fruits of its sta??tory violation, and ensure that there remain no 
practices likely to result in me?? ??olization in the ??lure." 
Microsoft III, 253 F.3d at 103 (quoting Ford Motor Co. v. United S?? 
405 U.S. 5??2 577 (1972), and citing United States v. United Shoe 
Mach. Corp., 391 U.S. ?? 4,250 (1968) (internal citations omitted)). 
No new legal standard for monopolization relief ?? is put forwar?? 
by the DC Circuit. On the contrary, the Court adopted the 
traditional test ??d on by the Supreme Court. Joint Status Report, 
United States v. Microsoft Corp., at 2g (D.DC filed S?? .20, 2001).
    The CIS, however, articulates a different and considerably less 
rigorous stan??d for a reme??y in an antitrust case. According to 
the CIS, "[a]ppropriate injunctive relief. ??hould: (1) end 
the ??lawful conduct; (2) 'avoid a recurrence of the 
violation" and others like it??d (3) undo is anticompetitive 
consequences." Significantly, the formulation advocated DOJ 
does not re??re the remedy to 'terminate" the illegal 
monopoly, or to 'deny the defendan??e fruits" of its ?? 
awful conduct. Regardless of whether the DOJ formulation may have 
been ??propriate in pas??es, it is simply the wrong standard of 
review for the remedy in this case, where the Dist?? Court and Court 
of Appeals have clearly outlined how Microsoft violated th?? Her??an 
Act. The PFJ is deficient under either formulation. There are 
substantial disparities ??tween the CIS and the PFJ. And the DOJ has 
not even attempted to defend the PFJ under the ?? string??, and 
binding, Ford/United Shoe/Grinnell standard that this Court must 
see?? enforce. CIS at 2.4 (citations omitted).
    ?? SIIA's Remedy Proposals are Reasonable and Proportional 
to Microsoft's Unlawful Conduct ??UA's proposed modifications to the 
PFJ, described in detail below, are both ??umerous and substantial. 
Regrettably for consumers, Microsoft's already proven monopolist 
??cts have so destroyed competition in the operating systems market 
that adoption of these pro??als is critical if the PFJ is to 
"unfetter" the market from Microsoft's anticompetitive 
cond?? "terminate" Microsoft's illegal monopoly, deny 
Microsoft the ""fruits" of its Sherma??ct 
violations, and prevent future monopolistic acts, in accordance with 
the Ford/United Shoe/Grinnell standard for remedies.
    There are similarities between this case and the AT&T 
divestiture, the last ??ge mo??ization settlement under the Tunney 
Act. SIIA submits that in This case the PFJ is simila??y completely 
inadequate to remedy the serious antitrust violations in this ma??. 
In the former matter Judge Greene reviewed the evidence on all 
issues except remedy. Af?? evidentiary hearings, third-party 
submissions, and lengthy oral argument, Judge Gre?? declined to 
approve the consent decree as proposed because he concluded that it 
was inadequ?? in certain areas and precluded the Court from 
effective oversight and enforcement. Judge Gre?? required 
significant changes to the proposed decree before he would consent 
to enter the settlement under the Tun??ey Act's public interest 
standard, holding that "[i]t does not follow... that ?? Court] 
must ?? ??uestioningly accept a [consent] decree as long as it 
somehow, and however ?? inad??tely, deals with the antitrust... 
problems implicated in the lawsuit." SIIA ?? respect??lly 
requests that this Court follow Judge Greene's prudent actions and 
send ?? parries bac?? to the negotiating table to formulate an 
appropriate PFJ. This Court should re?? ??e its con??s on on the PFJ 
until after the pending State case has been litigated.
    C. The PFJ Fails to Address the Core Violations Affirmed by the 
D?? Circuit
    1. The PFJ Does Not Eliminate Microsoft's Binding of its 
M??eware to its Operating System As the C??S indicates, the core 
manner in which Microsoft unlawfully mainta??d its Win?? Operating 
System ("OS") monopoly was by bundling and tying 
platform ??dleware to the OS. Microsoft used this strategy to defeat 
the alternative platform threats pos?? by Nets?? and JAVA. The DC 
Circuit ruled that these actions constituted unlawful ??intenance of 
mo??poly under Section 2.
    a. Failings of the PFJ
    It is critical for this Court to understand that the business 
and economics that ??ive the software industry demonstrate 
conclusively that the ubiquity of a development platf?? will almost 
always beat technological superiority. The common interest of 
software dev??bers and cons?? in adopting the most uniform platform 
is the basis of the Microsoft mone??y. As a result, if Microsoft is 
allowed to continue to bind or bundle its middleware offerings th 
the Windows OS, the ubiquity of its middleware will be permanent, 
and active middiew?? comp?? will never emerge. Microsoft will enjoy 
a perpetual maintenance of its nopoly, codified and reinforced by to 
the PFJ, and consumers will suffer a significant retardi?? of 
innnov??tion that would have otherwise occurred. The negative 
consequences of this ??ome on innov??tion cannot be overstated. If 
there is no way to reach consumers except throu?? Microsoft's 
platform, and if Microsoft remains free to cut off the access of 
applicati?? that are "too ??ssful," then there are few 
incentives for independent innovation in the fie?? that Microsoft 
occupies. Yet one of the principal comparative advantages currently 
enje?? by the Un??tates" economy and its consumers is 
generally superior technological deve?? ??nent and innovation. 
Allowing Microsoft's monopoly to continue unfettered (as the PFJ 
doe?? would signi?? erode this advantage over a short time.
    The CIS recognizes this central fact and claims to have 
addressed it. The CIS ??ays that the PFJ will ensure that OEMs 
(manufacturers of PCs) have the contractual and eco??nic freed?? to, 
distribute and support non-Microsoft middleware products without 
fear??oercion or retaliation by Microsoft. Further, the CIS claims 
the PFJ will ensure that OEMs have he freed ?? to configure the 
personal computers they sell to feature and promote non-Microsoft 
midd?? are, and will ensure that developers of these alternatives to 
Microsoft prod?? are able to fea?? those products on PCs. The CIS 
also claims the PFJ will ensure that OEM ??ave the freedom to offer 
non-Microsoft middleware, by requiring Microsoft to provide the OEMs 
with the ability to customize the middleware installed.
    SIIA considers these goals to be laudable. But flaws in the PFJ 
as written m?? that it cann?? achieve these goals, or even reduce 
the monopoly Microsoft currently enjoys??
    i. The "Plumbing" Problem
    First, merely allowing OEMs and end-users (individuals and 
businesses) to ??veicons and shor?? cuts (so-called "end user 
access" ) does not solve the underlying problem. ?? PFJ leaves 
all of the browser middleware on the PC hard disk, which means that 
it is ava??le to Window, and all Windows applications. In other 
words, the PFJ does nothing to re??e or modi??y the code itself- the 
hidden "plumbing': by which Microsoft has bound Intel Explorer 
(IE). Windows. As a result, third-party software developers can 
continue to rely Microsoft's middleware plumbing--as long as 
they write Windows applications. N??e of the incer??ves that bind 
developers to Microsoft will change under the PFJ because dev??ers 
will still b??sured that Microsoft's middleware will be installed on 
about 95 percent of??sktop PCs whether or not the "end user 
access" is removed. In short, Microsoft can still enjoy 
benefit it wres??ed from Netscape and JAVA when it forced their 
middleware out of the main??un. That bene??vas not a ubiquitous 
icon--it was ubiquitous plumbing.
    The PFJ thus fails to address the network effect that drives the 
Microsoft mo??oly corrp??tiors will still lice the same

[[Page 29086]]

applications barrier to entry because Microsoft's development 
platform platform will still be ubiquitous. ISVs will therefore 
continue to write ??plications to the vi??osoft APIs, ignoring the 
more narrowly distributed--and therefore highest perunit?? 
??lrematives. If anything, the PFJ helps to lock in this network 
effect by mere??iving OEM?? and end users the option to remove the 
icons and shortcuts rather than allow them to decide?? whether to 
add the Microsoft middleware in the first place. For this reason are 
the PFJ fails to meet even the requirements of antitrust remedies 
law and does not comport the DC Circuit opinion.
    ii. Distribution of middleware
    As is detailed throughout these comments, it is import-ant for 
this Court to un??stand that Microsoft currently enjoys a monopoly 
in the distribution channel--namely, the Win??ws oper?? system. 
The PFJ does nothing to alter this monopoly since Microsoft is 
ali??ed to contr?? integrating its middleware into its ubiquitous 
OS. The "removal" of the mi??eware in the s??peificial 
manner proposed by the PFJ permits Microsoft to commingle code for 
middleware with the OS, and does nothing to prevent Microsoft from 
protecting its w??ows monep??ly power through the same exclusionary 
means used against Netscape and ??A. Nothing is more persuasive than 
experience, and experience suggests that granting Ms the right?? 
uninstall" IE is a meaningless remedy In fact, Microsoft has 
already revis?? Windows XP so that OEMs may" 
"uninstall" end user access to IE. Nor one OEM to date 
has?? en adva??age of this option.
    iii. Reliance on OEMs
    SIIA also believes that the PFJ's reliance upon OEMs in this 
section of the is mis??d OEMs have historically been low-margin 
economic dependents of Micr??ft, and they have therefore been 
reluctant to challenge Redmond. Since 1995-98, this situa?? I 
has worseued. Currently, PC manufacturers face falling prices and 
demand. It is not ec??mieally rational in this market environment to 
expect OEMs to invest in the research and de??pment, and product 
design work, necessary to replace Microsoft's "free" 
middleware with ?? products of c??peting vendors. OEMs should have 
the option to ship Microsoft middleware hey choo?? do so by 
obtaining it from Microsoft, and not because they were forced to so 
by Microsoft's bundling or bolting of the middleware are to the OS.
    iv. Lack of exclusivity
    Another essential element of the PFJ's supposed remedy to 
Microsoft's mon??ly is to crea??e "marketplace" for 
competitive middleware on the PC desktop. This 
"marke??ce," however is illusory. It will never occur 
under the current structure of the PFJ. Deve??ers canno??be offered 
the "Microsoft plus" market that Netscape and JAVA 
offered befo?? Microsoft's unlawful counterattack. Microsoft will 
still have to all PCs for fr?? by virtue of its ?? r??ution 
monopoly. Consequently, its competitors can only hope to be instia?? 
alongside Microsoft's middleware on some of the machines sold by 
OEMs. Instead "Microsoft plus" they will have to settle 
for "Microsoft minus." Since software dev??pers write 
first ?? the most widely available middleware (the applications 
barrier to entry l9), c??eting middle are vendors will not pay much 
for the chance to run a distant second to Mir??oft in ubiquity. Nor 
does the PFJ allow independent middleware companies to purchase a 
??icrosoft-free" market; without the commingling remedy, 
alternative middleware vendors cart?? pay for exclusivity. The PFJ 
only permits competitive middleware vendors to pay for share ??ccess 
to some PCs. SIIA's proposed anti-bundling remedy, in contrast, 
would immediately ??ease the value and competitiveness of the 
"marketplace" by permitting PC manufacturers to y 
differn??late their products with competing middleware.
    b. Remedies for the PFJ's failings
    The appropriate remedies proposed by SIIA for this bundling 
problem are n??erous because the problem is so central:
    Microsoft should be prohibited from incorporating any middleware 
it the OS (including for purposes of this section IE), and 
prohibited from making any Microsoft Middleware Product the default 
middleware, i?? order to prevent the continuation of the 
applications barrier to entry. Further, the definition of Middleware 
Product in the 2000 Decree s??ld be amended by:
    The definition of "Bind" in Section 7.d of the 2000 
Decree should be supplemented to add "and all of its related 
files, including, without limitation, by commingling of code;" 
IE, and other browsers (includ?? MSN Explorer) should be eliminated 
from the definition of" Middle?? Product, but instead covered 
by the open source remedy described and Microsoft should be 
prohibited from "altering or interfering with the choice of 
middleware by a user or OEM, including without limitation setting or 
changing MIME types to automatically launch a Microsoft Middleware 
Product, plug-in or other Microsoft software." Microsoft 
should be provided with a 90-day transition period in whi?? 
reconfigure Windows XP and any other existing OS products that 
currently bind Middleware Products with the OS. Three other remedial 
points bear discussion here. First, the current definition Microsoft 
Middleware or Microsoft Middleware Product allow Microsoft to 
unilate?? Dete??e the scope of its obligation simply by deciding 
whether to ship a product ??rately from Windows. The definition 
under the PFJ provides that if Microsoft has distribu?? middleware 
separately from the OS, it is a Middleware Product. In S??A's view 
the defin??on should provide that if anyone distributes middleware 
separately from the Middleware Product, and subject to the binding 
prohibition. Thus, if a competitor c?? middleware technology, 
Microsoft would therefore be precluded from introducing it versic?? 
integrated: with the OS, and thereby stifling the potential for the 
new middleware techn??logy to erode the applications barrier to 
entry. In other words, the proposed r?? definition would ensure that 
Microsoft cannot gate" the development of middleware integ?? 
new innovations pioneered by third-parties into its OS, instead of 
distri?? Mi??ft "clone" as a separate retail product.
    Second, the Office Suite of productivity applications and the 
Outlook email infor??tion management program should be added to the 
definition of Middleware order preclude Microsoft from evading the 
constraint of this section of the PFJ by b?? or O?? technology (each 
of which exposes APIs and can erode the applications entry ?? the 
OS. Third, Microsoft should be required to provide IE source code on 
an open s?? descr??bed below. This is necessary because IE, which 
once was a classic example ?? middleware, has now been so thoroughly 
integrated into the OS by Microsoft that P?? Mi??ft to bind 
middleware to IE would allow .Microsoft to circumvent the anti-b?? 
pro??on. Under a properly revised PFJ: IE would be treated as a 
Windows Operating System Product "for purposes of this 
section." To the extent middleware is available in the retail 
channels from competitors, Microsoft would be barred from tying, 
binding, or bolti?? (either contractually or technologically) 
similar technology to the operating system. Microsoft would be 
prohibited from shipping Windows to OEMs wit Middleware or 
Middleware Product included. Both OEM and end users would, of 
course, be free to use Microsoft middleware received by download, or 
sold in retail stores. OEMs would also be free to procure 
Microsoft's middleware separat?? and include that software on their 
retail PC systems. Microsoft products that would fall under the 
middleware restrictions l include Media Player and Windows 
Messenger. The Court of Appeals" decision in this matter 
supports the SIIA's proposed a?? reined?? While the Appellate Court 
reversed the District Court's conclusion that Mi?? exc??y conduct 
violated Section 1 as a per se unlawful tying arrangement, it ?? 
affirmed liability for monopoly maintenance under Section 2 for this 
same behavio?? "[t]??ologically binding IE to Windows... both 
prevented OEMs from pre-insta?? bro??s and deterred consumers from 
using them." The Court specifically fo?? Mic??ft's commingling 
of software code for Windows and IE was unlawful and r??, that its 
remand of the Section 1 tying claim was wholly consistent with 
imposing S?? liabi??y for essentially the same conduct: "The 
facts underlying the tying allegation overlap ??th those set 
forth.., in connection with the * 2 monopoly maintenance c?? Thus, 
this Court is not limited in an3" fashion in altering the PFJ 
to restrict Microsof?? bund?? and bind other software with the OS.
    The DC Circuit's express affirmance of liability for binding IE 
to Window signi?? because Microsoft sought to limit ;he Court's 
holding solely to the more on which the DC Circuit "also 
affirmed, of excluding IE from the so-called "add/re?? 
Micr??ft argued that its commingling of code was appropriate and 
that the Court s?? affi?? the ground that it had not allowed end 
users a means of deleting the IE i?? desk?? The Court of Appeals 
rejected Microsoft's argument out-of-hand.
    2. The PFJ Does Not Prevent Microsoft from Using Window Features 
to Protect Its OS Monopoly
    a. Failings of the PFJ
    The current computing market is shifting away from client-side 
software, to??d an

[[Page 29087]]

envit??ent of Internet-based ("distributed") 
applications and Web services. Eve??ng from spread sheets and music 
to air travel reservations and photo development can be off?? as a 
web service. Microsoft has made clear its desire to shift its entire 
business from a produ??icensing model to a model in which it derives 
revenue from a subscription of services. Microsoft has designed 
Windows XP to distribute key middleware components such as Passport, 
??dows Messenger, and Windows Media Player, while at the same rime 
making them archit??urally necessary for the provision of many 
internet services, in addition, Microsoft has in??singly been ??ding 
Web-based services into its Windows operating system, thereby plac?? 
competitive and innovative services at a great disadvantage. This is 
an all-too-fami?? tactic. By bundling and tying its Web-based 
services and Internet middleware to Windows?? Microsoft further 
reinforces the applications barrier to entry achieved by locking 
us?? into its own Web-based services and proprietary Internet 
interfaces. The CIS stares that the PFJ is designed to prevent 
recurrence of the same or ??ilar prac?? that Microsoft employed to 
reach its current monopoly position. As disc??ed above, however, the 
PFJ does not achieve the goal stated by the CIS because it fails to 
proh?? Microsoft from continuing to bundle and tie middleware to its 
Windows operating s??m, despi??he Court of Appeals" conclusion 
that these same acts were among Microsoft??ore Shern?? Act 
violations. The PFJ does nothing to impede Microsoft from repeating 
?? pattern of exclusionary conduct because the PFJ is restricted to 
the software market and produ??hat existed in 995-98, and does 
not address today's Web-based marker in which service??nd multi??ia 
are replacing client-side software. The PFJ does not cover Web 
services?? Web-based applications, or Internet content, all of which 
Microsoft has integrated into Window??P. Therefore Microsoft is free 
simply to continue using its familiar repertoire of anti??petitive 
tacti??s (e.g., tying; technical restrictions on user choice, etc.) 
to protect its OS again??reats in the Web-based market through its 
Windows XP design. These inadequacies of the ??run completely 
counter to tile public interest and only compound the problems 
caused b?? Microsoft's unlawful conduct by enabling Microsoft to 
extend its unlawfully-won monopoly to next generator of technology.
    b. Remedies for the PFJ's Failings
    The PFJ should be modified to explicitly foreclose Microsoft's 
use of Windo??XP features to protect its Windows monopoly against 
Internet-based competition from ??er product?? and Web-based 
services. More specifically, with respect to the PFJ's OE??ovisions, 
SIIA proposes the following:
    . the OEM provisions should be amended so that Microsoft may not 
re??ct (by contract or otherwise), or retaliate directly or 
indirectly against, a ?? OEM from modifying, adding or deleting 
icons, taskbars, toolbars, li?? and default pages, or other similar 
end user features, in Internet Exp?? and successor browser products 
whether or not such browsers are distributed together with or 
separately from a Windows Operating Sy??m Product;
    . the OEM provisions should be expanded to cover the current 
configu?? on of Windows XP by permitting OEMs to remove, 
modify" or substitute ?? "My Photos," "My 
Music" and similar OS folders; and
    . Section 3.a.iii.2 of the 2000 Decree should be clarified to 
require Microsoft to compensate an OEM for the placement of any 
icons of Microsoft products or services on the Windows desktop.
    . With respect to tying of products and services, the 
prohibition on contractual tying in Section 3.f of the 2000 Decree, 
precluding Micro?? from "conditioning" a Windows 
Operating System Product license on 'OEM or other 
licensee" agreeing "to license, promote or 
distribute" ??y other Microsoft software product, 
"whether or not for a separate or positive price," 
should be reinstituted. In this regard, this provision ??uld be 
supplemented to include a prohibition on tying or bundling Web-??ed 
services, or access to Web-based services, with the Windows OS or 
??Microsoft Internet browser.
    Only with these modifications can the PFJ satisfy DOJ's 
own remedial goal?? the Court of Appeals" requirement to 
prevent future monopolistic practices. The modification?? the OEM 
provisions are essential to enabling OEMs" flexibility to 
differentiate their products OEMs must be free to eliminate or alter 
start menus and to integrate value-added technologies i??eir 
offerings. This ability must not be constrained by first having to 
remove or otherwi?? ??hange the Windows bundle. The key to an 
effective remedy is changing the ability of Microsoft to make all 
systems integration and software bundle decisions, and moving some 
of that dec??-making power down the supply chain either to the OEMs, 
or integrators, acting on their beh?? Moreover this ability should 
not be limited to fringe, applications, but should give OEMs the 
ability to focus on the core applications actually driving PC sales 
and demand at any??en point. This modification is designed to 
prevent the further reinforcement of the ap??tions barrier to entry 
by locking users into Microsoft's Web-based services. Microsoft's 
??rol over interoperability interfaces is anticompetitive; it 
directly reinforces the applications b??er to entry reduces 
opportunities for ISVs and competing platform suppliers to 
cr??platform applications, and prevents emerging computing platforms 
(e.g., handheld devices, d??al telephones, etc.) from evolving into 
at least partial substitutes for desktop PCs.
    Finally, it is critical to give OEMs the ability to customize 
and earn revenue??m desktop and browser configuration. 
Unfortunately, Microsoft's ability to impose its produc??acement and 
icons on the browser and the desktop for both products and services, 
without "??ng" for me placement, undercuts the ability 
of OEMs to earn revenue primarily because it e??inates the ability 
of the OEMs to provide exclusivity. This was most evident m Summer 
2001??hen AOL's deal with a major OEM for placement of an AOL icon 
on the Windows des?? was thwarted by Microsoft's insistence that its 
corresponding icons also be included by??OEM, without compensation. 
Microsoft's action undercut the economic value of the AO??clusive 
arrangement and the OEM's ability to exercise its right to desktop 
flexibility.
    The Court of Appeals's remedial standard in this case supports 
SIIA's prop??ban on con??al tying, which goes directly to 
Microsoft's ability to control the applicati?? barrier to entry. The 
District Court is specifically, obligated under the DC Circuit's 
standard "ensure there ??ain no practices likely to result in 
monopolization in the future." This req??s a cont??al tying 
prohibition to include not just the markers in which tying was 
used??eviously to m??in Microsoft's OS monopoly, but also the 
markets, such as the Web-based ??vices and applications integrated 
in Windows XP, in which tying would likely result in new m??polies 
in the future. A prophylactic ban on contractual tying is necessary, 
taking into account?? Court of Appea??s remand of the Section 1 
claim, because without it Microsoft could easily ??e a prohi?? on 
technical bundling middleware with Windows.
    With respect to Web-based services, two additional points 
directly support th?? Contra??al remedy. First, 
"Hailstorm"--now renamed NET MyServices--is a 
de??opment platform that industry experts agree is middleware under 
any definition. Second, un?? products, there has never been a claim 
that technological efficiency is achieved by ty?? Web-based services 
to the OS. Therefore, the Section 1 tying issues addressed by the 
C?? of Appe?? are immaterial to a tying ban on Web-based services. 
The Appellate Cou??ite clearly recognized that "[t]he facts 
underlying the tying allegation substantially overlap wit??ose set 
forth in Section II.B in connection with the 2 monopoly 
maintenance claim." ??use OEM and ?? contractual tying was a 
central element of Microsoft s unlawful monopoly ??intenance, it 
should equally be a central component of any remedy.
    In its discussion of relief, the Court of Appeals did not 
indicate that any part??lar form of exclusionary behavior was off-
limits, but at most that there should be an "indicat?? of 
significan causal connection" between a remedy and maintenance 
of the Windows ??nopoly. Curiously Assistant Attorney" General 
James has reportedly argued that elimination ?? tying relief from 
the PFJ was required because the DC Circuit "excluded" 
the tying clai?? In the con?? of the Court's actual decision, that 
is plainly incorrect. Regardless of the de?? on by DOJ and the State 
plaintiffs not to retry Section 1 liability, the Court of Appeals 
re??d was based solely on application of the particular clements of 
Section 1 tying law, indepe??nt of both Section 2 liability (which 
it affirmed) and remedy.
    3. Microsoft Has Unfettered Ability. to Define Certain Term?? 
the PFJ
    a. Failings of the PFJ
    The PFJ does not adequately remedy Microsoft's monopolistic 
conduct beca?? it grants Microsoft complete freedom to decide what 
constitutes middleware and what qualifi??as a platform software 
product. Under the PFJ, Microsoft Middleware is limited to soft?? 
code that Microsoft (1) distributes separately from the OS, and (2) 
trademarks. A relat?? deficiency of the PFJ is

[[Page 29088]]

its provision that [t]he software code that comprises a Windows 
Oper??g System Product shall be determined by Microsoft in its sole 
discretion."
    This ability to categorize its own products gives Microsoft 
enormous flexibi?? to circu??ment the requirements of the PFJ, many 
of which hinge on product definition. ?? For exam?? merely by 
placing a product that would ordinarily be considered middlew ?? 
"inside" the OS, or by adding the trademark 
"Windows" to a generic designation. Microsoft ?? exclude 
the product from the PFJ's middleware definition, thereby avoiding 
the triggering o??e API disclosure provisions. According to the CIS, 
the PFJ will ensure that OEMs have the freedom to of?? non-Microsoft 
middleware by requiring Microsoft to provide the OEMs with the 
ability ??ustomize the middle ware installed. More specifically, the 
CIS asserts that "[t]he limits in th?? definitions ensure that 
the provisions of the Proposed Final Judgment apply to products that 
ca??edibly be said to pose, alone or in combination with other 
products, nascent threats to the appl??tions barrier to 
entry."
    The PFJ cannot possibly achieve the stated goals of the CIS if 
it continues to ??ow Microsoft to determine for itself what 
middleware can be included in the OS, and th??ope of a Windows 
Operating System Product. By unilaterally exercising its powers 
under th?? FJ, Microsoft can target competing middleware providers 
and deny ISVs and others the?? PIs needed to interoperate with 
Windows. As a result, the PFJ permits competitive gaming of?? 
settlement in o?? maintain Microsoft's monopoly power, thus reducing 
innovation and ch??eling OEM flexibility into those areas chosen by 
Microsoft because they do not threaten Microsoft's market power. 
Microsoft's ability to manipulate these crucial product definitions 
w??d deprive consumers of whatever limited benefits that the PFJ 
does provide.
    b. Remedies for the PFJ's Failings
    To have any hope of achieving the C1S's goals, the PFJ must be 
modified to ??nove from Microsoft the power to unilaterally decide 
the scope of its provisions. The traderma??mitation in the 
Middleware definition, and the "sole discretion" proviso 
in the Windows Ope??ng System Product definition, should both be 
removed from the PFJ. The concept of "redistributable" 
should be eliminated as well from the: PFJ?? his would fore?? 
Microsoft's ability to keep key technologies outside the definition 
of Mid??vare by simply ??lining to make stand-alone versions 
available and thereby harming those ?? plat?? (such as the Apple 
Macintosh) to which it ports Middleware today. As di??ssed above, 
the CIS asserts that the PFJ's definitional limits will ensure the 
PFJ's applica?? only to comp??itively significant products. 
Contrary" to this claim, however, there is no rati?? conn?? 
between trademark status or stand-alone distribution and the 
competitive ??nificance of ??leware. Indeed, in some respects these 
factors act at cross-purposes to the F?? because they encourage the 
same type of technical integration with new middleware that 
Microsoft used with ?? to eliminate the threat from Netscape and 
JAVA.
    4. The API Disclosures Under the PFJ Act to Reinforce The?? 
Applications Barrier to Entry According to the CIS, the API 
disclosure provisions of the proposed decree?? "creat[e] the 
opportunity for software developers and other computer industry 
participants to ??elop new middleware products that compete directly 
with Microsoft by requiring Microsoft t?? sclose all of the 
interfaces and related technical information that Microsoft's 
middleware uses ?? interoperate with the Windows operating 
system." While SHA concurs with the i?? of the CIS, a careful 
examination indicates that this statement cannot be reconciled with 
th??rms of the PFJ. The PHJ would not provide middleware competitors 
with the information ??ded to interoperate. If anything, it allows 
Microsoft itself (as it does now) to decide wheth?? when, and which 
AP's to release to potential competitors, and includes mitigating 
provisions ?? undermine any apparent disclosure and fortify the 
applications barrier to entry.
    The information disclosure and interoperability sections of the 
PFJ are amo??s most complex. The core of the provisions are found in 
Section III.D, which addresses the ??ue of API disclosure, and 
Section III.E, which addresses the disclosure of communications 
pro??ols. These core provisions rely on numerous definitions which 
serve to undercut the effe??eness of these ??tions. SIIA describes 
below the impact of each definition. While Section III.J appears at 
the end of the PFJ, and III.D and III.E appear??ard the beginng of 
the PFJ, Section III.J is directly relevant to the scope of the 
disclosure??nd, in fact, relevant to no other provision of the PFJ). 
Section III.I.5 is also carefully exa??ed in S??A's analysis as it 
appears to grant Microsoft unique rights to insist on cross 
licer??to "any" intell?? property developed through the 
use of Microsoft's APIs.
    a. Failings of the PFJ--Section III.D.--API Disclosu?? 
PFJ provision III.D requires Microsoft to disclose ":the APIs 
and related doc??entation that are used by Microsoft 
Middleware" (defined in the PFJ) "to interoperate" 
(under??ed in the PFJ) "with a Windows Operating System 
Product" (defined in the PFJ). This pro??on simply restates 
Microsoft's current business practices.
    Relevant to the question of whether any new information is 
actually require?? the definition of documentation" within the 
context of API disclosure. "Documentation ??is defined in 
Section VI.E of the PFJ as 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.
    It is therefore unclear whether any information disclosure is 
required under ??section of the PFJ that is not already part of 
Microsoft's information disclosure regime through ?? Microsoft 
Developers Network. The fact that the critical term 
"interoperate" is left ??efined suggest that the parties 
did not have a meeting of the minds regarding the kind of in??mation 
disclosure that is required under the PFJ. Likewise, the decree does 
not specify wha??meant by "use" of APIs. In fact, the 
phrase "technical information" does not even appear in 
th??roposed decre??. In contrast, the 2000 Decree's interim conduct 
remedies included a detail??efinition of "Technical 
Information" (Section 7.dd) that the Department and Microsoft 
have ??out expla?? eliminated from the proposed decree.
    The utility of the information disclosure is also constrained by 
what Microsoft's permitted to define under the PFJ. As previously 
noted, Microsoft "in its sole discr??" shall determine 
the software code that comprises a Windows Operating System Product. 
??crosoft, therefore, could redefine some or all of a particular 
"middleware" technology as par?? Window's and escape any 
of the disclosure requirements of Section III.D.
    Similarly, the definition of "Applications Programming 
Interfaces" lacks cle??nd effective meaning. APIs are defined 
as "interfaces, including any associated callba??terfaces, 
that Microsoft Middleware running on a Windows Operating System 
Product uses t??ll upon that Windows Operating System Product in 
order to obtain any services from that W??ows Operating System 
Product." This definition is inherently ambiguous because it 
de??ds on two terms, Windows Operating System Product and Microsoft 
Middleware, which are ?? defined by Microsoft alone.
    It also remains unclear when there would be any information 
disclosure req??d by the PFJ. API disclosure for new "Windows 
Operating System Products" is required in ??mely ?? 
mann??r"
    This term is defined as "at the time Microsoft first 
releases a beta test ?? of a Windows Operating System Product to 
150,000 or more beta testers." In the sof?? e industry, of ?? 
the ?? "beta tester" has a meaning distinct from 
"beta copy." In the context ?? Microsoft products, even 
assuming that Microsoft has ever had 150,000 "beta tester ?? 
it would be easy to circumvent the timeliness requirement of this 
provision by limiting distri?? on to under 100 000 beta 
testers--a number that is substantial.
    The professed objective, as stated by the government, is to 
encourage "midd?? are innovations." Yet, according to 
the specific terms of the PFJ, innovators are ?? those who are not 
entitled to APIs under the proposed decree. What innovators require 
is ?? the APIs that Microsoft middleware calls upon to perform its 
functions, but rather others, like ??indows APIs, that the next or 
broadened competing programs can call when executing their ??. By 
PFJ at 17. james.htm
    b. Failings of the PFJ--Section III.E--Communicati?? 
Protocols
    The CIS asserts that the provisions in Section III.E of the 
proposed decree w prevent Microsoft from incorporating into its 
Windows Operating System Products features functionality with which 
its own sender software can interoperate, and then refusing make 
avai?? information about those features that non-Microsoft servers 
need in order ??ave the same opportunities to interoperate with the 
Windows Operating

[[Page 29089]]

System Product." the dec?? API disclosure provisions, the 
specific obligations of Microsoft found in th?? FJ do not meet ?? 
Department's own test articulated in the CIS.
    Section III.E of the decree does not require the disclosure of 
any APIs to co?? ??titors, only the release of "Communications 
Protocols." Microsoft is free to refuse to disc ?? to comp??s 
any of the APIs that enable its server OS products to interoperate 
with ??ows, ?? Middleware.. or with Microsoft applications such as 
Office and Ou?? Thus. the ?? by Windows to interoperate with 
Microsoft s server OS, and vice-ve?? are simply ?? disclosable under 
the proposed decree. Nothing in the prevents Microsoft from building 
"features and functionalities" for server 
interoperability into Windows.
    The definition of "Communications Protocols" itself 
is extraordinarily ambi??s. The dec?? defines Communications 
Protocol in Section VI.B as: the set of rules for information 
exchange to accomplish predefined tasks bet?? Windows Operating 
System Product and a server operating system produc?? via a network, 
including, but not limited to, a local area network, area network or 
the Internet. These rules govern The format, semantics, timin??cing, 
and error control of messages exchanged over a network. This ??tion 
does not prescribe what predefined tasks" are encompassed, and 
the ??rase "for?? semantics, sequencing, and error control of 
messages" can just as easily be. d to apply only ?? physical 
means of sending information to or from a server (the rules for ?? 
smitting information packets over a network) rather then the content 
of such information (the ??es for structuring and interpreting 
information within such packets).. Indeed, although the descri?? 
Section III.E as providing support for "features and 
functionalities," those ns do not appease ther in the 
substantive provision or the definition of Communications Proto 
Moreover, the key terms of Section III.E (like Section III.D, 
described above ??re undefined. Microsoft is allowed to define the 
term Windows Operating System Pr?? The co??nding prong of Section 
III.E is that Communications Protocols are disclosa?? when used ?? a 
Windows Operating System Product to interoperate with "a 
Microsoft set operating system product." This important term, 
which provides the boundary" for Microsoft" ??ligation 
to disclose crucial information to rivals, is nowhere defined in the 
PFJ. Likewise,?? Section III.D, the failure of" Section III.E 
to define "interoperate" reminds one of the stice ?? 
prior failure to define "integrate" in the 1995 consent 
decree.
    The CIS asserts the term "server operating system 
product" includes, but is limited to, the ?? Windows 2000 
Server product families and any successors. The PFJ, however, does 
not c??ain any of this language. Since consent decrees are 
interpreted as contracts, use of the ?? to supplement a decree in 
ways in which the parties did not agree is arguabl?? Unenforceable.
    As with the definition of Windows Operating System Product, the 
scope of ??ndows server ??ating system product"--and thus 
Microsoft's Communications Protoco?? sclosure obligations--as a 
matter of law is subject Microsoft's sole discretion Therefore. ion 
III.E requ?? only the disclosure of the rules to accomplish 
predefined tasks" (defined b?? Microsoft) by which a 
"Windows Operating System Product" (defined by 
Microsoft) interoper?? with a "Microsoft sever operating 
system product" (defined by Microsoft).
    Section III.E does not cover protocols that are implemented in 
Internet ?? to support interoperability with Microsoft's server OS 
products. Many, if not most, ?? with servers occur via the Internet 
browser. Therefore, Microsoft can e y evade any ?? scope of this 
provision by incorporating proprietary interfaces and ?? cols into 
IE rather than Windows.
    The obligations of Section III.E only apply to Communications 
Protocols th??re "?? ... on or after the date this Final 
Judgment is submitted to the Court." ??onsequently all of the 
Communications Protocols built into Windows 2000 and Window ?? are 
expt?? disclosure because they were implemented before the proposed 
decree ??submitted. This ??ing proviso thus provides a "safe 
harbor" for all current Microsoft server pr ?? since under the 
anguage of Section III.E their means of interoperating with Windows 
nee ever be disclesed.
    c. Section III.J. Carve Out.
    Any disclosure provided by Sections III.D. and III.E. is 
mitigated by the car, ?? in ?? J, which permits Microsoft to refuse 
to disclose, in its discretion, protoc?? API's, and ?? information 
that are necessary for competition in the market and which Microsoft 
has ??. This Section of the PFJ is overbroad given the 
"District Court finding ?? the Court of Appeals ruling. For 
example, this Section would arguably allow Microsoft ?? to disclose 
any APIs between the IE browser and the Windows OS, and the 
Communi?? ?? between IE and ISS, Microsoft's web server, because of 
the browser's rel??ce upon authe??cation and encryption 
technologies.
    Section III.J.2 is even more troubling because it appears to 
give Microsoft th??ght to disclosure requests even where legitimate 
needs are shown to promote intero?? ability refuse For ??, based 
upon highly subjective criteria determined by Microsoft, it 
coul??fuse to ?? an API, Documentation or Communications Protocol 
if: i) Microsoft determ?? that there is not ?? "reasonable 
business need" for the information, or ii) if the entity fails 
to m?? "reasonable objective standards established by 
Microsoft for certifying the authentic and viability of its 
business," or iii) if the entity does not agree "to 
submit at its own ?? ?? program using such APIs, Documentation or 
Communication Protocols to ??rd-party verification approved by 
Microsoft."
    d. Section 11I.I.5--Mandatory Cross "Licensing
    The requirements of Section III.I.5. reinforce the monopoly 
position of Microsoft and are incon??sent with the abuses found by 
the Courts. This Section is sweeping in its bre?? by provi??ing 
Microsoft with the right to insist upon a cross license to 
"any" intellectual ??perty rights ?? to the exercise of 
a third-party's options under the PFJ, including ac ?? sing APIs ?? 
Communications Protocols granted under Sections III.D. and III.E. 
the ??sible safely provided by the last clause is entirely illusory 
due to the breadth of the cross??se.
    e. Other Failings of the PFJ
    The CIS claims that the PFJ will prevent Microsoft from 
hampering the dev, operation of "potentially theatening 
software" by withholding interface information permitting its 
own product to use hidden or undisclosed interfaces. The PFJ's 
trea?? Of APIs ?? to achieve the goal stated by the CIS for several 
reasons. API's are centra?? The barrier- Microsoft's control of 
Windows APIs reduces costs for Wind, developers and raises costs for 
rivals. As the Court of Appeals explained, because controls the 
APIs, "porting existing Windows applications to the new 
version of ?? much less costly than porting them to the operating 
systems of other entrants who ?? freely include APIs from the 
incumbent Windows with their own." More fundam??lly, mere?? 
focusing upon Windows APIs used by Microsoft Middleware Products is 
no create conditions necessary for effective competition by 
alternative operating systen alternative Middleware. By requiring 
that APIs and similar information relate to ?? purpose of 
interoperating with a Windows Operating System Product" the 
PFJ doe undermine, but instead reinforces, the applications barrier 
to entry. Disclosing Win?? it easier for ISVs to write more 
middleware applications for the Wind.
    As described in Section II.C.1 above, by limiting the add/remove 
provisions "access" to middleware, the PFJ allows the 
code itself to remain on all Windows ?? which ?? incentives for ISVs 
to write to the APIs exposed by Microsoft mid instead of 
competitors. Thus, removing the obstacle of hidden or delayed APIs 
will non-Microsoft Middleware, since Microsoft Middleware code will 
continue to be ??
    Additionally,. failing to require Microsoft to disclose APIs and 
similar interf?? (file formats data structures, code??s, and 
protocols) needed to interoperate with Microsoft?? Middleware and 
the Microsoft Office family allows Microsoft to repeat its anti-Net: 
of ?? cross-platform middleware that poses a competitive threat. The 
PFJ's require disclosure of Platform Interfaces similarly allows 
Microsoft to hamper ISVs competing platform developers in the 
competition for other platforms, such as non-I??desktops, handhelds 
and mobile phones.
    f. Remedies for the PFJ's Failings
    In order to create the appropriate market incentives necessary 
to reduce the a ?? SDA urges that any effective remedy must: expand 
API disclosure rights to include MS Office Middleware (Wo?? Excel, 
PowerPoint, Access, Outlook), include APIs and similar interfaces 
exposed by, or required to interop?? effectively with Microsoft 
Middleware, and expand the definition of Microsoft Middleware, and 
include Platform Interfaces. To be more specific, the following 
changes should be made to the PFJ: The API disclosure provisions of 
Section 3.b of the 2000 decree, inch their applicability to 
"Communications Interfaces and Technical Information"- 
as well as the definitions thereof and of "Timely 
Main--should be expanded to require Microsoft in addition to

[[Page 29090]]

make availa??to ISVs, IHVs, and OEMs, on the same terms as APIs: all 
"file formats," "data structures," 
"compression/decompression algorithms ('co-
de??s')" "protocols" and related interfaces 
for its Applications products and Middleware, including but not 
limited to Office; and APIs, Communications Interfaces and Technical 
information allowing for interoperability of Microsoft Office with 
any Microsoft Platform Software, Windows Operating System Product, 
or Microsoft applications software product.
    Microsoft should also be required to make available to all ISVs, 
IHV OEMs and third-party licensees all "Platform 
Interfaces" required to enable software installed on other 
computing devices (including but limited to servers, handheld 
devices, digital phones, etc.), whether Microsoft software, or that 
of any other company, to "Interoperate Effectively" with 
any Microsoft Platform Software, Windows Opera System Product or 
Microsoft applications software product. "Platfor?? 
Interfaces" and "Interoperate Effectively" should 
be defined as set f??in Appendix A.
    S??A's proposal to expand the availability of API information to 
include Pla?? Inte??s (PIs), as well as Windows APIs, ensures that 
both ISVs and competing pl ?? soft?? vendors will have adequate 
technical information to develop applications ??ther OS platforms 
that can "Interoperate Effectively" with the Windows OS 
and other Micro ?? appli??nt??ons and middleware software. As a 
result, ISVs would face lower economi??bstacles in porting Windows 
applications to other OS platforms, and would have an incentive ?? 
tempt to develop cross-platform applications That would run equally 
well on any PC operatin?? ??stem, or other ?? device such as a 
desktop, handheld, or mobile device.
    In considering this remedy it is important for the Court to 
understand that All isclosure ?? by which third-party software 
products run on the Windows OS, but ?? competing PC and non-PC 
platforms. Therefore, API disclosure alone has a counte??ductive ill 
?? impact by reinforcing both the Windows platform, and the 
applications ?? to entry The communications protocols go to the 
broader question of allowing third ?? to ?? and add value to the 
operating system environment by better understand the way in which 
its different pieces communicate. By expressly including file 
formats and a structures for Microsoft applications (e.g. Office, 
Outlook, Exchange) in the inform, m that Microsoft is required to 
disclose to ISVs, the proposed remedy would reduce Micro ?? ability 
to expl??it its control of these critical interfaces (its ability to 
cut off the air supply o Vs) to reinforce the applications barrier 
and to disadvantage competing middleware and ?? software vendors.
    S??A's proposed remedy would benefit consumers by providing a 
uniform b on which middleware and applications developers 
unaffiliated with Microsoft could design, ?? and ship competing 
software products that are interoperable with the Microsoft OS and 
?? dominant applications and middleware products, thus eliminating 
exces?? and ?? stemming from software incompatibilities. Consumers 
would benefit ?? an expar?? choice of timely, interoperable software 
products, allowing them to make ??chasing decisio??s on the 
objective merits of product features and functions, rather than 
Micr?? unilateral power to control and offer interoperable software 
products.
    As expanded, the remedy would also facilitate entry" by 
independent platforn?? venders and act to diminish the applications 
barrier to entry protecting Microsoft's ?? First, by requiring the 
disclosure of file formats and related technical in?? for Office and 
Outlook--two Microsoft applications products that dominate 
their respe?? the proposal would support the competitive development 
of applications ??can read/write files created by these Microsoft 
products, thereby providing consumers w a choice of applications in 
these key product categories for non-Microsoft PC platforms.
    Second, the inclusion of PIs and the extension of APIs to 
include technical ?? mation for Office/OS interoperability would 
provide a level playing field on which unaffilia?? platform softw?? 
vendors and middleware developers could write cross-platform 
software a??ompeting OS pro??uots. In the absence of the market 
incentives that would have been created?? dives??re, these 
informational parity provisions will ensure, if enforced 
effectively??at the Windo?? OS monopoly is not used by Microsoft to 
constrain the development of ??eting platf??s and applications 
through the control of PIs and related technical informat??
    5. The PFJ Fails to Prevent a Repetition of Microsoft's 
Anti??apetitive Acts With Respect to NET
    a. Failings of the PFJ
    Microsoft has developed its .NET Framework (and has also 
designed Wind??XP) with the ??ion of protecting its underlying 
Windows franchise and leveraging its desk?? OS monopoly into the 
broader realm of internet-based applications, Web services, and 
??dheld OS sofi??. Microsoft's efforts to develop proprietary APIs 
and interfaces for its NE'??amework, incl??g he Common Language 
Runtime (CLR) it has now substituted for Java, h??been disc??d in 
detail in a number of trade and general business publications. In 
short?? first exti??shing the cross-platform threat posed by JAVA 
technology, Microsoft deve??d a substitute executable runtime 
environment, limited to the Windows platform only??NET Frarm?? is 
the functional equivalent of JAVA, but is compatible only with the 
W??ows elie??d server OS products, and with Microsoft's COM software 
design structure?? Cons??tly, by maintaining the proprietary, and 
Windows-centric nature of this N?? Frar??, Microsoft has succeeded 
in locking Web server providers into use of ??indows serve??S 
products, and it has precluded other OS platform vendors from 
competing??the "Crea?? today's networked PC users.
    The impact on?? and on consumers competition resembles the 
effect in 1995-9?? Micro??'s campaign against Netscape and 
JAVA. Consumers are denied a choice??tintime en??s, the applications 
barrier to entry is strengthened against competition ??non-Micr??ft 
runtime environments, and Microsoft's Windows OS monopoly is 
protec?? against the ??r threat from server-based applications.
    The CIS claims generally to prevent a repetition of Microsoft's 
past exclusi?? conduct and??e specifically, to protect the 
competitive significance of non-Microsoft Mi?? ware, networks which 
depends on content, data, and applications residing on servers and 
passing o?? such as the Internet. The PFJ neither accomplishes the 
stated goals of the CIS nor ??isfies the Court ?? Appeals standard 
of review.
    The 2000 Decree included a broad API and "Communications 
Interface" pr?? ion thatreq?? disclosure of interface 
information for interoperability between non-Micro: OS platfor?? 
non-PC platforms (handhelds, phones, etc.) and Windows. The PFJ, 
howe?? takes a more ??ow approach, limiting API disclosure 
requirements to middleware alone a; ??ailing to addre?? 
interoperability with other platforms or applications. As a result, 
Microsoft ??rategy of "Windo?? everywhere" is 
essentially unaffected by the PFJ.
    b. Remedies for the PFJ's Failings
    In order to prevent further monopolistic practices by Microsoft 
in relation to NET initi?? SIIA proposes to include in the PFJ a 
remedy that maximizes the degree o ??terface info??ion disclosed 
by" Microsoft, including with respect to its .NET framework 
f?? server interc??e ability, and requires that Microsoft port .NET 
to non-Windows client and s??r operating systems. Specifically, 
Microsoft should be required to disclose to OEMs, ISVs and all other 
parties covered by Sections 14 and II.C.9 of these Comments all 
APIs, Communications Interfaces, protocols and related technical 
interfaces required or useful for interoperability between the .NET 
Framework and a Windows Operating System Product, and ?? the .NET 
Framework and a Windows server operating system product or any Web-
based server (including Web, applications, commerce and other 
Internet servers); and the .NET Framework, within six months of the 
effective date, Linux and the Top three non-Microsoft server OS 
platforms, and to Macintosh and the top three non-Microsoft client 
OS platforms (including the leading non-Microsoft handheld com 
puting OS).
    As discussed in Section II.C.7 below, the appropriate remedy for 
Microsoft ??lawful cond??t specifically directed against JAVA, 
designed to restore a "but for" market is 
"'unf??ed"' by Microsoft's illegal 
activities, is to require the inclusion of JAVA ?? the Wir??S. The 
remedy proposed here with respect to .NET is similar. Since M: soft 
has substi?? its own, proprietary middleware for JAVA--seeking 
to use its ubiquito?? distri?? capability to extinguish rival 
technologies--it should be prevented fro??rofiting by its 
foreclosure of rival platforms. Indeed. the PFJ includes JAVA 
expressly in th?? ??finition of Mi?? eware, but has no provisions 
designed to restore the competitiveness of this ??hnology or c??ain 
Microsoft's present efforts to make a proprietary substitute for 
JAVA.
    ?? Microsoft III, 253 F.3d at 103 (citation omitted).
    By opening the .NET Framework interfaces, thereby" 
permitting competing s ??r vendo??s to interoperate with Windows

[[Page 29091]]

PCs running .NET, and by porting .NET to o?? PC plat??s, SIIA's 
proposed modification would help to prevent the end user lock-in 
??forced by MET. Effective relief in this case must prevent 
Microsoft's further reinforceme??the app??s barrier to entry, which 
the Court of Appeals expressly found to be the ?? e most impo??t 
factor protecting Microsoft's Windows OS monopoly? This remedy is 
??ssary both ??eve the stated goals of the CIS and, as required by 
the Court of Appeals ??deny Mi??ft the "fruits" of its 
exclusionary tactics directed to Java and favoring the ??" 
Fra??ork.
    6. The PFJ's Lack of a Remedy for Internet Explorer Allow 
??icrosoft to Retain "Fruits" of Its Monopoly 
Maintenance
    As the Court of Appeals affirmed, Microsoft's exclusionary 
practices illegal ??naintained its O??opoly against the threats 
posed by Netscape and JAVA?? Since the beg?? ng of Micr??ft's 
campaign against the middleware threat, Netscape's market share has 
d??ned from ore?? percent to less than 10 percent. Microsoft's 
product--IE--has swept the f??rew??ing Microsoft's 
anticompetitive conduct by eliminating the browser as a 
viab??distrobi??ion channel for non-Microsoft middleware and APIs. 
As a result, develope most impo??t distribution channel--other 
than Windows itself--is now subject to Mi?? sows 
mono??ly*;control. Moreover, IE provides Microsoft with the power to 
require the t??of Microsoft's proprietary. APIs, communications 
interfaces, and/or security protocols ?? interoperability with 
desktop PCs via the Internet. As Microsoft's recent exclusion?? AVA 
from, ??and Windows XP amply demonstrates, Microsoft has used its 
browser mon?? y to exc?? distribution of any non-Microsoft platform 
software. Unfortunately, un?? the PFJ it can ??e to do so.
    a. Failings of the PFJ
    The CIS claims that the PFJ will prevent recurrence of the same 
or similar p??ices employed by Microsoft to reach its current 
monopoly position, and restore the coral tire threat pos??iddleware 
prior to Microsoft's unlawful conduct? Further, under the r?? dial 
stan??mandated by the Court of Appeals in this case, the PFJ must 
deny Micros?? e "fruits" violations. The PFJ plainly 
fails to meet both the stated goals he CIS, of its ?? ??erman Act 
and the Court of Appeals standard. Despite Microsoft's dominance of 
the Web bro?? market, which ??tained as a direct result of its 
unlawful conduct, the PFJ does not provid?? y remedy" for 
??hether open source, licensing, source code access, or even API 
availability ??addition, with the PC interface migrating 
rapidly" from the desktop to the Web browser, this s ??oming 
of the ?? will permit Microsoft to do with IE whatever the PFJ 
precludes it from d ?? with Wind??s desktop.
    b. Remedies for the PFJ's Failings
    It is therefore S11A's position that the PFJ should require 
Microsoft to licens ??e source code??E on an "open 
source" basis, thus removing from Microsoft the ability to u 
??rowsers as a?? cations and Internet gateway that further preserves 
its OS monopoly. Sp??ically: Microsoft should be required to 
disclose and make available for lice?? an?? third-party--within 
60 days of the PFJ's effective date, and thereafter at least 180 
days prior to its commercial distribution of any?? browser 
product--all source code for IE and any successor Browse?? 
products.
    Such license should grant a royalty-free, nonexclusive perpetual 
lic?? on a non-discriminatory basis to make, use, and distribute 
products implementing or derived from Microsoft's source code 
pursuant to t?? industry-standard GNU General Public License 
agreement. Microsoft should be permitted to assess an appropriate 
license fee in ?? to recover its administrative overhead and 
distribution costs associat?? with open source licensing of IE. The 
proposed open source approach is linked directly to the central 
charge ??onopoly maintenance affirmed by the DC Circuit. Not only is 
Microsoft's IE monopoly a?? it" of its unlaw?? OS 
monopolization, but the browser represents one of the best API 
platfor ??on which ISVs ??develop cross-platform software 
applications that would help erode The ap ??ations bar?? entry. 
Moreover, an open source requirement would reinforce the standard 
??elated provisions discussed in Section II.C.10 below by. 
eradicating Microsoft's ability to ?? propr?? IE browser standards 
to extend its desktop OS monopoly into Internet- a server- based 
app??ications. Because the browser has become the de facto standard 
interface--Internet aud??video, e-commerce and electronic mail 
applications, an open source remedy ??ents Mic??ft from biasing 
these crucial digital markets to Microsoft's own software an ??rmats 
by supp??g only proprietary interfaces in IE.
    Finally, an open source requirement is the only mechanism that 
creates a "b?? r" mar??, restores the market to what it 
would have been but for Microsoft's suc??ful anti??etitive strategy 
of foreclosing Netscape from the market, and eliminating ?? hreat 
the browser to the applications barrier to entry. Thus, the open 
source bro ??r remedy posed by wo??dress the browser-specific 
unlawful conduct central to the monopoly main?? ??ceviola?? affirmed 
on appeal.
    The proposed modification to the PFJ would eliminate Microsoft's 
"fruits" ?? foreclose the ??e protecting its OS market 
power. This would serve the interests of consi?? s by rest?? 
competition and innovation in browsers and precluding Microsoft from 
us?? IE as a vehic?? controlling the Internet standards, protocols 
and interfaces that lie at the ??rt of a netw??ed PC marketplace. In 
addition, it would: lower barriers to competition for desktop OS 
software and middlewa??y eroding Microsoft's power to dictate the 
APIs. communications inter ??es and security protocols by which PCs 
can interoperate with other devi?? and software platforms over the 
internet; redress Microsoft's monopolization of the distribution 
channels for desktop middleware runtimes; and foster (and perhaps 
restore) competition within the major distribution channels for 
desktop middleware.
    As discussed above, the proposed IE remedy is necessary to 
satisfy the requi??ent that any ??f in this case remove from 
Microsoft the "fruits" of its monopoly maintenar 
??violation.
    The C??rt of Appeals opinion also supports the open source 
remedy in other respect?? n its reve??f the attempted monopolization 
claim, the Court chastised DOJ and the tri?? tort for not ??ifically 
defining Internet browsers as a relevant product market. It is 
clea?? ??wever, that li??e the Section 1 tying, claim, the attempted 
monopolization claim was simply ??ther legal theor??ising from the 
same set of operative facts. As the Court recognized, the p??iffs 
"made the ?? argument under two different 
headings--monopoly maintenance and atte??ted mo??ation." 
As a form of unlawful monopoly maintenance, the Court had n?? 
fficulty hol??g that "Microsoft's efforts to gain market share 
in one market (browsers) ser?? to meet the ??t 10 Microsoft's 
monopoly in another market (operating systems) by keepin ??val 
browsers from gaining the critical mass of users necessary to 
attract developer atten?? t away from ??ndows as the platform for 
software development." Thus, DOJ's failure to?? roduce aff??ve 
evidence defining a relevant market for Internet browsers cannot 
stand a barrier to fashi??g relief that restructures IE in order to 
eliminate its use as a vehicle for mai??ining Microsoft's desktop OS 
monopoly.
    In sum, Microsoft's abuse of monopoly power through IE must be 
remedied pro??s directed specifically at IE, something the PFJ 
completely fails to address, ??is one of the ??ironies of the 
settlement proposed by DOJ that in a case centered around ?? either 
the API provisions nor any other section of the PFJ redresses 
Microsoft's acquisition of ??yet in Inte??wsers, and its concomitant 
effect of reinforcing Microsoft's Windows m?? poly pow?? ignoring 
the browser issue the PFJ ensures that there will never be a corn 
??itive oppp?? ity to reinvigorate browser competition, or to 
provide middleware cornpetit?? in the range ?? Internet-based 
technologies controlled by the browser.
    7. The PFJ Fails to Rectify Microsoft's Unlawful Conduct A ??nst 
JAVA
    a. Failings of the PFJ
    The CIS states that the PFJ is designed to restore the 
competitive threat that ??Idleware prod??, such as Sun Microsystems 
JAVA, posed prior to Microsoft's unlawful act ??s. The PFJ ??ever, 
fails entirely to address the fact that Microsoft s illegal tactics 
thwart JAVA tecj??gy, which would have significantly eroded the 
applications barrier to entry?? ??e Court of Appeals found that 
Microsoft violated Section 2 by entering into exclusive ISV d?? for 
distrib??ion of Microsoft's own, incompatible version of JAVA, and 
by deceiving developers into ??ing JAVA applications with Microsoft 
tools that produced only Windows-c ??patible code. Microsoft also 
unlawfully destroyed Netscape as a viable distribution cha?? or JAVA 
tecj??gy
    b. Remedies for the PFJ's Failings
    SIIA's proposed remedy therefore requires inclusion of the JAVA 
runtime e?? onment in Mi??scft's OS products, and prohibits 
Microsoft from distributing any JAVA de ??pment tools. S??ifically, 
for a period of seven years, Microsoft should be required to dish 
??te free of charg?? binary form in all copies of its Platform 
Software (including upgrades and ??isions such as Service Packs) the 
latest version of the JAVA Middleware as delivered to M??soft, at 
least ?? days prior to

[[Page 29092]]

Microsoft's commercial release of any such Platform Software ?? 
addition Microsoft should be enjoined from distributing: any 
Platform Software in beta or final commercial form unless such 
Platform Software includes the latest version of the JAVA Middlewa??
    Runtime as delivered to Microsoft in binary form by Sun 
Microsyste ??no later than 90 days prior to distribution by 
Microsoft of such Platform Software or any upgrade or revision 
thereto; any Microsoft Operating System Product that requires, 
favors or advantages the utilization or functionality of any 
Microsoft Middlew?? Runtime (including the .NET framework) relative 
to the utilization o corresponding functionality of any competing 
Middleware Runtime ?? application, including (without limitation) 
the JAVA Middleware Runtime; any Office product that favors or 
advantages the utilization or functionality of any Microsoft 
Middleware Runtime, including the ?? framework, relative to the 
??tilization or corresponding functionality ?? ny competing 
Middleware Runtime or application, including (without limitation) 
the JAVA Middleware Runtime; and any developer tool or development 
environment for the JAVA lang?? (including any tool or development 
environment that uses or convert: JAVA source or class files to 
other formats). The DC Circuit explicitly upheld Microsoft's Section 
2 liability for exclusi??y con??t di??ected specifically at JAVA. 
The Court affirmed Judge Jackson's conclus??that Mi??ook steps to 
""maximize the difficulty with which applications 
written i?? a could be p?? from Windows to other platforms, and vice 
versa.'"
    To eliminate the threat posed by JAVA, Microsoft acted to 
destroy the value ??he tech??gy by polluting the industry standard 
set of JAVA interfaces and protocols, ??crosoft then ??ed its 
monopoly power by requiring its customers to adopt and distribute it 
?? omc??ble, non-standard JAVA runtime and tools implementations. As 
the CIS ??n M??t fried to "extinguish Java" because 
"a key to maintaining and reinforcing ??appli??tons barrier to 
entry has been preserving the difficulty of porting application?? 
??om Win??s to other platforms, and vice versa," which JAVA 
was designed to elimina??
    ??A's proposed remedy would increase consumer choice by 
fostering corer- ion and innov?? in middleware. Similarly, it would 
foster competition and create innova?? among ope??g systems by 
promoting the competitive distribution of middleware, and ere?? 
Micr??ft's power to dictate The APIs, and related interfaces by 
which PCs interope?? with netw??ed devices. It would also redress 
Microsoft's specific acts ofmonopolizati?? irected at JA?? and thus 
deny Microsoft "the fruits of its statutory violation.'"
    8. The PFJ Fails to Mandate Porting Requirements
    a. Failings of the PFJ??
    Another significant shortcoming of the PFJ is its failure to 
mandate that Mic?? ft port its key ??uctivity (Office), browsing 
(IE), and other Microsoft Middleware Products ??on-Mic?? operating 
systems. In the current market, such operating systems (Apple, ??ax, 
etc.), as well as handhelds (Palm, etc.), set-top boxes (Liberate, 
etc.), phones (Nokia, etc.) ?? other Inter??er abled appliances will 
only be provided with a level playing field to comp?? if Microsoft 
provides porting of its now-dominant products.
    Mi??rosoft's ability and willingness to exploit the porting 
issue to its advanta?? as been spec??lly demonstrated m this case. 
Both the District Court and the Court of App?? ??dged That Microsoft 
previously used its monopoly power over Office to im??e an unla?? 
e??clusiona?? deal on Apple for distribution of IE on the Macintosh? 
This ??e of mos??f monopoly power by Microsoft is not specifically 
prohibited by the PFJ. ?? t result, Mic??ft could continue to use 
its monopoly power over Office, -and the overwhelr?? do?? of IE, to 
constrain and eliminate competition from other OS platforms b?? 
fusing, or thre??g to refuse, to port Office or IE to those 
platforms. By ignoring this realit?? e PFJ egle??s a critical 
component of the Microsoft monopoly, and significantly compro?? s 
its abili?? effectively eliminate what the Court of Appeals 
identified as the single m?? reportant factor??cting Microsoft's 
Windows OS monopoly: the applications barrier.
    b. Remedies for the PFJ's Failings
    The CIS asserts that the PFJ will ensure that OEMs have 
contractual and eco??nic free?? make decisions about distributing 
and supporting Non-Microsoft Middle?? Prod?? without fear of 
retaliation or coercion by Microsoft. The foregoing will pu??rtedly 
be achi??s reply by prohibiting Microsoft from retaliating against 
an OEM that supp??or dist??s alternative middleware or operating 
systems. But OEMs will not be e??mically free ??rt or distribute 
alternative operating systems until control of the applica??s 
barrier is se?? from Microsoft. Since The porting of Office, IE and 
other Microsoft Midd??re
    Pro?? is a crucial element in re-establishing competition in the 
market for opera?? systems, SIIA ??ses that Microsoft should be 
required: to port Office, within six months of entry of final 
judgment, to Linux the top three non-Microsoft PC platforms 
(including the leading non-Microsoft handheld computing OS) based on 
shipments in a year; to port future versions of Office, within six 
months from the date that ?? products become commercially available 
for use with a Windows Operating System Product, to Macintosh and 
the top three non-Micro: PC platforms (including the leading non-
Microsoft handheld comput?? OS); to port IE and other Middleware 
Products that Microsoft ports to any non-Microsoft OS platform to 
Linux and the two most significant other non-Microsoft PC platforms; 
and to provide the same or similar functionality in such ported 
Office applications and Middleware as that available with the 
Windows Operating System Product version of the application. Without 
modifying the PFJ to include such specific language, the only way 
??revent "Po??g b??ackmail" by Microsoft would be 
lengthy and expensive litigation attemp?? to show that a ??al, or 
threat to refuse, porting would constitute a change in Microsoft's 
"??mercial rela??" with an OEM. Requiring Microsoft to 
port its Office and IE Middleware ducts to non??soft operating 
systems is essential to overcoming the applications barrier ??d 
tjere??roviding OEMs with the contractual and economic freedom the 
CIS promi.??--for at leas??easons, described below. Without a 
remedy specifically" addressing Offi?? the OE?? not be free of 
Microsoft's monopoly pressure. For example, Microsoil?? d be free 
??dition pricing advantages for Office on an OEM's adoption of 
Microsoft ??dleware.
    First, Microsoft's monopoly power over the Office business 
applications sui?? Word, Exce??werPoint, Access, 
Outlook--provides it with the ability to constrain and ?? 
inate?? comp??ion from other OS platforms by refusing (or as in the 
case of Apple, threate?? to refuse??t Office. The most important 
contributor to the applications barrier to en?? is MS Offi??ch 
currently holds a dominant share of over 95 percent of the business 
pr??ctivity so??applications market. Without the ability to run MS 
Office on a PC, users h?? little or no ?? except to select a 
Microsoft platform in order to maintain read/write intero?? ability 
with the most important applications product in today's software 
market.
    Second, MS Office serves as the basis for Microsoft's current 
strategy of ex?? ting its desk t??O?? dominance into the broader 
realm of handheld and other non-PC comp?? systems. Thus the porting 
of Office would directly address the applications barrier to entry, 
?? would pro??reased recentives?? investment in, and consumer 
purchase of, cornpetra?? soft?? for both PCs and other computing 
devices, such at handhelds. In addition, exposing its o?? of APIs, 
Office itself can represent a useful means of encouraging cross-?? 
form mid??are, but only if it is available on non-Microsoft 
platforms. Microsoft's refu?? to port MS ??e, except in return for 
Apple's agreement to make IE the default browser f?? ??e Ma??h, was 
thus manifestly anticompetitive and a major reason for Microsoft's 
??ntenance of its ?? monopoly.
    Third. ISVs and consumers today effectively have no choice in 
browser fun??ality Other ??n Microsoft's IE browser. As a 
consequence, Microsoft can now choose to ??antage its OS ?? any 
competing operating system either by refusing to port IE to the 
cor?? ng OS, by doing so significant]y later than for its OS 
products, or by porting only inferior ??ns of IE. Like??, ??icrosoft 
can use the dominance of its IE product to extend its desktop O 
??onopol to that :o/non-PC devices, such as handheld computers. 
Unlike virtually every ISV?? Microsoft has re?? to port either its 
Office software or Internet Explorer to the Palm OS. A?? en 
sour??ion of IE, as proposed in Section II.C.6 above, can eliminate 
Microsoft's?? ity to prese?? as a proprietary interface to the 
Internet; however, it cannot alone rectify ?? porting problem d??e 
to the lack of browser competition. Because Microsoft has 
established browser as a ??enue product, there is no profit 
opportunity for any ISV or platform cor??itor to create ??ux. Palm 
(or other handheld, digital phone, set-top box, etc ) or other ver?? 
t of Intera??/Explorer. Fourth, because Microsoft's anticompetitive 
conduct destroyed the Internet ??ser as an

[[Page 29093]]

econ??callyy significant market, it should be required to redress 
that harm by portin?? E to other plat??s. This flows directly from 
the recognition in the CIS that "Microsoft's a?? succeeded in 
eliminating the threat that the Navigator browser posed to 
Microsoft's ??rating system?? .... The adverse business effects of 
these restrictions also deterre??etscape from ?? taking technical 
innovations in Navigator that might have attracted cons??rs and 
reven??" Because porting the Navigator browser to all 
significant PC platforms ??an integr?? part of Netscape's 
competitive strategy until Microsoft began its unlawful c??aign, a 
remedy should restore the pro-competitive effect--a 
ubiquitously, available browse at exposes uniform APIs on all OS 
platforms--that has been lost as a result of Micro??'s 
violatio??s.
    Arguments that porting is impossible or too costly are not 
legitimate. Micro?? ports versio??s of Office, Outlook, Media 
Player, IE and other middleware to the Macintos ??day, some of which 
are available free, and others for purchase. Furthermore. as the 
Coun?? Appeals explai??ed the important economic consideration in 
porting is usage, as opposed to a??lute volu?? Particularly as to 
software (like IE and Outlook) that exposes its own APIs, ??sage 
share, ?? the underlying operating system, is the primary 
determinant of the platfor?? ??allenge a [pr??] may pose." 
Thus, requiring That Microsoft port to other OS platforms ?? 
principal, ubiqu?? ?? middleware/applications it now controls merely 
replicates what would be easy decisi?? ?? a stand-alone company 
that, unlike Microsoft, did not have an economic disad??tage other 
OS platforms. Because a firm that did not have a Windows mon??ly 
would port both Office and IE, Microsoft should be required to port 
these crucial products.
    Finally, creating a viable market for Linux would immediately 
introduce pri?? comp??tion to the Windows OS. Linux--which is 
currently free--would be a po??tially attractive alternative to 
Windows, even in the OEM channel, if Office, IE and Outlo?? were all 
available for that client platform.
    9. The PFJ Places a Disproportionate Reliance on OEMs to ??rease 
Competition
    a. Failings of the PFJ
    As noted previously, the PFJ's overwhelming reliance on OEMs as 
the prin?? ?? means for in??ing competition into the OS market is 
unjustifiable. Rather than adopt a m?? ??faceted approa?? focusing 
on all of the contributors necessary to adequately reinvigorate 
co??ition in the OS marker, the PFJ mistakenly focuses merely on 
allowing OEMs greater "flexil??y" to custor?? Windows 
icons and non-Microsoft middleware. By doing so the PFJ tur?? blind 
eye to the economic realities of today's market. OEMs are currently 
under such ext?? ??dinary financial pressures today that, even if 
they had the business experience necessary to ??er the software 
business, they have no financial incentive to purchase and 
incorporate into ?? r PCs anything other than the full Microsoft 
software package. The failure of any OEM to on Microsoft's offer 
last summer to replace icons in the Windows XP desktop makes pl. 
this reality.
    The PFJ is purportedly designed to restore the competitive 
threat that non-Mi??soft middl?? products posed prior to Microsoft's 
unlawful undertakings. As noted a??e, the CISc?? that the PFJ does 
this by giving OEMs "the contractual and economic fr??m to 
make ??isions about distributing and supporting non-Microsoft 
software products t?? have the poten??a to weaken Microsoft's 
personal computer operating system monopoly with fear of coerci?? or 
retaliation by Microsoft." The PFJ only provides such freedom 
to OE?? in form, however, not in substance. Changes in OEM and 
retail PC market conditions--una?? ??owledged by the 
DO??--make it highly unlikely that contractually liberating the 
OEM distribut?? channel, without significantly more, can effectively 
serve as the prime vehicle for restoring C comp??tion. Such market 
changes include dramatically shrinking margins, price pr??ires, and 
slowing demand in the PC sector--trends that are the opposite 
of the high-flying e?? ??mic indici?? of the PC hardware market from 
1995-98 when Microsoft's vertical restricti?? foreclosed OEM 
distribution to its middleware rivals.
    In this current economic environment, provisions which merely 
give OEMs t?? ability to remove products or services, or that give 
OEMs the ability to make changes to the ??ting system ?? not succeed 
in achieving the stated goal of the CIS. The competitive la?? cape 
of the PC s??clor today is one of rapid commoditization with 
shrinking R&D budgets.
    b. Remedies for the PFJ's Failings
    Creating choice and differentiation in the PC sector is 
dependent upon two st?? first, the PP must fundamentally redefine 
the relationship between Microsoft and all OEM ?? affirmatively 
transferring some design and bundling decisions from Microsoft to 
the Ms (in the PC supply chain); second, the PFJ must create a 
regime in which OEMs have an??nomic ?? to choose alternative bundles 
of ??oducts and services for the Windows OS ??form from other 
vendors, thereby encouraging competition on the merits in the 
applicatio?? midd?? are and other non-OS markets.
    In order to accomplish these objectives S??A proposes that 
Microsoft be req?? to license Windows to independent ISVs and 
software integrators (including platform ??are com??ors)who would be 
protected by the same API disclosures, desktop configu?? 
flexib??lity, and pricing nondiscrimination guarantees as provided 
to OEMs under the ?? J. More spec??cally, Microsoft should be 
required to license the base binary code of Window including new 
??ions and upgrades of Windows at a reasonable time before shipping 
of that duct to OEM ?? all third parties so that the licensees may 
create and license competitive b?? ??es comprised of Windows and 
non-Microsoft applications, middleware, services and to??
    ((a)) licensed third parties should have all the rights to 
modify the OS and IE desk?? links and related interfaces as provided 
to OEMs in Sections III.E and III.H of the??;
    ((b)) licensed third parties should have all the rights of 
access to APIs and other re??ical information as provided to OEMs in 
Sections III.D and III.E of the PFJ.
    ((c)) licensees should be protected by the same OEM 
nondiscrimination safeguard??ovided ?? Sections III.A, III.B and 
III.F of the PFJ;
    ((d)) Microsoft should be required to provide complete 
transparency of its agreeme?? with ??EMs and others;
    ((e)) the licenses should be made available for a price equal to 
the lowest (per volu?? ??price that Microsoft charges for any 
current version of the Windows OS to OEMs o?? her end user 
licensees, including enterprise customers, add any volume discounts 
sho?? ??e ??ardized and published; and
    ((f)) Microsoft should be prohibited from taking actions to 
interfere with or degrad??e in??eroperability of third-party 
applications with Windows.
    This licensing proposal would foster wholesale-level competition 
for combin?? ??S and application bundles, thereby making available 
critical systems integration services to ??Ms seeking ??o provide 
alternative software packages to retail customers. The SIIA prop?? 
recognizes the realistic limitations on OEMs in creating and 
defining alternative sof?? ??re bundles (including middleware) and 
therefore creates opportunities for systems inte??ors and others to 
"stand in the shoes" of the OEMs and exercise their same 
rights to modify ?? cust?? the Windows desktop and middleware 
selections. This remedy works in??em with the ?? on middleware 
bundling, the provisions regarding OEM restrictions, and the ??I and 
tech?? information disclosure. It would limit Microsoft's ability to 
choke off the ??elopment of new middleware and potential rival 
platforms by creating an alternative means fo?? ??aker of those so 
??products and services to distribute them to OEMs and, potentially, 
co??mers. By producing potential rival, retail-level bundles of 
software applications and servic ??with the OS, the licensing 
proposal could offer an important means to foster the technologica?? 
development and consumer acceptance of non-Microsoft middleware and 
potential a native platforms.
    Adoption of the licensing provision would result in at least 
three major benef?? to cons?? and competition. First, the provision 
would allow the market, rather than ??crosoft, to deter?? the 
applications on, and configuration ?? consumers" PC desktops. 
The?? ??ense would ??Microsoft's ability ;o use its OS monopoly to 
favor its own products ove?? comp?? software. End users would be 
able to choose among competing, custon?? ??d bundles of applications 
that are as seamlessly integrated into the operating system as 
??crosoft's products are?? today.
    Second, in addition to to promoting consumer choice and creating 
competitio?? retail-level OS Application bundles, the licensing 
proposal would help preserve competitio ?? appli??, e-commerce, and 
other markets that Microsoft has targeted with its ille??actics. By 
given there applications/services and the investors, engineers, 
developers, and ??ers behind them--an alternative means to 
obtain access to consumers, the licensing pro?? ??alwould give 
??petitors in these markets a new protection from Microsoft's 
anticompetiti?? cries. Con?? would benefit from the new

[[Page 29094]]

choices, new applications, and new services ?? would resu??t.
    Third, with a variety of licensees potentially acting as systems 
integrators an?? sellers, this ?? would provide the OEMs an 
efficient way of procuring bundles of speci?? ??ed software to 
resell to consumers.
    10. The PFJ Pails to Constrain Microsoft From Converting O?? 
Industry Standards Into Exclusive Microsoft Protocols
    The CIS states that the PFJ is designed to prevent recurrence of 
the same or s?? far prac?? that Microsoft employed to reach its 
current monopoly position. Microsc?? mono?? over the PC operating 
system market gives it a unique ability to appropria?? or its sole 
use and benefit technology first developed by others. By embracing 
industry st??rd technology. Microsoft ensures that its products 
benefit from the innovations of other?? ??y adding proprietary 
extensions to industry standards, Microsoft can effectively approp?? 
re those stanca?? for its sole benefit and can also extinguish the 
threat to Microsoft's proprie ?? standards posed by voluntary, open 
industry standards.
    The Court of Appeals affirmed that this is what Microsoft did to 
JAVA. It in?? ionally deceived ??AVA developers and entered into 
exclusive ISV deals for distribution of ??osoft's own, incompatible 
version of JAVA. The Court explained that Microsoft fragment, he
    JAVA standard in order to "thwart Java's threat to, 
Microsoft's monopoly in the ma?? for operating systems," and 
to "[k]ill cross-platform Java by grow[ing] the polluted 
Jav??arket." SO
    a. Failings of the PFJ
    The PFJ, however, does not restrict Microsoft's ability to 
modify, alter, or re??e to supp?? computer industry standards, 
including JAVA, or to engage in campaigns to??eive developers of 
rival platform, middleware, or applications software. By choosing 
to??port only its own, proprietary implementation of open industry 
standards, Microsoft can conti??to exclu?? meaningful competition 
from alternative platform vendors. In addition, Mic??oft will be ins 
position to dictate the interfaces and protocols by which products 
other than I, such as servers. handhelds, or telephones, can 
interoperate with PCs running Microsoft's des??p OS, and the 
applications that run on those PCs.
    b. Remedies for the PFJ's Failings
    SIIA proposes as a remedy that the PFJ constrain Microsoft's 
ability to conve??pen industry standards into exclusive Microsoft 
protocols through "extension" or other un??teral condu?? 
Specifically, Microsoft should be enjoined from modifying, altering, 
sub-se??g or super-se??ing any industry-standard Communication 
Interface or Security Protocol, e??pt to the extent that such 
modified Communication Interface or Security Protocol is 
complian??th, and appr??ved by. an independent, internationally 
recognized industry standards organizat?? Security protocol should 
be defined as set forth in Appendix A.
    This proposed remedy would protect consumer choice in platform 
software by ??suring that co??s??ers are not required to purchase 
only Microsoft applications and other sof??tre products??n order to 
interoperate with Windows. It would foster innovation by ensuri??hat
    ?? Id. at 76-77 (citation omitted).
    Microsoft has a business incentive, reinforced by the PFJ, to 
extend industry standat?? for sound engineering reasons, rather than 
anticompetitive foreclosure. The PFJ would requir?? at Microsoft 
additions to open industry, standards be approved as compliant with 
a volt??y industry standard available for support by all 
competitors; importantly, however, it ??ld not otherwise restrict 
Microsoft from developing new technologies, interfaces, or standa?? 
in propr??t??ry format.
    11. MS Office Should be Included in the PFJ
    Microsoft Office, a hybrid of application and middleware is a 
significant con??nent of the current applications barrier to entry. 
The Court of Appeals relief standard in this??se, tracking United 
Shoe, requires that a remedy "ensure that there remain no 
practices??ly to result in monopolization in the future."\81\ 
To foreclose prospective antitrust practice??t is settled law that a 
remedy is not limited merely to the proven violations, but should 
e??mapass untr??ed roads" the monopolist could use into the 
future to protect its market pow?? "when the purpose to 
restrain trade appears from a clear violation of the law, it is not 
necess?? that all, of the ?? traveled roads to that end be left open 
and that only the worn one be closed.
    a. Failings of the PFJ
    The CIS states that the PFJ is designed to prevent recurrence of 
the same or s??lar practices that Microsoft used to reach its 
current monopoly position.\83\ The PFJ does ??: achieve these stated 
goals because the PFJ's API, pricing, exclusive dealing, and OEM 
flexib?? provisions are all limited to Windows platform software. 
Due to the dominant market?? are of ??
    Microsoft III, 253 F.3d at 103 (citation omitted).
    ?? Int'l Sall Co. v. United States 332 U.S. 392, 400 (1947).
    ?? CIS at 3.
    MS Office--around 95 percent of the business productivity 
suite market--Microsoft dange??sly positioned to evade any 
relief by repeating the stone exclusionary and i??al acts employing 
Office, instead of Windows OS, to the same devastating effect upon 
the ??sumer. More??ver, as previously described, Office exposes its 
own set of APIs and can there ?? essentially function as a 
middleware alternative to operating system software.
    b. Remedies for the PFJ's Failings
    A remedy must cover MS office in order to foreclose Microsoft's 
ability to e??e the PFJ's ??sions by engaging in the same conduct 
with Office that is prohibited with ??indows. Speci??i??lly MS 
Office, the largest component of the applications barrier to entry, 
should be included in a number of provisions in order to prevent 
evasion of the remedy. These ??lude:
    . Disclosure of APIs supporting interoperability of Office and 
Window Microsoft 1Middleware (see Section II.C.4 above);
    . Disclosure of proprietary file formats for Office (see Section 
II.C.4 above);
    . Prohibiting binding of Office with the Windows OS (see Section 
II.C. above); and
    . Requiring Microsoft to price its Windows and Office products 
offered enterprise customers (i.e., all non-OEM customers) on a 
stand-alone b?? without any volume or other discount arising from 
combining the sale such products with any other Microsoft software 
product. Legitimate volume discounts for either Windows or Office 
products are not other ??e affected by this provision.
    As noted above, the existing scope of the API provisions is 
overly narrow sin??hey seem?? require transparency in the OS/
middleware interface, but not correspondin??enness in the ??face 
between either applications or Office and the Windows OS. Under 
th??IA proposa?? Office, Outlook, and JAVA would be encompassed by 
the Middleware defi?? on in order to preclude Microsoft from evading 
the constraint of the remedy by binding Off Outlook o?? JAVA 
technology (each of which exposes APIs and can erode the applic??ons 
barrier to entry) to the OS. Similarly, the scope of 
"multimedia viewing software" s??ld be expanded from 
merely viewing digital content to encompass the entire spectrum of 
func??ion??ities provided by Real Player, Windows Media Player, and 
the like, in ord?? prevent Microsoft from evading the middleware 
bundling provisions by simply segmenting i?? multi??e?? middleware 
into different sub-products or applications.
    12. The PFJ Fails to Stop Microsoft From Intentionally Disab?? 
Competitors" Products
    a. Failings of the PFJ
    The PFJ lacks any general "catch-all" enforcement 
provision designed to sto??icrosoft from taking intentional action 
to disable or adversely affect the operation of competi?? middle 
ware or applications products. The CIS claims that the PFJ has the 
teeth need ??to ensure that ??soft cannot thwart the purposes or 
remedies of the PFJ, and that the PFJ ??prive Microsoft of the means 
with which to retaliate against, or hinder the development of 
??peting products k4 Unlike the District Court's interim decree in 
2000, however, the PFJ ine??cably fails ??o ??clude a general 
prohibition of such conduct, relying instead upon narrowly ??wn 
prohibitions limited to specific forms of conduct.
    b. Remedies for the PFJ's Failings
    ?? order to remedy this glaring problem, SIIA proposes that the 
PFJ be altered that Section (.3 of the 2000 Decree is restored 
verbatim:
    Microsoft shall not take any action that 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 of" such non-Microsoft Middleware in 
writing that Microsoft intends to take such action, Microsoft's 
reasons for taking the action, and any ways known to Microsoft for 
the supplier to avoid or reduce interference with, or the degrading 
?? the performance of the supplier's Middleware.
    In addition, Microsoft should be prohibited from promoting any 
standard as?? en" unless it has standards-body approval.
    As is discussed in detail above, the Court of Appeals found that 
Microsoft ha?? aff??

[[Page 29095]]

deceived JAVA developers and improperly entered into exclusive ?? 
ISVs for dis??ution of Microsoft's own incompatible version of JAVA. 
Moreover, the d??ct cou?? Findings of Fact are replete with 
findings, none of which were overturned on the eff?? that Microsoft 
intentionally made it more difficult for Netscape and JAVA tun on 
the Windows platform. For instance, Judge Jackson found that the 
purpose of Micro's techni?? integration of IE "was to make it 
more difficult for anyone, including syste?? administrators and 
users, to remove Internet Explorer from Windows 95 and to 
simul??usly complicate the experience of using Navigator with 
Windows 95."\85\ "Microsoft's re?? respect the user's 
choice of default browser fulfilled Brad Chase's 1995 promise to n?? 
the use of any ??wser other than Internet Explorer on Windows a?? 
experience." By i??rasing the lik??lihood that using Navigator 
on Windows 98 would have unpleasant conseque?? for users, ??ierosoft 
further diminished the inclination of OEMs to pre-install Navigator) 
Windows" ??6 The obvious adverse impact on consumers of 
intentional interference with cor??ting middleware and applications 
is evident: consumers are denied choice of software and ?? market is 
ar??ally tipped toward Microsoft products on a basis other than the 
performance the products themselves. This is a classic way in which 
Microsoft's maintenance of its, monopoly harms both competition and 
consumers. In order to ensure that Microsoft ??not intentionally 
degrade the performance of competitors" products, including 
middlewa?? such tactics should be specifically outlawed.
    ?? Findings of Fact at 79 160.
    ?? Findings of Fact at 85 172.
    III. CONCLUSION
    As noted previously, because it may be difficult for this Court 
to reach a con?? regarding the PFJ without prefiguring a decision on 
nearly identical "live" issues in ?? State case 
currently before this Court, SIIA respectfully requests that this 
Court take this n??er under advise?? until the State case has 
concluded. Alternatively. this Court should adop??A's propo?? 
remedy, as described in these comments.
    Respectfully submitted,
    Ken Wasch, President (Bar No. 93??4)
    Software and Information Industry ??sociation
    090 Vermont Avenue, NW
    6th Floor
    Washington, DC 20005
    (202) 289-7442
    Douglas L. Hilleboe (Bar No. 3860
    Steptoe & Johnson LLP
    1330 Connecticut Avenue, NW
    Washington, DC 20036
    (202) 429-3000
    Dated: January 28. 2002
    APPEND??X A DEFINITIONS OF "PLATFORM INTERFACES,"
    "INTEROPERATE EFFECTIVELY" AND "BROWSER"
    Platform interfaces" means all interfaces, methods, 
routines and protocols tl??enable any Mico??oft Operating System or 
Middleware Product installed on a Personal Con??ter to (a) execut?? 
fully and properly, applications designed to run in whole or in part 
on any M soft Platform Software installed on that or any other 
computing device (including without ??nitation ?? server??ligital 
telephones, handheld devices), (b) Interoperate Effectively with 
Micr??ft ?? Platform Software or applications installed on any other 
device, or (c) perform netw?? security I, ?? prot?? such as 
authentication, authorization? access control: or encryption.
    "Interoperate Effectively" means the ability of two 
different products to acce:??tilize and/or support the full features 
and functionality of one another. For example, non-??osoft Platf?? 
Software "Interoperates Effectively" with an application 
designed to run on ??crosoft Platfor?? Software if such non-
Microsoft Platform Software can be substituted for the ??icrosoft 
Plafor?? Software on which such application was designed to run, and 
nonetheless e?? le the application user the ability to access, 
utilize and support the full features and function y of the ?? 
application without any disruption, degradation or impairment in the 
functionality or??ures of the application.
    ??Internet Browser" means software that, in whole or in 
part, (i) makes hyperte?? ??ransfer protoccl?? (HTTP) requests in 
response to user input: (ii) converts or renders hypertext ??kup 
language HTML) and extensible markup language (XML) to any displayed 
form. or interme??linte representation with the intent to display 
it; (iii) displays or keeps in mere stores in any way 
"cookies," which are named values sent from web servers 
to web br??sers?? with the expectation that the browser send back 
the named values back to the server??uture intera??ion; (iv) 
displays, keeps in memory or otherwise stores a collection of 
unifo??resource It locat?? URLs) representing a history of a use's 
interaction with web servers; (v) di??ys or?? keeps in??memory or 
otherwise stores "bookmarks," which are named URLs 
configur??e by a user; c?? runs JavaScript programs or runs programs 
in any computer programmi??anguage which is broadly compatible with 
JavaScript. The standards and formats referenced his definition 
include all successors to those standards and formats that may arise 
during term of the Final Judgment. The technical elements identified 
in subsections (i) to (vi) inclu?? not only the for??n of these 
functionalities as They currently exist and have existed in the 
past, also as They come to exist in the future, even if they come to 
be known by different names.
    IN THE UNITED STATES DISTRICT COURT FOR. THE DISTRICT OF 
COLUMBIA
    UN?? STATES OF AMERICA, Plaintiff, Civil Action No. 98-12-
CKK MICROSOFT CORPORATION, Defendant. Defendant.
    STATE, OF NEW YORK: et al., Plaintiffs, Civil Action No. 
98-123 ??KK, MIC??CFT CORPORATION, Defendant.
    COMMENTS OF SOFTWARE & INFORMATION INDUSTRY ASSOCI??ION ON 
PROPOSED FINAL JUDGMENT
    Ken Wasch, President (Bar No. 934984)
    Software and Information Industry Associ?? n
    1090 Vermont Avenue. NW
    6th Floor
    Washington, DC 20005
    (202) 289-7442
    Douglas L. Hilleboe (Bar No. 386091)
    Steptoe & Johnson LLP
    1330 Connecticut Avenue, NW
    Washington, DC 20036
    (202) 429-3000
    Dated: January 28, 2002
    COMMENTS OF SOFTWARE & INFORMATION INDUSTRY ASSOC??ION ON 
PROPOSED FINAL JUDGMENT
    ??uant to Section 2(b) of the Antitrust Procedures and Penalties 
Act (the "i??ney Ac?") 15 U.S.C. 16(b)-(h) (2000), 
the Software & Information Industry Associati?? 
("SIIA") ?? submits these comments on the Proposed Final 
Judgment ("PFJ") filed by the Unite??tates Department of 
Justice ("DOJ") on November 6, 2001.
    SIIA is the principal trade association of the software code and 
information ??tent corporate education, and intellectual property 
protection to more than 800 leading st?? are and information 
companies. Our members develop and market software and 
electronic??tent for business education, consumers, and the 
Internet. SIIA's membership is comprised ??arge and small software 
companies, e-business and information companies, as well as many ??r 
traditional and electronic commerce companies of varying sizes. 
Among SIIA's key public policy issues is the promotion of 
competition in the ??ftware industry. SIIA has promoted these 
principles of competition in a variety of fora, in??ng the federal 
counts.
    I. In??duction and Summary
    The PFJ proffered by DOJ represents a remarkable change of 
heart-or, per?? more accu??tely a loss of heart. For whatever 
reason, DOJ proposes to end one of its m?? important and successful 
monopolization cases with a settlement that reflects neither its 
litigat?? position nor the decisions it won at trial and on appeal. 
A settlement as weak as this would, ?? been disappointing, but 
perhaps understandable, if it had been reached before trial, in 
su??t situation, ?? and sometimes DOJ must take a bird in the hand. 
But in this ??e, much of the litigation is past; and the new 
Administration arrivals are not free to decide w?? legal?? theories 
?? apply to this case. The law" of this case is settled. The 
trial and appeals cou?? have alreac??nade findings of fact and 
conclusions of law. These findings and conclusio?? ??annot be 
??ignored in a proceeding whose raison d??tre is protecting against 
an improperly mot??ed or expedient compromise of the public's 
interest in enforcement of the, antitrust laws.
    Appropriate relief in an antitrust case should end the unlawful 
conduct, pry o?? the market to competition, avoid a recurrence of 
the violation and others like it, and und?? antic??et??tive 
consequences. Unfortunately, SIIA submits that the PFJ does not 
ac??aplish these goals and ignores significant parts of the Court of 
Appeals's decision regarding ??icrosoft's ?? anti??olations and 
their consequences. Even where it seems to address the viola ?? is 
DOJ filed, its PFJ on November 6, 2001,. which, if approved by this 
Court, ??ld terminate United States action against Microsoft 
Corporation ("Microsoft") in th??ase and prtovid??tain 
remedies for Microsoft's violations of the Sherman Act that were 
uph?? by the United

[[Page 29096]]

States Court of Appeals for the District of Columbia. See United 
Stares v. Mi?? Corp 25:3 F.3d 34 (DC Cir.) ("Microsoft 
III") (en bane), cert. denied, 122 S. Ct. 35 2001). In 
addition to DOJ and Microsoft, nine State plaintiffs agreed to the 
terms of the PFJ. ??wever, nine State plaintiffs and the District of 
Columbia concluded that the relief provided b??e PFJ is woefully 
??nadaquate and thereby continue to pursue a complete remedy through 
?? identified by the Court, the PFJ is so porous that it provides 
little or no protection 1st a repetition of Microsoft's past 
anticompetitive acts. Flaws in the PFJ's Remedies. The two most 
salient remedies imposed Microsoft PFJ und?? concern flexibility for 
OEMs to install competing middleware and A?? DOJ's future Co?? 
Impact Statement ("CIS") stresses the importance of 
preventing??ises in these areas. The theme of the CIS and PFJ is 
that competition was injured in this ?? prin??ly because Microsoft's 
illegal conduct maintained the applications barrier ??try in the 
perso?? computer operating system market by thwarting the success of 
middle ware ??it would have re??ed competing operating systems gain 
access to applications and other need compl??tents. The PFJ is 
intended to restore competition. In fact, however, the PFJ so 
loosely that it is likely to have only the most modest effect on 
Microsoft's actions--none at all o??s ability to monopolize new 
sectors of the information technology market.
    a. Middleware. Middleware was at the heart of the case. Impelled 
by enth??asm for the Interne, PC users embraced Netscape's browser, 
and Netscape (particularly" in c??pination led a Competitive 
Impact Statement ("CIS")required I ?? under the ??tunney 
Act. 15 U.S.C. 16(b). The CIS provides an abbreviated history 
he legal?? proc?? in this case, describes Microsoft's monopolistic 
and anticompetitive pra??es that the District Court and the Court of 
Appeals held to be Sherman Act violations, and ??apts to expla??hy 
in DOJ's opinion, the PFJ remedies such violations and provides 
appro??e ?? bene?? lot consumers.
    Middleware is "platform software that runs on top of an 
operating system--uses opera?? system interfaces to take 
advantage of the operating system's code and fun??nalley--and 
si??u??taneously exposes its own APIs so that applications can run 
on the middle?? itself.
    An application written to rely exclusively on a middleware 
program's APIs could run all operating systems on which that 
middleware runs. Because such middleware also run??n Windows, 
application developers would not be required to sacrifice Windows 
compa??lity if they chose to write applications for a middleware 
platform." CIS at 11. desk??ip This is not simply an academic 
observation on the part of SIIA and its m??ers. For practi??ally 
every one of our members, the rise of independent middleware opened 
r??opportu??ities that were the objects of intense strategic focus. 
The reason for this fo?? was that our members" programs 
suddenly could use Netscape and JAVA as mediators to in launch, and 
run on the desktop. For the first time in years it seemed possible 
that independe?? software ??enders (ISVs) would have a way. to reach 
the great majority of computer users ind??ndent of Microsoft. 
Indeed, because they could run on other operating systems, JAVA and 
??cape's browser suddenly offered these ISVs an even broader market 
than they could obtain ?? developing for the Microsoft operating 
system. The CIS describes how this competitive threat struck at the 
heart of Microsoft monopo??y, and Microsoft's counterattack used 
every possible weapon, including su?? unlawful tacti??a 
"leveraging" its operating system monopoly. The PFJ 
seeks to prevent Mi??soft from repeatto?? these tactics by ensuring 
that future middleware vendors are not denied ac??; to the desktop. 
But the measures chosen are unlikely to have that effect. As a 
matter of dr??ng, they are f??y weak. Microsoft itself is expressly 
granted nearly complete control over ?? meaning of m??dleware" 
under the PFJ.
    Equally important, these measures are written for a world that 
no longer exist ?? The h??ils moved on. The PFJ grants to hardware 
makers the fight to add middlewa??cons to their First but these 
companies simply lack the financial strength and the motivation ?? 
develop new. software that might threaten Microsoft. To take one 
example, OEMs have been ??ured by ??rosoft's Microsoft for several 
months that they may customize their desktops by uninstalling 
Internet Explorer; not one has actually done so. Meanwhile, the PFJ 
does not give in??endent software vendors who might challenge 
Microsoft the one thing that would tempt then ?? a channel to users 
that is not subject to exclusionary practices by Microsoft. On the 
??trary, the PFJ pro??ects middleware only after Microsoft has 
launched a similar product, by wh?? time it is too late. Developers 
of applications will always develop first and most enthusiastical?? 
or the most ?? deployed platform, because that platform becal?? it 
offers them the largest marke?? the most users ??, in turn, will 
typically choose the most widely deployed platform becan?? it offers 
them ?? greatest choice of applications. This reinforcing 
circle---a well established ??twork effect--in at the 
heart of Microsoft's dominance of the industry. Cross-platform mid?? 
ware threatened Microsoft in 1995-98 because it could offer 
developers an even bigger m?? et--a Microsoft plus" 
market.
    ?? Microsoft cannot be seriously challenged in that way again 
because no n??entrant to the middle ware market can hope to equal 
the ubiquity of Microsoft in that market, le?? one achie??e the. 
"Microsoft plus" market that Netscape and JAVA offered 
in 1995-98.
    b. APIs The PFJ also requires that Microsoft disclose the APIs 
used by Mi??soft middleware to interoperate with the Microsoft 
operating system. Here, too, the PFJ. ??ers both from ?? drafting, 
and from a curious blankness regarding the sources of Micros?? 
Dom??ce of the market. The provision is replete with terms that are 
not defined ("inter??perate"), are defined only. vaguely 
("API"), are defined based on how a pro?? is named or 
distributed ("Microsoft Middleware") or, most 
remarkably, are left to be defined ?? Microsoft's "so1e 
discretion" ("Windows Operating system Product").
    In any event, the PFJ does little more than throw Microsoft into 
a briar patch?? as long called ?? Microsoft's competitive dominance 
depends on having the largest stab??f application developers writing 
for its users. To write programs for Microsoft users, t?? deve??per 
must have access to Microsoft's APIs. The APIs are their air supply, 
an??licrosoft has every reason to give developers access to that air 
supply- within limits. As lon??s Microsoft can keep its hand on the 
valve, as long as it can cut off the air supply to d??lopers who are 
too independent or too successful, it has every incentive to provide 
extensi?? Info??ion about its APIs. And the PFJ leaves the valve 
firmly in Microsoft's hant??y allow?? Microsoft to impose royalties 
and other restrictions on developers who obt?? access to the APIs. 
The PFJ thus requires little or nothing more than Microsoft would 
provid?? its own. Unless developers can be guaranteed an air supply 
that does not depend on Microso??hey will not chal??erage the 
company that can unilaterally cut them off. 2. Backward-Looking 
Remedies. In short, when all is said and done, this ?? wagers 
everything on a series of measures that might have prevented 
Microsoft from unlaw??y dest??ng Netscape in the browser wars. Even 
this is open to question, but the real??blem with the PFJ lies 
deeper, for there is not the slightest chance that these measures 
will ??ow a new com??or on the order of Netscape to emerge. The 
market has moved on. Focusin??ly on preve??ing a repetition of the 
unlawful actions Microsoft took in 1995-98 is like negt??ting 
an end to World War II by letting the Germans keep Paris as long as 
they promise to re??d the ?? Mag??t Line.
    Such a limited focus is not just improvident, it ignores the 
instructions of the ??rt of Appea?? that any relief 
"terminate" Microsoft's unlawful monopoly and 
"deny" the ??pany the "fruits" of its 
unlawful conduct. This cannot be accomplished by relying on the 
eme??ce of some yet to-be-identified middleware challenger. To the 
contrary, Microsoft has alr?? soli?? its unlawful victory, into a 
browser monopoly, and it now bids fair to make ?? entire Interne?? 
into a proprietary Microsoft environment. Any remedy that seeks to 
deny M??soft the fruits of its unlawful conduct must at a minimum 
prevent Microsoft from using the ??e conduct to extend its control 
of services that rely on Internet Explorer.
    For that reason, SIIA urges that the PFJ be expanded to address 
present and??e ?? and not just the dead past. The PFJ must take 
steps to reduce the massiv??tructural advantage that Microsoft has 
achieved by unlawfully leveraging its operating systen??tonopoly 
into a??nternet-access monopoly. These steps include opening the 
code of Internet??plorer ?? ("IE" restricting 
exclusionary uses of Windows XP and the tools that make up Mi??oft's 
??NET in??tiative, preventing Microsoft from "polluting" 
standards by adding propriet?? exten??ons, and inclusion of 
Microsoft's productivity applications in any relief. ??
    3. Missing Principle. One further gap in the PFJ deserves 
mention, If the ??sific changes required by the PFJ are of very 
dubious force, the only provisions likely to??e continuing value are 
those that spell out broad principles of conduct. Here too there??

[[Page 29097]]

??nuch room ?? disappointment. The PFJ does not prohibit Microsoft 
from intentionally di??ling or adve?? affecting the operation of 
competing products. No explanation is offered ?? this ?? omiss??on.
    4. Procedure. Finally, SIIA wishes to address one procedural 
point. At the ??er of this pr??ceeding are the decisions of the 
Court of Appeals and the District Court. Wh??hey say about 
Microsoft's conduct and about the appropriate remedies are an 
essential part o??e public interest analysis. But they are also at 
the heart of the case between the remaining liti??ing States and 
Microsoft. It may be difficult to reach a conclusion about this PFJ 
without prefi??ng a decision on the very. issues that the parties 
intend to litigate before the Court in the ne??future. To do ??o on 
the basis of a few Tunney Act filings rather than a full record 
might do a?? justice to the p??ies to that litigation. S??A 
therefore respectfully requests that this Court ?? the PFJ and its 
terms under advisement until the conclusion of the litigation.
    In sum, the PFJ, as written, represents a failure of will and 
technological wis??m that cannot be approved by this Court 
consistent with the unanimous liability decision o??e Court of 
Appeals, traditional standards of antitrust remedy law, or the 
Tunney. Act.
    II. ARGUMENT
    A. Standard of Review
    Under the Tunney Act, this Court is required to review a 
proposed settlemen?? deter??e whether it serves the "public 
interest." In most instances Tunney Act pr??edings occur prior 
or to trial and without any judicial findings of liability. The Act 
was passed ??open this stage of the proceedings to the sunlight of 
public scrutiny. In the unique procedura??ntext of this case 
however, where the Court of Appeals issued an opinion on the merits 
prio?? the ini?? of Tunney Act proceedings, the "public 
interest" standard must necessarily ?? applied consistent with 
the Court of Appeals opinion. The Court of Appeals ruled, 
"[t]he Su?? me Court has expl??ed that a remedies decree in an 
antitrust case must seek to 'unfetter a mar,?? from 
antice??petitive conduct," Ford Motor Co., 405 U.S. at 577, to 
'terminate the illegal??nopoly, deny to the defendant the 
fruits of its statutory violation, and ensure that there remai??) 
practices likely to result in monopolization in the future." 
Thus, this Court must ??sider each of these factors in its public 
interest analysis.
    Ordinarily, the Department of Justice is given prosecutorial 
discretion in de??ng whe?? bring a civil antitrust action. As a 
result, courts generally require that a ??posed settlement only be 
"within the reaches of the public interest'," for 
which approval ?? warranted even if it falls short of the remedy the 
court would impose on its own." Thus, in ??ical Tunney Act 
cases, courts have permitted entry of consent decrees which were 
merel?? consistent wire the government's general theory of liability 
as manifested in its complaint" a ??chat "grani??[ed] 
relief to which the government might not be strictly entitled" 
under the m?? rust laws, Bech??, 648 F.2d at 660. In this case, 
after trial and with the benefit of an extensive factual record, the 
??tort of Appeals held specifically that relief must seek to 
"terminate" Microsoft's operating, ??tern mo??, 
"unfetter" barriers to competition to the OS market, and 
"deny" Micros??he
    The CIS, however, articulates a different and considerably less 
rigorous start ??d for a rem?? ??n an antitrust case. According to 
the CIS. "[a]ppropriate injunctive relief, ??hould: (1) end 
the ??lawful conduct; (2) 'avoid a recurrence of the violation 
and others like it: ??d (3) undo its anticompetitive 
consequences." Significantly, the formulation advocated DOJ 
does not re?? the remedy to 'terminate" the illegal 
monopoly, or to 'deny the defendan??e fruits of its un??awful 
conduct. Regardless of whether the DOJ formulation may have been 
??propriate in pas??cases, it is simply the wrong standard of review 
for the remedy in this case, v??re the District Court and Court of 
Appeals have clearly outlined how Microsoft violated th?? ??herman 
Act. The PFJ is deficient under either formulation. There are 
substantial disparities ??tween the CIS and the PFJ. And the DOJ has 
not even attempted to defend the PFJ under the r??e stringent, and 
binding, Ford/United Shoe/Grinnell standard That this Court must 
seek ??enforce.
    B. S??A's Remedy Proposals are Reasonable and Proportional 
to M??osoft's Unlawful Conduct??s proposed modifications to the PFJ, 
described in detail below, are boy ??amerous and substantial. 
Regrettably for consumers, Microsoft's already proven monopolist?? 
Lets have so de??ed competition in the operating systems market that 
adoption of these pro??als is critic?? if the PFJ is to 
"unfetter" the market from Microsoft's anticompetitive 
cond?? "terminate" Microsoft's illegal monopoly, deny 
Microsoft the "fruits" of its She?? violations, and 
prevent future monopolistic acts, in accordance with the ford/
United?? Shoe/Grinnell standard for remedies.
    There are similarities between tiffs case and the AT&T 
divestiture, the last ??ge monopolization settlement under the 
Tunney Act. S??A submits that in this case the ?? is similarly 
completely inadequate to remedy the serious antitrust violations in 
this ma?? In the former matter Judge Greene reviewed the evidence on 
all issues except remedy. Af?? evidentiary hearings, third-party 
submissions, and lengthy oral argument, Judge Gre?? declined to 
approve the consent decree as proposed because he concluded that it 
was inadequ?? in certain areas and precluded the Court from 
effective oversight and enforcement. Judge Gre?? required 
significant changes to the proposed decree before he would consent 
to enter the settl??ant under the ??ey Act's public interest 
standard, holding that "[i]t does not follow, that [?? Court] 
must ??questioningly accept a [consent] decree as long as it 
somehow, and however?? inade??tely, deals with the antitrust... 
problems implicated in the lawsuit." SHA?? respectfully 
requests that this Court follow Judge Greene's prudent actions and 
send ?? parties back to the negotiating table to formulate an 
appropriate PFJ. This Court should re??e its cone??s on on the PFJ 
until after the pending State case has been litigated.
    C. The PFJ Fails to Address the Core Violations Affirmed by the 
D?? Circuit
    1. The PFJ Does Not Eliminate Microsoft's Binding of its 
M??lleware to its Operating System
    As the CIS indicates, the core manner in which Microsoft 
unlawfully mainta??d its Winc??ws Operating System 
("OS") monopoly was by bundling and tying platform, 
??Idleware to the OS. Microsoft used this strategy to defeat the 
alternative platform threats pos?? by Netse??pe and JAVA. The DC 
Circuit ruled that these actions constituted unlawful ??tintenance 
of mo??poly under Section 2.
    a. Failings of the PFJ It is critical for this Court to 
understand That the business and economics that ??ire the software 
industry demonstrate conclusively that the ubiquity of a development 
platf??t will almost always beat technological superiority. The 
common interest of software der??bers and consumers in adopting the 
most uniform platform is the basis of the Microsoft mon??y. As a 
result, if Microsoft is allowed to continue to bind or bundle its 
middleware offerings ??th the Windows OS, the ubiquity of its 
middleware will be permanent, and active middlew?? comp??tition will 
never emerge. Microsoft will enjoy a perpetual maintenance of 
its??nopoly, codified and reinforced by to the PFJ, and consumers 
will suffer a significant retardi?? of innovation that would have 
otherwise occurred. The negative consequences of this ??ome on 
innovation cannot be overstated. If there is no way to reach 
consumers except throu?? Micro?? platform, and if Microsoft remains 
free to cut off the access of applicatio?? that are



MTC-00030615

    IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA 
UNITED STATES OF AMERICA Plaintiff, v. MICROSOFT CORPORATION, 
Defendant. Civil Action No. 98-1232 (CKK) STATE OF NEW YORK, 
et al., Plaintiffs, v. MICROSOFT CORPORATION, Defendant. Civil 
Action No. 98-1233 (CKK) COMMENTS OF AOL TIME WARNER ON THE 
PROPOSED FINAL JUDGMENT TABLE OF CONTENTS Page INTRODUCTION 1
    I. THE COURT SHOULD USE THE REMEDIAL OBJECTWES ESTABLISHED BY 
THE DC CIRCUIT IN THIS CASE AS THE STANDARD FOR ASSESSING WHETHER 
THE PFJ IS "IN THE PUBLIC INTEREST." 4
    II. AS MICROSOFT STARTS TO IMPLEMENT MOST OF THE DECREE'S 
PROVISIONS, THE COURT SHOULD CONSIDER HOW--IF AT ALL--OEMS 
ARE RESPONDING 9
    A. There Is No Indication That Microsoft's Implementation Of 
Major Aspects Of The PFJ Is Even Beginning To Promote Competition Or 
Helping To Loosen Microsoft's Control Over The Desktop 10
    B. The Provisions Of The PFJ Implemented By Microsoft Since July 
11th Are Not Showing Signs That They Will Work To Restore 
Competition In The Browser Market 14
    III. THE PFJ IS NOT IN THE PUBLIC INTEREST BECAUSE IT DOES NOT 
EVEN ATTEMPT TO HALT MICROSOFT'S MOST INSIDIOUS PRACTICE: ITS 
ILLEGAL BINDING AND BUNDLING OF MIDDLEWARE APPLICATIONS WITH THE 
WINDOWS OS 17

[[Page 29098]]

    A. The Court Of Appeals Explicitly Held That Code 
Commingling--A Form Of Tying Unaddressed By The 
PFJ--Violates Section 2 Of The Sherman Act 19
    B. Microsoft Uses A Variety Of Other Tying Practices To Maintain 
Its Operating System Monopoly; If The Monopoly Is To Be 
"Terminated," Such Contractual Tying Must Be Prohibited 
24
    C. By Allowing Microsoft To Continue To Tie Its Middleware 
Applications To Windows, Microsoft Retains One Of The Most Valuable 
"Fruits" Of Its Illegal Acts 31
    IV. THE PROPOSED FINAL JUDGMENT FURTHER FAILS THE PUBLIC 
INTEREST TEST, BECAUSE IT DOES NOT ACHIEVE EVEN THE LIMITED 
OBJECTWES THAT IT HOLDS OUT AS ITS AIMS 33
    A. The PFJ Allows Microsoft To Continue Engaging In 
Discriminatory And Restrictive Licensing Agreements To Curtail The 
Use Of Rival Middleware Products 34
    B. The PFJ Requires Microsoft To Disclose APIs Only In Certain, 
Narrow Circumstances 39
    C. The PFJ Does Not Ban Many Forms Of Retaliation By Microsoft 
Against OEMs 42
    D. The PFJ Does Nothing To Remedy Microsoft's Illegal Campaign 
To Eliminate Java 45
    E. The PFJ Includes A "Gerrymandered" Definition Of 
Middleware 47
    F. The PFJ Lacks A Meaningful Enforcement Mechanism 50
    V. THE CIRCUMSTANCES OF THIS CASE STRONGLY MILITATE IN FAVOR OF 
GATHERING EVIDENCE AND TESTIMONY--EITHER IN A HEARING, OR 
THROUGH THE USE OF THE RECORD FROM THE REMEDIAL PROCEEDING--TO 
DETERMINE IF THE PFJ MEETS THE PUBLIC INTEREST TEST 53
    A. The Complexity And Significance Of This Case--And The 
Inadequacy Of The CIS--All Militate In Favor Of A Hearing On 
The PFJ 53
    B. The Court Should Conduct A Proceeding--Taking Evidence 
And Hearing Testimony, If Necessary- To Determine How The PFJ's 
Provisions Have Functioned Since Some Were Put In Place In 2001 56
    C. In Making Its "Public Interest" Determination, 
This Court Should Take Into Account The Evidence That Will Be 
Adduced In The Upcoming Remedial Proceeding 58
    CONCLUSION 61
    COMMENTS OF AOL TIME WARNER ON THE PROPOSED FINAL JUDGMENT
    Pursuant to Section 2(b) of the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16, AOL Time Warner respectfully 
submits the following comments on the Proposed Final Judgment 
("PFJ") in the above-referenced matter.
    INTRODUCTION
    The Proposed Final Judgment sets forth a decree that is too 
limited in its objectives and too flawed in its execution to meet 
the Tunney Act's "public interest" test. It allows 
Microsoft to continue to bind and bundle its middleware applications 
with its Windows Operating System (")--even though the 
Court of Appeals found Microsoft's actions in this regard to be 
illegal. And its patchwork of constraints on Microsoft's conduct is 
so loophole-ridden and exception-laden as to render its provisions 
ineffective. As a result, the PFJ is inadequate to promote 
competition and protect consumers, and the Court should refuse to 
find that its entry would be "in the public interest." 
15 U.S.C. 16(e).
    The PFJ comes before the Court in an unprecedented posture for a 
Tunney Act proceeding. This proposed settlement was 
reached--not as the case was being flied, nor as it was being 
tried, nor even as it was being appealed--but rather, after the 
Court of Appeals for the District of Columbia Circuit unanimously 
affirmed a finding of illegal monopoly maintenance by Microsoft. 
Such circumstances surely require a more rigorous application of the 
"public interest" standard than when a case is settled 
before the first interrogatory is even served--the usual 
situation when a Tunney Act review is conducted. Helpfully, a 
readily available and judicially administrable measure of the 
"public interest" is available for use in this special 
circumstance: the four-part test for "a remedies decree" 
established by the DC Circuit in this very litigation. United States 
v. Microsoft, 253 F.3d 34, 103 (DC Cir. 2001). Applying this 
standard, we believe that the Court should find the PFJ to be in the 
"public interest" only if it (1) "unfetter[s] a 
market from anticompetitive conduct"; (2) "terminate[s] 
the illegal monopoly"; (3) "den[ies] to the defendant 
the fruits of its statutory violation"; and (4) 
"ensure[s] that there remain no practices likely to result in 
monopolization in the future." Id. (internal quotations 
omitted). We believe that there are at least three reasons why the 
Court should conclude that the PFJ does not meet this test. First, 
since July 11, 2001 (for the browser) and December 16, 2001 (for 
other middleware), Microsoft has been implementing many of the PFJ's 
remedial provisions. Thus, the Court need not speculate about the 
impact these provisions would have on the industry if they were put 
in place; rather, it can seek submissions and review evidence on 
whether these critical provisions are beginning to work as they .are 
being implemented by Microsoft. We believe that any such inquiry 
will reveal that the original equipment manufacturers 
("OEMs") are not exercising the flexibility that the PFJ 
ostensibly provides them, because the loophole-ridden PFJ gives too 
few rights to the OEMs and does too little to protect the OEMs in 
the exercise of those rights. As a result, there is little reason to 
believe that the PFJ will prove effective in restoring competition, 
terminating Microsoft's monopoly, or stripping Microsoft of the 
fruits of its illegal acts.
    Second, the PFJ fails to prohibit Microsoft's signature 
anticompetitive conduct: the binding of its middleware applications 
to its monopoly operating system, and its bundling of these products 
to further entrench its OS monopoly. The factual questions that 
surround these legal issues are quite complex, but here again, the 
Court has a powerful tool to employ: the extensive factual findings 
entered by the District Court. These factual findings document 
Microsoft's purposeful commingling of middleware application code 
with the Windows OS to harm competition, as well as the contractual 
bundling of those applications with the OS, to force OEMs to 
distribute Microsoft's middleware, and to raise distribution hurdles 
for middleware rivals. Given the PFJ's failure to ban practices that 
the District Court and the Court of Appeals found to be at the 
center of Microsoft's illegal maintenance of its OS monopoly, the 
PFJ does not meet the "public interest" standard.
    Third, even with regard to those limited objectives that the PFJ 
does attempt to achieve--i.e., the creation of "OEM 
flexibility" to promote desktop competition--the proposed 
decree is so ridden with loopholes, exceptions and carve-outs as to 
render it ineffective. These deficiencies are highlighted when the 
PFJ is compared to previous remedial plans considered in this case, 
including Judge Jackson's interim conduct remedies and the mediation 
proposal offered by Judge Richard Posner (which Microsoft apparently 
agreed to even before it had been found liable for antitrust 
violations).
    Finally, we believe the Court will find the remedial proposal of 
the litigating state attorneys general ("Litigating 
States" Remedial Proposal" or 
"LSRP")--and the Court's consideration of that 
proposal--to be useful in its review of the PFJ. Most 
immediately, the LSRP provides a benchmark as to what one group of 
antitrust enforcers believes to be compelled by the "public 
interest" in order to achieve the case's remedial objectives. 
Moreover, the LSRP provides a helpful point of comparison for some 
specific aspects of the PFJ--i.e., a way to illustrate why 
particular PFJ provisions are ineffective, by comparison. And third, 
the Court's consideration of the LSRP will adduce testimony and 
other evidence that should be weighed in determining whether the PFJ 
should be approved. Taken as a whole, a comparison of the PFJ with 
the Litigating States" Remedial Proposal shows why the latter, 
and not the former, faithfully meets the remedial objectives set 
forth by the DC Circuit and serves the "public interest" 
as expressed in the nation's antitrust laws.
    I. THE COURT SHOULD USE THE REMEDIAL OBJECTIVES ESTABLISHED BY 
THE DC CIRCUIT IN THIS CASE AS THE STANDARD FOR ASSESSING WHETHER 
THE PFJ IS "IN THE PUBLIC INTEREST."
    Passed by Congress in 1974, the Antitrust Procedures and 
Penalties Act, commonly known as the "Tunney Act," 
provides that a proposed consent decree may be entered in an 
antitrust case only if the district court determines that such entry 
is "in the public interest." See 15 U.S.C. 16(e). 
Given that the Court will receive numerous submissions on this 
point, we do not provide here a recitation of the Tunney Act's 
provisions, or an extensive analysis of the standard of review under 
the Act. Instead, we focus on just one, overriding 
"procedural" question: How should the Court measure 
"the public interest" in this unique case? For reasons 
we will explain below, we believe that the measure of the 
"public interest" to be applied in reviewing the PFJ can 
be found in the remedial objectives set forth by the DC Circuit in 
its consideration of this litigation. See Microsoft, 253 F.3d at 
103.
    First, while the Tunney Act itself does not define "public 
interest," the case law makes

[[Page 29099]]

clear that the Court must begin its analysis "by defining the 
public interest" in accordance with the basic purpose of the 
antitrust laws, which is to" 'preserv[e] free and 
unfettered competition as the rule of trade."' United 
States v. American Tel. & Tel. Co., 552 F. Supp. 131,149 (D.DC 
1982) (quoting Northern Pacific Ry. Co. v. United States, 356 U.S. 1 
(1958)). As a general rule, a court has discretion to reject a 
proposed consent decree that is ineffective because it fails to 
address or resolve the core competitive problems identified in the 
Department of Justice's complaint. United States v. Microsoft Corp., 
56 F.3d 1448, 1457-62 (DC Cir. 1995). As this Court stated in 
United States v. Thomson Corp., 949 F. Supp. 907, 913 (D.DC 1996), 
the court has a responsibility "to compare the complaint filed 
by the government with the proposed consent decree and determine 
whether the remedies negotiated between the parties and proposed by 
the Justice Department clearly and effectively address the 
anticompetitive harms initially identified." A court should 
"hesitate" in the face of specific objections from 
directly affected third parties before concluding that a proposed 
final judgment is in the public interest. United States v. 
Microsoft, 56 F.3d at 1462. And it "should pay 'special 
attention" to the clarity of the proposed consent decree and 
to the adequacy of its compliance mechanisms in order to assure that 
the decree is sufficiently precise and the compliance mechanisms 
sufficiently effective to enable the court to manage the 
implementation of the consent decree and resolve any subsequent 
disputes." Thomson Corp., 949 F. Supp. at 914 (citing United 
States v. Microsoft, 56 F.3d at 1461-62).
    In the context of this proceeding, tremendous guidance as to the 
content of the public interest test can come from the earlier 
decision of the Court of Appeals in this case. In that decision, the 
DC Circuit wrote:
    [A] remedies decree in an antitrust case must seek to 
"unfetter a market from anticompetitive conduct," 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."
    Microsoft, 253 F.3d at 103 (quoting Ford Motor Co. v. United 
States, 405 U.S. 562, 577 (1972) and United States v. United Shoe 
Mach. Corp., 391 U.S. 244, 250 (1968)). These words, in our view, 
form the essence of the public interest test to be applied by the 
Court in this Tunney Act proceeding.
    First, on its face, this passage speaks of the object of a 
"remedies decree in an antitrust case," without 
differentiating between a decree that is achieved through 
negotiation and one achieved through litigation. Thus, the Court of 
Appeals" ruling would appear to be directly controlling here, 
insofar as it states the measure of adequacy for any remedial 
decree, however achieved. There is no apparent reason why the 
"remedies decree" negotiated by the Department of 
Justice with Microsoft should not have to meet the standard of 
adequacy generally set forth by the Court of Appeals in its 
decision. This is particularly true given that the passage merely 
"defin[es] the public interest in accordance with the 
antitrust laws." Accord American Tel. & Tel. Co., 552 F. 
Supp. at 149.
    How wide a "gap" between a hypothetical litigated 
result and the proposed settlement is permissible in these 
circumstances is a question that need not be answered here because 
the PFJ falls so very short of meeting any reasonable understanding 
of the "public interest," given its failure to address 
many of Microsoft's illegal acts and its loophole-ridden provisions 
in the areas that it does purport to cover.
    [I]t is not necessary that all of the untraveled roads to 
[anticompetitive conduct] be left open and that only the worn one be 
closed. The usual ways to the prohibited goals may be blocked 
against the proven transgressor.
    Additionally, "antitrust violations should be remedied 
'with as little injury as possible to the interest of the 
general public" and to relevant private interests." Id. 
(quoting United States v. American Tobacco Co., 221 U.S. 106, 185 
(1911)).
    Second, the four-part test established by the DC Circuit here 
would give the Court a clear and manageable standard on which to 
evaluate the proposed decree's adequacy. Use of the DC 
Circuit's formulation thus avoids one of the principal bases of 
controversy and difficulty in Tunney Act reviews -i.e., the lack of 
a judicially manageable standard for assessing the public interest 
and the consequent risk that judges will inappropriately use 
standardless judgment to review an exercise of prosecutorial 
discretion. Thus, unlike in other Tunney Act cases, where a court 
lacks an appropriate benchmark on which to measure the purported 
benefits of the settlement (and thus must be careful not to impose 
its judgment for that of the Justice Department), here, there is a 
clear benchmark for the Court to use: the standard set by the Court 
of Appeals with regard to a "remedies decree."
    Moreover, to the extent that insisting that the PFJ meet the 
standard set by the Court of Appeals would result in a more exacting 
review than the review imposed in other Tunney Act proceedings, that 
would be appropriate in this circumstance. For while the 
overwhelming majority of decrees reviewed under the Tunney Act occur 
in a pre-trial context--where the court lacks a judicial 
finding of illegality against which to measure the efficacy of the 
proposed settlement--this proposed settlement was reached after 
an appellate affirmance of liability. Because the public has 
invested its resources and time, and taken the risk to win a 
judgment of liability and defend that judgment on appeal, it has a 
right to expect a more rigorous decree that meets a higher standard 
of review. Under these circumstances, the Court's review under the 
Tunney Act should not be deferential to the Justice Department; 
instead, the Court should apply the Court of Appeals" four-
part test and determine if the PFJ meets that test.
    As explained in more detail below, the PFJ fails to meet the DC 
Circuit's four-part test, because contrary to the claims of the 
Department of Justice, it will neither "provide a prompt, 
certain and effective remedy for consumers," nor 
"restore competitive conditions to the market." (See CIS 
at 2.) Specifically, it does not "unfetter [the] market from 
anticompetitive conduct," because it does not even try to stop 
Microsoft's illegal binding and bundling practices--or 
effectively limit Microsoft's ability to coerce OEM behavior to its 
liking. It does not "terminate the illegal monopoly" 
because it does not effectively promote rival middleware, and 
because its provisions are so laden with loopholes, exceptions and 
carve-outs. It does not "deny to the defendant the fruits of 
its statutory violation," because it allows Microsoft to 
continue to leverage its OS monopoly to gain market share in other 
markets. And it does not "ensure that there remain no 
practices likely to result in monopolization in the future," 
because it leaves Microsoft free to exploit the OS monopoly to gain 
dominance in critical new markets. Failing to address the core 
anticompetitive wrongs that were found at trial and upheld on appeal 
against Microsoft, and failing to meet the four-part remedial test 
established by the DC Circuit, the PFJ is manifestly contrary to the 
public interest and should be rejected.
    II. AS MICROSOFT STARTS TO IMPLEMENT MOST OF THE DECREE'S 
PROVISIONS, THE COURT SHOULD CONSIDER HOW--IF AT ALL OEMS ARE 
RESPONDING.
    As noted above, the question before the Court is whether the PFJ 
is "in the public interest." 15 U.S.C. 16(e). In 
making that determination, the statute indicates that the Court may 
want to consider, inter alia: (1) "the competitive 
impact" of the PFJ, (2) whether it results in the 
"termination of alleged violations," and (3) "the 
impact of [the PFJ] upon the public generally and individuals 
alleging specific injury." Id.
    Fortunately, contrary to most other courts conducting Tunney Act 
reviews, this Court need not struggle with evaluating the 
"competitive impact" of the PFJ in a factual vacuum 
because Microsoft has been, according to its own statements, 
implementing some provisions found in the PFJ since last July, and 
the bulk of its provisions since December. That means the Court need 
not base its "public interest" judgment on abstract 
legal and economic analyses only; instead, the Court's analysis can 
(at least in part) be shaped by a consideration of how Microsoft is 
beginning to implement parts of the PFJ, and how the PFJ's 
provisions are starting to work in practice. 7 We believe that such 
a practical review will demonstrate that the portions of the PFJ in 
question show little prospect--if any- that they will 
"unfetter the market," "terminate the 
monopoly," or "deny" to Microsoft "the 
fruits of its violation."
    A. There Is No Indication That Microsoft's Implementation Of 
Major Aspects Of The PFJ Is Even Beginning To Promote Competition Or 
Helping To Loosen Microsoft's Control Over The Desktop.
    In the joint stipulation filed with the Court on November 6, 
2001, Microsoft stated that it would "begin complying with the 
[PFJ] as [if] it was in full force and effect starting on December 
16, 2001 ." (Stipulation and Revised Proposed Final Judgment 
at 2 (November 6, 2001).) While provisions with specific timetables 
were exempted from this

[[Page 29100]]

pledge--resulting in an excessive delay for some of the PFJ's 
competitive protections many of the PFJ's remedial provisions were 
covered by it. Thus, with regard to many provisions of the PFJ, the 
proposed decree has been "in effect" since mid-December.
    Microsoft's stipulation offers the Court a unique opportunity to 
learn, not just how the PFJ would serve the public interest once 
implemented, but instead, whether the PFJ provisions already in 
effect are showing signs that they are likely to serve the public 
interest. These provisions have now effectively been in place for 43 
days--and by the time of a likely hearing or other proceeding 
to consider this question (presumably, in March or April), will have 
been in effect for three to four months.
    Microsoft may protest that a three- to four-month period in 
which parts of the PFJ will have been applied is inadequate to test 
those remedies. And that is doubtlessly true with regard to some 
measures of the PFJ's effectiveness, such as whether Microsoft's 
share of the OS market has shrunk from near absolute to anything 
less. But there are other measures of the PFJ's effectiveness that 
should be readily discernible even in this relatively short time.
    Among the questions we believe that the court could determine, 
by the time of a heating in March or April, would be:
    .Have the OEMs exercised (or even attempted to 
exercise)--in any way beyond the prevailing industry practice 
prior to December 16th--the flexibilities to remove/replace 
icons, start menu entries, and default settings for Microsoft 
middleware products, that are purportedly provided in Section 
III.C.1 of the PFJ? If not, why not?
    .Are non-Microsoft middleware products gaining new distribution 
via the OEMs as a result of the provisions of Sections III.A. and 
III.C.2 of the PFJ, as implemented? If not, why not?
    .Are non-Microsoft middleware products, to a greater extent than 
before implementation of the PFJ, attaining the benefits of an 
"automatic launch," pursuant to the provisions of 
Section III.C.3 of the PFJ? If not, why not?
    .Is any OEM offering a dual-boot computer, as authorized by 
Sections III.A.2 and III.C.4 of the PFJ? If not, why not?
    .Are there new IAP offerings being made at the conclusion of PC 
boot sequences, pursuant to Section III.C.5 of the PFJ? If not, why 
not?
    . Has any ISV, IHV, IAP, ICP or OEM gained any additional 
Windows licensing tights that it did not have prior to the 
implementation of the PFJ, pursuant to Section III.I of the PFJ? If 
not, why not?
    . Has Microsoft terminated any payments to OEMs that were 
anticompetitively advantaging Microsoft's products, and that are now 
forbidden, pursuant to Sections III.A and III.B of the PFJ? Based on 
our knowledge of industry developments, we believe that the answer 
to each of these questions is "no," with perhaps some 
very rare and isolated exceptions. Thus, despite Microsoft's 
proclaimed implementation of large portions of the PFJ, there is 
scant evidence of OEMs even attempting, let alone succeeding, to 
offer consumers new choices with respect to middleware products. 
Even in a relatively short time frame of a few months, one would 
expect to find numerous OEMs reaching agreements to promote or carry 
multiple non-Microsoft products. But no such evidence exists. No 
doubt, that is why countless industry observers and analysts have 
concluded, after examining the PFJ, that "[t]he changes we 
will see are minute. Microsoft can control its own destiny. It can 
do whatever it wants."
    Presumably, it cannot be in "the public interest" to 
settle a case after years and years of litigation - including a 
finding of liability for the government at trial, affirmed 
unanimously on appeal by the Court of Appeals (See Microsoft, 253 
F.3d at 46)--for a remedial decree that effectuates only 
"minute" changes in the strategy the defendant was using 
to illegally maintain its monopoly. And yet, that is precisely what 
appears to be happening, as the effectiveness--or lack thereof- 
of parts of the PFJ are starting to be observed in application.
    While we certainly agree with the Department of Justice that it 
will only be "over time" that any remedy could 
"help lower the applications barrier to entry," (see CIS 
at 29), that objective will never be achieved if the PFJ does not 
lead OEMs to even begin to "offer rival middleware to 
consumers and ... feature that middleware in ways that increase the 
likelihood that consumers will choose to use it." (Id.) That 
is: the pro-competitive journey of a thousand miles can never be 
completed if- as it appears to be the case--the PFJ does not 
create a market in which OEMs feel free to take that all-important 
first step. To the extent that much of the CIS suggests that the 
goal of the remedy is to create OEM flexibility for its own 
sake--i.e., to make sure that OEMs have the right to choose 
non-Microsoft products, whether or not they exercise that 
right--it misses the mark. The goal of this litigation is not 
to protect OEMs" rights, but rather to protect 
consumers" rights to enjoy a free and competitive market. In 
such a market, OEMs can be important surrogates for consumers, but 
only if they actually offer competitive choices. Likewise, to the 
extent that the other goal of the remedial proceeding is to reduce 
the applications barrier to entry, that objective is only achieved 
to the extent that the OEMs actually distribute and promote non-
Microsoft middleware--it is not advanced by the unexercised 
presence of theoretical OEM choice.
    Thus, the determination of whether the PFJ will be effective in 
promoting its purported ends--i.e., fostering OEMs in making 
those choices and creating opportunities for competition--need 
not be left for some subsequent proceeding or for antitrust scholars 
in future years. It can be ascertained now from the submissions that 
the Court is receiving, or, if those submissions are inadequate, it 
could be resolved by the Court in a proceeding where evidence is 
taken and testimony is heard. See Section V.B, infra. The manner in 
which Microsoft is already implementing portions of the PFJ is among 
the most probative considerations the Court can weigh in determining 
how--it at all--the proposed settlement will promote 
competition in the years to come.
    B. The Provisions Of The PFJ Implemented By Microsoft Since July 
11th Are Not Showing Signs That They Will Work To Restore 
Competition In The Browser Market.
    In addition to the general applicability of the PFJ's 
provisions, several of its provisions have been in place--as 
they relate to the Internet browser--since Microsoft took steps 
to implement them after the Court of Appeals" decision last 
June. As with the more general PFJ provisions discussed above, the 
Court should examine whether these browser-specific remedial 
provisions--which will have been in place for eight months by 
mid-March--have been effective to date. Again, we believe that 
the evidence to date shows that the provisions are showing no sign 
of effectuating change in the market; thus, the PFJ--which 
(with regard to browsers) does little more than codify these 
unilateral Microsoft actions does not meet the "public 
interest" standard.
    On July 11, 2001, in response to the decision of the Court of 
Appeals, Microsoft announced a program of "greater OEM 
flexibility for Windows." See Press Release, Microsoft 
Corporation, Microsoft Announces Greater OEM Flexibility For 
Windows, July 11, 2001. Specifically, Microsoft announced that it 
would amend its OEM license agreements to provide that: PC 
manufacturers will have the option to remove the Start menu entries 
and icons that provide end users with access to the Internet 
Explorer components of the operating system. Microsoft will include 
Internet Explorer in the Add/Remove programs feature in Windows XP. 
PC manufacturers will have the option to remove the Start menu 
entries and icons that provide end users with access to Internet 
Explorer from previous versions of Windows, including Windows 98, 
Windows 2000 and Windows Me ....
    Consumers will be able to use the Add-Remove Programs feature in 
Windows XP to remove end-user access to the Internet Explorer 
components of the operating system .... Id. These provisions mirror 
the browser-related provisions found in Sections III.C.1 and III.H.1 
of the PFJ. Indeed, they comprise almost the entirety of all 
browser-related remedial provisions found in the PFJ.
    Thus, the question of whether the PFJ fulfills the Department of 
Justice's promise of an effective remedy for "restor[ing] the 
competitive threat that middleware products posed prior to 
Microsoft's unlawful undertakings," can easily be 
assessed--at least with regard to the browser threat, which was 
such an extensive part of the Court of Appeals" 
decision--by seeing how effective these unilateral Microsoft 
actions, taken in July of 2001, have been to date. And unlike the 
provisions discussed above, which were put in place only in 
December, it cannot be argued that these browser-related provisions 
have not yet been tested in the marketplace; rather, they were in 
place for the launch of Windows XP, which Bill Gates recently dubbed 
the "best-selling release of Windows ever, and one that is 
creating great opportunities for PC manufacturers and our other 
partners in the industry." In the simplest terms, as we note 
above, these "remedies" will have been in place for 
eight months by mid-March of 2002.

[[Page 29101]]

    We believe that the initial evidence shows that these provisions 
are completely ineffective. We are unaware of a single OEM that has 
used the "flexibility" provided to it by Microsoft to 
remove Internet Explorer from the Start menu, or from any of its 
multiple promotional placements on the PC desktop. Nor are we aware 
of any OEM that has elected to use any competitor to Internet 
Explorer as a default browser, or to promote alternative browsers to 
Internet Explorer in any way. Moreover, there is no 
indication--more than six months after Microsoft's July 11th 
announcement and four months after the first shipments of Windows 
XP--that Internet Explorer's commanding market share in the 
browser market has fallen in any measurable way. If the provisions 
of the PFJ are strong enough to "restore" competition to 
the marketplace, which DOJ claims they are (see CIS at 3 
("[t]he requirements and prohibitions [of the PFJ] will ... 
restore the competitive threat that middleware products posed prior 
to Microsoft's unlawful undertakings")), one would expect to 
see that the market shares of Microsoft's browser competitors have 
increased during this time frame. There is simply no evidence of 
that. Not only is there a dearth of evidence suggesting that the 
PFJ's provisions are going to restore competition to the level 
enjoyed by Microsoft's rivals prior to its illegal conduct, but 
there is no evidence to suggest they are affecting the market at 
all.
    A remedial provision that has no market impact cannot be said to 
be in the "public interest," especially in a case like 
this where the damage from Microsoft's illegal campaign to eliminate 
rival middleware has already been done. In other words, because 
Microsoft has illegally driven down the market shares of its rival 
middleware developers, restoring competition to the marketplace 
requires much more than simply eliminating the illegal practices: 
only if the status quo ante is restored would OEM freedom of choice 
be meaningful. And yet, the evidence suggests that the PFJ 
provisions that relate to the browser will have no market impact, 
given the practical experience with highly similar proposals put in 
place by Microsoft last July. This is important evidence for the 
Court to consider when reviewing the PFJ.
    III. THE PFJ IS NOT IN THE PUBLIC INTEREST BECAUSE IT DOES NOT 
EVEN ATTEMPT TO HALT MICROSOFT'S MOST INSIDIOUS PRACTICE: ITS 
ILLEGAL BINDING AND BUNDLING OF MIDDLEWARE APPLICATIONS WITH THE 
WINDOWS OS.
    In this submission--and doubtlessly in the many others the 
Court will receive--we identify a number of specific 
deficiencies in the PFJ. See Section IV, infra and Attachment B. But 
one omission stands out above all others: the failure of the PFJ to 
limit Microsoft's ongoing and insidious efforts to maintain its 
monopoly--and leverage and entrench that monopoly--by 
tying its middleware applications to the Windows OS. This 
conduct--found illegal by the District Court and upheld as 
illegal by the Court of Appeals (see Microsoft, 253 F.3d at 
67)--is left unchecked by the PFJ. By contrast, a remedy to 
address this practice appeared in the interim conduct remedies 
offered by the District Court, as well as the remedial proposal 
designed by Judge Richard Posner ("Posner Proposal"). 
The practice is also addressed extensively in the litigating 
states" proposed remedy. By failing to remedy one of 
Microsoft's "signature" anticompetitive acts, the 
PFJ--even before reaching its many other defects--falls 
far short of the four-part remedial standard set by the Court of 
Appeals, and by the same token, fails to meet the public interest 
test established by the Tunney Act.
    In explaining why it did not seek to limit Microsoft's tying of 
middleware applications to Windows in the PFJ, the Justice 
Department has suggested that there was no basis for such a remedy 
because of the Court of Appeals" reversal of the District 
Court's finding of liability under Section 1 of the Sherman Act, and 
the appellate court's direction that the remedy here should 
"focus[] on the specific practices that the court had ruled 
unlawful." This analysis fundamentally misapprehends the 
implications of the Court of Appeals" ruling: contrary to 
DOJ's view, the Court of Appeals did not suggest that an anti-tying 
remedy was inappropriate or unnecessary here; indeed, much of the 
Court of Appeals" decision is a strong declaration of how 
Microsoft's various forms of tying violated Section 2 of the Sherman 
Act. See, e.g., Microsoft 253 F.3d at 65-67. A remedy that 
truly "focused on the specific practices that the court had 
ruled unlawful" would have to address the tying practices that 
the Court of Appeals "ruled unlawful"; the PFJ does not.
    Because Microsoft's various forms of middleware applications 
tying are critical tactics that it uses to maintain its illegal 
monopoly, they must be ended if the remedy is to "terminate 
the monopoly." (See Microsoft's Tying Strategies To Maintain 
Monopoly Power In Its Operating System ("Mathewson & 
Winter Report"), attached hereto as Attachment A.) 
Furthermore, the opportunity to gain market share as a result of 
such tying is one of the principal fruits of Microsoft's illegality, 
and should therefore be denied to it. As a result, the failure of 
the PFJ to address Microsoft's tying is a fundamental flaw that 
alone merits rejection of the proposed decree.
    Importantly, we note that the legal and economic arguments 
presented below are reinforced by the empirical observations set 
forth in Section II, supra. That is, the legal and economic analysis 
below which suggests that a remedy without a ban on tying will be 
ineffective in theory, is supported by the fact that such a 
remedy--imposed in part since July, and more substantially 
since December--is proving to be ineffective in practice.
    A. The Court Of Appeals Explicitly Held That Code 
Commingling--A Form Of Tying Unaddressed By The 
PFJ--Violates Section 2 Of The Sherman Act.
    In affirming the District Court's findings of fact concerning 
Microsoft's practice of commingling the code for its own middleware 
products with the code for the Windows OS, the Court of Appeals made 
clear that such commingling was an unlawful act in violation of 
Section 2 of the Sherman Act. See Microsoft, 253 F.3d at 
65-67. Specifically, the Court of Appeals concluded that 
Microsoft's "commingling has an anticompetitive effect ... 
[and] constitute[s] exclusionary conduct, in violation of 
2." Microsoft, 253 F.3d at 6667 (emphasis added). 
According to the appeals court, Microsoft's "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." Id. at 66. Moreover, the Court 
of Appeals affirmed the District Court's finding that such 
commingling was done, deliberately and intentionally, to advance 
Microsoft's anticompetitive aims. Id.
    Notwithstanding these clear declarations by the Court of 
Appeals, this practice is not prohibited by the PFJ. Such a 
prohibition was omitted despite the finding that it is 
illegal--and despite the Justice Department's recognition that 
the first remedial objective in a decree should be to "end the 
unlawful conduct." (See CIS at 24.) Thus, Microsoft remains 
free to bind its middleware applications, including the browser, to 
its Windows OS --making it impossible for an OEM, or a 
consumer, to remove that application from a PC without doing damage 
to that PC's operating system.
    Microsoft's suggestion that competition is adequately served by 
allowing OEMs to pre-install rival middleware and to remove end-user 
access to Microsoft middleware--instead of banning commingling- 
is incorrect for several reasons. First, as the District Court found 
and the Court of Appeals affirmed, commingling of code strongly 
deters--and may even prevent--OEMs and consumers from 
using middleware products offered by Microsoft's competitors 
(because the Microsoft product is inextricably intertwined with the 
OS and is thus both easier to use and harder to remove). Why would 
an OEM include a competing middleware product that will cost money 
to install and use up valuable space on the hard drive when 
Microsoft's product is already there and has been so tightly knit 
with the OS that it cannot be removed without doing damage to the 
OS? As the Court of Appeals noted (citing the District Court's 
holding), Microsoft's commingling has both prevented OEMs from pre-
installing other browsers and deterred consumers from using them. In 
particular, having the IE software code as an irremovable part of 
Windows meant that pre-installing a second browser would 
"increase an OEM's product testing costs," because an 
OEM must test and train its support staff to answer calls related to 
every software product preinstalled on the machine; moreover, pre-
installing a browser in addition to IE would to many OEMs be 
"a questionable use of the scarce and valuable space on a PC's 
hard drive."
    Microsoft, 253 F.3d at 64 (citations omitted).
    As long as commingling is permitted, OEMs and other third party 
licensees will have no incentive to take advantage of the limited 
freedom provided by the PFJ and will continue to use Microsoft's 
middleware products at the expense of its competitors. As a result, 
commingling reduces Microsoft's

[[Page 29102]]

distribution costs for its middleware applications to zero. It also 
raises the distribution costs of rival middleware application makers 
-who not only must pay for something that Microsoft gets for free 
(i.e., distribution via OEMs), but must also pay an added bounty to 
persuade OEMs to install their applications as the second such 
application on a PC. This, of course, assumes that such an added 
payment strategy for such middleware would even be plausible (which 
is highly doubtful, except in rare cases) and would not be defeated 
by Microsoft, a rival with roughly $39 billion in cash available to 
deter the prospect of being outbid by other middleware developers 
for PC access.
    The other way in which code commingling illegally enhances the 
position of Microsoft middleware is by encouraging applications 
programmers to write their programs to Microsoft's products. 
(Mathewson & Winter Report at 14-16.) Third 
party developers decide how to write their applications based upon 
what APIs they believe will be available on the broadest number of 
computers and will enable their products to function most smoothly. 
See Microsoft, 253 F.3d at 55. Because the PFJ will allow Microsoft 
to continue commingling its middleware and OS code, it essentially 
guarantees that Microsoft's application programming interfaces 
("APIs") are universally available in all Windows 
environments (in other words, on virtually all PCs)--and that 
software developers who write their applications to Microsoft's APIs 
can write directly to the OS. This is true regardless of whether or 
not end-user access to the middleware product is visible. As a 
result, third party software developers (whose business interests 
are to develop successful applications, not to challenge Microsoft's 
monopoly) will almost always write their programs to Microsoft 
middleware.
    Thus, in the end, as both the Court of Appeals and the District 
Court concluded here, commingling itself deters OEMs from installing 
rival middleware. See Microsoft, 253 F.3d at 66; Findings of Fact, 
84 F. Supp. 2d at 49-50, 159. No doubt this is why every 
other remedial plan contemplated in this litigation--from the 
Posner Proposal, to Judge Jackson's interim remedial order, to the 
proposal set forth by the Litigating States --has prominently 
included a ban on code commingling (or, at the very least, a 
requirement that Microsoft make available a non-commingled version 
of Windows). Yet, despite that, despite the Court of Appeals" 
holding, and despite the District Court's factual findings, the PFJ 
fails to prohibit or limit this practice in any manner whatsoever.
    Microsoft has already demonstrated its willingness and ability 
to fend off threats from competing middleware products by illegally 
commingling code with the Windows OS. As currently drafted, the PFJ 
gives the company a green light to continue this anticompetitive and 
illegal practice. The public interest requires that Microsoft's 
practice of tying its middleware and operating system, via code 
commingling, be prohibited.
    B. Microsoft Uses A Variety Of Other Tying Practices To Maintain 
Its Operating System Monopoly; If The Monopoly Is To Be 
"Terminated," Such Contractual Tying Must Be Prohibited.
    The Justice Department's insistence that the remedy in this case 
should not include a general tying prohibition because the 
government abandoned its Section 1 tying claim is logically flawed. 
Contrary to DOJ's assertions, as discussed at length above, the 
ultimate remedy in this case must "terminate" 
Microsoft's illegally maintained monopoly- and that can only happen 
if the remedy addresses those behaviors that anticompetitively 
maintain the Windows monopoly. The bundling, or contractual tying, 
of Microsoft's middleware products to its Windows OS is clearly such 
an anticompetitive behavior: it is the signature tactic used by 
Microsoft to maintain its monopoly and fend off competitive 
challenges, and it has been expressly found to be illegal by the 
Court of Appeals. See, e.g., Microsoft, 253 F.3d at 61 (the 
restriction in Microsoft's licensing agreements that prevents OEMs 
from removing or uninstalling IE "protects Microsoft's 
monopoly from the competition that middleware might otherwise 
present. Therefore, we conclude that the license restriction at 
issue is anticompetitive.") (emphasis added); see also 
Mathewson & Winter Report at 13-33. Put 
another way, various tying practices were found by the Court of 
Appeals to illegally reinforce Microsoft's OS monopoly and thus must 
be banned in order to realize the remedial mandate of the Court of 
Appeals and the public interest objectives of the Tunney Act.
    The anticompetitive nature of tying is apparent on its face: it 
reduces competition and consumer choice, making it less likely for 
Windows consumers to acquire and use non-Microsoft middleware 
products for reasons unrelated to the merits of those products. See 
Microsoft, 253 F.3d at 60 (upholding District Court's conclusion 
that contractually restricting OEMs" ability to remove IE 
"prevented many OEMs from distributing browsers other than 
IE"); see also Mathewson & Winter Report at 23. 
Microsoft only makes Windows available for license to OEMs in a 
bundle that includes a number of its middleware applications (e.g., 
Internet Explorer, Windows Media Player, Windows Messenger, MSN). 
Microsoft also contractually prohibits OEMs from removing its 
applications from the bundled offering. As explained in the attached 
economic report from Professors Frank Mathewson and Ralph Winter, 
such tying is anticompetitive and should fall under the purview of 
these remedy proceedings for four principal reasons: (1) it 
reinforces Microsoft's monopoly by increasing the applications 
barrier to entry against OS competitors; (2) it reinforces 
Microsoft's monopoly by deterring direct challenges to the OS itself 
as the platform of choice for software developers; (3) it weakens 
the greatest current competitor to Windows--prior versions of 
Windows; and (4) Microsoft's more recent practice of tying the 
Windows Media Player to the OS creates a new variant of the 
applications barrier to entry problem for potential OS rivals: a 
content-encoding barrier to entry. (See Mathewson & Winter 
Report, passim.)
    First, tying anticompetitively strengthens Microsoft's OS 
monopoly by reinforcing the applications barrier to entry against OS 
competitors. (Id. at 14-16.) The dominance of the 
Windows standard in a wide range of applications, including a few 
particularly important applications, hampers entry into the 
operating system market because an entrant has to offer both a new 
operating system and a full set of applications, or hope that 
applications will quickly develop once the new operating system 
becomes available. See Microsoft, 253 F.3d at 55 (applications 
barrier to entry stems, in part, from the fact that "most 
developers prefer to write for operating systems that already have a 
substantial consumer base"). This is referred to as the 
applications barrier to entry, and the District Court found that it 
served to protect Microsoft against an OS challenge from IBM in the 
1990s. Id. (upholding District Court's finding that "IBM's 
difficulty in attracting a larger number of software developers to 
write for its platform seriously impeded OS/2's success").
    By engaging in tying to gain dominance in key applications 
markets, Microsoft can turn the already-daunting applications 
barrier to entry into a virtually insurmountable shield. As the 
Court of Appeals explained, "Microsoft's efforts to gain 
market share in one market (browsers) served to meet the threat to 
Microsoft's monopoly in another market (operating systems) by 
keeping rival browsers from gaining the critical mass of users 
necessary to attract developer attention away from Windows as the 
platform for software development." Microsoft, 253 F.3d at 60. 
If Microsoft controls the key applications, it can unilaterally 
decide not to make those applications available for even the most-
promising rival operating systems. Microsoft's tying thus 
anticompetitively advantages its position in the middleware 
applications market and sustains its OS monopoly as well. (See 
Mathewson & Winter Report at 66.)
    Consider, for example, Microsoft Office. At one point, companies 
such as Corel and Lotus provided the most popular versions of these 
applications. At that time, to compete with Microsoft's Windows, 
rival operating systems needed to persuade Corel and Lotus to port 
their applications to those rival systems. Now that Microsoft has 
successfully leveraged Windows to obtain dominance in the Office 
suite of applications, however, rival OS providers would have to 
persuade Microsoft to port Office to rival systems.
    If Microsoft can gain dominance with key middleware applications 
such as Office, MSN Messenger, and Windows Media Player, it can 
ensure that rival operating systems cannot meet customers" 
demands for the most popular applications. That is, when Microsoft's 
browser, Microsoft's media player, and Microsoft's instant messenger 
are dominant in those applications markets, Microsoft may choose not 
to write its applications to interoperate with a potential rival 
OS--making it much more difficult for nascent operating systems 
to compete with Windows. Thus, Microsoft's tying, over time, takes 
today's very high "applications barrier to entry," and 
raises it immeasurably higher. (See Mathewson & Winter Report at 
66.)

[[Page 29103]]

    Second, tying reinforces Microsoft's monopoly by deterring 
direct challenges to the OS itself as the platform of choice for 
software developers. (Id. at 17-19.) A clear 
incentive for Microsoft to tie its Internet Explorer browser with 
Windows was the threat that Netscape--on its own, or combined 
with Java software--would eliminate Microsoft's network 
advantages in the operating system by providing middleware that 
would offer a competing platform for software developers. As the 
District Court and Court of Appeals found, Netscape and Java were 
particular threats to Microsoft's dominance in operating systems 
because they potentially represented a platform/programming 
environment in which software applications could be developed 
without regard to the underlying operating system. See Microsoft, 
253 F.3d at 74. With middleware, the success of a new operating 
system no longer depended on the development of new code by every 
application developer. (See Mathewson & Winter Report at 
19.)
    If rivals develop valuable, widely distributed middleware, 
software vendors could very well begin to write most of their 
applications directly to that middleware, and the applications 
barrier to entry would disappear. By using anticompetitive tying to 
dominate each promising field of middleware, Microsoft ensures that 
software developers face a unified field of proprietary Microsoft OS 
and middleware interfaces. (Id.) Thus, Microsoft's tying practices 
serve, in this way too, to reinforce and entrench its illegal OS 
monopoly.
    Third, tying weakens the greatest current competitor to 
Windows--prior versions of Windows. (Id. at 
27-30.) Existing versions of Windows provide 
competitive constraints on Microsoft for a simple reason: if new 
versions of Windows are insufficiently innovative or too expensive, 
consumers will choose to retain their older versions of the product. 
Through tying, however, Microsoft weakens this source of competition 
in two ways. First, new versions of Windows are marketed as much for 
new applications as for new OS features. Windows XP, for example, is 
being marketed in part for its inclusion of new applications, such 
as Windows Media Player 8.0--not just based on innovations and 
improvements to the OS itself. Second, middleware applications such 
as Internet Explorer, Windows Media Player (with the attendant 
Microsoft Digital Rights Management), and MSN allow Microsoft to 
track consumer usage. Microsoft's binding of these products to 
Windows thus creates a total product that lends itself to usage and 
leasing fees. By gradually reducing the price of Windows and 
increasing the usage fees on its tied applications, Microsoft can 
shift to a usage or leasing revenue model, rather than a revenue 
model based on sales. This eliminates the competitive threat from 
previous versions of Windows (in addition to providing Microsoft 
with the fruits of its illegal behavior, as discussed in Section 
III.C, below). (See id. at 28.)
    One might argue that the durable-goods monopoly problem is 
eliminated by Microsoft's refusal to allow OEMs to install (without 
penalty) old versions of Windows. As explained in the attached 
Mathewson & Winter Report, this is incorrect for two reasons: 
"(i) increases in the price of the new version of Windows will 
reduce overall demand for new PCs, as users invoke the option to 
keep existing PCs with the old version, and (ii) there is a retail 
market for new versions of Windows software for installation on 
existing PCs. Both (i) and (ii) provide channels through which the 
existing stock of Windows software provides some competition for a 
new version of Windows (i.e., it increases the elasticity of demand 
for the new version). If the price of a new version is increased, 
the demand for the new version is reduced because fewer consumers 
will purchase new PCs as the price increase for Windows raises the 
price of the overall package of the PC and the (mandated by 
Microsoft) new version of Windows, and because some consumers who 
would have purchased Windows to install on their old PCs will now 
refuse to do so." (See Mathewson & Winter Report at 12 n. 
10.)
    Fourth, in addition to these three general ways in which 
Microsoft's contractual tying reinforces the OS monopoly, 
Microsoft's more recent tying of its media player to the OS creates 
yet another special and highly significant reinforcement of the 
Windows monopoly. (See Mathewson & Winter Report at 36.) 
This problem results from the close connection between the media 
player and Microsoft's proprietary media encoding format, Windows 
Media Audio ("WMA"). Because Microsoft does not license 
the WMA format to some rival media players--including, most 
notably, the only other media player with substantial market 
presence, Real Player--Microsoft's media player is the only 
major player that can play content encoded in Microsoft's format. As 
Microsoft's format becomes more and more widespread--it is 
currently growing in use at a rate ten times that of its 
rivals--more and more content will become viewable and playable 
only via Microsoft's media player, which is only distributed via 
Microsoft's OS.
    In such a market, then, a rival OS would have to overcome not 
only today's applications barrier to entry to compete with 
Windows--that is to say, it would have to persuade application 
writers to write their applications to interoperate with their 
OS--it would also have to overcome a new, even more daunting 
"content encoding barrier to entry"--i.e., it would 
have to persuade owners of thousands (or perhaps even millions) of 
pieces of multi-media content to re-encode their content in formats 
that the media player used by the rival OS could read. (Id. at 
37-38.) This barrier to entry applies not only to 
rival PC operating systems, but also to evolving operating systems 
for handheld and mobile communications devices, since consumers will 
want to access the best streaming content using those devices. Thus, 
the currently daunting applications barrier to entry is raised many 
times higher by virtue of the tying of the Windows Media Player (and 
its related proprietary formats) to the Windows OS.
    All four of these anticompetitive effects are mutually 
reinforcing, because of the network effects operating between the 
applications sector and the operating system market. (Id. at 
31-33.) Achieving dominance in applications 
(through tying) strengthens the dominance of the OS, because buyers 
in the OS market are more assured of available applications. The 
greater dominance in the OS market in turn feeds back into greater 
dominance in applications, since the tying strategies take the form 
of imposing an artificial advantage relative to applications of the 
dominant OS supplier. The greater Microsoft's share across all 
middleware applications markets, the greater the applications 
barrier to entry.
    Thus, a remedy that does not forbid Microsoft's anticompetitive 
tying leaves in place one of Microsoft's most powerful tools to 
maintain its OS dominance--and as a result, does not 
"unfetter" the market or "terminate" the 
illegal monopoly. For this reason, the PFJ's failure to include a 
ban on bundling is not in the public interest.
    C. By Allowing Microsoft To Continue To Tie Its Middleware 
Applications To Windows, Microsoft Retains One Of The Most Valuable 
"Fruits" Of Its Illegal Acts.
    The Court of Appeals made clear that one necessary element of 
any remedy in this case was to "deny to [Microsoft] the fruits 
of its violation." See Microsoft, 253 F.3d at 103 (quoting 
United Shoe Mach. Corp., 391 U.S. at 250). This is in accord with 
the prevailing doctrine in this area. See Grinnell Corp., 384 U.S. 
at 577; 2 P. Areeda & H. Hovenkamp, Antitrust Laws 325(c) 
(2d ed. 2000).
    The Court of Appeals found that Microsoft illegally maintained 
its OS monopoly by engaging in anticompetitive practices. See 
Microsoft, 253 F.3d at 51, 66. Here, because of the nature of its 
monopoly, one of the most lucrative fruits of Microsoft's illegal 
behavior is the ability to bundle its other software products with 
the OS and reap gains in those markets as well. In this way, the 
PFJ's failure to ban such tying clearly renders it deficient, 
because without such a prohibition it will fail to prevent future 
violations of Section 2, as discussed above--and also fail to 
prevent Microsoft from reaping the benefits of the OS monopoly that 
it illegally maintained. Without such a prohibition, Microsoft will 
be able to continue profiting from its anticompetitive behavior and 
will have evaded any real punishment for breaking the law.
    For these reasons, as with the ban on code commingling discussed 
above, every other remedial proposal considered in this litigation 
included a ban on Microsoft's contractual tying via bundling. A 
formulation of such a ban was found in Judge Jackson's interim 
conduct remedies, which--in addition to the ban on binding 
middleware products to the OS--would also have prohibited 
Microsoft from "conditioning the granting of a Windows 
Operating System Product license ... on an OEM or other licensee 
agreeing to license, promote, or distribute any other Microsoft 
software product that Microsoft distributes separately from the 
Windows Operating System Product in the retail channel or through 
Internet access providers, Internet content providers, ISVs or 
OEMs." United States v. Microsoft, 97 F. Supp. 2d 59, 68 (D.DC 
2000).
    Judge Posner's proposal would have prohibited tying any 
middleware product

[[Page 29104]]

with the OS unless Microsoft offered a version of the OS without the 
middleware application, and did so at a reduced price. See Posner 
Proposal 3(9). The litigating states also have proposed a very 
similar remedial approach. (See LSRP at 4-6.) Thus, it is only 
the PFJ, among the various proposals, that has failed to take this 
essential step to terminate Microsoft's OS monopoly, and deny 
Microsoft the fruit of its illegal acts. A remedy without such a 
provision cannot be in the public interest.
    IV. THE PROPOSED FINAL JUDGMENT FURTHER FAILS THE PUBLIC 
INTEREST TEST, BECAUSE IT DOES NOT ACHIEVE EVEN THE LIMITED 
OBJECTIVES THAT IT HOLDS OUT AS ITS AIMS.
    As demonstrated above, the PFJ fails to address Microsoft's 
anticompetitive tying of middleware applications to the Windows OS, 
and consequently fails to fulfill the remedial mandate of the Court 
of Appeals. Yet, even for those anticompetitive acts that the PFJ 
does attempt to address, it does not provide an adequate remedy for 
Microsoft's illegal conduct. Indeed, the PFJ is so replete with 
carefully crafted carve-outs and exceptions that many of its 
provisions, though well intentioned, are rendered meaningless. The 
result is that the PFJ will do little, if anything, either to 
terminate Microsoft's monopoly or constrain its ability to fend off 
middleware threats in the future. And, as we argue above, the 
preliminary experience with these provisions--since the onset 
of their implementation by Microsoft provides little reason to 
believe that the PFJ will be effective in practice. See Section II, 
supra.
    While any conduct remedy will, of course, have limitations and 
the potential for evasion, none of the major defects in the PFJ are 
inherent in the nature of this sort of remedy. The Litigating 
States" Remedial Proposal provides a useful contrast on this 
point. Unlike the PFJ, the LSRP does not leave certain of 
Microsoft's anticompetitive acts unaddressed or leave Microsoft with 
the ability to perpetuate its operating system monopoly by illegally 
eliminating competitive threats from middleware developers. The 
Litigating States" Remedial Proposal prevents Microsoft from 
continuing its anticompetitive practices, is designed to restore the 
competitive balance in the marketplace, and seeks to ensure that 
competitive threats may emerge in the future unhindered by 
Microsoft's anticompetitive conduct. As such, it fully comports with 
the Court of Appeals" decision and provides this Court with a 
clear roadmap of what the public interest requires in this case.
    To avoid undue length or repetition, we do not here provide a 
comprehensive list of all the numerous inconsistencies, loopholes, 
and shortcomings of the PFJ; we have included, in Attachment B, a 
more complete listing for the Court's benefit. (See A Detailed 
Critique of the Proposed Final Judgment in U.S. v. Microsoft, 
Attachment B.) In this Section, instead, we focus on six critical 
deficiencies in remedies that (unlike tying) are purportedly 
addressed in the PFJ: (1) the PFJ's failure to prevent Microsoft's 
discriminatory licensing practices; (2) its limited and slow-moving 
API disclosure provisions; (3) its inadequate protections for OEMs 
from retaliation; (4) its failure to promote distribution of Java; 
(5) its "gerrymandered"finition of middleware; and (6) 
its complete lack of an effective enforcement mechanism. Where 
helpful, we contrast the relevant provision in the litigating 
states" proposal for comparison's sake. By comparing the two 
proposals on a few central issues, it should be clear why the LSRP, 
and not the PFJ, addresses Microsoft illegal conduct in manner that 
both comports with the Court of Appeals" decision and serves 
the "public interest" under prevailing antitrust law.
    A. The PFJ Allows Microsoft To Continue Engaging In 
Discriminatory. And Restrictive Licensing Agreements To Curtail The 
Use Of Rival Middleware Products.
    One of the ways in which the District Court found, and the Court 
of Appeals upheld, that Microsoft illegally protects its operating 
system monopoly from rival middleware is through discriminatory and 
restrictive licensing provisions. Specifically, the Court of Appeals 
found that Microsoft uses its licenses not only to reward OEMs that 
utilize and promote its products (and to discriminate against those 
OEMs that wish to promote non-Microsoft products), but also to 
restrict the manner in which OEMs can distribute rivals" 
products. See Microsoft, 253 F.3d at 61-67.
    Despite these findings, the PFJ permits Microsoft to continue to 
employ discriminatory and restrictive licensing agreements to 
curtail the use of its competitors" products. As currently 
structured, the PFJ allows Microsoft to continue its use of 
discriminatory and restrictive licensing provisions to fend off 
nascent threats from middleware competitors in several ways. First, 
the PFJ explicitly allows Microsoft to provide market development 
allowances to favored OEMs; it likewise allows Microsoft to enter 
into "joint ventures" with OEMs, that, in practice, are 
little more than shells for arrangements by Microsoft to shower 
financial rewards on OEMs that are willing to refuse to deal with 
Microsoft's competitors. Given the intense competition and low 
margins in the OEM industry, these rewards would create a decisive 
competitive disadvantage for "disfavored" OEMs, forcing 
them to accede to Microsoft's restrictive terms.
    The PFJ's mechanisms for enabling these anticompetitive tactics 
are surprisingly explicit. Under Section III.B.3 of the PFJ, 
Microsoft is allowed to pay OEMs "market development 
allowances" to promote Windows products. Thus, OEMs that 
promote Microsoft products apparently can receive de facto cash 
rebates on their Windows shipments, while OEMs that deal with 
Microsoft's rivals will pay full list price. This preferential 
behavior in the browser market was found illegal by both the 
District Court and the Court of Appeals. See Microsoft, 253 F.3d at 
60-61. Microsoft should be allowed to engage in legitimate 
pricing decisions, but those decisions should be limited to volume-
based discounts published in its price lists.
    Second, under Section III.G.2 of the PFJ, Microsoft may use 
"joint ventures" to escape any restrictions the proposed 
settlement would place on its licensing practices. For example, 
Microsoft may join an OEM in a joint venture for any "new 
product, technology or service" or improvement to any existing 
"product, technology or service," provided that the OEM 
contributes significant developer "or other resources." 
(See PFJ at Section III.G.2.) In such an arrangement, Microsoft can 
seek, and obtain, a pledge that its partner be "prohibit[ed] 
... from competing with the object of the joint venture 
. . . for a reasonable period of time." (Id. at 
III.G.) Thus, Microsoft could enter into a "joint 
development" project for the "new product" of 
"Windows X for Preferred OEM Y." The OEM's contribution 
could be entirely in marketing and distribution. Yet, under the 
language of the PFJ, it appears that Microsoft would have the 
ability to contractually prohibit OEMs in such joint ventures from 
offering products or services that compete with Microsoft. Given 
Microsoft's history of abusive and coercive behavior toward OEMs, it 
should not be allowed to enter into joint ventures with OEMs that 
result in exclusive agreements. Otherwise, in no time at all, 
Microsoft will use the opportunity to squelch competition.
    Third, the PFJ purports to provide OEMs with the freedom and 
flexibility to configure the computers they sell in a way that does 
not discriminate against non-Microsoft products. Under Section 
III.C, the PFJ ostensibly prohibits Microsoft from entering into an 
agreement that would - among other things--restrict an OEM's 
ability to remove or install desktop icons, folders and Start menus, 
and modify the initial boot sequence for non-Microsoft middleware. 
However, the PFJ contains carve-out provisions that may render these 
prohibitions effectively meaningless. Under the express terms of 
Section III.C.1 of the PFJ, Microsoft may retain control of desktop 
configuration by being able to prohibit OEMs from installing or 
displaying icons or other shortcuts to a non-Microsoft product or 
service, if Microsoft does not provide the same product or service. 
Thus, for example, if Microsoft does not include a media player 
shortcut inside its "My Music" folder, it can forbid an 
OEM from doing the same. This turns innovation--and the premise 
that OEMs be permitted to differentiate their products--on its 
head: under the PFJ, rivals can "compete" with 
Microsoft, but they are never allowed a chance to bring a product to 
market first, to offer a functionality before Microsoft does, or to 
benefit from their innovations before Microsoft determines that it 
is ready to meet (and if history is a guide, extinguish) these 
competitive challenges.
    Additionally, under the PFJ, Microsoft can control the extent to 
which non-Microsoft middleware is promoted on the desktop by virtue 
of a limitation that OEMs may promote such software at the 
conclusion of a boot sequence or an Internet hook-up only if they 
display no user interface or a user interface that is "of 
similar size and shape to the user interface provided by the 
corresponding Microsoft middleware." (See PFJ at III.C.3.) And 
OEMs are allowed to offer Internet Access Provider 
("IAP") promotions at the end of a boot sequence, but 
only for their own IAP offerings (whatever that ambiguous

[[Page 29105]]

limitation means). (See id. at III.C.5.) Thus, under the PFJ, 
Microsoft maintains the ability to set the parameters for 
competition and user interface. In order to promote competition from 
rival middleware, Microsoft must be prohibited from entering into 
restrictive and discriminatory contractual agreements with its 
licensees. Although remedial proposals could have been crafted to 
address these anticompetitive practices, the PFJ falls short of this 
mark.
    By contrast, the Litigating States" Remedial Proposal 
would bring Microsoft's unlawful behavior to an end and thus provide 
competing middleware the opportunity to receive effective 
distribution through the important OEM channel. Under the LSRP, 
Microsoft would be required, at a minimum, to offer uniform and non-
discriminatory license terms to OEMs and other third-party 
licensees. The LSRP would also require Microsoft to permit its 
licensees to customize Windows to include whatever Microsoft 
middleware or competing middleware the licensee wishes to sell to 
consumers. (See LSRP at 7-9.)
    In addition, the LSRP specifically prohibits Microsoft from 
employing market development allowances, including special discounts 
based on joint development projects. It also gives OEMs and other 
third-party licensees the flexibility to feature non-Microsoft 
products in ways that increase the likelihood that consumers will 
use them, without providing broad exceptions that enable Microsoft 
to avoid its obligations. Thus, it is the LSRP--and not the 
PFJ--that meets the Tunney Act's "public interest" 
standard.
    B. The PFJ Requires Microsoft To Disclose APIs Only In Certain, 
Narrow Circumstances.
    Another key element of the government's case against Microsoft 
was the company's withholding of the operating system's API 
information from rivals, so as to illegally degrade the performance 
of rival applications. In any market where Microsoft is allowed to 
withhold APIs, rival software will perform imperfectly in the 
Windows environment, and Microsoft will illegally gain dominance. 
Accordingly, in order to promote competition from rival middleware 
developers, it is essential that Microsoft be required to provide 
timely access to all technical information required to permit non-
Microsoft middleware to achieve interoperability with Microsoft 
software.
    Section III.D of the PFJ imposes an obligation on Microsoft to 
disclose to Independent Software Vendors ("ISVs"), and 
others, the APIs that Microsoft middleware uses to interoperate with 
any Windows OS product. However, the PFJ's requirement for API 
disclosure is drawn much too narrowly to allow non-Microsoft 
middleware to compete fairly with Microsoft middleware. Here again, 
a comparison with the proposal of the litigating states is 
instructive.
    First, the PFJ's disclosure requirement fails to prevent 
"future monopolization," because it fails to apply to 
critical technologies that Microsoft is likely to use to maintain 
the power of its OS monopoly in the future. Because nascent threats 
to Microsoft's monopoly operating system currently exist beyond the 
middleware platform resident on the same computer, any effective API 
disclosure requirement must apply to all technologies that could 
provide a competitive platform challenge to Windows, including 
network servers, web servers, and hand-held devices. The PFJ does 
not; by contrast, the Litigating States" Remedial Proposal 
expressly provides that Microsoft must disclose all APIs, technical 
information, and other communications interfaces so that Microsoft 
software installed on one computer (including personal computers, 
servers, handheld computing devices and set-top boxes) can 
interoperate with Microsoft platform software installed on another 
computer. (See LSRP at 11.)
    Second, the PFJ creates an apparent exception for Microsoft's 
API disclosure requirement in the emerging areas of identity 
authentication and digital rights management 
("DRM")--critical applications that are also 
important to the prospects of Microsoft's "future 
monopolization." Section III.J. 1 .(a) appears to exempt 
Microsoft from disclosing any API or interface protocol "the 
disclosure of which would compromise the security of ... digital 
rights management ... or authentication systems, including without 
limitation, keys, authorization tokens or enforcement 
criteria." This exception is written much more broadly than 
any of the limits on Microsoft behavior, and could easily be used to 
protect Microsoft's APIs relating to DRM and identity authentication 
applications. The implication of this is that any rival DRM or 
authentication software will not function as well as Microsoft's 
DRM, Passport, and .Net My Services (formerly known as Hailstorm). 
Thus, under the PFJ, Microsoft may be able to degrade the 
performance of any rivals to any of these services.
    These markets, however, are just as important to the next stage 
of the industry's evolution as browsers were to the last stage. DRM 
solutions, for example, allow content vendors to sell audio and 
video content over the Internet on a "pay for play" 
basis. Since the most prevalent use of media players in the years 
ahead will be in playing content that is protected in this fashion, 
if non-Microsoft media players cannot interoperate with 
Windows" DRM solution, those media players will be virtually 
useless except for "freeware" content. Thus, if DRM is 
exempt from API disclosures under the PFJ, Microsoft can destroy the 
competitive market for one of the most vital forms of 
middleware--media players.
    The authentication exemption is potentially even more far-
reaching. Most experts agree that the future of computing lies with 
server-based applications that consumers will access from a variety 
of devices. Indeed, Microsoft's ".Net" and ".Net 
My Services" (formerly known as Hailstorm) are evidence that 
Microsoft certainly holds this belief. These services, when linked 
with Microsoft's Passport, may allow Microsoft to participate in a 
substantial share of consumer e-commerce transactions over the 
Internet, irrespective of which device is used to access the 
Internet (cell phones, handheld computers, etc.). If Microsoft 
prevents competition with its Passport standard, it may be able to 
realize its stated goal of charging a fee for every single e-
commerce transaction on the Internet.
    Under the guise of security, Microsoft has obtained a loophole 
in the PFJ that undercuts a critical disclosure requirement. 
Microsoft's legitimate security concerns which, of course, are 
shared by all of its major business rivals--do not require this 
loophole. Section III.J.2 of the PFJ excludes from disclosure rights 
any company with a history of software counterfeiting or piracy or 
willful violation of intellectual property rights, or any company 
that does not demonstrate an authentic and viable business that 
requires the APIs. This means that Microsoft only has to disclose to 
bona fide software rivals whose interests in security and stability 
are as great as Microsoft's. As added protection, Section III.J. 1 
.(b) of the PFJ allows Microsoft to refrain from any disclosure 
simply by persuading an impartial government body, on a case-by-case 
basis, that a specific disclosure would put system security at risk. 
Together, these provisions provide Microsoft with all the room it 
needs to take legitimate security precautions.
    Once again, the litigating states" proposal provides a 
useful contrast. It contains no disclosure "carve out" 
to exempt DRM and identity-authentication from the general 
disclosure obligation imposed on Microsoft. (See LSRP at 11.) 
Instead, it creates a regime of timely, complete, and comprehensive 
API disclosure that will allow competitors an opportunity to 
challenge Microsoft's efforts to entrench its OS monopoly in a 
market where distributed computing is the dominant model--an 
opportunity that was sadly missed as the browser became critical to 
Internet-related applications, due to Microsoft's anticompetitive 
refusals to share technical information. Thus, once again, it is the 
LSRP, not the PFJ, that would meet the Court of Appeals" 
objectives and the public interest standard.
    C. The PFJ Does Not Ban Many Forms Of Retaliation By Microsoft 
Against OEMs.
    The District Court found, and the Court of Appeals upheld, that 
in order to create a competitive market structure in which non-
Microsoft middleware products are able to compete effectively with 
Microsoft products, licensees, such as OEMs, must have the ability 
to distribute and promote non-Microsoft products without fear of 
coercion or interference from Microsoft. Recognizing the central 
role that OEMs play in the distribution and ultimate usage of non-
Microsoft middleware products, the PFJ includes an anti-retaliation 
provision which is intended to protect those entities that support 
or promote non-Microsoft products. According to the Department of 
Justice, this anti-retaliation provision "broadly prohibits 
any sort of Microsoft retaliation against an OEM based on the OEM's 
contemplated or actual decision to support non-Microsoft 
software." (See CIS at 25.)
    Unfortunately, the PFJ does not provide the broad protection 
from Microsoft's retaliation that the government claims it does. 
Indeed, the PFJ's anti-retaliation provision is so narrow that it 
will do little, if anything, to protect OEMs that wish to distribute 
or promote non-Microsoft products.
    The PFJ's anti-retaliation provision is deficient in numerous 
respects. First, it

[[Page 29106]]

appears to create only a narrow range of procompetitive activities 
that OEMs can engage in without being subject to Microsoft 
retaliation. For example, the PFJ prohibits retaliation for OEMs 
that promote rival middleware, but does not appear to prohibit 
retaliation against OEMs that promote any other type of rival 
software (which, under the PFJ's language, probably includes rivals 
to Passport, MS Money, Windows Movie Maker, and MSN Messenger, just 
to name a few). Even if this glitch were unintentional, the 
ambiguity might still be sufficient to allow Microsoft to coerce 
OEMs into avoiding Microsoft rivals.
    Second, even within the scope of protected OEM activities, the 
PFJ appears to bar only certain types of Microsoft retaliation. The 
PFJ prohibits Microsoft from withholding "newly introduced 
forms of non-monetary Consideration" from OEMs, but is less 
clear about whether Microsoft may use already-existing forms of 
consideration to retaliate against OEMs. (See PFJ at III.A.) More 
importantly, while the PFJ prohibits Microsoft retaliation via an 
alteration of commercial agreements, it does not appear to prohibit 
any other form of Microsoft retaliation (e.g., product 
disparagement) that Microsoft can imagine.
    In addition, under Section III.A of the PFJ, Microsoft may, sua 
sponte, terminate an OEM's Windows license after sending the OEM two 
notices stating that it believes the manufacturer is violating its 
license. There need not be any adjudication or determination by any 
independent tribunal that Microsoft's claims are correct. All that 
is required are two notices; after that, Microsoft may terminate an 
OEM's license. This provision means that the OEMs are, at any time, 
just two registered letters away from unannounced economic calamity; 
after all, given Microsoft's monopoly on the operating system, 
termination of an OEM's Windows license is a death sentence for an 
OEM's business.
    Again, such inadequate safeguards are not inherent in an 
effective non-retaliation protection. For instance, the Litigating 
States" Remedial Proposal prevents Microsoft from taking any 
action that directly or indirectly adversely affects OEMs or other 
third-party licensees that in any way develop, distribute, support 
or promote competing products, thereby providing the type of 
protection contemplated by the Court of Appeals. (See LSRP at 
13-14.) Thus, the Litigating States" Remedial Proposal 
clearly prohibits Microsoft retaliation for any procompetitive OEM 
behavior and prohibits all forms of Microsoft retaliation. 
Importantly, the LSRP also prohibits Microsoft from retaliating 
against any individual or entity for participating in any capacity 
in any phase of this litigation. Again, it is the LSRP that meets 
the Court of Appeals" objectives for this case--not the 
PFJ.
    D. The PFJ Does Nothing To Remedy Microsoft's Illegal Camoaion 
To Eliminate Java.
    Yet another aspect of the trial court's decision that was upheld 
on appeal by the DC Circuit was the District Court's finding that 
Microsoft's actions in eliminating the threat posed by Sun 
Microsystems" Java technology were unlawful under Section 2 of 
the Sherman Act. See Microsoft, 253 F.3d at 74-75. The PFJ, 
however, omits any remedy for this core abuse. Thus, unlike either 
the District Court's remedy or the remedy Judge Posner suggested, 
the PFJ does not protect those specific products, such as Java, that 
actually compete with Windows today and offer alternatives to 
Microsoft's dominance.
    The Litigating States" Remedial Proposal addresses this 
deficiency by requiring that Microsoft distribute Java with its 
platform software for a period of ten years. (See LSRP at 
17-18.) The LSRP recognizes, as did the District Court and 
Judge Posner, that in order to ensure that rival products such as 
Java can compete with Microsoft, they must receive the widespread 
distribution that they could have obtained absent Microsoft's 
unlawful behavior.
    The requirement that Microsoft distribute Java with its 
operating system and Internet Explorer browser takes on even greater 
importance in light of Microsoft's recent behavior. For example, 
although the Court of Appeals upheld the trial court's finding that 
Microsoft targeted and destroyed independent threats from the Java 
programming language, see Microsoft, 253 F.3d at 53-56, 60, 
Microsoft announced less than a month later that it was dropping any 
support for Java from Windows XP. As The Wall Street Journal 
reported at the time, "This favors Microsoft's new 
technologies, and will inconvenience consumers.... [I]f you want 
your Web page accessible to the largest number of people, you may 
want to drop Java" and switch to Microsoft's competing set of 
products, which is under development and is known as .NET." 
Thus, notwithstanding the Court of Appeals" holding that 
Microsoft illegally maintained its monopoly by requiring major 
independent software vendors to promote Microsoft's JVM exclusively 
(i.e., by requiring developers, as a practical matter, to make 
Microsoft's JVM the default in the software they developed), 
Microsoft is again acting illegally to maintain--and further 
entrench--its operating system monopoly against Java's 
middleware threat.
    To remedy the specific and extensive anticompetitive tactics 
aimed at Java, as found by the District Court and affirmed by the 
Court of Appeals, Microsoft should be ordered--as outlined in 
the Litigating States" Remedial Proposal--to distribute 
with its platform software a current version of the Java middleware. 
This would ensure that Java receives widespread distribution, thus 
increasing the likelihood that it can serve as a viable competitive 
platform to Windows. Although rivals such as Java will likely remain 
small players compared to the dominant Windows OS, their existence 
on the competitive fringe is critical to provide some competitive 
discipline to Microsoft on pricing and coercion matters. Moreover, 
the existence of these rivals creates a base for future developments 
that might one day provide true alternatives to Windows.
    E. The PFJ Includes A "Gerrymandered" Definition Of 
Middleware.
    Though not readily apparent, the effectiveness, or lack thereof, 
of the PFJ's restrictions on Microsoft's behavior heavily depends on 
the proposed agreement's definition of "middleware." 
Under the proposed settlement, OEMs are protected from retaliation 
and can promote competitive alternatives to Microsoft products only 
in the area of middleware. Thus, if rival software falls outside of 
the definition of middleware, Microsoft can essentially use its 
coercive might to prevent that software from being distributed via 
OEMs. Conversely, if a Microsoft product is not classified as 
middleware, Microsoft is permitted to use coercion to force its 
adoption and promotion.
    The PFJ adopts a new, and greatly narrowed, definition of 
middleware, both in terms of "Microsoft Middleware 
Products" and "non-Microsoft Middleware." The 
result is significant because under the newly created definition, 
Microsoft may be able to subvert many of the PFJ's restrictions. The 
Litigating States" Remedial Proposal defines middleware in a 
manner consistent with the definition adopted by both the District 
Court and the Court of Appeals. It thus prevents Microsoft from 
using a definitional shell game to avoid changing its unlawful 
behavior.
    The District Court and the Court of Appeals adopted the same 
definition of middleware: software products that expose their own 
APIs; are written to interoperate with a variety of applications; 
and are written for Windows as well as multiple operating systems. 
See Microsoft, 253 F.3d at 53; see also Findings of Fact, 84 F. 
Supp. 2d at 17-18, 28-29. Thus, while the DC 
Circuit discussed browsers and the Java technologies as leading 
examples of middleware, Microsoft, 253 F.3d at 59-78, it never 
adopted an exclusive list limited to specific products (as the PFJ 
does).
    Importantly, the Court of Appeals also agreed with the District 
Court that the appropriate category of "middleware" 
applications that merit protection against Microsoft's 
anticompetitive conduct includes any application that could operate 
separately or together with other such applications to create even 
the "nascent" potential for alternative platforms that 
could compete with Microsoft's OS monopoly. Id. at 52-54, 
59-60, 74.
    These standard definitions of middleware were also endorsed in 
the Posner Proposal, which, as noted above, Microsoft was reportedly 
ready to accept last year. Section 2(3) of the Posner Proposal 
defined middleware broadly, to include any "software that 
operates between two or more types of software ... and could, if 
ported to multiple operating systems, enable software products 
written for that middleware to be run on multiple operating 
systems." Moreover, the substantive portion of the Posner 
Proposal, in Section 3(8)(c), explicitly included not just 
enumerated products, but also any "middleware distributed with 
such operating system installed on one personal computer to 
interoperate with any of the following software installed on a 
different personal computer or on a server: (i) Microsoft 
applications, (ii) Microsoft middleware, or (iii) Microsoft client 
or server operating systems."
    The PFJ departs significantly from these established definitions 
of middleware and

[[Page 29107]]

instead adopts wholly new definitions for both "Microsoft 
Middleware Products," and "non-Microsoft 
Middleware." These definitions include several flaws that 
Microsoft may be able to use to anticompetitively advantage its 
applications, continue to profit from the fruits of its illegally 
maintained monopoly, and evade the practical consequence of the PFJ 
for many product lines.
    To start, the PFJ's definition of "Microsoft Middleware 
Products" appears to limit this category to five specifically-
listed existing products and their direct successors. This makes no 
sense for two reasons. First, why define the most critical term in 
the proposed settlement narrowly when Microsoft has already 
demonstrated its skill at evading consent judgments? And second, why 
does the list include certain Microsoft products, but arguably not 
their virtually indistinguishable cousins: i.e., Outlook Express, 
but not Outlook; Windows Messenger, but not MSN Messenger; the 
Microsoft JVM, but not MSN RunTime; Internet Explorer, but not MSN 
Explorer. Likewise, Microsoft middleware applications such as the 
MSN client software and Passport appear to be excluded. The 
significance of these omissions cannot be overstated. For example, 
although Microsoft must allow OEMs, under the PFJ, to remove end-
user access to Internet Explorer, the decree's language appears to 
allow Microsoft to ban any effort to replace MSN Explorer with a 
competitor. This is a step backwards from the status quo.
    Additionally, Section III.H.2 of the PFJ explicitly limits OEM 
flexibility to set non-Microsoft Middleware as a default so that it 
can be automatically invoked: the PFJ appears to allow OEMs to do so 
only with competitors of "Microsoft Middleware Products" 
that (1) appear in separate Top-Level Windows, with (2) separate 
end-user interfaces or trademarks. Thus, Microsoft might be able to 
avoid the PFJ's provisions simply by embedding Microsoft middleware 
with other middleware, or not branding it with a trademark. That 
means Microsoft--not the OEMs, and certainly not the 
market--would determine the scope of desktop competition and 
the pace of desktop innovation.
    Conversely, the definition of the rivals to Microsoft Middleware 
Products "non Microsoft Middleware Product"--is 
also jury-rigged to advantage Microsoft. Under Section IV.N of the 
PFJ, protected middleware products are limited to those applications 
"of which at least one million copies were distributed in the 
United States within the previous year." Thus, developers have 
no protection from Microsoft's well-honed predatory tactics until 
they can obtain substantial distribution. The PFJ's middleware 
definition also does not explicitly include web-based services, the 
most important future platform challenge to the Windows monopoly. 
These web-based services represent an important and growing type of 
middleware, and the PFJ's failure to explicitly cover them may allow 
Microsoft to recreate and extend its desktop monopoly to new 
platforms.
    The newly created and narrowly crafted definitions of middleware 
in the PFJ pave the way for Microsoft to avoid many of the 
prohibitions on its conduct. The middleware definitions in the LSRP, 
on the other hand, are consistent with those endorsed by the 
District Court and Court of Appeals, and ensure that the protections 
from Microsoft's illegal conduct are extended to Microsoft's 
competitors in critical middleware markets.
    F. The PFJ Lacks A Meaningful Enforcement Mechanism.
    For any remedy against Microsoft to be effective, it must 
include a strong, timely, and meaningful enforcement mechanism. The 
PFJ creates an extraordinarily weak enforcement authority--one 
that likely will be overwhelmed and co-opted by Microsoft. More 
specifically, as currently drafted, there are two principal problems 
with the PFJ's enforcement mechanism.
    First, the proposed decree leaves all enforcement to a single, 
three-person Technical Committee ("TC"). With no looming 
antitrust proceedings to put pressure on Microsoft to behave, 
Microsoft will have every incentive to hinder the efforts of the TC. 
Moreover, Microsoft will have substantial insights and influence 
over the TC--Microsoft will appoint at least one member of the 
TC (the first two members will appoint the third); the TC will be 
stationed full-time on Microsoft premises; and the TC will rely for 
many types of enforcement on a compliance officer hired and paid for 
by Microsoft. In light of all this, it would be easy to imagine a 
situation where the TC, during the entirety of its existence, never 
took a single action critical of or hostile to Microsoft, no matter 
what behaviors Microsoft engaged in.
    Second, the enforcement authority has no power other than the 
authority to investigate. The TC cannot expedite claims, assess 
fines, or otherwise move quickly to redress Microsoft's illegal 
behavior. If the TC finds any abuse, its only recourse will be to 
the courts, through mini-retrials of United States v. Microsoft. 
Moreover, under Section W.D.4.(d) of the PFJ, the TC is prohibited 
from using any of its work product, findings, or recommendations in 
any court proceedings. Thus, even if the TC eventually refers a 
matter to the courts, the proceedings will have to start from 
scratch. The history of the 1994 consent decree shows the futility 
of this type of approach.
    By contrast, the Litigating States" Remedial Proposal 
recommends the creation of a Special Master who is empowered and 
equipped to investigate Microsoft's behavior in a manner that is 
prompt and resolute. The appointment of a Special Master with 
defined remedial powers is essential if Microsoft's unlawful 
behavior is to be curbed and competition restored to the 
marketplace. Thus, the creation of a Special Master provides for a 
mechanism that is much more effective in ensuring Microsoft's 
compliance with the settlement decree, and does not suffer from the 
defects identified above in the PFJ's TC proposal.
    First, unlike the TC in the PFJ, a Special Master, as selected 
by the Court, would be independent. He or she would not be dependent 
on Microsoft for resources, appointment, or other needs. Second, 
under the Litigating States" Remedial Proposal, the Special 
Master would have the authority to identify, investigate, and 
quickly resolve enforcement disputes. For example, under the 
States" proposal, the Special Master would have the power and 
authority to take any and all acts necessary to ensure Microsoft's 
compliance. (See States" Proposed Text 18(b).) The 
Special Master would have the benefit of both business and technical 
experts. (See id. 18(d).) Upon receipt of a complaint, it 
would be required to make an initial determination of whether an 
investigation is required within fourteen days. After notifying 
Microsoft and the complainant of its decision to investigate, 
Microsoft would then have fourteen days to respond. After 
Microsoft's response, the Special Master would be required to 
schedule a hearing within twenty-one days, and fifteen days after 
the hearing, would be required to file with the Court its factual 
findings and a proposed order. (See id.
    Unlike the enforcement mechanism in the PFJ, the creation of a 
Special Master as outlined by the States would prevent disputes over 
Microsoft's compliance from becoming wars of attrition that would 
drain the system and guarantee Microsoft victory. The history of 
this case, and of antitrust regulation in general, suggest the need 
for an enforcement mechanism that can ensure the timely resolution 
of any disputes and minimize any demand on judicial resources. The 
enforcement provisions contained in the Litigating States" 
Remedial Proposal accomplish these objectives.
    V. THE CIRCUMSTANCES OF THIS CASE STRONGLY MILITATE IN FAVOR OF 
GATHERING EVIDENCE AND TESTIMONY--EITHER IN A HEARING, OR 
THROUGH THE USE OF THE RECORD FROM THE REMEDIAL PROCEEDING--TO 
DETERMINE IF THE PFJ MEETS THE PUBLIC INTEREST TEST.
    We believe, for the reasons presented above, that the PFJ fails 
the Tunney Act's "public interest" test and should be 
rejected. At the very least, however, there is ample basis for the 
Court to conclude that a rigorous hearing is needed to air the 
objections to the PFJ and resolve the doubts that the Court 
hopefully has about the proposed decree. While it need not be a 
lengthy proceeding, the Court may also want to consider accepting 
evidence and taking testimony- or alternatively, making use of 
record evidence it will receive in the upcoming proceeding 
concerning the LSRP. The question of what can be learned about the 
PFJ's prospects for effectiveness, since its partial implementation 
began in July (and, in other respects, December), is especially 
critical, and would benefit from additional fact-finding by the 
Court.
    A. The Complexity And Significance Of This Case--And The 
Inadequacy Of The CIS--All Militate In Favor Of A Hearing On 
The PFJ.
    Of all the cases in which courts have reviewed proposed consent 
decrees to make a public interest determination under the Tunney 
Act, the case most similar to the present action is American Tel. 
& Tel. Co., 552 F. Supp. at 131, aff'd sub nom Maryland v. 
United States, 460 U.S. 1001 (1983), in which Judge Greene subjected 
the

[[Page 29108]]

government's proposed consent decree with AT&T to intense 
judicial review. In AT&T, the court recognized that the proposed 
settlement not only would dispose of "what is the largest and 
most complex antitrust action brought since the enactment of the 
Tunney Act, but [] itself raises what may well be an unprecedented 
number of public interest questions of concern to a very large 
number of interested persons and organizations." American Tel. 
& Tel. Co., 552 F. Supp. at 145. In light of the size and the 
complexity of the case, as well as its "unfortunate 
history" and the interests of third parties, the court held an 
extensive hearing to address key issues raised by the consent decree 
and the comments of interested parties. Id. at 147, 152. The case 
for an extensive hearing on the PFJ in this proceeding is 
overwhelming for similar reasons.
    First, this is an extremely complicated case, to say nothing of 
the profound consequences any settlement will ultimately have on the 
computer and Internet industries. The economic significance of the 
computer industry is unquestioned. In such an environment, expert 
economic analysis is critical to help the Court not only understand 
the incentives that will drive Microsoft's response to any proposed 
settlement, but also assess whether the PFJ will succeed in bringing 
the monopolist's unlawful behavior to an end and promoting 
competition in a market that has long been restricted. Given the 
complexity of this case, the Court should not approve the PFJ 
without an adequate hearing to consider the many--and often 
technical--objections to it that will doubtlessly be raised in 
the Tunney Act submissions.
    Second, in terms of the impact that any proposed settlement in 
this case will have on the public, Judge Greene's depiction of the 
AT&T case is, once again, more than fitting here: "[t]his 
is not an ordinary antitrust case." Id. at 151. Microsoft is 
one of our nation's largest corporations. It plays a central role in 
one of the country's most critical and important industries, and 
thus in our country's economy. Any settlement that addresses 
Microsoft's illegal conduct in a manner that is consistent with the 
Court of Appeals" decision and prevailing antitrust law will 
have far-reaching consequences on numerous organizations, both 
public and private, as well as on Microsoft, its employees, 
shareholders, competitors, and most importantly, consumers. Thus, a 
hearing to consider the breadth and depth of these consequences is 
in order before the PFJ is approved.
    Third, a hearing should be held to require the Justice 
Department to answer the many questions surrounding the 
PFJ--raised here, and doubtlessly elsewhere--that the 
Competitive Impact Statement ignores or fails to adequately address. 
Why was a new, "gerrymandered" definition of middleware 
used in the PFJ--instead of the definition used by both the 
trial and appellate courts, and in every other remedial proposal? 
Why was a Java-related remedy omitted, when that was such a key part 
of the case? Why were only some forms of retaliation, for only some 
procompetitive acts, prohibited? And most importantly, why does the 
PFJ not address all of the anticompetitive wrongs that were found at 
trial, and upheld on appeal--including, most especially, 
Microsoft's unlawful tying? These questions are not answered by the 
CIS, as the Tunney Act directs and the public interest demands, and 
as the Court would surely desire. A full review of these questions, 
and many others, is needed by the Court before it can approve the 
PFJ (if it is inclined to approve the PFJ).
    Thus, in light of the specific objections from third parties 
revealing the PFJ's numerous deficiencies--and the oddity of 
the differing remedial proposals now before the Court--the 
Court should hear oral argument and, if necessary, take additional 
testimony. Giving the government an opportunity to explain the 
omissions in its proposed settlement, and third parties the 
opportunity to demonstrate the efficacy of the litigating 
states" proposal, will afford the Court the necessary basis on 
which to make its public interest determination in this important 
and unprecedented case.
    B. The Court Should Conduct A Proceeding--Taking Evidence 
And Hearing Testimony, If Necessary.--To Determine How The 
PFJ's Provisions Have Functioned Since Some Were Put In Place In 
2001.
    A second rationale for a hearing is to develop a factual record 
concerning the point we make in Section II, supra: namely, that the 
Court can assess the prospects for the likely effectiveness of the 
PFJ by seeing how those provisions that have been implemented are 
starting to work--or not-in practice.
    Above, we have suggested that the empirical record developed in 
the PC industry since Microsoft's July 11, 2001 announcement of 
"greater OEM flexibility for Windows," and since 
Microsoft began to implement many of the PFJ's remedial provisions 
on December 16, 2001, should be examined carefully by this Court as 
it determines whether the PFJ is in the "public 
interest." We also express the view that these provisions 
have, in fact, been ineffectual in promoting competition and are 
showing no signs that they will yield change in the competitive 
position of non-Microsoft middleware--and as a result, cannot 
be said to be in the public interest.
    At the same time--while we doubt it, seriously--we 
recognize it is theoretically possible that there may be reasons why 
these provisions have not yet shown signs of effectiveness, but 
would be effective over time. At least, that is what Microsoft and 
the Justice Department are likely to assert. If the Court is 
inclined to give these assertions any credence, that is all the more 
reason for the Court to conduct a proceeding--taking evidence 
and hearing testimony, if necessary--to make a determination on 
such claims based on empirical evidence, rather than relying upon 
hypothetical contentions or abstract theories. Such a proceeding is 
authorized by the Tunney Act, see 15 U.S.C. 16(f), and would 
be appropriate in this instance.
    Evidence and testimony from the OEMs can make clear whether they 
are taking advantage of the "new flexibility" ostensibly 
being provided under the PFJ--and if not, why not. Given the 
OEMs" likely fears of retaliation from testifying in such a 
proceeding--as reflected by their apparent (and understandable) 
reluctance to testify in the remedial proceeding--the Court may 
want to consider appointing a Special Master to take evidence from 
the OEMs confidentially. Likewise, evidence and testimony from non-
Microsoft middleware companies can indicate how the provisions of 
the PFJ, after they have been in place for several months, 
are--or are not--enabling them to compete with Microsoft. 
The same can be said for OS rivals to Microsoft.
    The point is that while we firmly believe that the publicly 
available information and reports all indicate that the PFJ's 
provisions, as implemented since December 16th (and the browser-
related PFJ provisions, as implemented since July 11th), have done 
little or nothing to promote competition, the Court may wish to base 
such a conclusion upon a judicially developed record that would 
allow both proponents and opponents to offer explanations and 
evidence in support of their views. Such a proceeding could be of a 
more informal nature, i.e., the Court could solicit comments from 
the relevant parties and industry experts; or it could be conducted 
by a Special Master, as we suggest above; or it could be a more 
formal, trial-type undertaking. All of these approaches are 
authorized under the Tunney Act, which grants wide discretion to the 
court to adopt whatever form of proceeding it considers most 
effective. See 15 U.S.C. 16, passim. But on one point, the 
Act, or at least its legislative history, is rather firm: 
"[T]he court must obtain the necessary information to make [a] 
determination that the proposed consent decree is in the public 
interest." 1974 U.S.C.C.A.N. 6535, 6538-39 (H.R. Rep. 
93-1463, quoting S. Rep. 93-298, at 6-7 (1973)) 
(emphasis added). Some sort of proceeding to examine these questions 
is justified in these circumstances, and could be helpful to the 
Court in its consideration of the practical effects of the PFJ.
    C. In Making Its "Public Interest" Determination, 
This Court Should Take Into Account The Evidence That Will Be 
Adduced In The Upcoming Remedial Proceeding.
    Finally, the Court should take advantage of the Tunney Act's 
broad procedural flexibility to use the record evidence that will be 
amassed in the upcoming remedial proceeding as it make its 
"public interest" determination in this review. The 
Court's Tunney Act review of the PFJ in this proceeding can be 
substantially assisted by the record developed in the forthcoming 
proceeding on the LSRP. As we have argued, the Court's objectives in 
both proceedings are the same--namely, to terminate Microsoft's 
illegal conduct, prevent the recurrence of such conduct, and create 
a market structure in which competition does not simply exist in 
theory, but actually yields real alternatives to Microsoft's 
products. Moreover, the Court's analysis in both proceedings is 
guided by the same legal principles. See Section I, supra.
    Many of the questions the Court must answer in the course of 
reviewing the PFJ--e.g., What sort of anti-retaliation 
provisions are needed to empower OEMs and foster real

[[Page 29109]]

competition? Must third parties be empowered to promote competition 
through offering alternatives to the "Windows bundle" 
for a remedy to be effective?--will be addressed, in whole or 
in part, in the remedial proceeding. To the extent that these 
questions can only be answered by hearing testimony from some of the 
same individuals and the same sources in the remedial proceeding, 
the Court's reliance on that evidence in this proceeding would 
result in a more comprehensively informed review, streamline the 
Court's resolution of the issues, and lead to a much more efficient 
use of judicial resources.
    The Tunney Act itself grants the Court wide discretion to 
undertake any procedures it "may deem appropriate" in 
making its public interest determination. 15 U.S.C. 16(f)(5). 
This includes using evidence from another proceeding. See American 
Tel. & Tel. Co., 522 F. Supp. at 136. As the court noted in 
AT&T, "[i]n a Tunney Act proceeding the Court is not 
limited by the rules of evidence but may take into account facts and 
other considerations from many different sources." Id. at 136 
n. 7 (emphasis added). In that case, the court relied on a report by 
the Antitrust Subcommittee of the House Committee on the Judiciary, 
which had conducted an investigation of the matter, to fill in gaps 
left in the court record. Id. at 136. If a court can weigh an 
evidentiary record compiled by the Congress, it surely can weigh an 
evidentiary record of its own creation in a related proceeding.
    The Court is currently overseeing a wide range of discovery, 
both written and oral, in the remedial proceeding. Testimony will 
presumably be taken from a host of witnesses that will establish, 
among other things: how Microsoft deals with OEMs, including how 
various Microsoft practices limit OEM flexibility in configuring the 
desktop; how Microsoft has used the commingling of code, and other 
forms of binding its middleware to the OS, to reinforce the 
applications barrier to entry; how Microsoft has used discriminatory 
and anticompetitive licensing agreements to limit the distribution 
and use of rival products; how Microsoft's illegal conduct has 
worked to destroy Java; how Microsoft's .Net initiative repeats the 
illegal monopoly leveraging tactics it successfully used to decimate 
Netscape; how Microsoft's concealment of APIs degrades the 
performance of non-Microsoft products and services; and how 
Microsoft has manipulated industry standards and developed 
proprietary standards and formats that limit the interoperability of 
competing products.
    This evidence, which will be presented during the Court's 
remedial hearing later this Spring, will form the basis on which the 
Court crafts its remedy in the ongoing litigation. It is our view 
that this evidence will affirmatively demonstrate why the LSRP, and 
not the PFJ, fulfills the mandate of the Court of Appeals and 
comports with well settled antitrust law. By the same token, it will 
also demonstrate why the PFJ fails to redress Microsoft's illegal 
behavior in a manner consistent with the public interest.
    Because many of the questions the Court faces in this proceeding 
mirror those in the remedial proceeding, the Court should take the 
record evidence from the remedial proceeding into account in 
conducting its Tunney Act review of the PFJ. Simply put, by 
utilizing this evidence, the Court will adduce the information it 
needs to make its "public interest" determination in a 
manner that encourages greater efficiency and avoids unnecessary 
delay or duplication.
    CONCLUSION
    The Court should refuse to find that entry of the PFJ is 
"in the public interest." The PFJ does not unfetter the 
market from Microsoft's dominance; it does not terminate the illegal 
monopoly; it does not deny to Microsoft the fruits of its statutory 
violations; and it does not end Microsoft's practices that are 
likely to result in monopolization in the future.
    More specifically, the PFJ does not even attempt to address, let 
alone end, Microsoft's illegal binding and bundling practices that 
have done so much to fortify its OS monopoly and to harm desktop 
competition. And its limited provisions are so filled with loopholes 
and exceptions that they are rendered ineffective.
    At the very least, the Court should refuse to approve the PFJ 
until after it has concluded an extensive review, including an 
inquiry into whether the PFJ's provisions--as implemented by 
Microsoft since last year--are showing signs of effectively 
restoring competition to the marketplace. The Court could conduct an 
evidentiary hearing, appoint a Special Master, and/or rely upon the 
record that will be adduced in the trial on the Litigating 
States" Remedial Proposal to meet its evidentiary needs.
    In the end, it is the proposal of the litigating 
states--not the PFJ--that meets the public interest 
standard. The Court should reject the PFJ, and impose a strong, 
effective and forward-looking remedy that addresses Microsoft's 
proven anticompetitive conduct in a manner consistent with the 
mandate of the Court of Appeals and the nation's antitrust laws.
    Dated: January 28, 2002
    Paul T. Cappuccio
    Edward J. Weiss
    AOL TIME WARNER, Inc.
    75 Rockefeller Plaza
    New York, New York 10019
    (212) 484-8000
    Randall J. Boe
    Laura E. Jehl
    AOL, Inc.
    22000 AOL Way
    Dulles, Virginia 20166
    (703) 265-1000
    Respectfully submitted,
    Ronald A. Klain
    Benjamin G. Bradshaw
    Jessica Davidson Miller
    O'MELVENY & MYERS LLP
    555 13th Street, NW, Suite 500 West
    Washington, DC 20004-1109
    (202) 383-5300
    ATTORNEYS FOR AOL TIME WARNER, INC.
    ATTACHMENT A
    Microsoft's Tying Strategies To Maintain
    Monopoly Power In Its Operating System
    (Civil Actions No. 98-1232 and 98-1233 CKK)
    Submitted on behalf of AOL Time Warner by
    Frank Mathewson and Ralph A. Winter
    Charles River Associates Inc.
    Suite 1501
    80 Bloor Street West
    Toronto, Ontario M5S 2V1
    Canada
    January 28, 2002
    TABLE OF CONTENTS Page
    I. INTRODUCTION 1
    II. MICROSOFT HAS MANY TECHNIQUES AT ITS DISPOSAL FOR TYING
    MIDDLEWARE TO WINDOWS 2
    III. ECONOMIC ANALYSIS SHOWS THAT MICROSOFT HAS SUBSTANTIAL
    INCENTIVES TO USE TYING TO SUSTAIN ITS OPERATING SYSTEM 
MONOPOLY,
    HARMING CONSUMERS AND COMPETITION 4
    A. As a general matter, absent legal constraints, Microsoft 
possesses substantial economic incentives to integrate its products 
in a manner that reinforces its OS monopoly 5
    (1) Microsoft ties its applications to its operating system as a 
way of sustaining the applications barrier to entry 5
    (2) Microsoft ties applications to its operating system as a way 
of deterring direct challenges to Windows" position as the 
dominant platform for software developers 7
    (3) Microsoft has incentives to tie to achieve a monopoly in 
complementary applications as insurance against possible future 
erosion of its OS dominance 9
    (4) Microsoft's operating system also has durable-goods 
qualities that create further anti-competitive incentives for tying 
12
    (5) Microsoft's anti-competitive tying incentives are mutually 
reinforcing and are manifest in strategies that lack any competitive 
justification 14
    B. Microsoft's anti-competitive incentives are particularly 
powerful in the markets for browsers and streaming media, as well as 
the adjacent markets for content-encoding, digital fights 
management, e-commerce, and convergence 15
    C. The theorized benefits of product integration that may exist 
in some cases do not apply to the markets at issue in this case 19
    (1) The economics of software markets cast doubt on Microsoft's 
efficiency arguments for integration of its own browser and media 
player with the OS 20
    (2) Contrary to Microsoft's claims, issues of pricing and 
innovation provide further evidence that Microsoft's tying harms the 
marketplace and consumers 22
    IV. GIVEN THE INCENTIVES, HISTORY, AND EVIDENCE IN THIS CASE, 
THE CONCLUSION IS THAT MICROSOFT HAS ENGAGED, AND IS ENGAGING, IN 
ANTI-COMPETITIVE TYING IN ORDER TO PROTECT AND STRENGTHEN ITS 
OPERATING SYSTEM MONOPOLY 24
    A. Microsoft's options, incentives, and history create a strong 
presumption that Microsoft's tying harms OS competition and 
consumers 24
    B. The evidence indicates that Microsoft is anti-competitively 
tying the browser and the media player with its operating system 25
    V. CONCLUSION 28

[[Page 29110]]

    VI. APPENDIX: CURRICULUM VITAE OF FRANK MATHEWSON 1
    VII. APPENDIX: CURRICULUM VITAE OF RALPH WINTER 1
    I INTRODUCTION
    1. We have been engaged in this case as professional economists 
to assess the economic incentives and effects of Microsoft's tying 
practices. Our specific charge is to determine whether Microsoft is 
tying middleware applications to its operating system 
("OS") in a manner that protects and reinforces its 
monopoly power in the market for operating systems. Middleware is 
software that runs on the OS platform, i.e., that calls on the basic 
operating system through application programming interfaces 
("APIs") of the OS in order to invoke functions of the 
OS, but which in turn contains its own published APIs that allow 
higher-level applications to run on the middleware itself. To 
execute our mandate, we have reviewed the economic incentives at 
play in this market, conducted interviews with various software 
developers, and studied the key documents in this case, including 
the Proposed Final Judgment and the Competitive Impact Statement of 
the U.S. Department of Justice, the submissions made on behalf of 
Microsoft, and the Comments Of AOL Time Warner On The Proposed Final 
Judgment.
    2. Based on our analysis, we conclude that Microsoft has tied 
its middleware applications to its Windows operating system in ways 
that preserve and reinforce its monopoly power in the market for 
operating systems on PCs, damaging competition and harming 
consumers. The anti-competitive use of tying strategies to maintain 
a monopoly in this manner is, in our understanding, a violation of 
Section 2 of the Sherman Act. We conclude that market forces alone 
do not discipline Microsoft to limit the integration of middleware 
code into its OS or the bundling of middleware products with its OS 
to efficiency-enhancing levels. Rather, Microsoft has the ability to 
tie in ways that lack pro-competitive justification, and in any 
event has incentives to use tying strategies to integrate 
applications into its OS more aggressively than justified by 
efficiency.
    3. We begin in the next section with a brief description of the 
tying strategies at Microsoft's disposal. We then demonstrate 
through economic analysis that Microsoft has substantial incentives 
to tie its middleware products to its monopoly OS to reinforce and 
entrench that monopoly. Given these incentives, Microsoft's history, 
and the evidence in this case, we conclude that Microsoft has 
engaged, and is engaging, in anti-competitive tying, and is doing so 
in a way that maintains its OS monopoly, to the detriment of 
consumers and competition.
    II. MICROSOFT HAS MANY TECHNIQUES AT ITS DISPOSAL FOR TYING 
MIDDLEWARE TO WINDOWS.
    4. Microsoft has various means of binding its middleware 
products to the Windows operating system. Before describing these 
practices and the ways in which Microsoft uses them to reinforce its 
OS monopoly, we explain the general concept of middleware and why 
Microsoft's licensing of middleware with its OS in the Windows 
package constitutes tying.
    5. Middleware is exemplified by products such as Internet 
browsers, including Microsoft's Internet Explorer ("IE") 
and Netscape's Navigator, media players, instant messaging, and 
middleware applications platforms such as Java. By a strategy of 
tying middleware to the OS, we mean any constraint that Microsoft's 
operating system be bought with (or bound to) Microsoft middleware 
products, or any contractual or financial inducement to this end. 
Microsoft has argued that various middleware applications, 
especially IE and Windows Media Player ("WMP"), are 
essential components of an integrated operating system rather than 
distinct products, and that tying or bundling these products with 
the core operating system therefore does not constitute tying. 
Microsoft's argument is incorrect.
    6. Middleware products, such as browsers and media players, are 
sold in separate markets. Users can obtain Navigator or RealPlayer 
without purchasing an operating system in the same transaction. 
Users can also obtain IE or MSN Messenger without obtaining Windows. 
Until Microsoft bundled WMP into Windows, users could obtain these 
two products in separate transactions. Moreover, these products are 
clearly sold by different suppliers. The Court cannot give serious 
weight to Microsoft's argument that once WMP, for example, is 
integrated into Windows, the media player ceases to be a separate 
product: If this argument were accepted, then the mere fact that 
Microsoft integrates application code into the operating system 
would itself be a defense for its actions. In other words, tying, as 
a means of reinforcing a monopoly position, would constitute its own 
defense. The law, we suggest, cannot intend this.
    7. Tying involves contractual arrangements whereby Microsoft 
puts pressure on original equipment manufacturers 
("OEMs") or end-users to acquire Microsoft applications 
as a condition of acquiring Windows. It includes requirements that 
OEMs install Microsoft applications, rather than applications 
developed by Microsoft's rivals, and prohibitions on removing or 
uninstalling those applications. It also includes financial 
inducements to adopt Microsoft applications when Windows is 
purchased and installed. Each of these requirements is enforced 
through Microsoft's coercive power to harm non-adhering OEMs.
    8. Tying also involves designing the OS so that Microsoft's 
applications are integrated into the OS code, leaving rival 
applications unnecessary or even dysfunctional. This type of tying 
includes: (a) basic integration of code; (b) efforts by Microsoft to 
hinder disintegration; and (c) efforts to hamper the 
interoperability of rival applications. Basic integration involves 
providing, as part of the OS, services previously offered as 
standalone applications. This could be done in a purely modular 
fashion without the commingling of application code into the kernel 
of the operating system. If done in this manner, the products can be 
easily removed and replaced with competing products in a "plug 
and play" fashion. Technological efforts that hinder 
disintegration, however, have stronger anti-competitive overtones. 
These include: commingling code in a manner that hampers, and 
perhaps even bars, the replacement of the products or default 
options; designing the OS so that Microsoft's applications are 
chosen as default applications; making it difficult for OEMs or 
users to replace the icons or launch sequences; and creating 
utilities to "sweep" the Windows desktop and replace 
non-Microsoft icons.
    9. Note that some of these forms of tying, such as hampering 
rivals" performance, entirely lack pro-efficiency rationales, 
while all of them can be used in inefficient, anticompetitive 
manners. The remainder of this paper demonstrates that Microsoft has 
strong incentives to engage in such anti-competitive, inefficient 
bundling, and that it is doing so in a manner detrimental to 
competition with the goal of maintaining its extant monopoly in 
operating systems.
    III. ECONOMIC ANALYSIS SHOWS THAT MICROSOFT HAS SUBSTANTIAL 
INCENTIVES TO USE TYING TO SUSTAIN ITS OPERATING SYSTEM MONOPOLY, 
HARMING CONSUMERS AND COMPETITION.
    10. Microsoft has maintained that its tying is efficient and 
that it should be allowed to determine the level of integration of 
applications into its operating system. Microsoft argues that it 
should be free to tic its products together in any fashion it sees 
fit, as this type of product integration is efficient and promotes 
innovation with eventual consumer benefits. These arguments 
generally claim to defend Microsoft's intellectual property, and are 
expressed in terms of the general advantages of product integration, 
rather than defining specific benefits to users from Microsoft's 
practice of tying particular middleware products, such as IE or WMP, 
into the Windows package.
    11. Microsoft's claim amounts to the belief that market forces 
alone achieve the optimal degree of product integration and 
separation without any further regulatory or legal constraints. As a 
matter of economic theory, this argument fails to take note of 
Microsoft's position as a dominant producer in a market with 
substantial barriers to entry. For this general market-forces 
argument to be valid, Microsoft would need to demonstrate that 
competitive vigor in the market will discipline Microsoft to engage 
only in tying that enhances efficiency. But such complete reliance 
on market forces to achieve efficiency, in turn, requires open 
entry, while the evidence in this case has shown that there are 
significant barriers to entry in the OS market. This leaves 
Microsoft in a position to exploit any strategic and anti-
competitive motives to integrate. As a matter of market reality, as 
we shall explain, the evidence demonstrates that Microsoft has 
engaged in tying to an excessive degree, with the sole purpose of 
achieving anti-competitive aims in general and OS monopoly-
preserving aims in particular.
    12. With respect to the practices of tying middleware, 
Microsoft's interests are not aligned with those of competition and 
consumers: Microsoft can benefit without improving its product by 
using tying strategies to reinforce and strengthen its existing OS 
dominance.

[[Page 29111]]

    A. As a general matter, absent legal constraints, Microsoft 
possesses substantial economic incentives to integrate its products 
in a manner that reinforces its OS monopoly.
    13. Below, we set forth four theories that explain why 
Microsoft's practice of integrating its applications with the 
Windows OS helps to maintain its OS monopoly, in a way that is 
detrimental to consumers and competition. First, tying helps to 
sustain the applications barrier to entry, and thus serves to 
enhance Microsoft's OS dominance. Second, tying deters direct 
challenges to Windows" position as the dominant platform and 
thereby maintains or enhances Microsoft's OS dominance. Third, tying 
involves dynamic leveraging that permits Microsoft to achieve a 
monopoly in complementary applications as insurance against any 
possible erosion of the OS monopoly. Put another way, a monopolist, 
such as Microsoft which produces a pair of perfectly complementary 
products, aims to protect its full monopoly power by ensuring its 
future monopoly in at least one of the complementary products. 
Fourth, tying permits Microsoft to mitigate the competitive 
constraints on its operating system monopoly provided by previous 
releases of the OS. These four theories are not mutually exclusive; 
each of them contributes to a full understanding of Microsoft's 
anti-competitive conduct. And, to make matters worse, each of these 
anti-competitive results is mutually reinforcing because of the 
network effects operating between the applications sector and the 
operating system market.
    (1) Microsoft ties its applications to its operating system as a 
way of sustaining the applications barrier to entry.
    14. Microsoft has a general incentive to engage in anti-
competitive tying to protect its dominance in operating systems 
against the possibility of competitive developments in applications 
markets. The first means by which it accomplishes this is through 
enhancing the applications barrier to entry. The dominance of the 
Windows standard in a wide range of applications, or in a few 
particularly important applications, makes entry into the operating 
system market more difficult because an entrant has to offer both a 
new operating system and a full set of applications, or somehow rely 
on the chance that applications will quickly develop once the new 
operating system becomes available. In this way, an entrant faces a 
"chicken-and-egg" problem because of the indirect 
network effects in the operating system: the entrant could not 
succeed without a set of applications available to purchasers of its 
operating system; yet, few software developers would invest in the 
development of new applications based on an operating system without 
a large market share. This is referred to as the applications 
barrier to entry. The dominance of Windows as a standard for 
applications leads to the applications barrier to entry and growth 
in the operating system market.
    15. Microsoft is able to sustain this barrier by exploiting a 
collective action problem among buyers. When Microsoft ties by 
supplying the OS with an application such as IE or WMP, users must 
incur a series of costs to replace the application. These costs 
include purchasing or downloading the substitute browser or media 
player, installing the application, and incurring any uncertainty 
associated with the possible compromise in the functional integrity 
of the system. In an application market, buyers would collectively 
be. better off if each incurred the costs of purchasing from 
competing suppliers, because doing so would ensure greater 
competition in the future application market. However, Microsoft's 
tying practices preclude this result.
    16. Buyers" purchase decisions with respect to either the 
operating system or applications collectively affect the future 
market structure because Microsoft will achieve dominance if most 
buyers choose Microsoft products. Once Microsoft achieves dominance, 
network externalities sustain this dominance so that the market 
structure becomes a monopoly as a result of buyers" previous 
purchase decisions. The impact of each buyer's purchase decision on 
the future market structure, however, is negligible. Moreover, 
buyers do not take into account the impact of their purchase 
decisions on other buyers. As a result, even a small disadvantage to 
purchasing a competing product in the operating system or 
applications markets is enough to make the individual buyer prefer 
Microsoft's product. The result is that buyers" decisions make 
them collectively worse off. The future dominance of Microsoft and 
the higher prices faced by buyers are a result of their collective 
decision to purchase Microsoft's applications. Microsoft exploits 
this collective action problem and pursues dominance in the 
applications markets through its tying practices.
    (2) Microsoft ties applications to its operating system as a way 
of deterring direct challenges to Windows "position as the 
dominant platform for software developers.
    17. Microsoft's incentives for anti-competitive tying are 
particularly strong in the case of applications that might allow for 
the development of direct substitutes to the monopolized operating 
system. A clear incentive for Microsoft to tie its IE browser with 
Windows has been the threat that Netscape, either individually or 
combined with Java software, could eliminate Microsoft's network 
advantages in the operating system, by providing middleware (which 
serves potentially as universal translation support between any 
application and any operating system) that would provide a competing 
platform for software developers. This was a particular threat to 
Microsoft's dominance in operating systems because it potentially 
represented a platform/programming environment in which software 
applications could be developed without regard to the underlying 
operating system. Middleware provides a layer of software between 
applications and the operating system and can accommodate a new 
operating system with a change in a single set of code. Without 
middleware, the success of a new operating system would depend on 
the development of new code by every application developer. This 
incentive also explains Microsoft's initiatives to develop a 
Microsoft version of Java in an attempt to undermine the universal-
translator aspect of Java.
    18. Some economists have argued that the backwards compatibility 
of Microsoft's version of Java, i.e., the ability of all general 
Java applications to run on Microsoft's version, rules out the 
hypothesis that Microsoft designed its version of Java for the 
purpose of stifling the potential threat to its dominance in 
operating systems. This argument is wrong in its static assumption 
about compatibility. Given the history of the industry, the fact 
that Microsoft's initial version of Java was universally compatible 
with Java applications does not lead one to believe that if 
Microsoft dominated not just browsers but also Java in the future, 
it would continue to assure both compatibility of applications and 
free distribution of the pair of middleware products. Were Microsoft 
to establish dominance in the potential browser-Java bypass of its 
operating system dominance, why would it allow the bypass to be 
freely and effectively available? The concerns expressed by 
Microsoft's executives about the risks of 
"commoditization" of the operating system are well 
known.
    19. Middleware generally has the potential to act to varying 
degrees as a universal translator between an operating system and 
specific applications, because (as the name suggests) middleware 
intermediates between the operating system and applications: it 
invokes calls through an operating system's APIs and in turn issues 
its own APIs to applications. To accommodate a new operating system, 
instead of each application requiring re-coding for compatibility, 
only the "bottom half" of the middleware application 
must be reprogrammed. If twenty applications run on top of a 
particular middleware program, for example, compatibility with a new 
operating system could be achieved by reprogramming the middleware 
program instead of reprogramming each application. Middleware thus 
mitigates the indirect network effects of the operating 
system--and could potentially diminish the dominance of any 
operating system that these network effects support.
    (3) Microsoft has incentives to tie to achieve a monopoly, in 
complementary applications as insurance against possible future 
erosion of its OS dominance.
    20. A common response to the argument that monopolies can profit 
through leveraging into a second market is that monopoly profits can 
be collected only once: a tie into a complementary market with an 
increase in the price of the tied good by a dollar will reduce the 
demand price of the first good by a dollar. According to this 
response, there is no incentive to leverage. In the simplest, static 
world in which there are no industry dynamics, no uncertainty, and 
no variation in consumer demand, this "one-monopoly 
theory" is correct. This theory, however, fails when there is 
uncertainty about the preservation of monopoly. If the initial 
monopoly is at some risk, then an incentive for leverage arises as 
insurance against the loss of monopoly profits. In the event that 
the first monopoly fails and the second succeeds, the monopolist 
will have preserved a monopoly in at least one of the

[[Page 29112]]

markets. Consistent with the common response, having a monopoly in 
only one of the pair of markets is sufficient to collect the full 
monopoly profits. If either market's monopoly is uncertain, the 
monopolist has an incentive to create monopolies in both markets, 
and thus increase the likelihood of being able to obtain monopoly 
profits in at least one market.
    21. If Microsoft fears for the longevity of its operating system 
monopoly, or believes that operating systems are in a mature market 
with limited prospects for growth, it will have strong incentives to 
make minor sacrifices to Windows functionality in order to obtain 
dominance in high-growth markets. This is particularly true if the 
sacrifices (such as damaging relationships with OEMs and consumers 
by forcing them to accept an inferior browser or media player) have 
negligible effects on demand for Windows.
    22. The greater the threat to its OS dominance in the future, 
the more incentive Microsoft has to establish a dominant supplier 
position in an application market, such as the browser or media 
player market. To take a hypothetical future contingency, if the 
development of middleware means that the future OS market turns out 
to be more competitive than the current market, then Microsoft's 
actions to achieve dominance in the application market will leave it 
with dominance in one product of a pair of complementary products, 
rather than dominance in neither. Microsoft's incentive to establish 
dominance in key applications is thus strengthened by the fact that 
Microsoft's monopoly in the operating system market is not 
guaranteed to always be airtight
    23. The gains from leveraging are especially strong where 
network effects are present in applications markets or these markets 
otherwise promise large potential growth in revenues for any firm 
that establishes early dominance. Network effects have three 
implications that make Microsoft's tying practices particularly 
effective in reinforcing its OS dominance. First, in the early 
stages of the market's development, purchasers will be on alert for 
signals of which standard will eventually become dominant, in order 
to reduce their exposure to later costs of converting to the 
dominant standard. Tying a new application with the dominant Windows 
operating system will send strong signals to purchasers that will 
help to "tip" the market toward Microsoft's favored 
products, particularly given Microsoft's history. Second, a feedback 
loop will cause both the tying and Microsoft's dominance to steadily 
accelerate. As Microsoft begins to gain a substantial share in an 
application market, it will be able to engage in more overt forms of 
tying, as customers grow to accept even inconvenient results from 
Microsoft's anticompetitive behaviors (such as poor interoperability 
with rivals) because of the reinforcing network effects.
    This, in turn, will accelerate the tipping toward Microsoft 
dominance. Third, once Microsoft's dominance is established, 
proprietary standards and continued tying will lock in this 
dominance, not just on current production but on future applications 
in the same functional space. While all of these effects promote 
Microsoft's dominance in applications, it is the feedback effect of 
this control over applications to reinforce the OS dominance that is 
relevant for the matter at hand.
    24. It may appear that any preservation-of-monopoly theory must 
be applied narrowly to Microsoft's monopoly power in operating 
systems. If this were the case, then the insurance theory of tying 
just described would not apply, since this theory explains why tying 
to establish dominance in a new market can be profitable because of 
the profits that can be captured in that new market, instead of why 
it is profitable to protect the monopoly in the operating systems 
market.
    25. The standard "one-monopoly" theory, however, 
tells us that when there are two perfectly complementary products A 
and B, a monopoly over either, or a monopoly on both, allows the 
identical profits and results in the identical effects. (This theory 
holds in a static framework that sets aside the other three theories 
that we discuss.) With respect to an OS with a set of applications 
that are virtually universally adopted by all PC users, a monopoly 
over the OS alone is identical in its effect and in its incentives 
to a monopoly over the set of applications alone or a monopoly over 
both the OS and the set of applications. That is, there is only one 
monopoly: the economic role of tying under the monopoly-insurance 
theory is not creating a new monopoly, but rather preserving the 
monopoly (the monopoly being at least one monopoly position in the 
OS-applications pair). The monopoly-insurance theory thus explains 
the anti-competitive use of tying to preserve a monopoly in 
violation of Section 2 of the Sherman Act.
    26. The monopoly-insurance theory of tying has the effect of 
reinforcing Microsoft's monopoly position even if the preservation-
of-monopoly requirement of Section 2 of the Sherman Act is construed 
narrowly to apply only to Microsoft's existing monopoly on operating 
systems for PCs.
    The reason (discussed below) is that all of Microsoft's 
incentives for tying applications to Windows are mutually 
reinforcing. Even if Microsoft's incentive for tying were primarily 
to insure a monopoly in the event that the Windows OS monopoly 
failed in the future (the insurance theory), one effect of the tying 
is to reduce the chance that the Windows OS monopoly actually does 
fail, because of the strengthening of the applications barrier to 
entry. The impact is preservation, though imperfect, of Microsoft's 
monopoly in the operating system market.
    (4) Microsoft's operating system also has durable-goods 
qualities that create further anti-competitive incentives for tying.
    27. Part of Microsoft's argument that it should be free to 
"innovate" rests on the notion that an important source 
of "competition" in selling new versions of Windows is 
the existing stock of old versions of Windows. While it is true that 
the durable-goods aspect of the OS market (i.e., the ability of 
consumers to retain their existing versions of the OS instead of 
buying a new version) disciplines Microsoft, it only does so in the 
sense that Microsoft earns fewer profits than it would in a 
hypothetical world in which it were to lease its OS. The claim that 
the OS market is, in fact, more competitive than this hypothetical 
market does not weaken the claim that Microsoft's position in the OS 
market is dominant and that its activities are illegal.
    28. Moreover, this "durable good monopolist" feature 
of the market contains an incentive for Microsoft to engage in 
illegal bundling. The strategy of leasing as a means of escaping the 
durable monopolist's dilemma is well established and has been 
thoroughly analyzed by economists. Rather than selling the product 
into the market in each period, if the monopolist seller of a 
durable good can lease the product on a period-by-period basis, it 
can retain complete control over the supply of the good into the 
market in each period. This allows the monopolist to set monopoly 
prices in each period instead of being constrained by the 
consumers" option to continue using the already-purchased 
stock (or version) of the product. The monopolist who leases for a 
period can lease both previous and current production together to 
achieve monopoly profits; doing so eliminates the competitive 
discipline that would otherwise occur as past sales re-enter current 
and future markets. If Microsoft could move to a business plan of 
leasing rather than selling software, it would completely eliminate 
competition from old versions of the software: as Microsoft leases 
new versions of software, it could retire leases on old versions.
    This would serve to protect the monopoly power that Microsoft 
enjoys from its OS. Tying can allow Microsoft to implement this 
leasing strategy so as to avoid the durable good discipline. 
Specifically, tying the use of the OS to some complementary 
transaction that can be leased, or priced on a per-use 
basis--rather than sold--provides Microsoft with the 
opportunity to collect a revenue stream that is immune to the 
competitive discipline imposed by previous versions of the OS.
    29. The escape from the durable monopolist's dilemma via leasing 
thus creates another incentive for tying. Tying allows Microsoft to 
move closer to the leasing outcome by facilitating the collection of 
transaction fees based on current usage. The set of middleware 
products that potentially puts Microsoft in the position of 
collecting a fee on Internet transactions serves this role. These 
products are IE, WMP, Microsoft's Digital Rights Management 
("DRM") software, as well as the .Net My Services 
initiative. The Digital Rights Management software, with WMP, will 
initially support a market for music and video products. The 
combination of these middleware applications, enabling the Microsoft 
e-commerce network, will then support the transition to Internet 
sales transactions of a broad variety of products. As Microsoft 
begins to shift its revenue structure from Windows sales to Internet 
transaction fees, it will seek to control the key Internet access 
choke points such as browsers, media players, and digital rights 
management. Tying facilitates this control. Moreover, Microsoft can 
directly charge usage fees for its media player software that it 
cannot

[[Page 29113]]

charge for the OS. While the durable-goods monopoly theory of 
Microsoft's tying incentives can be seen most directly as a theory 
of the incentive to dominate applications that facilitate a leasing 
business plan, one important impact of dominating these applications 
is to preserve Microsoft's dominance in the market for operating 
systems. The impact, in other words, is a preservation of 
Microsoft's OS monopoly.
    30. As an empirical matter, versions of Windows are converging 
in their substitutability. This convergence of versions strengthens 
the durable-good monopolist incentive to tie in two ways. First, it 
increases Microsoft's incentive to escape the durable-good 
monopolist discipline on prices, since the easier it is to 
substitute the current version of Windows with existing versions, 
the stronger this discipline is. Second, there are, in principle, 
two ways of leasing to escape the durable-good monopoly discipline. 
Microsoft could rent the OS or tie it to an application and collect 
the corresponding stream of revenues each time the application is 
used. The converging substitutability of Windows" versions 
renders the former more difficult, increasing the incentive to 
escape the durable-good discipline by tying applications. Thus, the 
increasing substitutability among sequential versions of Windows, 
even if later versions are superior, reinforces Microsoft's 
incentives to extend its monopoly to dimensions, such as Internet 
sales, in which it can charge a vig or rent the application.
    (5) Microsoft's anti-competitive tying incentives are mutually 
reinforcing and are manifest in strategies that lack any competitive 
justification.
    31. The incentives for anti-competitive tying that we discuss 
are mutually reinforcing because of the network effects operating 
between the applications sector and the operating system market. 
Achieving dominance in applications (through tying) strengthens the 
dominance of the OS, because buyers in the OS market are more 
assured of available applications; the greater dominance in the OS 
market in turn feeds back into greater dominance in applications, 
since the tying strategies take the form of imposing an artificial 
advantage relative to applications of the dominant OS supplier. The 
greater Microsoft's share across all applications markets, the 
greater the applications barrier to entry. Greater shares in 
applications markets create a feedback effect of even greater 
dominance in the OS market. The source of this feedback effect is an 
"indirect network effect": the greater the penetration 
of any operating system, the more applications will be written to 
it, and consequently, the more valuable the operating system will be 
to any user. Since the OS monopoly is not perfect, Microsoft will 
therefore take advantage of anti-competitive opportunities to 
generally strengthen the applications barrier to entry. As a general 
principle, therefore, any extension of Microsoft's monopoly to a set 
of important applications reinforces its monopoly in operating 
systems.
    32. Microsoft has a clear incentive to engage in tying in the 
form of hampering rival applications and coding its own applications 
to be defaults to the detriment of consumer choice. This type of 
tying has a negligible negative effect on the demand for Windows, 
and by tipping high-growth markets, could provide Microsoft with 
long-term profits.
    33. Given that the Windows source code is both complex and 
proprietary, Microsoft can engage in this type of tying 
surreptitiously. For example, Microsoft can alter the algorithms 
that set "favorites" in folders and task bars so that 
Microsoft-preferred applications and web sites are used more 
frequently. In addition, Microsoft can cause subtle performance 
problems for rival applications in Windows environments. This type 
of tying, however, is consistent only with anti-competitive 
behavior-no efficiency benefits result from harming rivals or 
setting Microsoft options as defaults.
    B. Microsoft's anti-competitive incentives are particularly 
powerful in the markets for browsers and streaming media, as well as 
the adjacent markets for content-encoding, digital rights 
management, e-commerce, and convergence.
    34. In markets with network effects and perceived similarity in 
product functions, directional changes in market shares can 
"tip" the market toward a dominant outcome because 
consumer expectations as to which format will dominate are self-
realizing. In other words, the expectation on the part of consumers 
that a particular format will dominate leads each consumer to choose 
that format because of the rational concern that other formats will 
not be supported--accelerating the dominance and confirming the 
expectations of consumers. Consider the browser and the media player 
as examples.
    35. In the browser market, Microsoft has achieved the dominance 
that it sought, and its monopoly power in the OS continues. These 
are related: browser dominance reinforces OS monopoly power. The 
connection is that browser dominance increases the applications 
barrier to entry and simultaneously removes the direct middleware 
threat posed by Netscape.
    Both of these effects in turn serve to increase the demand for 
the Windows OS through network effects as buyers anticipate 
continued dominance of Microsoft formats in both the operating 
system and applications markets; the two effects thus reinforce the 
dominance of Windows OS.
    36. Now that Microsoft has effectively achieved dominance in 
browsers, and through this reinforced its dominance in operating 
systems, the stage is set for applying the same tactics to markets 
for other applications. The media player market represents an 
important current market in which Microsoft's anti-competitive 
strategies are at play. In the media player market, Microsoft's 
first incentive for tying is to protect its dominance in the market 
for operating systems by deterring the development of new middleware 
platforms. Streaming media players will be essential for Internet 
browsing in the future because of their ability to enhance Internet 
content rendering under bandwidth constraints. If Microsoft achieves 
dominance in the media player market (and as noted above, the 
"tipping point" argument suggests that a trend to 
dominance can quickly translate into a highly dominant market 
share), any entrant into the operating system market would also have 
to provide a media player compatible with the WMP format.
    37. For this reason, the applications barrier to entry incentive 
is especially powerful for streaming media players. Rival operating 
systems will be unable to provide a functional (i.e., Windows Media 
Audio-compatible) media player since the Windows Media Audio format 
is proprietary and Microsoft refuses to universally license it. 
Because compatibility with streaming media is vital to future 
operating systems, Microsoft's dominance over operating systems will 
be ensured. The observation that Microsoft licenses the software for 
playing downloaded media, but not the software for streaming media, 
suggests that Microsoft is strategically aware of the profit-
enhancing power of retaining exclusive property rights on media 
streaming software.
    38. To elaborate: with respect to other applications, an entrant 
into the OS market could--at least in theory--provide an 
OS plus a set of applications. However, even this potential entry 
strategy is not available in the case of the media player 
application, because the use of a media player by a user depends not 
just on products that could be provided by the new entrant, but on 
the proprietary formats chosen by Internet sites using media player 
software. In this sense, the provider selection of Microsoft's 
proprietary format creates a content-encoding barrier to entry for 
streaming media players. Again, this reinforces Microsoft's monopoly 
power over the OS market.
    39. An additional anti-competitive incentive for dominating an 
application market is to secure a monopoly position in at least one 
product in the application/OS pair in order to achieve monopoly 
profits even in the event that the OS dominance is not sustained. 
This is discussed above in Section III.A.3. The possibility that the 
OS dominance is not sustained means that the joint monopolist could 
not necessarily collect the maximum profits through the OS price 
alone.
    Dominance of the application market would secure, or at least 
increase the likelihood of, monopoly profits.
    40. This incentive is particularly relevant to streaming media 
markets. For example, the OS dominance could be at risk as consumers 
move to handheld devices for computing and accessing the Internet 
that do not require Windows OS. Presumably, however, these customers 
will still wish to play music and see videos on such devices. To the 
extent that WMP and its accompanying format achieve dominance for 
streaming media, Microsoft will maintain monopoly power in the pair 
of products consisting of the OS plus the media player. (Recall that 
the essential measure of monopoly in the markets for a pair of 
complementary products is dominance in at least one of the 
products.) Thus, streaming media players and formats hold the 
potential for Microsoft to maintain its original monopoly.
    41. Additionally, significant gain accrues to Microsoft if its 
DRM technology dominates the related market for audio and video 
files.

[[Page 29114]]

Using encryption technology, DRM technology permits only users with 
licenses to play the packaged file. The license has a key to unlock 
the encryption.
    Should a user without a license attempt to play the file, the 
application initializes with an application that permits the user to 
acquire the license. Applications with DRM technology and Windows 
Media Device Manager enable the use of WMP on devices other than 
conventional desktop computers. Since market participants will tend 
to limit their investments to the likely dominant standard, 
Microsoft can easily become the sole provider of DRM solutions. 
Moreover, this will be a critical market for Microsoft, since users 
will require licenses for downloading, and content providers require 
certificates for encryption. The alternatives of mutual 
interoperability or even open standards are equally plausible 
conceptually, but not in Microsoft's interests.
    Microsoft thus has incentives to use tying to ensure that its 
DRM solution remains proprietary and becomes dominant. Microsoft can 
ensure this outcome by making its media player format the format of 
choice for both users and content providers, and tying WMP to 
Windows ensures this choice. Once again, this creates a content-
encoding barrier to entry that permits Microsoft to maintain its 
monopoly power in the pair: OS plus WMP as an application.
    42. Because of the durable-goods nature of Microsoft's OS 
monopoly, as described in Section III.A.4 above, Microsoft has 
additional incentives to tie streaming media technologies to the OS. 
Indeed, the greatest value for locking in the dominant streaming 
media and DRM formats may be the vig that Microsoft hopes to collect 
from Internet transactions.
    43. Dominating the media player format so as to collect a vig on 
transactions would position Microsoft to collect transactions 
revenue that may well exceed revenues available from Windows 
software licenses alone--even if Microsoft's dominance of the 
OS market is secure. As we discussed in Section III.A.4, monopolists 
of durable goods recognize that past sales constitute future 
competition (here, older versions of Windows compete with current 
and future versions of Windows). The monopolists face a competitive 
constraint against increasing prices even in the absence of any 
significant rivals. Such monopolies naturally seek ways to 
circumvent the constraint. In the case of Windows, the constraint is 
potentially circumvented by the collection of the vig on 
transactions.
    44. What is the link between dominance in operating systems, 
streaming media, digital rights management, e-commerce, and 
convergence? Microsoft will attempt to use its dominance in any of 
these markets to increase the use of Microsoft-favored products in 
all of these markets. In contrast to the potential situation where 
different players are strong in each market, Microsoft will leverage 
its dominance in any market to strengthen its position in all of 
them. Microsoft's incentive to do this lies in the many revenue 
streams that it currently forgoes. For example, Microsoft does not 
currently charge web sites for the use of Windows media formats. If 
Microsoft establishes dominance in the media player market, as it 
translates to dominance in e-commerce hosting, Microsoft will no 
longer have any constraint on fully exploiting this revenue stream. 
Once again, this links back to the original dominance in Microsoft's 
OS. All of these applications are mutually reinforcing and serve to 
preserve the monopoly power that accrues from packaging Microsoft's 
OS with complementary applications.
    C. The theorized benefits of product integration that may exist 
in some cases do not apply to the markets at issue in this case.
    45. As a theoretical matter, of course, in many transactions, 
purchasers would prefer to buy bundles of products and services. 
Purchasers of glass prefer to have borates included, drivers prefer 
to have steering wheels with their cars, and purchasers of shoes 
typically prefer to have laces included. The relevant question here 
is whether computer applications are similar to those 
examples--i.e., whether browsers and other middleware such as 
streaming media players are "mere inputs" into the 
overall "Windows experience."
    (1) The economics of software markets cast doubt on Microsoft's 
efficiency arguments for integration of its own browser and media 
player with the OS.
    46. As discussed above, many forms of tying have no efficiency 
justification. Contractual provisions limiting the acceptance of 
rival technologies, or efforts to redesign code to harm 
rivals" performance, create economic loss. As further 
discussed above, Microsoft has these forms of tying at its disposal, 
incentives to use them, and a historical record of using them.
    47. Microsoft's claims regarding the efficiencies of its 
contractual tying- i.e., that it reduces consumer time costs and 
confusion to have a set of default options provided with a personal 
computer "out of the box"--confuse the benefit to 
consumers of having a browser and its media player bundled along 
with the OS, with the benefit of having Microsoft's choice of 
applications bundled with the OS. The efficiencies that come with 
providing an integrated package of an OS and various applications 
are not specific to Microsoft's applications. In a market where OEMs 
were free to offer whichever packages of software consumers desired 
(e.g., Microsoft Windows with RealPlayer and IE, or Microsoft 
Windows with WMP and Netscape), the market would provide those 
varieties of packages preferred by consumers. The market would 
respond fully to the efficiencies associated with the purchase of a 
full package of hardware, OS, and software applications, and in 
addition, the market would be free to offer the variety that 
consumers demanded.
    48. Our analysis supports the hypothesis that Microsoft's tying 
of IE and WMP and its efforts to gain DRM dominance are not driven 
by efficiency concerns. Although selection of some defaults is 
necessary on each PC, there appear to be no engineering efficiencies 
to the integration of the choice of default into the OS. To the 
contrary, choice and market competition (and consequently, 
efficiency) suffer when knowledgeable OEMs (who act as informed 
agents of consumers) face artificial barriers to playing that role, 
such as when Microsoft commingles code or makes Microsoft 
applications difficult to permanently remove as default settings. By 
designing system software to hamper the installation or operation of 
rival software suppliers, Microsoft reinforces the applications 
barrier to entry; the impact is a strategic reduction in competition 
and a reinforcement of Microsoft's OS monopoly.
    49. Additionally, the usual arguments made to justify 
integration in other markets are largely inapplicable to software 
application markets. It is often argued that integration occurs (i) 
to reduce transaction, distribution or production costs, or (ii) to 
increase the value of the final product.
    50. The argument that transaction and assembly costs justify 
integration does not apply to major software applications. For 
example, consumers want to purchase some integrated packages of 
complementary products such as functioning automobiles because 
separate purchases of steering wheels, engines, dashboards, seats, 
etc. would impose enormous transaction and assembly costs.
    By contrast, software markets allow assembly at low cost even 
without integration, provided that monopolists are legally 
prohibited from impairing interoperability. With OEMs acting as 
purchasing and assembly agents for end-users, it is no more 
efficient for Microsoft to create OS-and-application bundles than 
for multiple OEMs (or third-parties who can then license such 
bundles to OEMs) to create those OS-and-application bundles desired 
by end-users.
    51. Forced integration of particular software brands does not 
increase value. Instead, it causes an efficiency cost to the extent 
that end-users value the product variety entailed in the variety of 
inputs. The value of variety is lost with integration. Steering 
wheels in cars are typically undifferentiated commodities that 
comprise a trivial portion of the value of the final product.
    Thus, even though a consumer could replace the steering wheel 
with limited effort, there is little reason to do so because a 
different steering wheel is unlikely to improve the performance of 
the overall product. By contrast, technological development in 
software applications markets means that different applications can 
differ substantially in what they deliver to consumers. Loss of 
product variety as a result of integration can be costly.
    (2) Contrary to Microsoft's claims, issues of pricing and 
innovation provide further evidence that Microsoft's tying harms the 
marketplace and consumers.
    52. Microsoft has argued that the extension of monopoly power 
across a set of complementary products may produce consumer benefits 
if the monopolist charges lower prices than would be charged if 
independent monopolists were to separately produce two or more 
complementary products. In the latter case, each independent 
monopolist would raise prices higher than the level that would 
maximize the combined profits of all the monopolists. Thus,

[[Page 29115]]

according to this theory, consumers benefit from Microsoft's 
monopoly leveraging through lower prices.
    53. This theory imagines a static world in which innovation and 
entry are non-existent, and firms simply set prices to maximize 
profits, given unchanging demand and unchanging technology. The 
practical implications of the theory for the real world of rapidly 
changing technology and potential dynamic competition (as opposed to 
monopoly positions that are airtight) are minimal.
    In an economic theory that incorporates industry dynamics, 
strategies taken by a dominant firm to eliminate a firm in a 
complementary market remove a potential rival or entrant in the 
primary market. In the reality of software markets, this anti-
competitive effect clearly overwhelms any theoretical, static price 
effect: innovation and dynamic competition thus are, and should be, 
the focus of the Microsoft case. The driver of consumer benefit in 
these markets is innovation: over the past ten years, while prices 
of applications have fluctuated only moderately, the performance of 
applications has grown dramatically. New applications, such as 
browsers and media players, have become important sources of 
consumer benefit, while improvements in existing applications such 
as financial software have yielded strong consumer benefits. In any 
analysis on the impact of tying, the most important question is the 
impact on innovation, not price. Tying harms innovation by 
preserving Microsoft's monopoly position, protecting it against 
dynamic competition to the detriment of consumers.
    54. Microsoft argues that a single monopolist over two products 
has greater incentives to innovate than two separate monopolists. If 
two complementary products are monopolized separately, the argument 
goes, each monopolist ignores the positive benefits that accrue to 
the other firm from an increase in its own pace of innovation. In 
the matter at hand, this theoretical efficiency would argue that if 
Microsoft had a monopoly in operating systems, while Novell had a 
monopoly in browsers, Novell would not innovate as much as possible 
because it would not take into consideration the positive effects of 
browser innovation on operating system demand.
    This reasoning also suggests that innovation in the industry 
would be enhanced if Microsoft's OS dominance were to be extended 
further into still more applications markets. The key point missed 
in this theory is that any extension of Microsoft's OS monopoly 
power would dampen innovation into substitutes for Microsoft's OS. 
Enhancing the applications barriers only reduces the incentive for 
any firm to engage in OS or applications innovation. If an 
application could be open to competition--i.e., if it could be 
characterized by some rivalry or competition, as an alternative to 
Microsoft's integration--then unrestrained competition would 
strengthen rather than weaken innovation. While Microsoft's 
dominance in the browser market today may be a fait accompli, 
untying the OS and media player will lead to such greater 
competition in media player innovation.
    55. Significantly for this case, untying would also increase 
competition in the operating system market. As discussed earlier in 
Section III.A, tying protects Microsoft's operating system dominance 
by maintaining the applications barrier to entry and weakening or 
deterring direct platform challenges. If there are separate 
monopolists in adjacent markets, each will have the incentive to 
enter or sponsor entry into the other's market, leading to 
competitive pressure in both markets.
    A. Microsoft's options, incentives, and history, create a strong 
presumption that Microsoft's Wing harms OS competition and 
consumers.
    56. The District Court's Findings of Fact confirm that it is 
Microsoft's "corporate practice to pressure other firms to 
halt software development that either shows the potential to weaken 
Microsoft's applications barrier to entry or competes directly with 
Microsoft's most cherished software products." As a historical 
matter, Microsoft has clearly engaged in anti-competitive, 
inefficient tying with other applications. For example, Microsoft 
has forbidden OEMs from changing system defaults so as to make non-
Microsoft products the "default application" in 
"out of the box" packages. While Microsoft allows the 
"installation icons" of competing applications to be 
installed on desktops "out of the box," installation 
icons disappear if they are not invoked. In an even more subtle form 
of contractual tying, Microsoft requires applications that run with 
Windows to obtain a certification from Microsoft. This permits 
Microsoft to monitor and perhaps discipline its applications rivals. 
While some of these practices differ in form from strict tying (a 
certification requirement for software is not the same as a 
contractual requirement that OEMs use Microsoft products), the 
effect is similar in that Microsoft is signaling to all other market 
participants that applications may only run with Windows by 
Microsoft's permission.
    57. Microsoft's profit incentives dictate that Microsoft would 
tie its products together much more aggressively than efficiency 
alone would suggest. With regard to the question of the nature of 
competition in the media player market, one of the current objects 
of Microsoft's tying, and, in particular its tying of WMP, is clear: 
as the District Court determined, the "multimedia stream 
[represents] strategic grounds that Microsoft [needs] to 
capture." That--and not efficiency--is the driving 
force behind Microsoft's conduct.
    B. The evidence indicates that Microsoft is anti-competitively 
Wing the browser and the media player with its operating system.
    58. In the absence of tying, Microsoft would provide an 
operating system and applications such as the browser and media 
player that were developed and offered in a modular, plug-
replaceable fashion. The applications codes for the browser and the 
media player would not be commingled with the OS code, but would 
instead communicate with the OS through a set of well defined APIs. 
Publishing the APIs and interface protocols in this non-tying world 
would enhance the value of Microsoft's operating system by 
encouraging competition in the innovation of the complementary 
good--the browser and the media player. Greater competition and 
functional value in the market for a complementary good always 
benefit a firm by increasing the demand for its product. In the 
absence of anti-competitive incentives to reinforce barriers to 
entry, this strategy would maximize the profits that Microsoft 
obtains from its operating system. The fact that Microsoft does not 
engage in such a business strategy demonstrates, in the absence of 
evidence that tying is efficient, that Microsoft is motivated by 
anti-competitive incentives.
    59. Microsoft openly engages in contractual tying and basic 
technological integration. By developing and marketing Windows XP as 
an integrated package of operating system and popular applications, 
Microsoft directly ignored the findings of fact and law by U.S. 
courts.Microsoft's history makes it likely that Microsoft is also 
engaging in various forms of OEM coercion to raise 
rivals"distribution costs and encourage the distribution of 
its own middleware products. Consistent with our analysis, this 
tying generally serves the purpose of Microsoft profitability and 
reinforcement of its OS dominance, rather than consumer benefit. 
Microsoft directly engages in anti-competitive tying when it 
prevents OEMs and end-users from removing or uninstalling IE and 
WMP. Microsoft does this through code commingling between the media 
player and the operating system that renders substitution for WMP 
difficult, or even impossible.
    60. Another example of anti-competitive tying is that Microsoft 
renders its own DRM technology software non-interoperable with other 
media players because of DRM's interaction with Window XP's own 
"secure audio path" software. While this is not tying in 
the sense of designing the operating system to be incompatible with 
rival applications, it does involve designing an 
application--DRM--that limits the compatibility of rival 
applications in a closely related market, the market for media 
players.
    61. More generally, Microsoft anti-competitively undermines the 
functionality and utility of rival streaming media players and 
formats. For example, Microsoft denies a license for playing files 
streamed in Windows content encoding formats to its principal 
competitor, RealNetworks, thereby reducing the utility to consumers 
of RealNetworks" products. Microsoft also disadvantages rival 
content-encoding formats by designing WMP to record only in Windows 
media formats. These actions have, in the past, served to reduce 
consumers" perceptions of rivals" performance--for 
example by deliberately making consumers" use of Netscape 
"a jolting experience" or damaging MP3 quality and 
functionality.
    62. In general, OEMs perform a screening function, as agents of 
consumers, by ensuring that the software products provided out of 
the box are compatible with each other and with the operating 
system. Consumers are aware that OEMs perform this function. 
Consumers are also aware that OEMs" reputations are based 
partly on packaging

[[Page 29116]]

high-quality software products, so that OEMs have the incentive to 
choose the best software products for the price. Consumers are in 
general not aware of the contractual restrictions imposed in various 
contractual arrangements that might explain the choice of media 
player, including, for example, any threat not to license the 
Windows OS to the OEM unless all Windows applications are included 
as defaults. Nor are consumers aware of any financial incentives 
offered to OEMs by Microsoft to include only Microsoft applications 
as default options. Contractual tying alone will thus cause 
consumers to infer, for reasons unrelated to merit, that 
Microsoft's applications are the optimal products for them.
    63. As suggested above, the interaction of all these effects, 
combined with rational expectations, can easily lead to the rapid 
foreclosure of competition. The force of self-realizing expectations 
is especially strong when one firm or one format is a natural focal 
point for consumer expectations. In markets where any number of 
formats could be sustained as dominant because of self-realizing 
expectations (economists term this "the multiplicity of 
rational expectations equilibria"), a focal point property of 
any one equilibrium can be important in predicting which equilibrium 
will be sustained. There could hardly be a stronger focal point than 
the Microsoft/Windows format for predicting the likely dominant (and 
perhaps sole) format. The history of the PC software industry is one 
of the dominance of Microsoft standards. The prediction that the 
Microsoft standard will predominate in the media player market is 
natural, perhaps inescapable, for a consumer--uninformed about 
the media player market specifically--debating about which 
format to adopt. While it is arguable that strong network effects 
might yield dominance by a single firm in a good or service and its 
complements, it is uncertain whether a monopoly outcome is 
inevitable absent tying. In this context, tying assures OS dominance 
and is therefore anti-competitive.
    64. Thus, Microsoft's coercion of OEMs to select WMP for the 
"out-of-the-box" experience, and to obscure the 
differences in capabilities between WMP and rival products, could 
weaken consumer awareness of the various functionalities available 
in the open market. This would increase expectations of a single 
dominant format, which in turn would accelerate that dominance. The 
dominance in the media player market, to emphasize the applications-
OS interaction once more, reinforces Microsoft's dominance in 
operating systems. V. CONCLUSION
    65. We show in this report that Microsoft has substantial 
incentives to engage in anticompetitive tying of its middleware 
products with Windows. It has incentives to use contractual 
inducements to OEMs to bundle Windows with its own middleware 
instead of rival products; commingle applications code into the 
kernel of the operating system; and hamper the interoperability of 
rival applications. We also show that Microsoft's tying--in all 
of its forms--reinforces Microsoft's monopoly in operating 
systems.
    66. Microsoft's incentives to anti-competitively bundle fall 
into four mutually reinforcing categories. First, by tying its 
middleware applications to the Windows operating system, Microsoft 
can strengthen the applications barrier to entry against its OS 
competitors. This reinforces Microsoft's OS monopoly. In order for 
entrants in the operating system market to succeed, they must have a 
wide variety of applications available for consumers to purchase. 
But software developers will invest in the creation of new 
applications only for operating systems that have widespread 
distribution. If Microsoft attains dominance with both the operating 
system and key middleware applications, it can ensure that its OS 
rivals will be unable to meet consumer demands for the most popular 
applications. With a dominant position in applications markets, 
Microsoft may choose not to write those applications to interoperate 
with rival operating systems, thus enhancing the already significant 
applications barrier to entry.
    67. Second, tying reinforces Microsoft's OS monopoly by 
deterring direct challenges to the OS position as the platform of 
choice for software developers. Since programmers can write calls to 
middleware products, Microsoft's dominance in these products reduces 
the possibility that a universal translator (middleware) between 
operating systems and applications would threaten the Windows 
monopoly. Just as with the browser, Microsoft weakens this 
competitive threat to operating systems by integrating the potential 
substitutes directly into the OS.
    68. Third, tying can provide a method of dynamic leveraging to 
ensure a future monopoly. This involves a direct counterargument to 
the familiar "one-monopoly theory," which states that a 
monopolist cannot collect more profits through a monopoly on a pair 
of complementary products (an operating system and an application) 
than through a monopoly on either product alone. Where the future 
entry into each product is uncertain, establishing a monopoly on 
both products in the pair increases the chance that the monopolist 
will retain a monopoly on at least one product in the future and 
therefore is positioned to collect full monopoly profits. In our 
context, the fact that the Windows monopoly over operating systems 
is not airtight creates an incentive for Microsoft to leverage its 
dominance so as to increase the likelihood of future dominance in at 
least one class of products--the operating system or 
applications. Dominance in applications provides (partial) insurance 
against the loss of monopoly power in operating systems, but the key 
is the preservation of monopoly in at least one of the pair of 
products: the OS and one or more important middleware applications.
    69. Finally, tying IE and WMP into the OS and locking in 
Microsoft's streaming media and DRM formats put Microsoft in a 
position to potentially collect a tax on e-commerce transactions. 
Tying thus facilitates the move by Microsoft to a business strategy 
of collecting revenues from per-transaction royalty of its software, 
rather than outright sale of its software. This business strategy 
lessens the competition that Microsoft, as a durable-good 
monopolist, faces from the sales of its own previous versions of 
Windows. In this sense, the strategy, and its facilitation through 
tying, reinforce Microsoft's dominance in operating systems.
    70. Product integration can theoretically be beneficial in some 
markets. Purchasers prefer to purchase some bundles of inputs, such 
as steering wheels with cars or laces with shoes. These efficiencies 
do not apply to the bundling of middleware with Windows. Purchasing 
a personal computer with a full set of applications and default 
options "out of the box" is valuable for many consumers. 
But the efficiencies that come with an integrated package of an OS 
and various applications are not specific to Microsoft's 
applications. In a market where OEMs were free to offer whichever 
packages of software consumers desired, without integration of 
applications into the operating system, and without Microsoft's 
tying constraints or inducements, the market would provide the 
variety of packages preferred by consumers. Moreover, the 
engineering efficiencies claimed for the integration of middleware 
code into the operating system appear to be negligible, and are 
therefore more than offset by the anti-competitive effects of tying. 
In fact, a software design organized around modular programming of 
the operating system and middleware applications would achieve the 
efficiencies associated with modular programming and would allow for 
plug-and-play replacement of the software.
    71. In the absence of tying, Microsoft would offer an operating 
system and middleware applications that were distinct in the sense 
of modular programming. For example, neither browser nor media 
player code would be commingled with OS code: instead, both would 
communicate with the OS only through a set of published APIs. 
Microsoft would enhance the value of its operating system by 
encouraging competition in the innovation of the complementary 
good--i.e., the browser and the media player. This strategy 
would maximize value to consumers and the profits that Microsoft 
obtains from its operating system. The fact that Microsoft does not 
engage in such a business strategy demonstrates, in the absence of 
evidence that its tying is efficient, that Microsoft is motivated by 
anti-competitive incentives that maintain its OS monopoly.
    VI. APPENDIX: CURRICULUM VITAE OF FRANK MATHEWSON
    G. FRANKLIN MATHEWSON--Professor of Economics, Director of 
the Institute for Poficy Analysis, University of Toronto
    Ph.D. Stanford University
    B. Com. University of Toronto
    ACADEMIC POSITIONS
    1996-present Director, Institute for Policy Analysis, 
University of Toronto.
    1969-present Professor of Economics, Department of 
Economics, University of Toronto.
    1969-present Research Associate, Institute for Policy 
Analysis, University of Toronto.
    1995-1996 Acting Chair, Department of Economics, 
University of Toronto.
    1985 Visiting Professor, Center for the Study of the Economy and 
the State, University of Chicago, Spring Quarter.

[[Page 29117]]

    1984 Visiting Scholar, Graduate School of Business, University 
of Chicago, Spring Quarter.
    1978-1983 Associate Chairman and Director of Graduate 
Studies, Department of Economics, University of Toronto.
    1970-1982 Professor of Economics, Faculty of Management 
Studies, University of Toronto.
    1978-1979 Senior Research Associate, Ontario Economic 
Council.
    1976-1977 Visiting Research Fellow, Department of 
Political Economy, University College, University of London.
    HONORS AND FELLOWSHIPS
--Social Science and Humanities Research Council Research 
Fellowship: 1994, 1991, 1989, 1987, 1986, 1985
--Social Science and Humanities Research Council Leave 
Fellowship: 1983-1984
--Canadian Council Leave Fellowship: 1976-1977
--Canada Council Doctoral Fellowship: 1966-1969
--Woodrow Wilson Fellowship: 1965
    PROFESSIONAL AFFILIATIONS
--Editorial Board, Journal of Economics of Business, 1992-
present.
--Editorial Board, Managerial and Decision Economics, 1994-
present.
--Editorial Board, Economic Inquiry, 1987-1997.
--Editorial Board, Journal of Industrial Economics, 
1990-1995.
--Associate Editor, International Journal of Industrial 
Organization, 1982-1988.
--Co-editor with M. Trebilcock and M. Walker. The Law and 
Economics of Competition Policy, Vancouver: The Fraser Institute, 
1990.
--Co-editor with J. Stiglitz. New Developments in the Analysis 
of Market Structures, Cambridge: MIT Press, 1985.
--Program Committee, European Association for Research in 
Industrial Economics, 19831991.
--Program Committee, Conference on Industrial Organization, 
International Economics Association, 1982.
    PUBLICATIONS
    "The Analysis of Efficiencies in Superior Propane: Correct 
Criterion Incorrectly Applied." With Ralph Winter. Canadian 
Competition Record, Fall 2000, 20(2): 88-97.
    "Professional Corporations and Limited Liability." 
With Michael Smart, in Peter Newman (ed.) Palgrave Dictionary in 
Economics and the Law, 140-143 London: MacMillan Reference 
Limited, 1999.
    "Law Firms." With Jack Carr, in Peter Newman (ed.) 
Palgrave Dictionary in Economics and the Law, 497-500, London: 
MacMillan Reference Limited, 1998
    "Canadian Bank Mergers: Efficiency and Consumer Gain 
versus Market Power" With Neil Quigley CD Howe Institute, 
Occasional Paper, No. 108, June 1998.
    "To Merge or not to Merge: Is that the Question?" 
With Neil Quigely. CD Howe Institute. Occasional Paper, No. 108, 
1998.
    "The Law and Economics of Resale Price Maintenance." 
With Ralph Winter. Review of Industrial Organization, 13:1-2, 
57-84, April 1998.
    "What's Essential, What's Prudential, What Can Competition 
Provide?" With Neil Quigley. Canadian Competition Record 18:2, 
11-28, 1997.
    "Reforming the Bank Act: Regulation, Public Policy, and 
the Market" With Neil Quigley. Canadian Business Law Journal 
29:1, 1-16, 1997.
    "Ensuring Competition: Bank Distribution of Insurance 
Products: Prospects and Implications for Canada." With 
Ignatious Horstmann and Neil Quigley. Toronto: CD Howe Institute, 
1996.
    "Buyer Groups and Exclusivity: Towards a Theory of Managed 
Competition." With Ralph Winter. International Journal of 
Industrial Organization 15:2, 137-164, 1997. (Presented at the 
EARIE Conference, Tel Aviv, Israel, 1993.)
    "Tying As a Response to Demand Uncertainty." With 
Ralph Winter. The RAND Journal of Economics 28:3, 566-583, 
1997. (Presented at the EARIE Conference, Lisbon, Portugal, 1990.)
    "Stability in the Absence of Deposit Insurance: The 
Canadian Banking System 1890-1966." With Jack Carr and 
Neil Quigley. Journal of Money, Credit and Banking 27:4, 
1137-1158, 1995.
    "Ensuring Failure." With Jack Carr and Neil Quigley. 
Toronto: CD Howe Institute, 1994.
    "Territorial Rights in Franchise Contracts." With 
Ralph Winter. Economic Inquiry 32:2, 181-192, 1994. (Presented 
at the EARIE Conference, Budapest, Hungary, 1989.)
    "Reply to R. Gilson." With Jack Carr. Journal of 
Political Economy 99:2, 426- 428, 1991.
    "The Economics of Law Firms: A Study in the Legal 
Organization of the Firm." With Jack Carr. Journal of Law and 
Economics 33:2, 307-330, 1990.
    "The Economic Effects of Automobile Dealer 
Regulation." With Ralph Winter. Annales d'Economie et de 
Statistique 15/16, 409- 426, Juillet-Decembre 1989.
    "Unlimited Liability and Free Banking in Scotland: A 
Note." With Jack Cart and S. Glied. Journal of Economic 
History 49:4, 974-978, 1989.
    "Vertical Restraints and the Law: A Reply." With 
Ralph Winter. RAND Journal of Economics, 19:2, 298-301, Summer 
1988.
    "Unlimited Liability as a Barrier to Entry." With 
Jack Carr. Journal of Political Economy 96:4, 766-784, August 
1988.
    "Is Exclusive Dealing Anti-Competitive?" With Ralph 
Winter. American Economic Review 77:5, 1057-1062, December 
1987.
    "Advertising and Consumer Learning." With Y. 
Kotowitz in FTC Conference Volume, Consumer Protection Economics, 
1986. (Paper presented at the FTC Conference on Advertising, 
Washington, 1984.)
    "Competition Policy and Vertical Exchange." With 
Ralph Winter. Royal Commission on the Economic Union and Development 
Prospects for Canada, University of Toronto Press, 1985.
    "The Economics of Franchise Contracts." With Ralph 
Winter. Journal of Law and Economics 3, 503-526, October 1985. 
(Paper presented at the EARIE Conference, Fontainebleau, 1984.)
    "The Economics of Life Insurance Regulation: Valuation 
Constraints." With Ralph Winter in J. Finsinger and M. Pauly 
(eds.), The Economics of Insurance Regulation, MacMillan and Company 
Limited, 1986. (Paper presented at IIM Conference on Regulation in 
Insurance Markets, Berlin, 1984.)
    "The Economics of Vertical Restraints in 
Distribution." With Ralph Winter in J. Stiglitz and G.F. 
Mathewson (eds.), New Developments in the Analysis of Market 
Structure, MIT Press, 1986.
    "An Economic Theory of Vertical Restraints." With 
Ralph Winter. RAND Journal of Economics 15:1, 27-38, Spring 
1984. (Reprinted in The Economics of Marketing, Cheltenham, UK: 
Edward Elgar Publishing Limited, 1998.)
    "Information, Search and Price Variability of Individual 
Life Insurance Contracts." Journal of Industrial Economics 
32:2, 131-148, December 1983. (Paper presented at the Canadian 
Economics Association Meetings, Montreal, 1980.)
    "The Incentives for Resale Price Maintenance." With 
Ralph Winter. Economic Inquiry 21:3, 337-348, July 1983. 
(Paper presented at the Western Economic Association Meetings, San 
Francisco, 1981.)
    "Vertical Integration by Contractual Restraints in Spatial 
Markets." With Ralph Winter. Journal of Business 56:4, 
497-518, October 1983.
    "Entry, Size Distribution, Scale, and Scope Economies in 
the Life Insurance Industry." With S. Kellner. Journal of 
Business 56:1, 25-44, January 1983.
    "Regulation of Canadian Markets for Life Insurance." 
With Ralph Winter. Department of Consumer and Corporate Affairs, 
Government of Canada, 1983.
    "The Rationale for Government Regulation of Quality" 
and
    "Policy Alternatives in Quality Regulation." With D. 
Dewees and M. Trebilcock.
    "Markets for Insurance: A Selective Survey of Economic 
Issues," in D. Dewees (ed.), The Regulation of Quality, 
Toronto: Butterworths, 1983.
    "An Economic Theory of Union-Controlled Firms." With 
Y. Kotowitz. Economica 49:196, 421433, November 1982. (Paper 
presented at the Canadian Economics Association Meetings, Quebec 
City, 1978.)
    "Advertising, Consumer Information and Product 
Quality." With Y. Kotowitz. Bell Journal of Economics 10:2, 
566-588, Fall 1979. (Paper presented at the European 
Econometric Society Meetings, Geneva, 1978.)
    "Informative Advertising and Welfare." With Y. 
Kotowitz. American Economic Review 69:3, 284-294, June 1979.
    "Information, Entry and Regulation in Markets for Life 
Insurance." Ontario Economic Council Research Studies, 
University of Toronto Press, 1982.
    "Some Issues on Public Advertising." With Y. 
Kotowitz. Journal of Contemporary Business 7:4, 123-124, 1979.
    "Economics of Fiscal Transfer Pricing in Multinational 
Corporations." With G.D. Quirin. Ontario Economic Council 
Research Studies, University of Toronto Press, 1978.
    "The Residential Demand for Electrical Energy and Natural 
Gas: A Model Estimated for Canada." With R. Hyndman and Y.

[[Page 29118]]

Kotowitz in W.T. Ziemba et al. (eds.), Energy Policy Modelling: 
United States and Canadian Experiences, Martinus Nijhoff Press, 
86-102, 1980. (Paper presented at the Canadian Energy Policy 
Modelling Conference, Vancouver, 1978.)
    "Economies of Scale in Financial Institutions: 
Reply." With P. Halpern. Journal of Monetary Economics 3, 
127-131, 1977.
    "The Benefits and Costs of Rate of Return 
Regulation." With J. Callen and H. Mohring. American Economic 
Review 66:5,290-297, June 1976.
    "Economies of Scale in Financial Institutions: A General 
Model Applied to Insurance." With P. Halpern. Journal of 
Monetary Economics 1:2, 203-220, April 1975.
    "Price Effects of Market Power in the Canadian Newspaper 
Industry: Reply." Canadian Journal of Economics 7:1, 13 
0-132, February 1974. Cents and Nonsense." The Economics 
of Canadian Policy Issues. With J. Carr and J. McManus. Holt, 
Rinehart, and Winston, 1972.
    "Metering Costs and Marginal Cost Pricing in Public 
Utilities." With G.D. Quirin. Bell Journal of Economics 
3:1,335-339, May 1972.
    "A Note on the Price Effects of Market Power in the 
Canadian Newspaper Industry." Canadian--Journal of 
Economics 5:2, 298-301, May 1972.
    "A Consumer Theory of Demand for the Media." Journal 
of Business 45:2, 212-224, April 1972.
    VII. APPENDIX: CURRICULUM VITAE OF RALPH WINTER
    RALPH A. WINTER--Professor of Economics and Finance, 
University of Toronto
    Ph.D. Economics, University of California at Berkeley
    M.A. Statistics, University of California at Berkeley
    B.Sc. Mathematics and Economics (with honors), University of 
British Columbia
    ACADEMIC POSITIONS
1988-present Professor of Economics and Finance, University of 
Toronto
1985-1988 Associate Professor, Department of Economics and 
Faculty of Management Studies, University of Toronto
1979-1985 Assistant Professor, Department of Economics and 
Faculty of Management Studies, University of Toronto
    HONORS AND FELLOWSHIPS
--Olin Senior Research Fellowship, Yale Law School, 1988
--National Fellowship, Hoover Institution, Stanford University, 
1986-1987
Harry Johnson Prize (with M. Peters), for best article in the 
Canadian Journal of Economics, 1983
Canada Council Doctoral Fellowship, 1975-1979
John H. Wheeler Scholarship, University of California at Berkeley, 
1974-1975
Dean's Honors List, University of British Columbia, 1974
    RESEARCH GRANTS
Social Sciences and Humanities Research Council Research Grant: 
1983-1985, 1986-1987, 1988-1989, 1990, 
1991-1993
Social Sciences and Humanities Research Council Post-Doctoral 
Research Fellowship: 1981-1982 and 1982-1983
    PROFESSIONAL AFFILIATIONS
International Editorial Board, Assurances
Editorial Board, Journal of Industrial Economics
    PROFESSIONAL APPEARANCES
British Columbia Utilities Commission, regarding capital structure 
and equity risk premium for Pacific Northern Gas, 1998
Canadian Radio-Television and Telecommunications Commission, 
regarding price cap regulation for telephone companies, 1996
Alberta Energy and Utilities Board, regarding fair rate of return 
for TransAlta Utilities Corporation and Alberta Power Limited, 1996
Expert witness, Nielsen case, before the Canadian Competition 
Tribunal, 1994
Ontario Energy Board (EBRO 483,484), regarding fair rate of return 
for Centra Gas, 1993 (written submission)
Ontario Energy Board (EBRO 4790), regarding fair rate of return for 
Consumers Gas, 1992
Expert witness, Chrysler case, before the Canadian Competition 
Tribunal, 1988
    PUBLICATIONS
    "Efficiency as a Goal of Competition Policy," in 
Canadian Competition Policy: Preparing for the Future, forthcoming, 
2002.
    "Efficiency Analysis in Superior Propane: Correct 
Criterion Incorrectly Applied," forthcoming, Canadian 
Competition Record, 2001, with G.F. Mathewson.
    The Law and Economics of Canadian Competition Policy, 
forthcoming 2001, with M.J. Trebilcock, E. Iacobucci, and P. 
Collins, University of Toronto Press.
    "Remarks on Recent Developments in Canadian Competition 
Policy," in Critical Issues in Mergers and Acquisitions, 
Queen's Annual Business Law Symposium, 2000, 59-67.
    "The State of Efficiencies in Canadian Competition 
Policy," Canadian Competition Record, Winter 2000, pp. 
106-114, with M.J. Trebilcock.
    "Optimal Insurance under Moral Hazard," in Handbook 
of Insurance, G. Dionne, editor, Kluwer Academic Publishers, 2000. 
pp. 155-186.
    "Substantial lessening of Competition in Canadian 
Competition Law", in Competition Law for the 21st Century, 
Canadian Bar Association 1998.
    "Resale Price Maintenance and the Canadian Competition 
Act", Review of Industrial Organization, 1998.
    "Colluding on Relative Prices", Rand Journal of 
Economics Vol. 28, No.2, (Summer 1997): 359372.
    "Tying as a Response to Demand Uncertainty", Rand 
Journal of Economics Autumn 1997 (with Frank Mathewson).
    "Exclusivity Restrictions and Intellectual Property" 
in Competition Policy and Intellectual Policy, Anderson and Gallini, 
eds. 1998 (with Patrick Rey).
    "Buying Groups and Exclusivity: Towards a Theory of 
Managed Competition" (with GF Mathewson): International 
Journal of Industrial Organization, 1997.
    "The Economics of Liability for Nuclear Accidents" 
(with M.J. Trebilcock), International Review of Law and Economics, 
1997.
    "Output Shares in Bilateral Agency Problems", with 
H. Neary, Journal of Economic Theory 1995.
    "The Dynamics of Competitive Insurance Markets", 
Journal of Financial Intermediation (1994), 379-415.
    "Territorial Restrictions in Franchise Contracts", 
with G.F. Mathewson, Economic Inquiry, 1994.
    "Vertical Control and Price versus Non-Price 
Competition," Quarterly Journal of Economics, CVIII(1), 
February 1993: 61-78.
    "Moral Hazard in Insurance Contracts", in G. Dionne, 
Ed., Insurance Economics, 1992.
    "The Liability Insurance Market," Journal of 
Economics Perspectives, Summer 1991: 115-136.
    "Solvency Regulation and the Insurance Cycle," 
Economic Inquiry, XXIX(3), July 1991: 458472.
    "The Law and Economics of Vertical Restraints," in 
M. Trebilcock, ed., Competition Policy in Canada, Vancouver: The 
Fraser Institute, 1990. With G.F. Mathewson.
    "The Economic Effects of Automobile Dealer 
Regulation," Annales d'Economie et de Statistique, 15/16, 
Juillet-Decembre 1989: 409-426. With G.F. Mathewson.
    "Vertical Restraints and the Law: A Reply," Rand 
Journal of Economics, 19(2), Summer 1988: 298-301. With G.F. 
Mathewson.
    "The Liability Crisis and the Dynamics of Competitive 
Insurance Markets," Yale Journal on Regulation, 1988: 
455-500.
    "Currency Options, Forward Markets and the Hedging of 
Foreign Exchange Risk," Journal of International Economics, 
25, 1988: 291-302. With R. Ware.
    "The Competitive Effects of Vertical Agreements: 
Comment," American Economic Review, 77(5), December 1987: 
1057-1062. With G.F. Mathewson.
    "The Role of Options in the Resolution of Agency Problems: 
Comment," Journal of Finance, December 1986:1157-1174. 
With R. Farmer.
    "R&D with Observable Outcomes," Journal of 
Economic Theory, December 1986:1336-1351. With M. Peters.
    "Public Pricing Under Imperfect Competition," 
International Journal of Industrial Organization, 4 (1), March 1986: 
87-100. With R. Ware.
    "The Economics of Life Insurance Regulation: Valuation 
Constraints," in J. Finsinger and M. Pauley (eds.), The 
Economics of Insurance Regulation, MacMillan and Company Limited, 
1986. With G.F. Mathewson.
    Review of Blair and Kaserman's" Law and Economics of 
Vertical Control", Journal of Economic Literature, 1986.
    Competition Policy and the Economics of Vertical Exchange, book 
published by The Royal Commission on Canada's Economic Prospects, 
1986, 167pp. (with G.F. Mathewson).
    "The Economics of Franchise Contracts," Journal of 
Law and Economics, October 1985: 503526. With G.F. Mathewson.
    "Licensing in the Theory of Innovation," Rand 
Journal of Economics, Summer 1985: 237-253. With N.T. Gallini.
    "The Economics of Vertical Restraints on 
Distribution," in G.F. Mathewson and J.E.

[[Page 29119]]

Stiglitz (eds.), New Developments in the Analysis of Market 
Structure, MIT Press, 1985. With G.F. Mathewson.
    "An Economic Theory of Vertical Restraints," The 
Rand Journal of Economics, 1 (1), Spring 1984: 27-38. With 
G.F. Mathewson.
    Regulation of Canadian Markets for Life Insurance, Consumer and 
Corporate Affairs, Ottawa, 1984. (With G.F. Mathewson, T. Gussman 
and C. Campbell).
    "The Incentives for Resale Price Maintenance under 
Imperfect Information," Economic Inquiry, XXXI(3), June 1983: 
337-348. With G.F. Mathewson.
    "Market Equilibrium and the Resolution of 
Uncertainty," Canadian Journal of Economics, XVI(3), August 
1983: 381-390. With M. Peters.
    "Vertical Integration by Contractual Restraints in Spatial 
Markets," Journal of Business, 56(4), October 
1983:497-519. With G.F. Mathewson.
    "Vertical Control in Monopolistic Competition," 
International Journal of Industrial Organization, 1(3), 1983: 
275-286. With N.T. Gallini.
    "On the Choice of an Index for Disclosure in the Life 
Insurance Market: An Axiomatic Approach," Journal of Risk and 
Insurance, XLIX(4), December 1982:513-549.
    "An Alternative Test of the Capital Asset Pricing Model: 
Comment", American Economic Review, Vol. 72, No. 5, December 
1982:1194-96. (With S.M. Turnbull).
    "Majority Voting and the Objective Function of the Firm 
under Uncertainty: Note," Bell Journal of Economics, 12(1), 
Spring 1981: 335-337.
    "On the Rate Structure of the American Life Insurance 
Industry", Journal of Finance. Vol. 36, No. 1, March 1981: 
81-97.
    ATTACHMENT B
    A DETAILED CRITIQUE OF THE PROPOSED FINAL JUDGMENT IN U.S. v. 
MICROSOFT
    Ronald A. Klain
    Benjamin G. Bradshaw
    Jessica Davidson Miller
    O'Melveny & Myers LLP
    555 13th Street, NW
    Washington, DC 20004
    January 2002

                            TABLE OF CONTENTS
 
                                                               Page
 
INTRODUCTION.....................................................      1
SECTION-BY-SECTION CRITIQUE OF THE PFJ...........................      2
Section III of the PFJ: Prohibited Conduct.......................      2
Section IV Of The PFJ: Compliance and Enforcement................     11
Section V Of The PFJ: Termination................................     12
Section VI Of The PFJ: Definitions...............................     12
 

    INTRODUCTION
    This Court may approve the parties" Proposed Final 
Judgment ("PFJ"), but only if it first determines that 
the proposed decree is "in the public interest." In 
reviewing the PFJ, we acknowledge that there are some beneficial and 
important restrictions put on Microsoft's unlawful conduct. In too 
many instances, however, these restraints are inevitably swallowed 
up by broad exceptions and grants of power to Microsoft. The result 
is that the proposed settlement will do little, if anything, to 
eliminate Microsoft's illegal practices, prevent recurrence of those 
acts, and promote competition in the marketplace. The public 
interest requires more, and the Court should thus reject the 
proposed settlement.
    The purpose of this document is to expose--on a point-by-
point, provision-by-provision basis--the many loopholes, 
"trap doors," and other critical deficiencies in the 
PFJ. We present the issues in an order that tracks the proposed 
decree itself so that they may be easily followed. We also provide 
"real world" examples where helpful.
    In general, the PFJ suffers from several global, overarching 
flaws. First, in critical places, the language used in the PFJ to 
define the protections for competition are not broad enough to cover 
behavior the Court of Appeals held to be unlawful. Rather, only 
specific rights are granted, only specific competitive products are 
protected, and only specific anticompetitive practices are banned. 
In many cases, the rights and limitations are further clawed-back 
through carefully crafted carve-outs that benefit Microsoft.
    Second, the proposed decree relies too heavily on the personal 
computer ("PC") manufacturers (original equipment 
manufacturers or "OEMs") to implement design 
changes--particularly in the critical area of 
middleware--without sufficiently ensuring their independence 
from Microsoft's tight clasp. The PFJ also follows timelines that 
are too loose and too generous to a company with the engineering 
resources and product-update capabilities of Microsoft.
    Third, in too many places, the constraints on Microsoft (once 
the exceptions are taken into account) devolve into a mandate that 
Microsoft act "reasonably." Aside from the obvious 
concern about Microsoft's willingness to do so given its track 
record, this formulation is problematic for other reasons. It does 
little more than restate existing antitrust law (such provisions 
cannot be said to be "remedial" if they, in essence, are 
merely directives to refrain from future illegal acts).
    And, in terms of enforcement, alleged violations of such 
"be reasonable" provisions can only be arrested through 
proceedings that will become, in essence, mini-retrials of U.S. v. 
Microsoft itself.
    In sum, a consent decree that causes little or no change in the 
defendant's behavior cannot be found to advance the public interest, 
especially when the defendant's conduct has been found by both the 
district and appellate courts to be in violation of the law. As 
such, based on the numerous shortcomings outlined below, the Court 
should disapprove the PFJ.
    SECTION-BY-SECTION CRITIQUE OF THE PFJ
    Section Ill of the PFJ: Prohibited Conduct
    A. Retaliation
    ?? The Scope Of The Protection Is Narrow: Section III.A of the 
PFJ appears to be directed at preventing Microsoft from retaliating 
against OEMs that attempt to compete with Microsoft products, but 
Microsoft is constrained only from specified forms of retaliation. 
If it retaliates against an OEM for any non-specified reason, that 
retaliation is not prohibited. This formulation is particularly 
problematic because the protected OEM activities are narrowly and 
specifically defined. Retaliation against an OEM for installing a 
non-Microsoft application that does not meet the middleware 
definition is not prohibited; nor is retaliation against an OEM for 
removing a Microsoft application that does not meet the middleware 
definition.
    For example:
    ?? MSN and MSN Messenger do not appear to be middleware under 
the PFJ's highly specific definition of a "Microsoft 
Middleware Product." Given this uncertainty, an OEM cannot 
know with confidence that it is protected from retaliation if it 
removes the icon and start menu promotion for MSN and/or MSN 
Messenger.
    ?? If client software to support Sun's Liberty Alliance (a 
competitor to Microsoft's Passport) were developed, it would 
probably not be middleware under the PFJ definition. Thus, Microsoft 
can retaliate if an OEM adds that software.
    More generally, it is odd to have a formulation that de facto 
approves of Microsoft's retaliation against OEMs, except where that 
retaliation is forbidden. That is, given that competitors to 
Passport, .Net My Services (formerly known as Hailstorm), Windows 
Movie Maker, Microsoft Money, gaming programs, and Microsoft Digital 
Photography programs--even when shipped through the OEM 
channel--may not be included in the scope of protected 
competition, Microsoft would be free to retaliate against OEMs that 
promote those competitors.
    Finally, the provision is substantially weakened in that only 
certain types of retaliation (i.e., retaliation by changing 
contractual relations and retaliation by changing promotional 
arrangements) are forbidden, as opposed to prohibiting any form of 
retaliation whatsoever. In order to

[[Page 29120]]

eliminate Microsoft's ability to unlawfully protect its OS monopoly, 
it is essential that Microsoft be prohibited from taking any action 
that directly or indirectly adversely affects OEMs or other 
licensees who in any way support or promote non-Microsoft products 
or services.
    ?? Non-Monetary Compensation Provision: Microsoft is free to 
retaliate against OEMs that promote competition by withholding any 
existing form of "non-monetary Compensation"--only 
"newly introduced forms of non-monetary Consideration" 
may not be withheld.
    ?? OEM Termination Clause Will Intimidate OEMs: Microsoft can 
terminate, without notice, an OEM's Windows license, after sending 
the OEM two notices that it believes the licensee is violating its 
license. There need not be any adjudication or determination by any 
independent tribunal that Microsoft's two predicate claims are 
correct; after just two notices to any OEM of a putative violation, 
Microsoft may terminate without even giving notice. This provision 
means that the OEMs are, at any time, just two registered letters 
away from an unannounced economic calamity. Obviously, that danger 
will severely limit the willingness of the OEMs to promote products 
that compete with Microsoft.
    ?? Pricing Schemes Will Allow Microsoft to Avoid Effects of the 
Decree: Microsoft can price Windows at a high price, and then put 
economic pressure on the OEMs to use only Microsoft applications 
through the provision that Microsoft can provide unlimited 
consideration to OEMs for distributing or promoting Microsoft's 
services or products. The limitation that these payments must be 
"commensurate with the absolute level or amount of" OEM 
expenditures is hollow--given that it is not clear how an OEM's 
costs will be accounted for, for this purpose.
    B. Pricing
    ?? Microsoft Can Use Rebates To Eviscerate Competition. Under 
Section III.B of the PFJ, Microsoft can provide unlimited 
"market development allowances, programs, or other discounts 
in connection with Windows Operating System Products." This 
provision severely weakens the protection for OEM choice, 
functioning the same way as the rebate provision discussed above, 
but without any tether or limiting principle whatsoever. Arguably, 
Microsoft can charge $150 per copy of Windows, but then provide a 
$99 "market development allowance" for OEMs that install 
WMP.
    Presumably, this is intended to be circumscribed by Section 
III.B.3.c, which provides that "discounts or their 
award" shall not be "based on or impose any criterion or 
requirement that is otherwise inconsistent with.., this Final 
Judgment," but this circular and self-referential provision 
does not ensure that the practice identified above is prohibited. 
While Microsoft should be allowed to engage in legitimate pricing 
decisions, those decisions should be limited to volume-based 
discounts offered on a non-discriminatory basis.
    C. OEM Licenses
    ?? Microsoft Retains Control Of Desktop Innovation: Under 
Section III.C of the PFJ, Microsoft would retain control of desktop 
innovation by being able to prohibit OEMs from installing or 
displaying icons or other shortcuts to non-Microsoft software/
products/services, if Microsoft does not provide the same software/
product/service. For example, if Microsoft does not include a media 
player shortcut inside its "My Music" folder, it can 
forbid the OEMs from doing the same.
    This turns the premise that OEMs be given flexibility to 
differentiate their products on its head.
    For example:
    ?? Sony--as a PC OEM and a major force in the music and 
photography industries--would be uniquely positioned to 
differentiate the "My Music" and "My Photos" 
folder. And yet, Sony's ability to do so turns solely on the extent 
to which Microsoft chooses to unleash competition in these areas.
    ?? Microsoft Retains Control Of Desktop Promotion." 
Microsoft also, very oddly, can control the extent to which non-
Microsoft middleware is promoted on the desktop, by virtue of a 
limitation that OEMs can promote such software at the conclusion of 
a boot sequence or an Internet hook-up, via a user interface that is 
"of similar size and shape to the user interface provided by 
the corresponding Microsoft middleware." Thus, Microsoft sets 
the parameters for competition and user interface.
    ?? Promotional Flexibility For IAPs Only, And Only For The OEM's 
"Own "IAP: OEMs are allowed to offer IAP promotions at 
the end of the boot sequence, but not promotions for other products. 
Also, OEMs are allowed to offer IAPs at the end of a boot sequence, 
but only their "own" IAP offers. Given that this phrase 
is ambiguous, Microsoft may attempt to read this provision as 
limiting an OEM's right to offer an IAP product to those IAPs 
marketed under the OEM's brand. Helpfully, the Competitive Impact 
Statement suggests otherwise, but whatever this phrase means, it is 
a needless restriction on an OEM's flexibility.
    D. API Disclosure
    ?? APIs Defined Too Narrowly: Microsoft can evade the disclosure 
obligation provided under Section III.D of the PFJ by "hard-
wiring" links to its applications, and through other predatory 
coding schemes. Additionally, the disclosure is limited to 
"APIs and related Documentation." This is too narrow and 
can be evaded. Moreover, the provision for the disclosure of 
"Technical Information" found in Judge Jackson's interim 
conduct remedies has been eliminated. These disclosures are 
necessary to provide effective interoperability.
    G. Anticompetitive Agreements
    ?? Joint Development Agreements Can Subvert Protections Of The 
Settlement. The protection against anticompetitive agreements is 
substantially undermined by the exception in Section III.G of the 
PFJ that allows Microsoft to launch "joint development or 
joint services arrangements" with OEMs and others. Under this 
provision, Microsoft can "invite" OEMs, ISVs, and other 
industry players to enter into "joint development" 
agreements and then resort to an array of exclusionary practices.
    For example:
    ?? Microsoft invites OEM X to form a "joint 
development" project to create "Windows for X," a 
"new product" to be installed on the OEM's PCs. As long 
as Microsoft's activities are cloaked under this rubric, it is 
exempt from the ban on requiring the OEM to ship a fixed percentage 
of its units loaded with Microsoft's applications, and other 
protections designed to promote competition.
    H. Desktop Customization
    ?? Add/Remove Is For Icons Only, Not The Middleware 
Itself." The add/remove provisions in Section III.H in the PFJ 
only allow for removal of end-user access to Microsoft 
middleware--not removal of the middleware itself. This position 
is inconsistent with the language in the Court of Appeals" 
opinion on commingling or the "add/remove" issue.
    If Microsoft's middleware remains on PCs (even with the end-user 
access masked), then applications developers will continue to write 
applications that run on that middleware--reinforcing the 
applications barrier to entry that was at the heart of this case. 
Allowing Microsoft to forbid the OEMs from removing its middleware, 
and allowing Microsoft to configure Windows to make it impossible 
for end-users to do the same, allows Microsoft to reinforce the 
applications barrier to entry, irremediably.
    As we have seen with the implementation of this approach (i.e., 
icon removal only) with regard to Internet Explorer in Windows XP, 
Microsoft can use the presentation of this option in the utility to 
make it less desirable to end-users.
    Moreover, limiting the required "add/remove" 
provision to icons only is actually a step backward from the current 
state of affairs in Windows XP, where code is removable for several 
pieces of Microsoft middleware.
    ?? Why Are Non-MS Icons Subject To Add/Remove?: The PFJ gives 
Microsoft an added benefit: it can demand that OEMs include icons 
for non-MS middleware in the add/remove utility. Why this should be 
required, in the absence of any finding that assuring the permanence 
of non-Microsoft middleware on the desktop is anticompetitive, is 
bizarre. This essentially treats the victims of Microsoft's 
anticompetitive behavior as if they were equally guilty of 
wrongdoing.
    ?? Microsoft Can Embed Middleware And Evade Restrictions: Under 
Section III.H.2, end-users and OEMs are allowed to substitute the 
launch of a non-Microsoft Middleware product for the launch of 
Microsoft middleware only where that Microsoft middleware would be 
launched in a separate Top-Level Window and would display a complete 
end-user interface or a trademark. This, in essence, allows 
Microsoft to determine which middleware components will or will not 
be subject to effective competition. By embedding its middleware 
components in other middleware (and thereby not displaying it in a 
Top Level Window with all user interface elements), or by simply not 
branding the middleware with a trademark, Microsoft can essentially 
stop rivals from launching their products in lieu of the Microsoft 
products.
    ?? Harder For Consumers To Choose Non-Microsoft Products Than 
Microsoft Products: In the same provision (III.H.2), Microsoft may

[[Page 29121]]

require an end-user to confirm his/her choice of a non-Microsoft 
product, but there is no similar "double consent" 
requirement for Microsoft Middleware. There is no reason why it 
should be harder for users to select non-Microsoft products than 
Microsoft products.
    ?? Microsoft Can "Sweep" The Desktop, Eliminating 
Rival Icons: Additionally, the OEM flexibility provisions are 
substantially undermined by a provision that allows Microsoft to 
exploit its "desktop sweeper" to eliminate OEM-installed 
icons by asking an end-user if he/she wants the OEM-installed 
configuration wiped out after 14 days. Thus, the OEM flexibility 
provisions will only last on the desktop with certainty for 14 days, 
and after that period, persistent automated queries from Microsoft 
can reverse the effect of the OEM's installations. The effect of 
this provision is to severely devalue the ability of OEMs to offer 
premier desktop space to ISVs--and to undermine the ability of 
OEMs to differentiate their products and provide consumers with real 
choices.
    ?? Desktop "MFN" Requirements: Finally, nothing in 
the decree appears to forbid Microsoft from 
requiring--especially where non-middleware is concerned- so-
called MFN agreements from the OEMs. These agreements tax OEM 
efforts to promote Microsoft rivals by requiring that equal 
promotion or placement be given to Microsoft products, often without 
compensation.
    I. Licensing Provisions
    ?? Licenses Put In Hands Of OEMs Only--They May Not Be Able 
To Use Them Without Help:
    The OEM licensing provision is limited in its effectiveness 
because the OEMs are prevented in Section 111.1.3 from 
"assigning, transferring, or sublicensing" their rights. 
This may severely limit their ability to partner with software 
companies to develop innovative software packages to be pre-
installed on PCs. This provision is especially harmful when 
contrasted with the broad partnering opportunities afforded to 
Microsoft under Section III.G. In addition, the OEMs" 
willingness to use these provisions--even if they have the 
financial and technical wherewithal to do so--may be limited by 
the weakness of the retaliation provisions discussed above.
    ?? Reciprocal License? "Equal Treatment" For Law 
Abiders And Law Breakers Is Not Equal:
    Under Section III.I.5, the PFJ requires ISVs, OEMs, and other 
licensees to license back to Microsoft any intellectual property 
they develop in the course of exercising their rights under the 
settlement. But that simply rewards Microsoft for having created the 
circumstances (i.e., having acted illegally) that necessitated the 
settlement in the first place. Microsoft should not be able to 
obtain the intellectual property rights of others simply because 
those law abiding entities have been required to work with a 
lawbreaker.
    In addition, this provision may inadvertently work as a 
"poison pill" to discourage 1SVs, et al., from taking 
advantage of the licensing rights ostensibly provided to them in 
Section III.I. The risk that an ISV would have to license its rights 
to Microsoft will be a substantial deterrent for that ISV from 
exercising its rights under Section III.I.
    J. "Security and Anti-Piracy" Exception to API 
Disclosure
    ?? The Settlement Exempts The Software And Services That Are The 
Future Of Computing: One of the most seemingly innocuous provisions 
in the PFJ is, in fact, one of the biggest loopholes: the provision 
found in Section III.J.1 that allows Microsoft to withhold from API, 
documentation or communication protocol disclosure any information 
that would "compromise the security of .... digital rights 
management, encryption or authentication systems." This 
provision raises several critical concerns:
    ?? Digital Rights Management Exception "Swallows" 
Media Player Rule." Since the most prevalent use of media 
players in the years ahead will be in playing content that is 
protected by digital rights management ("DRM") (i.e., 
copyrighted content licensed to users on a "pay-for-
play" basis), allowing Microsoft to render its DRM solution 
non-interoperable with non-Microsoft Media Players and DRM solutions 
essentially means that non-Microsoft media players will be virtually 
useless when loaded on Windows computers.
    ?? Authentication Exception Allows Microsoft To Control Internet 
Gateways, Server-Based Services: Most experts agree that the future 
of computing lies with server-based applications that consumers will 
access from a variety of devices. Indeed, Microsoft's 
".Net" and ".Net My Services" (formerly 
known as Hailstorm) are evidence that Microsoft certainly holds this 
belief. These services, when linked with Microsoft's 
"Passport," are Microsoft's self-declared effort to 
migrate its franchise from the desktop to the Internet.
    By exempting authentication APIs and protocols from the PFJ's 
disclosure/licensure requirement, the settlement exempts the most 
important applications and services that will drive the computer 
industry over the next few years. If Microsoft can wall off 
Passport, .Net, and .Net My Services with impunity--and link 
these Internet/server-based applications and services to its desktop 
monopoly--then Microsoft will be in a commanding position to 
dominate the future of computing.
    Additional Problems Raised By Numerous Provisions in Section III
    ?? No Ban On Commingling Of Code: Nothing in the agreement 
prohibits Microsoft from commingling code or binding its middleware 
to the OS. This was a major issue in the case; the Court of Appeals 
specifically found Microsoft's commingling of browser and OS code to 
be anticompetitive; it rejected a petition for reheating that 
centered on this issue. And yet, the PFJ would permit this activity 
to continue.
    ?? The danger of the absence of this provision is reinforced by 
what is found in the definition of the Windows Operating System 
Product ("Definition U"), which states that the software 
code that comprises the Windows Operating System Product 
"shall be determined by Microsoft in its sole 
discretion." Thus, Microsoft can, over time, render all the 
protections for middleware meaningless, by binding and commingling 
code, and redefining the OS to include the bound/commingled 
applications.
    ?? Too Many Of The Provisions Require A Mini-Retrial To Be 
Enforced: In numerous places throughout Section III, the limitations 
on Microsoft's conduct are basically rephrased versions of the Rule 
of Reason. For example, in Section III.F.2, Microsoft may enter into 
restrictive agreements with ISVs as long as those agreements are 
"reasonably necessary;" likewise, the Joint Venture 
provisions found in Section III.G also employ a rule-of-reason test. 
As such, they simply restate textbook antitrust law, and alleged 
violations of these provisions could only be resolved through mini-
trials.
    Server Interoperability Issues (Found in Sections III.E, III.H 
and III.J)
    ?? Only Full Interoperability Can Reduce Microsoft's Barriers To 
Desktop Competition: The PFJ's proposed server remedy will fail to 
provide meaningful, competitive interoperability between Microsoft 
desktops and non-Microsoft servers because:
    ?? The applications barrier to entry is central to this case and 
to Microsoft's desktop monopoly. A remedy that provides true server 
interoperability can be a powerful tool to reduce the applications 
barrier to entry. The server has the same potential to provide an 
alternative platform as did the browser or Java. In that sense, it 
is directly analogous to middleware products.
    ?? Microsoft has plainly recognized the threat that non-
Microsoft servers pose as an alternative applications platform and 
has acted to exclude those products from full interoperation with 
the desktop and to advantage its own server products. It is able to 
do so because it controls the means by which servers may 
interoperate with the functions and features of the Windows desktop. 
In order to succeed in establishing non-Microsoft servers as an 
effective alternative application platform, both consumers and 
application developers have to be convinced that such servers: (1) 
can overcome the interoperability barriers that Microsoft has 
erected, and (2) have become viable alternatives to Microsoft's own 
servers, insofar as they can fully interoperate with the desktop. An 
incomplete interoperability remedy fails to meet this test. Neither 
consumers (professional IT managers) nor server application 
developers will be attracted to non-Microsoft servers that lack any 
important interoperability functionality. If important 
interoperability barriers are left in place, IT managers simply will 
not buy the product and the remedy will fail to achieve its intended 
purpose. This is an important guiding principle.
    The proposed decree allows Microsoft to continue to exploit 
dependencies between its desktop applications or its desktop 
middleware and its servers or handheld devices to exclude server and 
handheld competition.
    ?? Section III.I Excludes Competing Server Vendors From The 
Benefits Of Section III. E's
    Disclosures: Section III.I limits Microsoft's obligation to 
license its desktop-server Communications Protocols to ISVs, IHVs, 
IAP, ICPs, and OEMs; thus, server

[[Page 29122]]

competitors are excluded from the group of companies that Microsoft 
must license information to under section III.E.
    ?? The Failure To Define "Interoperate" Is A 
Mistake: Neither Section III.E nor any other provision of the PFJ 
defines the meaning of "interoperate." The failure to 
define "interoperate" is tantamount to the Department of 
Justice's ("DOJ") prior failure to define 
"integrate" in the 1995 consent decree, and will form 
the basis for unending disputes over the scope of Microsoft's 
disclosure obligations.
    ?? "Communications Protocol" Is Defined Too Narrowly 
And Too Ambiguously: The definition of "Communications 
Protocol," which determines the scope of server information to 
be disclosed by Microsoft, is highly ambiguous and potentially very 
narrow in scope:
    ?? It appears to be limited to the Windows 2000 server, and thus 
may exclude Microsoft's Advanced Windows 2000 server and Datacenter 
server.
    ?? It is unclear whether "rules for information 
exchange" that "govern the format, semantics, timing 
sequencing, and error control of messages exchanged over a 
network" mean the rules for transmitting information packets 
over a network, or the rules for formatting and interpreting 
information within such packets.
    ?? It appears to be limited to information exchanged via LANs 
and WANs, and therefore may exclude information exchanged over the 
Internet. In other words, having illegally seized dominance over 
browsers, Microsoft will be allowed to use that power to establish 
de facto proprietary protocols for Internet communication and keep 
them entirely to itself. Even in its broadest possible meaning, the 
term "Communications Protocols" is insufficiently broad 
or comprehensive to require disclosure of the information needed to 
permit interoperability between non-Microsoft servers and the full 
features and functions of Windows desktops.
    ?? Section III.J's Carve-Out Eliminates the Most Important 
Disclosures: What little Section III.E provides, Section III.J takes 
away by permitting Microsoft to refuse to disclose the very 
protocols and technical dependencies it is currently using to 
prevent non-Microsoft servers from interoperating with Microsoft 
desktops and servers.
    Section IV Of The PFJ: Compliance and Enforcement
    A. Enforcement Authority
    ?? Enforcement Authority Is Too Difficult To Employ: Clearly, 
what is missing from the agreement is a quick, meaningful, and 
empowered mechanism for preventing and rectifying Microsoft's 
inevitable violations of the agreement. Thus, while the provision 
allowing Microsoft to cure any violations of Sections III.C, D, E, 
and H before an enforcement action may be brought is not itself 
objectionable, it is but one of a number of provisions that make 
enforcing the agreement cumbersome, expensive and time-consuming.
    B. Technical Committee / D. Voluntary Dispute Resolution
    ?? Source Code Access Is Not Enough: While it is helpful that 
the Technical Committee ("TC") will have access to 
Microsoft's source code and can resolve disputes involving that 
issue, the TC is otherwise powerless to compel Microsoft's 
compliance with the agreement in any other respect. The prospects 
that Microsoft will accept the decisions of the TC in a voluntary 
dispute resolution process are near zero. And the entire mechanism 
seems designed to extend disputes indefinitely: no time limits or 
time-lines are specified for dispute resolution.
    As it stands now, a party injured by Microsoft's violation of 
the decree can complain to the TC, which will then conduct an 
investigation:
    ?? Once the investigation is complete, the TC will presumably 
issue some decision; while the investigation is ongoing, the TC is 
supposed to consult with Microsoft's Compliance Officer, for an 
indefinite period;
    ?? If the TC concludes that Microsoft violated the agreement, 
and Microsoft does not agree to change its behavior or rectify the 
wrong, then the TC must decide whether to recommend the matter to 
the DOJ for further action;
    ?? Once recommended, the DOJ--after some review 
period--may decide to take action, and apply to the court for a 
remedy, or it may not;
    ?? And once the DOJ applies for action, the process in court to 
obtain relief or remedy may extend for an indefinite period.
    This is obviously a lengthy and ineffective process for ensuring 
that Microsoft complies with its obligations under the decree. In an 
industry where time is of the essence and delays can be fatal, the 
built-in delays that allow Microsoft to drag its feet are wholly 
unacceptable.
    ?? Technical Committee's Investigation Has Only Limited Use: The 
work of the Technical Committee cannot "be admitted in any 
enforcement proceeding before the Court for any purpose," and 
the members of the TC are forbidden to appear. Thus, under the terms 
of the decree, the substantial time, effort and expense that can go 
into a TC process may need to be duplicated in an enforcement action 
adding to the complexity and expense that the process will pose for 
victims of Microsoft violations.
    Section V Of The PFJ: Termination
    A. Five-Year Limit
    ?? Five-Year Coverage Is Inadequate: Given the scope of 
Microsoft's violations, the time period required to restore 
effective competition, and the pattern of willful lawbreaking on 
Microsoft's part, a five-year consent decree is inadequate.
    B. Two-Year Extension
    ?? Penalty For Knowing Violations Is Too Lenient: Amazingly, the 
PFJ provides that no matter how many knowing and willful violations 
Microsoft engages in, the restrictions found in the settlement may 
be extended only for a single two-year period. Thus, if Microsoft is 
adjudged to have engaged in such a pattern of violations, it 
essentially has a "free reign" to repeat those 
violations with impunity.
    Section VI Of The PFJ: Definitions
    A. APIs
    ?? API Definition Too Narrow: This is discussed above.
    I. ISV
    ?? Definition Is Not Forward-Looking: The definition of ISV is 
drafted too narrowly and should more clearly encompass developers of 
software products designed to run on new versions of the Windows 
operating system and next generation computing devices.
    K. Microsoft Middleware Product
    ?? Definition Exempts Too Much Middleware: Much of the decree is 
based on this definition--the OEMs" flexibility turns on 
what is included or excluded from this category of application. And 
yet the definition, which is different from the definition used by 
the District Court (affirmed and employed by the Court of Appeals) 
is fatally flawed.
    ?? First, there are only five existing products that can be 
known with certainty to be "Microsoft Middleware 
Products." That means that highly similar items, such as MSN, 
MSN Messenger, MSN Explorer, Passport, Outlook, and Office may be 
excluded from the definition of middleware. Why Windows Messenger 
would be covered by the PFJ, but MSN Messenger would be exempt; or 
why Internet Explorer would be covered, while MSN Explorer would be 
exempt--if this is, in fact, how the provision 
operates--is a mystery. Why ambiguity would be accepted in such 
a critical area is an even greater mystery.
    Given the uncertainty, Microsoft may attempt to retaliate 
against OEMs that remove even the icons for its applications; it may 
also attempt to prohibit end-users from removing these applications 
(or even their icons). This is a step backward from the status quo 
(even in Windows XP); the ambiguity is a gaping hole.
    ?? Second, the generic middleware definition, which applies only 
to new products, and therefore does not capture any product now in 
existence, allows Microsoft to define which products are included or 
not, by virtue of Microsoft's trademark and branding choices. Thus, 
as long as Microsoft buries these products inside other 
applications, they are not independently considered middleware.
    ?? Third, as suggested in the points above, the definition 
misses the future platform challenges to Microsoft's Windows 
monopoly: web-based services. These services should be specifically 
defined and included in the class of protected middleware.
    N. Non-Microsoft Middleware Product
    ?? Only Developers With Substantial Resources Will Be Protected: 
The competitive offerings protected by the decree are narrowly 
limited to offerings that fall within the definition of "Non-
Microsoft Middleware Products." Again, as noted above, the 
guarantees of OEM flexibility, promotion, and end-user choice apply 
only to these specified products--not to any other software 
applications.
    And yet, sadly, this narrow definition extends protection only 
to applications "of which at least one million copies were 
distributed in the United States within the previous year." 
Thus, "an innovator in his garage," creating a new form 
of middleware to revolutionize the computer industry, has no 
protection from Microsoft's rapacious

[[Page 29123]]

ways until he can achieve the distribution of 1 million copies of 
his software.
    Also, as noted above, "web-based services" are not 
captured in this definition, notwithstanding their importance to 
future competition to the Windows OS.
    R. Timely Manner
    ?? Netscape, All Over Again: Microsoft's obligation to disclose 
APIs and other materials needed to make applications interoperable 
with Windows in a "timely manner" is keyed off the 
definition of that term in Section R. But Microsoft retains complete 
control over this timeline because the definition provides that 
Microsoft is under no obligation to engage in these disclosures 
until it distributes a version of the Windows OS to 150,000 beta 
testers. Thus, as long as Microsoft restricts its beta testing 
program to 149,999 individuals until very late in the development 
process, it can effectively eviscerate the disclosure requirements. 
Our review of the available documentation shows, for example, that 
Microsoft had no more than 20,000 beta testers for Windows XP until 
very late in the release cycle; thus, had this provision been in 
place during the Windows XP release cycle, Microsoft would have been 
under no obligation to release APIs until the eve of product 
shipping.
    Slow disclosure of APIs is precisely how Microsoft defeated 
Netscape's timely interoperability with Windows 95. Thus, in this 
way, not only is the decree inadequate to prevent future wrongdoing, 
it does not even redress proven illegal acts in the past.
    U. Windows Operating System Product
    The scope of Microsoft's disclosure obligations under the 
agreement are determined in large part by the meaning of 
"Windows Operating System Product." The definition of 
Windows Operating System Product leaves Microsoft free to determine 
in "its sole discretion" what software code comprises a 
"Windows Operating System Product." In other words, 
Microsoft's disclosure obligation is subject entirely to its 
discretion.
    Added Definitions--Bind, Interoperate, Technical 
Information and Web-Based Service
    ?? Missing Definitions From Remedial Order: As discussed above, 
the PFJ omits the definitions for "Bind," 
"Interoperate" and "Technical Information," 
which are critical for ensuring that this agreement provides real 
constraints on Microsoft's illegal activities.
    ?? Exclusion Of Web-Based Services: In addition, the exclusion 
of web-based services from the category of protected competitive 
threats to the Windows OS is a grave omission. The definition of 
middleware should include a proviso that stipulates that web-based 
services be considered as if they were middleware (whether or not 
they technically fit in the category).



MTC-00030616

PATRICIA G. BUTLER
DANIELLE R. ODDO
Howrey Simon Arnold & White, LLP
1299 Pennsylvania Avenue, NW
Washington, DC 20004
(202) 783-0800
KENNETH M. FRANKEL
Finnegan, Henderson, Farabow, Garrett & Dunner, L.L.P.
1300 1 Street, NW
Washington, DC 20005
(202) 408-4000
Attorneys for non-party Red Hat, Inc.
    IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
    UNITED STATES OF AMERICA, Plaintiff, V. MICROSOFT CORPORATION,, 
Defendant.
    Civil Action No. 98-1232 (CKK)
    STATE OF NEW YORK ex. rel. Attorney General ELIOT SPITZER, et 
al., Plaintiffs, V.
    MICROSOFT CORPORATION, Defendant.
    Civil Action No. 98-1233 (CKK)
    COMMENTS OF RED HAT, INC. TO REVISED PROPOSED FINAL JUDGMENT AND 
COMPETITIVE IMPACT STATEMENT IN UNITED STATES V. MICROSOFT CORP., 
CIVIL NO. 98-1232, IN THE UNITED STATES DISTRICT COURT FOR THE 
DISTRICT OF COLUMBIA
    I. INTRODUCTION
    Pursuant to the Antitrust Procedures and Penalties Act, 15 
U.S.C. 16, Red Hat, Inc. ("Red Hat") files comments to 
the revised Proposed Final Judgment, filed November 6, 2001, and the 
Competitive Impact Statement, filed November 15, 2001, in United 
States v. Microsoft Corp., Civil No. 98-1232, in the United 
States District Court for the District of Columbia. Red Hat files 
these comments because the Proposed Final Judgment will not remedy 
the anti-competitive effects of Microsoft's antitrust violations 
that were upheld by the United States Court of Appeals for the 
District of Columbia Circuit in its June 23, 2001 decision. As a 
result, the market for PC-compatible operating systems--in 
which Microsoft unlawfully maintained its monopoly--will not 
return to a competitive environment, and the mandate of the District 
of Columbia Court of Appeals will be thwarted.
    The Litigating States have filed their own Proposed Final 
Judgment and, to the extent it contains additional modifications to 
DOJ's revised proposed Final Judgment. Red Hat supports those 
modifications.
    II. BACKGROUND
    It is no exaggeration to say that Linux is the operating system 
that provides the most serious and fastest growing competition to 
the Microsoft operating system. Linux is the PC-compatible open 
source operating system based on the kernel developed by Mr. Linus 
Torvalds in the early 1990s, and in the short amount of time that it 
has been in the marketplace, the Linux operating system has become a 
viable competitor to other operating systems. Red Hat, which began 
in 1994, offers the Red Hat version of the Linux operating system 
with support and software applications and is the largest 
distributor of open source Linux. In order for the Proposed Final 
Judgment to have an effect in restoring the competitive nature of 
the PC-compatible operating system market, Red Hat believes that 
each and every provision must be viewed with the overall perspective 
of whether the provision provides a level playing field for 
companies such as Red Hat, which offer direct competition in the 
injured market, or whether the provision directly or indirectly will 
enable Microsoft to perpetuate the monopoly it has been found to 
have maintained illegally. In order to provide a background for 
these comments to the Proposed Final Judgment, a brief overview of 
open source, and Red Hat Linux follows.
    Open source and free software is distinct from traditional 
(proprietary) software in that it is produced by a generally 
voluntary, collaborative process, and accompanied by a license that 
pants users the right to:
    1) have the source code,
    2) freely copy the software,
    3) modify and make derivative works of the software, and
    4) transfer or distribute the software in its original form or 
as a derivative work, without paying copyright license fees.
    Many open source and free software licenses also embody the 
concept known as copyleft. Simply put, this is the condition that 
all versions of the product, including derivative works, be 
distributed along with, and subject to, the conditions and rights in 
the license under which they were received. This concept is central 
to the ability of a licensor to ensure that its product remains open 
source or free software.
    The underlying principle is that improvements to a product are 
given back to the open source and free software community. In this 
way, open source and free software is continually improved, with the 
modifications being made available to all. Without the ability to 
impose this condition on further distribution, a copy, or a 
derivative work made pursuant to the authorization granted in the 
license, could be distributed without the right to copy, modify, 
distribute or have the source code--in effect it would be 
transformed into a proprietary work. It would cease to be 
"free." The benefits of open source and free software 
are numerous. In practical and commercial terms, open source and 
free software is stable, high quality software, which users are free 
to tailor to their own purposes. As the source code is available to 
all, a user is free to remedy any bugs it may find, maintain the 
software itself, or hire a third party to do so. The availability of 
the source code also allows the creation of complementary and 
interoperable programs by anyone and everyone, with no need to 
reverse engineer the product. As an element in the competitive 
environment, open source software provides an almost pure form of 
competition in the software (and, of course, operating system) 
competitive environment. Improvements are quickly available and 
users are able to make product-quality based choices, unfettered by 
many of the considerations that occur in other competitive markets. 
Moreover, because of the size of the community that participates in 
the open source arena, products are quickly debugged, refined and 
improved; greatly benefiting the ultimate end user.
    From a company with only $482,000 in revenue in 1995, Red Hat 
has grown to over $100 million in revenue in 2001. The vast majority 
of Red Hat's revenues are derived from the services it offers around 
its well-known Linux distribution, not from license fees or 
royalties. Despite its rapid growth, however, until last year Red 
Hat Linux was not considered an effective competitor with either Sun 
Microsystems or Microsoft in the

[[Page 29124]]

server market. With increasing success, Red Hat has now penetrated 
that market, demonstrating that it can be an effective competitor 
where no illegal monopoly exists. The same cannot be said for the 
desktop operating system market, the subject of many of the claims 
and findings against Microsoft in this matter. Because of 
Microsoft's stranglehold on that market, with over a 94% 
marketshare--a stranglehold unlawfully maintained--Red Hat 
has elected not to attempt to compete until a level playing field 
can be established. Any efforts by Red Hat toward competing would be 
utterly fruitless and an unjustified use of corporate resources.
    Microsoft has made no secret of the fact that it considers 
companies such as Red Hat to be potential competitive threats in the 
marketplace. According to Microsoft's own executives, Microsoft has 
contacted "U.S. lawmakers" in an effort to curtail the 
spread of the Linux operating system. Microsoft Executive says Linux 
Threatens Innovation, Feb. 14, 2001, Bloomberg News, at http://
news.cnet.com/investor/news/newsitem/0-99001028-4825719-
RHAT.html. (Ex. A attached hereto.) Microsoft's CEO, Steve Ballmer 
has described Linux as a "cancer that attaches itself in an 
intellectual property sense to everything it touches." 
Microsoft CEO takes lunch break with the Sun-Times, Chicago Sun 
Times, June 1, 2001, at http://www.suntimes.com/output/tech/cst-fin-
micro01.html (Ex. B attached hereto.); see also Joe Wilcox & 
Stephen Shankland, Why, Microsoft is wary of open source, CNET 
News.com, June 18,2001, at http://news.com.corn/
21001001-268520.html (Ex. C attached hereto.); Stephen 
Shankland, Microsoft license spurns open source, CNET News.com, June 
22, 2001, at http://news.com.com/2100-1001268889.html (Ex. D 
attached hereto.); Mike Ricciuti, Microsoft memo touts Linux, CNET 
News.com, Nov. 5, 1998, at http://news.com.com/
2100-1001-217563.html (Ex. E attached hereto.); Joe 
Wilcox & David Becker, Microsoft sues Linux start-up over name, 
CNET News.com, Dec. 20, 200l, at http://news.com.com/
2100-1001-277314.html (Ex. F attached hereto.). From 
these comments, it is clear, that, unless the Proposed Final 
Judgment protects the ability of non-Microsoft operating systems 
such as Red Hat Linux to gain access to, and compete for, software 
developers and users, and to compete, the remedies aspect of this 
lawsuit will be a failure. Therefore, in order for the Department of 
Justice to effect a remedy scheme that will address the findings of 
the Court of Appeals, the Department of Justice must ensure the 
ability of companies such as Red Hat to compete. A review of the 
Proposed Final Judgment, however, shows little to no attention paid 
to the very companies that directly compete in the market in which 
Microsoft unlawfully has maintained its monopoly. Unfortunately, 
this is despite the clear intent of the Competitive Impact 
Statement, in which the Department of Justice states:
    Appropriate injunctive relief in an antitrust case should: (1) 
end the unlawful conduct; (2) "avoid a recurrence of the 
violation" and others like it; and (3) undo its 
anticompetitive consequences. See Nat'l Soc'y of Prof'l Eng'rs v. 
United States, 435 U.S. 679, 697 (1978); United States v. E.I du 
Pont de Nemours & Co., 366 U.S. 316, 326 (1961); Int'l Salt Co. 
v. United States, 332 U.S. 392,401 (1947); United States v/Microsoft 
Corp., 253 F.3d 34, 103, 107 (DC Cir. 2001) Restoring competition is 
the "key to the whole question of an antitrust remedy," 
du Pont, 366 U.S. at 326. Competition was injured in this case 
principally because Microsoft's illegal conduct maintained the 
applications barrier to entry into the personal computer operating 
system market by thwarting the success of middleware that would have 
assisted competing operating systems in gaining access to 
applications and other needed complements. Thus, the key to the 
proper remedy in this case is to end Microsoft's restrictions on 
potentially threatening middleware, prevent it from hampering 
similar nascent threats in the future and restore the competitive 
conditions created by similar middleware threats. The Proposed Final 
Judgment imposes a series of prohibitions on Microsoft's conduct 
that are designed to accomplish these critical goals of an antitrust 
remedy.
    Competitive Impact Statement filed in U.S. v. Microsoft (D.DC 
Nov. 15, 2001) at 9. It is with consideration being given to the 
findings of the Court of Appeals and the realistic impact of the 
Proposed Final Judgment that Red Hat files these comments.
    III. COMMENTS ON INTELLECTUAL PROPERTY ISSUES ASSOCIATED WITH 
THE FINAL JUDGMENT
    A. The Proposed Final Judgment Would Neither Remedy Microsoft's 
Monopolization of, Nor Restore Competitive Conditions to, the Market 
for PC-Compatible Operating Systems, Because Microsoft Would Remain 
Free to Shut Down Competitive Operating Systems and Middleware 
Through Assertion of Microsoft's Intellectual Property Portfolio
    For intellectual property reasons, the Proposed Final Judgment 
would fail to remedy Microsoft's monopolization of the operating 
systems market and fail to accomplish the goal to restore 
competitive conditions to the market. It would fail because it would 
permit Microsoft to block software and hardware developers, users, 
and vendors from developing, using, distributing, or promoting 
competitive operating systems by threatening or bringing suits for 
infringement of Microsoft's extensive intellectual property 
portfolio. To provide an effective remedy and accomplish that goal, 
the narrow scope of licenses to Microsoft's intellectual property 
fights required by the Proposed Final Judgment must, at a minimum, 
be expanded to allow those persons to engage in that competitive 
conduct without the threat of an infringement suit by Microsoft.
    More specifically, the Proposed Final Judgment would prohibit 
Microsoft from retaliating against software and hardware developers, 
users, and vendors if they were to develop, use, distribute, or 
promote operating systems or middleware that competes with 
Microsoft's Windows operating system or middleware. But giving with 
its right hand and taking with its left, the Proposed Final Judgment 
would exempt from prohibited retaliation--and expressly 
allow--Microsoft to sue those persons for infringement of 
Microsoft's intellectual property fights if they engage in that 
conduct.
    Two primary effects would flow from this exemption. First, 
Microsoft would remain free to assert its intellectual property 
fights to stop developers and vendors of competitive operating 
systems and middleware from developing, using, distributing, or 
promoting their software. In that event, the downstream software and 
hardware developers, users, and vendors who want to use and work 
with competitive operating systems and middleware would not have any 
competitive operating systems or middleware to use, distribute, or 
promote. Second, Microsoft would remain free to assert the same 
intellectual property rights to stop those downstream developers, 
users, and vendors from using, distributing, or promoting such 
competitive operating systems and middleware.
    If no competitive operating systems and middleware were 
available or if the downstream developers, users, and vendors could 
not use, distribute, or promote competitive operating systems or 
middleware because Microsoft threatens or brings intellectual 
property infringement suits, the Proposed Final Judgment cannot 
accomplish its purpose: to remedy Microsoft's unlawfully maintenance 
of its monopoly and restore competitive conditions to the market 
Microsoft in which Microsoft's monopoly was unlawfully maintained.
    The antitrust remedy should at least remove this exemption and 
define retaliation to include threatening or bringing suit for 
infringement of Microsoft's intellectual property portfolio. Such a 
remedy would be proper and consistent with both Supreme Court and 
Justice Department precedent.
    1. Microsoft Illegally Maintained a Monopoly in the Market for 
Intel-Compatible Operating Systems
    The district court held, and the court of appeals affirmed, that 
Microsoft had illegally "maintained a monopoly in the market 
for Intel-compatible PC operating systems in violation of [Sherman 
Act] "2." United States v. Microsoft Corp., 253 F.3d 34, 
45, 50 (DC Cir. 2001). The remedy in this case should at the very 
least restore competition to that market, because that was the only 
district court holding that the court of appeals affirmed. See id. 
at 46. Unless the remedy restores competition within that market, 
the courts" holdings, and the Justice Department's and 
States" efforts in proving that antitrust violation, will be 
nullities.
    2. The Purpose of an Antitrust Remedy Is to Terminate the 
Monopoly and Restore Competition to the Monopolized Market
    Controlling case law and the Justice Department both recognize 
that the purpose of the remedy in a Section 2 case is to end the 
monopoly and restore competition to the market that the defendant 
monopolized. As the Supreme Court explained, and as the Court of 
Appeals recognized in Microsoft, in a monopolization case "it 
is the duty of the court to prescribe relief which will 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."

[[Page 29125]]

United States v. United Shoe Mach. Corp., 391 U.S. 244, 250 (1968); 
see Microsoft, 346 F.3d at 103 (quoting United Shoe). Indeed, the 
goal of relief is to make sure that competition results, not just to 
end a lawsuit. As the Supreme Court instructed:
    In an equity suit, the end to be served is not punishment of 
past transgression, nor is it merely to end specific illegal 
practices. A public interest served by such civil suits is that they 
effectively pry open to competition a market that has been closed by 
defendants" illegal restraints. If this proposed Final 
Judgment accomplishes less than that, the Government has won a 
lawsuit and lost a cause.
    International Salt Co. v. United States, 332 U.S. 392, 401 
(1947).
    In accordance, the Justice Department explained that its purpose 
in entering into the Proposed Final Judgment was to "restore 
competitive conditions to the market." Competitive Impact 
Statement at 2. Likewise, the Justice Department told the public in 
its press release that the "settlement will bring effective 
relief to the market and ensure that consumers will have more 
choices in meeting their computer needs." Press Release, U.S. 
Justice Department, Department of Justice and Microsoft Corporation 
Reach Effective Settlement on Antitrust Lawsuit, Nov. 2, 2001, at 
http://www.usdoj.gov/opa/pr/2001/November/01 at 569.htm (Ex. G 
attached hereto.). 3. Intellectual Property Restrictions Would 
Prevent the Proposed Final Judgment From Restoring Competitive 
Conditions to the Monopolized Market for Operating Systems
    a. The Proposed Final Judgment Would Ban Microsoft from 
Retaliating Against Certain Groups if They Work with Operating 
Systems or Middleware that Compete with Microsoft's Windows or 
Middleware
    The Proposed Final Judgment would protect certain groups of 
software or hardware developers, users, and vendors (OEMs, ISVs, and 
IHVs)\2\ from undefined "retaliation" by Microsoft if 
the groups were to work with operating systems or middleware that 
compete with Microsoft's Windows or middleware. It would provide 
that Microsoft shall not "retaliate" against those 
groups if they engage in certain conduct with any "software 
that competes with Microsoft Platform Software," which the 
Proposed Final Judgment defines to include Microsoft's Windows 
operating system "and/or a Microsoft Middleware 
Product."\3\ For example, the Proposed Final Judgment would 
provide that Microsoft "shall not retaliate" against an:
    2. Under the Proposed Final Judgment: OEM is an "original 
equipment manufacturer of Personal Computers that is a licensee of a 
Windows Operating System Product"; ISV is an "entity 
other than Microsoft that is engaged in the development or marketing 
of software products"; and IHV is an "independent 
hardware vendor that develops hardware to be included in or used 
with a Personal Computer running a Windows Operating System 
Product." See Proposed Final Judgment, Sections VI.O, I, II.
    3. "Microsoft Platform Software" is defined as 
including "a Windows Operating System Product" (either 
alone or with a middleware product), which in turn is defined as 
"the software code.., distributed commercially by Microsoft 
for use with Personal Computers as Windows 2000 Professional .... 
"Proposed Final Judgment, Section VI.L, U. An Operating System 
is defined as "the software code that, inter alia, (i) 
controls the allocation and usage of hardware resources ... 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." Id., Section VI?
    I. OEM for "developing, distributing, promoting, using, 
selling, or licensing any software that competes with" 
Microsoft's Windows operating system or middleware. Proposed Final 
Judgment Section III.A. 1.
    II. ISV or IHV for "developing, using, distributing, 
promoting or supporting any software that competes with" 
Microsoft's Windows operating system or middleware. Proposed Final 
Judgment Section III.F. 1 .a.
    b. The Ban on Retaliation Would Not Ban Infringement Suits
    While the term "retaliate" is undefined, the 
Proposed Final Judgment contradictorily exempts from the scope of 
prohibited retaliation--and therefore expressly 
permits--suits for infringement of Microsoft's intellectual 
property rights. More specifically, the provisions banning 
retaliation against OEMs, ISVs, and IHVs are followed by an 
exemption:
    Nothing in this provision shall prohibit Microsoft from 
enforcing.., any intellectual property right that is not 
inconsistent with this Final Judgment.
    Proposed Final Judgment Section III.A; see Section III.F.3. 
While the term "inconsistent" also is undefined, it is 
clear from a later section that a suit to enforce intellectual 
property rights against conduct that is protected from Microsoft's 
retaliation nevertheless is "not inconsistent with" the 
Proposed Final Judgment.
    The later section, Section III.I, provides that Microsoft must 
offer to license its intellectual property rights to the groups if 
those rights are required to exercise an option expressly provided 
under the Proposed Final Judgment. If it stopped there, the 
provision would be fine. But an exemption to that license provision 
emphasizes that the required license is very narrow, and that 
Microsoft could still bring infringement suits if the groups engage 
in the very conduct that is protected from Micros0ft's retaliation:
    I. Microsoft shall offer to license to ISVs, IHVs,... 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
    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,... or OEM is able to exercise the options 
or alternatives expressly provided under this Final Judgment (e.g., 
an ISV's, IHV'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);
    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 fights, licenses, 
covenants or immunities with regard to any Microsoft intellectual 
property to anyone. Proposed Final Judgment, Section III.I (emphasis 
added). In accordance, the Justice Department's November 15, 2001 
Competitive Impact Statement explains that a purpose of this 
provision is to "[permit] Microsoft to take legitimate steps 
to prevent unauthorized use of its intellectual property." 
Competitive Impact Statement at 49.
    "Unauthorized use" would include infringement. A 
patent, for example, provides the patent owner the exclusive fights 
to make, use, sell, and offer to sell the patented subject matter. 
35 U.S.C. 271(a). Those exclusive fights cover developing, 
distributing, promoting, using, and selling. Thus, while earlier 
sections of the Proposed Final Judgment say Microsoft could not 
"retaliate" against that conduct (Proposed Final 
Judgment Sections III.A.1, III.F.1.a), this later section 
contradictorily provides that Microsoft could retaliate against the 
conduct--by lawsuits (Proposed Final Judgment Section III.1.2).
    To illustrate the problem, apply the specific example quoted 
above, from Section III.I.2 of the Proposed Final Judgment, to an 
ISV that promotes an operating system that competes with Windows, 
and assume that Microsoft has patents that arguably cover that 
competitive operating system. Under the Proposed Final Judgment, 
Microsoft would be prohibited from "retaliat[ing]" if 
the ISV were "promoting" the competitive operating 
system, such as by offering it for sale. Proposed Final Judgment 
Section III.F.1.a. But the exemption provides that the option to 
promote the software without retaliation "shall not confer any 
rights to any Microsoft intellectual property rights [e.g., patents] 
infringed by that" competitive operating system. Proposed 
Final Judgment Section III.I.2. Thus, Microsoft could sue the ISV 
for infringing its patents by promoting the competitive software.
    Consequently, the Proposed Final Judgment would prohibit 
Microsoft from "retaliating" against an ISV or IHV for 
"developing, using, distributing, [or] promoting" the 
competitive operating system--but Microsoft could sue the ISV 
or IHV for patent infringement for the same acts: making 
(developing), using, selling (distributing), or offering to sell 
(promoting) that system. Likewise, it would prohibit Microsoft from 
"retaliating" against an OEM for "developing, 
distributing, promoting, using, or selling" a competitive 
operating system--but Microsoft nonetheless could sue the OEM 
for patent infringement for that conduct.
    Thus, while Microsoft could not "retaliate," it 
could sue for infringement, thereby completely eviscerating the ban 
on retaliation.
    B. Infringement Suits by Microsoft Based on Its Massive 
Intellectual Property Portfolio Could Stop Competitive Operating 
Systems or Middleware

[[Page 29126]]

    These intellectual property exemptions could permit Microsoft to 
completely prevent any competition from other operating systems or 
middleware, both at the development level and downstream throughout 
the development and distribution chain. ISVs, i.e., non-Microsoft 
entities that develop or market software products, would include 
developers and vendors of competitive operating systems. See 
Proposed Final Judgment Section VI.I. 4 A patent suit against such a 
developer or vendor for infringement of Microsoft's patents covering 
competitive operating systems could result in an injunction against 
making, using, selling, or offering to sell the competitive system, 
as well as damages (which could be trebled) and attorney fees for 
any sales. See 35 U.S.C. 283-285. If that 
occurred, downstream ISVs, IHVs, and OEMs would not have any 
competitive operating systems with which they could work.
    4. See. also, discussion in Parts IV.B. and V, infra, concerning 
the definition of ISVs. ISVs also would include downstream 
developers and vendors of middleware or applications software. A 
patent suit against them for infringement of Microsoft's patents 
would prevent them from, e.g., using a competitive operating systems 
to develop their software. Downstream IHVs and OEMs would include 
developers and vendors of personal computers. A patent suit against 
them for infringement of those Microsoft patents would prevent them 
from, e.g., making or selling any computers using competitive 
operating systems.
    The same would apply to competitive middleware. A patent suit 
against an ISV that develops competitive middleware would preclude 
the availability of competitive middleware. A patent suit against 
downstream developers or vendors of applications software would 
preclude them from using competitive middleware to develop their 
software. And a patent suit against downstream IHVs and OEMs would 
preclude them from making or selling computers using competitive 
middleware.
    Microsoft has amassed a large portfolio of numerous patents and 
other intellectual property that potentially covers competitive 
operating systems and middleware. While any infringement analysis 
must be specific to a particular software, it is clear that 
Microsoft has numerous patents that potentially could be asserted 
against that competitive software. The chart attached as Exhibit H 
lists over 1400 patents owned by Microsoft in December 2001 that are 
in Patent and Trademark Office classes that include operating 
systems and middleware software. Additional Microsoft patents 
covering operating systems and middleware may be in other classes. 
If Microsoft were to bring suit on multiple patents, the accused 
infringer would have to win against every patent to avoid an 
injunction and damages. The odds of losing are so great that only 
the most well financed competitive operating system or middleware 
developer or vendor could consider fighting that battle. The result 
would be the same downstream. If the competitive operating system or 
middleware developer or vendor indemnified its downstream customers 
(ISVs, IHVs, OEMs, and ultimate consumers), it would face the same 
problem. If it did not indemnify the downstream customers, those 
customers would face the problem directly. As a result, a threat of 
suit by Microsoft could be enough to stop the making, using, 
selling, or offering to sell competitive operating systems and 
middleware at all levels in the development-distribution chain.
    1. Microsoft Intends to Enforce Its Intellectual Property
    Microsoft clearly declared its intent to enforce its 
intellectual property rights against competitors by including the 
exemption for infringement suits in Section III.I of the Proposed 
Final Judgment and by arguing that the non-settling states were 
seeking to confiscate its intellectual property. See, Defendant 
Microsoft Corporation's Remedial Proposal at 2. (Dec. 12, 2001) 
("Microsoft Remedial Proposal"). Similarly, Craig 
Mundie, Microsoft's Senior Vice President of Advanced Strategies, 
reportedly told the audience at an Open Source convention last July:
    Well, at the end of the day, if you have a patent, you enforce 
the patent if it's valuable to you. And so I think that Microsoft 
and other people who have patents will ultimately decide to enforce 
those patents.
    Shared Source v. Open Source: Panel Discussion, O'Reilly 
Network, Aug. 9, 2001, at http://linux.oreillynet.com/pub/a/linux/
2001/08/09/oscon panel.html (Ex. I attached hereto.). The threat of 
Microsoft's patent enforcement has caused concern among the open-
source community, as reported last August. Galli, Peter, 
"Microsoft Patents a Threat to Open Source," eWEEK, Aug. 
28, 2001, at http://techupdate.zdnet.com/techupdate/stories/main/
0,14179,2808548.00.html ("Members of the open-source community 
are becoming increasingly concerned by ongoing moves from Microsoft 
Corp. to acquire a range of software patents that the company can 
potentially use down the line to attack and try to restrict the 
development and distribution of open-source software.") (Ex. J 
attached hereto.).
    2. The Intellectual Property Problem Can Be Fixed by Defining 
Retaliation to Include Infringement Suits and Eliminating the 
Exemptions
    The Proposed Final Judgment should define 
"retaliate" in Section VI of the Proposed Final 
Judgment. While the term should remain broad to bar any type of 
retaliation, it can specifically include bringing infringement 
suits:
    "Retaliate" means any type of retaliation and is 
intended to be construed broadly. It specifically includes 
threatening or bringing a suit for infringement of any intellectual 
property rights owned or licensable by Microsoft.
    In addition, the exemption sections should be modified to 
prevent infringement suits against the protected groups for engaging 
in conduct that the Proposed Final Judgment would prohibit Microsoft 
from retaliating against:
    For OEMs, Section III.A should be modified as 
follows--after the sentence "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," add the following:
    Acts that would be inconsistent with this Final Judgment 
include, but are not limited to, threatening or bringing suit for 
infringement of any intellectual property rights that would restrict 
the OEM from 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.
    For ISVs and IHVs, Section III.F.3 should be modified as 
follows--after the sentence "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," add the 
following:
    Acts that would be inconsistent with this Final Judgment 
include, but are not limited to, threatening or bringing suit for 
infringement of any intellectual property rights that would restrict 
the ISV or IHV from 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 exercising any of the options 
or alternatives provided for under this Final Judgment.
    Also, Section II1.1.2. should be deleted and replaced as 
follows--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, and to engage in conduct against which this Final 
Judgment prohibits Microsoft from retaliating; To enable those third 
parties to obtain those licenses, Section VIII of the Proposed Final 
Judgment should be modified as follows:
    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, except as provided in 
Section III.I.
    3. The Proposed Relief Requiring Licensing of Microsoft's 
Intellectual Property Is Proper and Consistent with Precedent
    The proposed modifications would require Microsoft to license 
certain of its intellectual property: that which potentially covers 
competitive operating systems, middleware, or other software or 
hardware and is necessary to ensure that the protected groups are 
free to engage in the conduct against which the Proposed Final 
Judgment would prohibit Microsoft from retaliating. Compulsory 
licensing of intellectual property to remedy monopolization is 
consistent with Supreme Court and Justice Department precedent, 
including the Proposed Final Judgment as it now stands, even though 
abuse of intellectual property rights was not found to be predatory 
conduct.
    To achieve the goal of restoring competitive conditions to the 
marketplace discussed above, the court has "large 
discretion" to fit the decree to the special needs of the 
individual case." Ford Motor Co. v. United States, 405 U.S. 
562, 573 (1972)

[[Page 29127]]

(quoting International Salt Co. v. United States, 332 U.S. 392, 401 
(1947)). That discretion includes prohibiting acts that may 
otherwise be valid, if necessary to correct the effects of the 
violation. "Equity has power to eradicate the evils of a 
condemned scheme by prohibition of the use of admittedly valid parts 
of an invalid whole." United States v. Bausch & Lomb 
Optical Co., 321 U.S. 707, 814 (1944). As the Court similarly 
instructed in United States v. Paramount Pictures, Inc., 334 U.S. 
131,148 (1948), to achieve effective relief a court can include 
restrictions on otherwise lawful conduct: "[E]quity has the 
power to uproot all parts of an illegal scheme--the valid as 
well as the invalid--in order to rid the trade or commerce of 
all taint of the conspiracy."
    Compulsory licensing of patents was ordered to remedy 
monopolization in, for example, United States v. United Shoe Mach. 
Corp., 110 F. Supp. 295 (D. Mass. 1953), aff'd, 347 U.S. 521 (1954), 
even though enforcement of the patents was not an alleged predatory 
act. The court concluded that the defendant had not improperly 
asserted its patents, but they were a barrier to entry into the 
monopolized market. See 110 F. Supp. at 297,332-33. In 
determining the remedy, the court's goals were not only to eliminate 
specific predatory practices that had caused or would cause 
monopolization, but also "to restore workable competition in 
the market." Id. at 346-47. The court explained that 
licensing of patents was proper as part of the remedy to reduce the 
effects of the defendant's monopolization caused by non-patent 
predatory business practices: Defendant is not being punished for 
abusive practices respecting patents, for it engaged in none .... It 
is being required to reduce the monopoly power it has, not as a 
result of patents, but as a result of business practices. And 
compulsory licensing, on a reasonable royalty basis, is in effect a 
partial dissolution, on a non-confiscatory basis. Id. at 351. 
Fifteen years later, the Supreme Court again concluded that the 
relief granted was within the proper scope of relief for an 
antitrust violation. United States v. United Shoe Mach. Corp., 391 
U.S. 244, 251 (1968).
    Similarly, the Justice Department has required compulsory 
licensing of intellectual property as part of the remedy in proposed 
final judgments in antitrust cases. One of the latest examples, and 
perhaps the most pertinent, is this Proposed Final Judgment's 
requirement that "Microsoft shall offer to license to ISVs, 
IHVs .... 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 .... "(Proposed Final Judgment Section III.I.) 
Indeed, the Competitive Impact Statement provides that some of those 
provisions "are designed specifically to prevent Microsoft 
from using its intellectual property rights to frustrate the 
intended effectiveness of the Proposed Final Judgment's disclosure 
provisions." Competitive Impact Statement at 49. The exemption 
from retaliation by infringement suits, however, allows that 
frustration. The issue, therefore, is not whether the remedy can 
properly include compulsory licensing of Microsoft's intellectual 
property. Instead, the issue is the scope of the licensing required. 
As shown above, the scope of the proposed modifications to the 
intellectual property provisions is reasonable and required to 
remedy the monopolization and restore competition to the market. The 
proposed modifications would not "result in... wholesale 
confiscation of Microsoft's intellectual property," a 
criticism that Microsoft wrongly asserted against the non-settling 
states" proposed remedy. Microsoft Remedial Proposal at 2. It 
would require only licensing that is necessary to prevent 
frustration of the anti-retaliation provisions. Moreover, the 
licenses could include royalties or other consideration on a 
reasonable and non-discriminatory basis, as provided in Section 
III.I. 1.
    Nor would the proposed modifications be a significant 
disincentive to innovation by Microsoft. Since the Proposed Final 
Judgment would expire in five years (see Proposed Final Judgment, 
Section V), the obligation to license would exist only for that 
limited time period. Any future innovation by Microsoft also would 
be free of this obligation after those five years. Any arguable 
effect on Microsoft's incentives to innovate during those five years 
would be limited and only to the extent necessary to provide 
effective relief from Microsoft's monopolization.
    In opposing the non-settling states" proposed relief, 
Microsoft pointed to the Court of Appeals" comment that the 
relief in this case "'should be tailored to fit the 
wrong creating the occasion for the remedy."' Microsoft 
Remedial Proposal at 5 (quoting Microsoft, 253 F.3d at 107). 
Microsoft also relied upon this Court's statement that the 
"scope of any proposed remedy must be carefully crafted so as 
to ensure that the enjoin[ed] conduct falls within the penumbra of 
behavior which was found to be anticompetitive." Microsoft 
Remedial Proposal at 6 (quoting Sept. 8, 2001 Tr. at 8). Removing 
the infringement suit exemption and defining retaliation to include 
threatening or bringing suit for infringement of Microsoft's 
intellectual property portfolio would fall well within that scope.
    C. Conclusion Regarding Intellectual Property
    The scope of the required intellectual property licensing under 
the Proposed Final Judgment is far too narrow to remedy the 
monopolization of, and restore competitive conditions to, the market 
the courts held Microsoft monopolized--Intel-compatible 
operating systems. The modifications to the scope proposed above 
would be no broader than that which is necessary to allow the groups 
protected under the Proposed Final Judgment to engage in the 
specific conduct that the Proposed Final Judgment allows them to 
engage in without fear of retaliation from Microsoft. As shown 
above, unless the scope of the licensing is expanded, and the 
exemptions for infringement suits removed, "the Government has 
won a lawsuit and lost a cause." International Salt, 332 U.S. 
at 401.
    IV. COMMENTS TO SECTION III--PROHIBITED CONDUCT
    A focus of any final judgment in this litigation must be to put 
in place safeguards and protections against future actions by 
Microsoft that may not fit the known pattern, but that will obtain a 
familiar result--unlawful continuation of the Microsoft 
monopoly. An important aspect of this focus is to make sure that the 
participants in the marketplace are given a chance at viability in a 
competitive marketplace. As worded, Section III does not provide the 
safeguards and protections that are necessary. Prohibiting actual 
retaliatory conduct by Microsoft is simply insufficient to obtain 
the goals of the final judgment.
    A. Section III.A
    The Department of Justice set forth a clear intent for the 
impact of Section III.A. As stated in the Competitive Impact 
Statement, the perceived effect of Section III.A is to 
"ensure[] that OEMs have the contractual and economic freedom 
to make decisions about distributing and supporting non-Microsoft 
software products that have the potential to weaken Microsoft's 
personal computer operating system monopoly without fear of coercion 
or retaliation by Microsoft." Competitive Impact Statement at 
9.
    Unfortunately, Section III.A fails to protect the ability of 
OEMs to make business choices in a non-coercive atmosphere, for 
reasons in addition to those discussed above concerning intellectual 
property.
    The conduct that is prohibited in Section III.A is actual 
retaliatory action by Microsoft against OEMs for, inter alia, dual 
booting personal computers with other operating systems. More 
specifically, Section III.A provides that "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 .... "Proposed Final Judgment, Section III.A. As 
worded, the only point at which injunctive relief is available is 
after an OEM can show actual retaliation.
    The problem with prohibiting only action "after the 
fact," is that it provides for enforcement only after 
Microsoft has taken negative action against an OEM. It is no secret 
that Microsoft is an important business partner to may OEMs and even 
the potential or implication of the change in an OEMs business 
relationship with an OEM can be sufficient to prevent action. 
Section III.A does not remove the business threat that will prevent 
OEMs from "crossing" Microsoft.
    Therefore, the parameters of the prohibitions on Microsoft's 
conduct need to be extended so that enforcement is not triggered 
only after an OEM has been harmed. By then, it may be too late and 
an OEM may find itself competitively or financially crippled by an 
impairment in its relationship with Microsoft. Moreover, by the time 
the retaliation is remedied, the OEM may even be out of the market. 
Ideally, Microsoft must be prohibited from maintaining the 
intimidating business environment that it has created--an 
environment that inhibits OEMs from the free exercise of competitive 
decision making. The language of the Proposed Final Judgment

[[Page 29128]]

ignores what the Competitive Impact Statement and the Court of 
Appeals have acknowledged.
    Thus, the actions prohibited under Section III.A must encompass 
a range of activities and not just after the fact retaliation in 
order to ensure that Microsoft does not continue to maintain 
unlawfully its monopoly. A possible modification of Section III.A is 
as follows: A. Microsoft shall not retaliate against an OEM by 
threatening to or altering Microsoft's commercial relations with 
that OEM, or by threatening to or 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: ....
    B. Section III.D
    An underlying premise of the Proposed Final Judgment is that if 
middleware software developers are able to develop and market 
middleware that can be used on either Microsoft or non-Microsoft 
operating systems or "that would have assisted competing 
operating systems in gaining access to applications and other needed 
complements" (Competitive Impact Statement at 9), then the 
competitive harm to the operating system market caused by 
Microsoft's unlawful maintenance of its monopoly will be remedied.
    With respect to Section III.D, the Competitive Impact Statement 
indicates an intent by the Department of Justice to: ensure[ ] that 
developers of competing middleware--software that over time 
could begin to erode Microsoft's Operating System 
monopoly--will have full access to the same interfaces and 
related information as Microsoft Middleware has to interoperate with 
Windows Operating Products. Microsoft will not be able to hamper the 
development or operation of potentially threatening software by 
withholding interface information or permitting its own products to 
use hidden or undisclosed interfaces.
    Competitive Impact Statement at 12.
    The Proposed Final Judgment makes an effort to provide the 
interface and related technical information 
"transparency" to the entities that the Department of 
Justice believes will need access to Microsoft software in order to 
develop software compatible with Microsoft and non-Microsoft 
operating systems. While the named entities include ISVs, however, 
they do not specifically include entities that provide non-Microsoft 
Operating Systems. An argument can be made that the definition for 
"ISVs" appears to be broad enough to include providers 
of non-Microsoft operating systems because under the definition 
"ISV" means an entity other than Microsoft engaged in 
the development or marketing of software products." Proposed 
Final Judgment, Section VI.I. The question and possible loophole 
remains, however, that Microsoft might argue that the transparency 
extends only to entities that develop middleware, but not to 
entities such as Red Hat--entities that provide non-Microsoft 
operating systems. In order to ensure that the protections are as 
inclusive as possible, the definition of "Independent Software 
Vendor" can be supplemented to include specifically entities 
that compete in the operating system market. Thus, under the Section 
VI--Definitions--"ISV" would be modified to 
mean an entity other than Microsoft that is engaged in the 
development, marketing or providing of software products or 
services, including Operating System Providers.
    C. Section III.F
    According to the Competitive Impact Statement, Section III.F 
"redresses conduct by Microsoft specifically found unlawful by 
the District Court and the Court of Appeals." By addressing 
only actual retaliatory conduct, however, Section III.F suffers from 
the same infirmity as Section III.A, and may provide injunctive 
relief only after Microsoft has taken action that will harm a 
business entity. Microsoft must not be prohibited only from actual 
retaliation, but must also be prohibited from intimidating, 
threatening to withhold business from, coercing or retaliating 
against any ISV or IHV because of activities that will further 
competing middleware or operating systems. See comment on Section 
III.A, supra.
    D. Section III.J
    As worded, Section III.J provides exceptions to Microsoft's 
disclosure obligations that have a serious potential to defeat the 
intent of the Proposed Final Judgment. The Competitive Impact 
Statement makes it clear that the exception to Microsoft's 
disclosure obligations is meant to be a "narrow exception 
limited to specific end-user implementations of security items such 
as actual keys, authorization tokens or enforcement criteria, the 
disclosure of which would compromise the security of a 
'particular installation or group of installations" of 
the listed security features." Competitive Impact Statement at 
18. The nature of security, however, requires that Section III.J 
should be modified so that there is a detailed specification of what 
Microsoft must provide under the mandates of the Proposed Final 
Judgment, rather than what it is excluded from providing within the 
context of security. Because of the potentially wide-ranging 
negative impact of this Section, Red Hat believes some background on 
the nature of security is required.
    All security experts agree that there is no such thing as 
perfect security, and indeed this pessimistic view extends to the 
field of computer security. In his book "Secrets and Lies: 
Digital Security in a Networked World", noted security expert 
Bruce Schneier explains "modem systems have so many components 
and connections--some of them not even known by the 
systems" designers, implementers, or users--that 
insecurities always remain. No system is perfect." If no 
computer system can be made perfectly secure, then any computer 
system can potentially suffer a security compromise. Moreover, it is 
not knowable whether the security compromise will be a result of 
people having access to information about a security weakness (which 
they can exploit) or people not having access to such information 
(which allows others to exploit something one might otherwise be 
able to defend against). Thus, on the one hand, one could argue that 
divulging any information whatsoever could lead to a security 
compromise, but on the other hand, that not divulging any 
information of any kind could also lead to a security compromise. 
Such is the nature of computer security (indeed, all security).
    One of the main issues in the antitrust case against Microsoft 
is the fact that Microsoft has controlled information about and 
permission to use system APIs, Documentation, licenses, and 
Communications Protocols to discriminate against or retaliate 
against one or more parties (or classes of parties), and has done so 
strategically to protect, extend, and indeed abuse its monopoly 
powers. Certainly any valid remedy for this anti-trust case would 
enjoin Microsoft from such conduct in the future.
    While the Proposed Final Judgment attempts to set guidelines 
under which Microsoft would be required to document, disclose, or 
license to third parties portions of APIs or Documentation or 
portions or layers of Communications Protocols, Section III.J(1) 
carves out a specific exemption: the case where the disclosure of 
such would compromise the security of anti-piracy, anti-virus, 
software licensing, digital fights management, encryption or 
authentication systems, including without limitation, keys, 
authorization tokens or enforcement criteria. While this may sound 
like a fair and reasonable exemption, it is not because Microsoft 
could legitimately argue that any requirement to document, disclose, 
or license anything to third parties could, in theory, result in a 
security compromise of one or more of these systems. Such is the 
nature of computer security.
    Thus, Section III.J(1) grants Microsoft legal protection for the 
very behavior that this Proposed Final Judgment was designed to 
remedy.
    As noted, the Competitive Impact Statement interprets Section 
III.J(1) as being an extremely limited exemption, essentially only 
extending to specific keys and security tokens, not to technologies, 
interfaces or interoperability. This interpretation, however, is not 
carried over to the language of the Proposed Final Judgment, which 
gives almost blanket permission to Microsoft to invoke the 
exemption. An appropriate modification of Section 
III.J(1)--other than removing it entirely--is as follows:
    No provision of this Final Judgment shall:
    1. Require Microsoft to disclose to any specific end-user 
implementations of security items such as actual end-user keys, 
authorization tokens, or enforcement criteria, the disclosure of 
which would compromise the security of a particular installation or 
group of installations of the security item. Notwithstanding the 
foregoing, if any such implementation of a security item requires a 
specific end-user key, authorization token, enforcement criteria, or 
analogous information to fully and equitably interoperate with 
Microsoft Platform Software, Microsoft Middleware, APIs, 
Communication Protocols, Microsoft applications software, or 
Microsoft network services (such as e-commerce or internet 
services), then Microsoft must either (a) disclose such specific 
end-user key, authorization token, enforcement criteria, or

[[Page 29129]]

analogous information, (b) provide alternative end-user keys, 
authorization tokens, enforcement criteria, or analogous information 
that enable third parties to fully and equitably interoperate with 
those software, products, or services, or (c) disclose how to make 
such end-user keys, authorization tokens, enforcement criteria, or 
analogous information that will fully and equitably interoperate 
with such software, products, or services; Microsoft must disclose 
or provide such keys, authorization tokens, enforcement criteria, or 
analogous information to third parties upon request and in a 
nondiscriminatory manner. In no event, however, shall Microsoft 
reserve to itself any functionality for such keys, authorization 
tokens, enforcement criteria, or analogous information.
    E. Section III.J(2)
    Section III.J(2) presents another loophole that Microsoft can 
manipulate to avoid disclosure of necessary information. Under the 
provisions of Section III.J(2), Microsoft is permitted to require a 
certification of the "authenticity and viability" of any 
business seeking a 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." Although the 
certification is required to be pursuant to "reasonable and 
objective standards," those standards are established by 
Microsoft and there is no independent third party approval either of 
the development or of the implementation of those standards. The 
Competitive Impact Statements indicates that: the requirements of 
this subsection cannot be used as a pretext for denying disclosure 
or licensing, but instead are limited to the narrowest scope of what 
is necessary and reasonable, and are focused on screening out only 
individuals or firms that should not have access to or use of the 
specified security-related information either because they have a 
history of engaging in unlawful conduct related to computer software 
(e.g., they have been found to have engaged in a series of willful 
violations of intellectual property rights or of one more violations 
consisting of conduct such as counterfeiting), do not have any 
legitimate basis for needing the information, or are using the 
information in a way that threatens the proper operation and 
integrity of the systems and mechanisms to which they relate.
    Competitive Impact Statement at 19. This will not be the case if 
there is no safeguard on the development or implementation of the 
standards. For example, Microsoft may decide to include financial or 
organizational requirements in order for a (1) an entity to be 
considered a "business" and (2) an entity to be 
considered an "authentic and "viable" business. 
Microsoft may decide to require that, in order for an entity to be a 
"business," it must operate in the market in a currently 
"traditional" manner, such as Microsoft operates, but 
not as many open source companies operate. Will a company need to 
undertake its own software development? Will a company need to own 
and license its software? Unless Microsoft is held to certain 
independent guidelines or policing, this provision may gut the 
intent of the Proposed Final Judgment.
    The potential for abuse with this provision is particular Feat 
when considering the open source development community. Most open 
source software is not developed or owned by a for-profit business 
entity. It is the result of collaborative development, with software 
code contributed by its author for the benefit of all. The 
restrictive language of Section III.J(2) would expressly permit 
Microsoft to deny access to such open source development projects.
    COMMENTS TO VI--DEFINITIONS
    A fair reading of the Proposed Final Judgment supports that the 
protections extend to the direct participants in the market in which 
Microsoft was found to have unlawfully maintained its 
monopoly--the providers of competing operating systems. The 
Proposed Final Judgment, however, needs to ensure that the 
protections extend to all possible readings. It cannot be ignored 
that the clear finding Upheld by the Court of Appeals is that 
Microsoft unlawfully maintained its monopoly in the PC-compatible 
operating system market. Thus, if there is any possibility that 
Microsoft can find a loophole, that possible loophole should be 
closed. It is in this vein that we recommend that the definitions 
should be expanded to include providers of competing operating 
systems--the participants in the market in which Microsoft 
unlawfully has maintained its monopoly. Operating System Providers, 
then, should be specifically included within the "ISV" 
definition--as recommended, supra. Furthermore, a proposed 
definition for Operating System Providers follows:
    "OSP" means an operating system provider that 
provides a non-Microsoft 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.
    VI. COMMENTS TO SECTION IV--COMPLIANCE AND ENFORCEMENT 
PROCEDURES
    A. Special Master
    By not providing for the appointment of a Special Master to 
ensure enforcement of the Proposed Final Judgment, the Justice 
Department has left the injunctive relief toothless. There is 
absolutely nothing in the Proposed Final Judgment that provides a 
speedy vehicle for the resolution of complaints from an independent 
third party, such as Red Hat, that Microsoft has violated the 
Proposed Final Judgment. As suggested by the Litigating States in 
their proposed final judgment, the appointment of a Special Master 
could be made pursuant to Rule 53 of the Federal Rules of Civil 
Procedure.
    B. Section IV.B--Appointment of a Technical Committee
    The Technical Committee ("TC") as constituted and 
mandated has no real authority or ability to address quickly and 
thoroughly third-party complaints regarding Microsoft's 
compliance with the Proposed Final Judgment. Moreover, it is 
structured as a committee of compromise and not enforcement. One of 
the members of the TC is to be selected by Microsoft, one of the 
members is selected by the plaintiffs and the third member is a 
joint selection. All of the members are to be "experts in 
software design and programming." This narrowly restricts the 
scope of the TC to technical interpretations. It takes out of the 
realm of the TC's expertise issues relating to business practices 
and acts that may have a competitive impact on the market.
    The TC should be supplemented with or assisted by a Special 
Master with the authority to order compliance with the Proposed 
Final Judgment. The Special Master will be able to address 
complaints relating to business practices as well as complaints 
relating to software disclosure or use.
    C. Section IV.D--Voluntary Dispute Resolution
    Section D sets forth the actual procedures for the Technical 
Committee to follow in the event that a third party makes a 
complaint regarding Microsoft's compliance with the Proposed Final 
Judgment. The procedures are general and the intent is to resolve 
complaints, not handle issues of enforcement. The Justice Department 
states that "It]his dispute resolution function reflects the 
recognition that the market will benefit from rapid, consensual 
resolution of issues, where possible. It complements, but does not 
supplant, Plaintiffs" other methods of enforcement. If the TC 
concludes that a complaint is meritorious, the TC will so advise 
Plaintiffs and Microsoft and propose a remedy." Competitive 
Impact Statement at 20. Despite this statement, the provision does 
nothing to ensure a resolution of issues. There is no requirement 
that Microsoft accept the remedy and no sanctions if Microsoft does 
not accept the remedy. In effect, there appears to be no ultimate 
control on Microsoft's conduct except for a separate action or 
convincing the Justice Department to seek an order to enforce the 
Proposed Final Judgment. This dispute resolution provision should be 
removed from the TC. The Special Master should administer the 
process for resolving third party complaints and have the authority 
to develop and administer a speedy process for resolving complaints 
and to order compliance if Microsoft is found to have violated the 
Proposed Final Judgment.
    Respectfully submitted,
    PATRICIA G. BUTLER
    DANIELLE R. ODDO
    Howrey Simon Arnold & White, LLP 1299 Pennsylvania Ave., NW 
Washington, DC 20004
    (202) 783-0800
    KENNETH M. FRANKEL
    Finnegan, Henderson, Farabow, Garrett &
    Dunner, L.L.P.
    1300 1 Street, NW
    Washington, DC 20005
    (202) 408-4000
    Attorneys for non-party
    Red Hat, Inc.
    Exhibit A

[[Page 29130]]

    Microsoft Executive Says Linux Threatens
    Innovation (Update1)
    Related News
    2/14/01 4:57 PM
    Source: Bloomberg News
    Redmond, Washington, Feb. 14 (Bloomberg)--Microsoft Corp.'s 
Windows operating-system chief, Jim Allchin, says that freely 
distributed software code such as rival Linux could stifle 
innovation and that legislators need to understand the threat.
    The result will be the demise of both intellectual property 
rights and the incentive to spend on research and development, he 
said yesterday, after the company previewed its latest version of 
Windows. Microsoft has told U.S. lawmakers of its concern while 
discussing protection of intellectual property rights.
    Linux is developed in a so-called open-source environment in 
which the software code generally isn't owned by any one company. 
That, as well as programs such as music-sharing software from 
Napster Inc., means the world's largest software maker has to do a 
better job of talking to policymakers, he said.
    "Open source is an intellectual-property destroyer," 
Allchin said. "I can't imagine something that could be worse 
than this for the software business and the intellectual-property 
business." Microsoft distributes some of its programs without 
charge to customers, although it generally doesn't release its 
programming code, and it retains the ownership rights to that code. 
Linux is the most widely known open-source product, though other 
programs including the popular Apache system for Web server 
computers also are developed the same way.
    $135 million investment in software maker Corel Corp. last 
October is being reviewed by the U.S. Justice Department. Corel said 
last month it willl drop efforts to develop the Linux operating 
system, though it will continue to make Linux applications. Corel 
said it hadn't consulted with Microsoft before making that decision.
    Brian Behlendorf, founder of open-source company CollabNet Inc., 
said most companies that use the open-source development model do 
retain the rights to some of their intellectual property. "I 
think Microsoft is trying to paint the open-source community as 
being fascist; that all software have has to be free, or none of it 
can be," said Behlendorf, whose company helps businesses run 
their own open-source projects.
    Allchin said he's concerned that the open-source business model 
could stifle initiative in the computer industry.
    Tin an American, I believe in the American Way," he said. 
"I worry if the government encourages open source, and I don't 
think we've done enough education of policy makers to understand the 
threat."
    Linux Adoption
    Some leading computer companies including International Business 
Machines Corp. and Hewlett-Packard Co. are selling Linux- based 
products and working on open-source projects, noted Jeremy Allison, 
a VA Linux Systems Inc. software developer. He's also a leader in a 
project develop an open-source file and printer server program. 
Microsoft only began significant lobbying efforts in the last few 
years. The Redmond, Washington-based company also talks to lawmakers 
about issues including the need for more visas for people with 
computer skills and computer privacy and security.
    Linux is the fastest-growing operating system program for 
running server computers, according to research firm IDC. It 
accounted for 27 percent of unit shipments of server operating 
systems in 2000. Microsoft's Windows was the most popular on that 
basis, with 41 percent.
    Despite Linux's success in some markets, Allchin says he isn't 
concerned about sales competition from the product. Microsoft 
provides support to change and develop products based on its 
operating system software that Linux companies don't, he said. 
Companies that use Linux in their products then must pay someone 
else for support, he said.
    "We can build a better product than Linux," he said. 
"There is always something enamoring about thinking you can 
get something for free."
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Inc. All rights reserved. Privacy policy
    Exhibit B
    Microsoft CEO takes launch break with the Sun-Times
    June 1, 2001
    It's hard to find a computer that doesn't run a Microsoft 
product, particularly in Chicago. Microsoft's Chicago-based Midwest 
district office, which covers Illinois, Indiana and Wisconsin, is 
the tech giant's biggest moneymaker in the country, with more than 
500 customers generating $500 million in revenue annually for 
Microsoft.
    It should come as no surprise, then, that the Seattle-area 
company sent its No. 2 man, CEO Steve Ballmer, for the official 
launch of its new Office XP software Thursday at the United Center 
(yes, Bill Gates went to New York).
    Between appointments in a whirlwind visit to Chicago--which 
included a lunch with 100 local companies and back-to-back-to-back 
media interviews-Ballmer sat down with Chicago Sun-Times reporter 
Dave Newbart to discuss the local tech economy, Microsoft's 
dominance in the market, the federal antitrust case, Microsoft's new 
licensing requirements and the open-source movement (in effect, free 
software on the Web, which he called a "cancer").
    Q: Boeing recently moved to Chicago. Why doesn't Microsoft 
relocate here?
    A: [laughs] We are quite comfortable with our headquarters in 
Seattle. Chicago is a great city. I'm from Detroit. I like it here. 
But we have 20,000 people comfortably ensconced in Seattle.
    Q: More seriously, in Chicago we do seem to have an inferiority 
complex about our place in the tech world. Rankings frequently put 
us toward the bottom among major cities in terms of our tech 
presence. How do you view the state of our tech economy?
    A: I think there is a lot of great stuff going on in Chicago. 
There are a lot of innovative users in the Chicago area, which is 
exciting. We have a lot of great partners. I'll be on stage with a 
company called Genesis [Consulting], which I'm very excited about. 
We have a local partner named Calypso [Systems].
    We literally have dozens of partners doing very innovative work 
with customers here. I don't know what the national surveys say. 
Other than Silicon Valley, I think it's hard to point to any one 
place and say, "That's where it's all happening."
    Q: Microsoft's market dominance and financial position are 
stronger than ever, despite the government's antitrust case and the 
weakening economy. Has the government's case had any impact on the 
way you do business?
    A: There has been no legal ruling put into effect. We have and 
continue to innovate within the spirit and letter of the law. We 
continue to do what we have always done, because we think it's 100 
percent correct. We add new capabilities to our product, we keep our 
prices low, we try to offer our customers better and better values. 
The laws were designed to encourage that and protect that behavior, 
because it's good for consumers.
    Q: Microsoft has expanded to a number of markets, especially 
with the development of the Xbox and a smart phone. What's next, and 
is there any area that you don't see yourself entering?
    A: We have a lot on our plate. We have a big dream about what 
XML (a markup language for documents containing structured 
information, such as words and graphics) can do for the world. The 
way software gets built will change over the years, which we are 
pursuing with our .Net platform. But we are hardly trying to do 
everything. I won't sit here and try to rule out that we might do 
other things in the future, but we have a few clear priorities.
    Q: The new Windows XP software, I've seen a trial version, 
contains a number of free products--media player, a CD burner, 
an Internet firewall. Could that bundling hurt smaller competitors 
who make stand-alone software? Isn't this kind of bundling that you 
offered with Windows and Internet Explorer?
    A: Just as with Internet Explorer, our job is to offer customers 
what they want. We are trying to provide more functionality at the 
same or better prices every day. [A]11 the new capabilities of 
Windows XP are open to software developers to add onto, to build 
value around. I think Windows XP ought to be a real boon to the 
kinds of innovations that come from smaller companies. The inclusion 
of Internet Explorer with Windows has been absolutely great ... for 
innovation in the software industry. Whether it was great for 
Netscape is a different question.
    Q: Independent analyses of your new licensing policy indicate 
that unless a

[[Page 29131]]

company upgrades its software every two years, it could face costs 
from one-third to double what they are paying now to upgrade. What 
do you think of the criticism that says Microsoft is forcing 
companies to upgrade to Windows XP by October or face much higher 
costs later?
    A: We are trying to simplify our licensing practices in many 
ways. We are clearly providing some incentive to upgrade more 
regularly. Your better customers get a better price. An analysis 
we've done, 80 percent of our customers are going to see the same or 
lesser prices, and 20 percent are going to see very small to 
somewhat larger increases.
    Q: The new software also allows a user to install it only twice. 
You have recently cracked down on corporate piracy and large-scale 
pirating operations. Are home users next?
    A: Intellectual property should be protected. That's the only 
way that a newspaper or a software company or record company or 
artist can get a fair return on their work. Our goal is to try to 
educate people on what it means to protect intellectual property and 
pay for it properly. We are trying to help customers understand when 
they are crossing the line by putting some bumps in the road so they 
can't do the wrong thing.
    Q: Do you view Linux and the open-source movement as a threat to 
Microsoft?
    A: Yeah. It's good competition. It will force us to be 
innovative. It will force us to justify the prices and value that we 
deliver. And that's only healthy. The only thing we have a problem 
with is when the government funds open-source work. Government 
funding should be for work that is available to everybody. Open 
source is not available to commercial companies. The way the license 
is written, if you use any open-source software, you have to make 
the rest of your software open source. If the government wants to 
put something in the public domain, it should. Linux is not in the 
public domain. Linux is a cancer that attaches itself in an 
intellectual property sense to everything it touches. That's the way 
that the license works.
    Q: You've been on this job [as CEO] almost 18 months. What has 
it been like replacing Bill Gates?
    A: [I]n a weird and strange way I probably feel more pressure 
now, no reason I should, but I feel a little more pressure, 
responsibility. The great thing is we get a chance to do two things. 
Bill gets a chance to put the highest possible percentage of time 
into our strategy. My particular capability and focus are really 
about building a management team, the business processes, etc. Bill 
and I are going to be around for a lot of years, but we are not 
going to be around forever. In some senses I'll put a little more 
time and energy into setting us up so the business is a business 
that doesn't depend on one guy, even a guy who is as talented as 
Bill Gates.
    Exhibit C
    Why Microsoft is wary of open source
    By Joe Wilcox and Stephen Shankland
    Staff Writers, CNET News.com
    June 18, 2001, 11:00 AM PT
    There's more to Microsoft's recent attacks on the open-source 
movement than mere rhetoric: Linux's popularity could hinder the 
software giant in its quest to gain control of a server market 
that's crucial to its long-term goals.
    Recent public statements by Microsoft executives have cast Linux 
and the open-source philosophy that underlies it as, at the minimum, 
bad for competition, and, at worst, a "cancer" to 
everything it touches.
    Behind the war of words, analysts say, is evidence that 
Microsoft is increasingly concerned about Linux and its growing 
popularity. The Unix-like operating system "has clearly 
emerged as the spoiler that will prevent Microsoft from achieving a 
dominant position" in the worldwide server operating-system 
market, IDC analyst AI Gillen concludes in a forthcoming report.
    While Microsoft's overall operating-system market leadership is 
by no means in jeopardy, Linux's continued gains make it harder for 
Microsoft to further its core plan for the future, Microsoft. Net. 
The plan is a software-as-a-service initiative similar to plans from 
competitors including Hewlett-Packard, IBM and Sun Microsystems.
    One of the cornerstones of .Net is HailStorm, which is built 
around the company's Passport authentication service.
    Microsoft.Net and HailStorm make use of XML (Extensible Markup 
Language) to pass information between computers based on Windows and 
computers using other operating systems. However, many .Net 
components-such as Passport and server-based software including the 
company's SQL Server database software and BizTalk e-commerce 
server-only on Windows. "The infrastructure to operate XML Web 
services relies on the Windows operating system and the .Net 
Enterprise Servers," Microsoft's marketing literature states.
    Microsoft needs to control the server operating-system market if 
HailStorm and all the .Net services and subscriptions associated 
with it are to succeed, analysts say.
    "HailStorm itself by definition needs Microsoft-provided 
or -partnered services, which means Microsoft's or its 
partners" servers," said Gartner analyst David Smith. 
"In that sense, Linux is a threat to .Net."
    Microsoft is expected to spend hundreds of millions of dollars 
marketing and developing .Net. Virtually every product from the 
company ties in to the plan at some point.
    While Linux hasn't displaced Windows, it has made serious 
inroads. Linux accounted for 27 percent of new worldwide operating-
system licenses in 2000, and Microsoft captured 41 percent of new 
licenses, according to IDC.
    Overall, Gartner estimates Linux runs on nearly 9 percent of 
U.S. servers shipped in the third quarter of 2000, with worldwide 
projected Linux server sales of nearly $2.5 billion in 2001 and 
about $9 billion in 2005.
    But Linux continues to gain credibility, particularly because of 
the massive support provided by IBM, which has pledged to spend $1 
billion on Linux development.
    In attacking Linux and open source, Microsoft finds itself 
competing "not against another company, but against a 
grassroots movement," said Paul Dain, director of application 
development at Emeryville, Calif.-based Wirestone, a technology 
services company.
    "My guess is that they are now under pressure to defend 
themselves against the criticism from the open-source and free-
software communities--whether it's justified or not--as 
well as companies like IBM that are aggressively marketing 
Linux," Dain said. "In order to combat that, they have 
to use strong language to get their point across."
    Increasing Linux use makes it more difficult to spread the .Net 
message. That, in turn, has led to a string of comments from 
Microsoft executives publicly denouncing Linux and open source. 
"Linux is a cancer that attaches itself in an intellectual 
property sense to everything it touches," Chief Executive 
Steve Ballmer said in an interview with the Chicago Sun-Times.
    Despite Microsoft's criticism, the company still uses open-
source code in some products. Servers for the company's Hotmail e-
mail service use FreeBSD for some DNS (domain name server) 
functions.
    "This is a legacy issue that came from Hotmail when we 
originally got it," said Microsoft spokesman Rick Miller. 
"We haven't gone out, purchased and put into place FreeBSD. It 
came when we purchased other companies. We didn't build any of our 
infrastructure on FreeBSD. We build it on Windows."
    In the mid 1980s, Microsoft licensed its TCP/IP (transmission 
control protocol/Internet protocol) networking stack from another 
company that used open-source code. "You could say it had its 
genesis in FreeBSD, but it's now absolutely Windows," Miller 
said. The code first appeared in Windows NT and also was used in 
Windows 2000.
    Critical of change
    Microsoft has also criticized the General Public License (GPL) 
that governs the heart of Linux. Under this license, changes to the 
Linux core, or kernel, must also be governed by the GPL. The license 
means that if a company changes the kernel, it must publish the 
changes and can't keep them proprietary if it plans to distribute 
the code externally.
    Other open-source projects, such as FreeBSD, allow changes that 
are kept proprietary. That provision was one reason FreeBSD proved 
appealing to Wind River Systems, the dominant seller of operating 
systems for non-PC "embedded" computing devices such as 
network routers. Microsoft's open-source attacks come at a time when 
the company has been putting the pricing squeeze on customers. In 
early May, Microsoft revamped software licensing, raising upgrades 
between 33 percent and 107 percent, according to Gartner. A large 
percentage of Microsoft business customers could in fact be 
compelled to upgrade to Office XP before Oct. 1 or pay a heftier 
purchase price later on.
    The action "will encourage--'force" may 
be a more accurate term--customers to upgrade much sooner than 
they had otherwise planned," Gillen noted in the IDC report. 
"Once the honeymoon period runs out in October 2001, the only 
way to 'upgrade" from a product that is not considered 
to be current technology is to buy a brand-new full 
license."'
    This could make open-source Linux's GPL more attractive to some 
customers feeling

[[Page 29132]]

trapped by the price hike, Gillen said. "Offering this form of 
"upgrade protection" may motivate some users to 
seriously consider alternatives to Microsoft technology."
    Ray Bailey, information services manager at The Bergquist 
Company, said a recent meeting with Microsoft changed the technology 
direction of his company, which manufactures electronic components 
and other goods.
    "Our IS team agreed that, due to Microsoft's changing of 
the licensing rules and the manner in which they have given us less-
than-adequate time to process those changes, we are seriously 
looking at other platforms," he said. "Linux is a strong 
contender for our next server because of the low-cost nature of the 
licensing."
    Internally, Microsoft seems somewhat torn on how to approach the 
open-source movement. While the company denounces the move toward 
free software, it does recognize at least some of the value of open-
source development.
    "Microsoft views open source as a competitor, but it's 
hard to treat it as a competitor," Gartner's Smith said. 
"So they have to attack basic tenets, mentality, way of life 
and thought processes." Since last year, Microsoft has made 
available to hundreds of its larger customers copies of its closely 
guarded Windows source code. The company hopes its best customers 
can help it improve Windows.
    Microsoft has been touting plans to broaden Windows source-code 
access to business partners in an initiative it calls its 
"shared-source philosophy."
    In particular, Microsoft wants to emulate the spirit of 
cooperation that has spawned groups of volunteer Linux programmers. 
"Having a sense of community is a good thing. It's one thing 
we've watched with interest," Craig Mundie, senior vice 
president of advanced strategies at Microsoft, said in a recent 
interview. "The more of that we can foster in our community, 
the better."
    Building a better community
    Microsoft hopes to imbue its programmer network with some of 
this community spirit, Mundie said. "The Microsoft Developer 
Network hasn't been one where there was a lot of dialogue between 
(developers) and with Microsoft developers."
    Though Microsoft will be expanding how it engages directly with 
those who see its source code, the company isn't going to extend the 
right granted to many members of the open-source community-the power 
to change the software. People may submit bug fixes, but 
"customers aren't trying to buy the rights to produce 
derivatives," Mundie said. "In general, we're going to 
control that reintegration. We worry a lot about uniformity and 
avoiding fragmentation."
    But how far Microsoft is willing to go with open source appears 
limited, said Smith, who noted that while attacking Linux, the 
company promises to support the Unix variant through .Net. It's 
"a nice PR story for Microsoft to talk about the possibilities 
about .Net on Linux," he said. "It is true that Linux 
can participate in those .Net services, but don't expect Microsoft 
to provide any incentive or anything else that would make that 
possible."
    Dain said Microsoft's attacks on Linux and open source may in 
the long run benefit technology buyers. "Personally, I think 
the talk on both sides-Microsoft vs. open source--will end up 
benefiting consumers in the workplace and at home. There definitely 
is competition in the marketplace, and this battle simply proves the 
point."
    And while Microsoft may have the advantage in the consumer 
market with Windows, it's still the underdog in the large-scale 
business server market.
    "To many people, including myself, implementing a 
Microsoft solution is a much more cost-effective way to go than a 
Sun or other high-end Unix/mainframe solution," Dain said.
    Exhibit D
    Microsoft license spurns open source
    By Stephen Shankland
    Staff Writer, CNET News.com
    June 22, 2001, 12:05 PM PT
    Microsoft lawyers have joined the company's campaign against 
open-source software, restricting how developers may use what it 
terms "viral software" in connection with Microsoft 
programming tools.
    The license of the second beta version of Microsoft's Mobile 
Internet Toolkit--software used so programmers can create 
server software to connect with handheld computers over the 
Internet--prohibits customers from using the Microsoft software 
in conjunction with "potentially viral software." (Read 
an excerpt here)
    In describing this category of software, Microsoft includes the 
most common licenses used for publishing open-source software, such 
as the Linux operating system. Licenses specifically excluded by 
Microsoft include the General Public License, the Lesser General 
Public License, the Mozilla Public License and the Sun Industry 
Standards License.
    While the provision in Microsoft's license isn't surprising, 
Fenwick & West intellectual property attorney Dana Hayter said 
the company could have picked a more neutral term, such as 
"open software."
    "The choice of the term says more about Microsoft's view 
than the rest of it," Hayter said. "I think it's a 
pejorative and misleading term. To suggest that open-source software 
is somehow "vital" is to confuse harm to your 
customers" machines and data with harm to Microsoft's 
profits." Microsoft representatives weren't immediately 
available for comment.
    The license provision, posted Thursday at Linux Today, is the 
latest step in an increasingly vocal campaign by Microsoft Chairman 
Bill Gates, Senior Vice President Craig Mundie and Chief Executive 
Steve Ballmer to disparage open-source software.
    The campaign, in which the executives have compared open-source 
software to viruses and cancer, comes at a time when some observers 
believe Microsoft is worried that Linux--the best-known open-
source project--will undermine the Microsoft. Net strategy for 
joining desktop computer users with sophisticated Internet services.
    Some open-source fans weren't happy with Microsoft's view of the 
software world and its use of the term "viral software."
    "The GPL is not a virus, it is a vaccine, an inoculation 
against later abuse of your code by having someone, such as 
Microsoft, take your hard work, incorporate it into a proprietary 
product which is then extended and kept closed, marginalizing your 
project in the process," said one comment at discussion site 
Slashdot.
    The Microsoft license seeks to prevent the possibility that a 
program that links both to Microsoft and open-source software 
components could force Microsoft to expose the now-secret source 
code of its software, Hayter said.
    "They're saying you cannot use (Microsoft) software in a 
way that would create in Microsoft any obligations to do anything 
with (Microsoft's) code, for example to make the source 
public," Hayter said.
    One example of a forbidden move would be to create software that 
used prepackaged components called libraries from Microsoft as well 
as a library covered by the GPL, Hayter said. Under the terms of the 
GPL, software covered by it may be directly incorporated only into 
other GPL software.
    But a legally grayer area is creating software that merely calls 
upon such libraries rather than incorporating the library code 
directly. The Free Software Foundation created the LGPL license for 
precisely such occasions; this license allows links to proprietary 
software.
    One example is the use of a library called 
"readline" that lets people use arrow keys and perform 
some other tasks when typing information into a computer, said 
PostgreSQL database developer Bruce Momjian. Because PostgreSQL is 
released under a BSD-style license that has different terms than the 
GPL, GPL code may not be freely mixed within PostgreSQL.
    "If we required the readline library, then the entire 
PostgreSQL software would have to be GPL'd," Momjian said, 
noting that programs such as the BSD-licensed libedit software offer 
an alternative. "If you use (readline) in any application, 
your entire application is GPL." Regardless of the legalities 
involved, the provision in the license is significant, Hatyer said. 
"This demonstrates they're taking open source 
seriously."
    Exhibit E
    By Mike Ricciuti
    Staff Writer, CNET News.com
    November 5, 1998, 11:20 AM PT
    Microsoft engineers see Linux as a "best-of-breed" 
Unix that outperforms the company's own Windows NT operating system 
and is a "credible alternative" to commercially 
developed servers, according to an internal memo posted to the Web 
this week.
    The admission, contained in the second so-called Halloween memo 
posted to the Web this week by programmer Eric Raymond, is counter 
to the company's public statements downplaying the significance of 
Linux, and its suggestions that Fortune 1,000 companies have little 
interest in open source software (OSS).
    The new memo also contains a single sentence suggesting that the 
company may investigate the use of patents and copyrights to combat 
Linux. Microsoft representatives were not immediately available to 
comment further on the statement.

[[Page 29133]]

    In a preface to the memo, Raymond states that the document had 
been leaked to him by a former Microsoft employee. A Microsoft 
representative today said the document appears to be authentic, and 
said it is the second in "what could be a series" of 
similar memos posted to the Web. Yesterday, a Microsoft 
representative downplayed the significance of the initial memo.
    According to the new memo, written by Microsoft engineer Vinod 
Valloppillil, Linux "represents a best-of-breed Unix, that is 
trusted in mission critical applications, and--due to its open 
source code--has a long term credibility which exceeds many 
other competitive OS's."
    In what the memo's author considers the "worst case" 
scenario for Microsoft, Linux will "provide a mechanism for 
server OEMs to provide integrated, task-specific products and 
completely bypass Microsoft revenues in this space."
    Another new revelation contained in the new memo is that 
Microsoft considers Linux to be a threat on both server and client 
systems. "Long term, my simple experiments do indicate that 
Linux has a chance at the desktop market..," the memo states. 
The initial memo only cited the server market as a competitive 
battleground between Linux and Windows NT, now renamed Windows 2000.
    The first memo, posted to the Web over the weekend, showed that 
Microsoft executives fear that the growing popularity of Linux and 
other open source software poses a direct threat to the company's 
revenue stream, and suggests the company could respond by modifying 
Internet protocols to become proprietary technologies that tie 
consumers and developers to Microsoft products.
    In the new memo, some of the reasons for the company's fears are 
more clearly defined. The memo states:
    . "Most of the primary apps that people require when they 
move to Linux are already available for free. This includes Web 
servers, POP clients, mail servers, text editors, etc."
    . "An advanced Win32 GUI user would have a short learning 
cycle to become productive [under Linux]."
    . "I previously had [Internet Explorer and Windows NT] on 
the same box and by comparison the combination of Linux /[Netscape 
Navigator] ran at least 30 to 40 percent faster when rendering 
simple HTML + graphics."
    . "Linux's (real and perceived) virtues over Windows NT 
include: Customization. Availability/Reliability. Scalability/
Performance. Interoperability." The author of the memo also 
writes that he believes consumers "love" Linux.
    Exhibit F
    Microsoft sues Linux start-up over name
    By Joe Wilcox and David Becker
    Staff Writers, CNET News.com
    December 20, 2001,3:50 PM PT
    Microsoft asked a court on Thursday to stop a Linux start-up 
from using a name the software giant contends infringes on the 
Windows trademark.
    The Redmond, Wash.-based software giant filed a motion with the 
U.S. Court for the Western District of Washington against Lindows, 
which is developing a version of the Linux operating system that 
will run popular applications written for Microsoft's Windows OS.
    Microsoft contends the company, which plans to formally release 
its product next year, purposely is trying to confuse Lindows with 
Windows. The suit asks the court to order the start-up to stop using 
the Lindows name and also seeks unspecified monetary damages.
    "We're not asking the court to stop the company from 
making their products," said Microsoft spokesman Jon 
Murchinson. "What we're saying is they should not use a name 
that could confuse the public and infringe on our valuable 
trademark."
    Lindows is based on the Wine project, an open-source effort to 
mimic the commands that Windows programs use. The San Diego-based 
Lindows company was launched earlier this year by Michael Robertson, 
former CEO of digital music site MP3.com.
    Robertson characterized the move as another attempt by Microsoft 
to thwart a viable threat to its Windows empire.
    "If they're alleging that people are going to be confusing 
Microsoft Corp. with Lindows.com, I think there's zero potential of 
that happening," he said. "If people are confused, just 
remember that we're not the convicted monopolist."
    Murchinson said Microsoft considered legal action a last resort.
    "Clearly we prefer to work with them to resolve this 
problem voluntarily. Their product name infringes on our 
trademark," Murchinson said. "We hope they will work 
with us to resolve this problem without the need for legal 
action." Robertson said he had heard from nobody at Microsoft 
regarding the name dispute. "They
    Microsoft has been involved in an increasingly fractious war of 
words with Linux supporters this year, with Microsoft executives 
castigating the open-source distribution model behind Linux as a 
sure road to commercial failure and on blight for software 
development. Emmett Stanton, an attorney at Palo Alto, Calif.-based 
Fenwick & West, said Microsoft has not been overzealous in the 
past about protecting its trademark, allowing spoof sites and others 
to go unchallenged.
    "They're not the type to sue at the drop of a hat," 
he said, concluding that there appears to be solid ground for the 
Lindows complaint. "Superficially, you would have to say 
there's some potential for confusion, and the defendant may be 
trying to trade on Microsoft's position in the marketplace."
    Robertson said he hoped to have a preview version of Lindows 
ready for download by next week, with a full version ready early 
next year. He said the company is targeting small and medium-sized 
business that might be interested in switching to a less expensive 
operating system but have invested in Windows applications such as 
Office. "We're trying to give consumers a choice, where 
there's really no choice today," he said.
    FOR IMMEDIATE RELEASE FRIDAY, NOVEMBER 2, 2001 WWW.USDOJ.GOV AT 
(202) 514-2007 TDD (202) 514-1888
    DEPARTMENT OF JUSTICE AND MICROSOFT CORPORATION REACH EFFECTIVE 
SETTLEMENT ON ANTITRUST LAWSUIT
    Settlement Provides Enforcement Measures To Stop Microsoft's 
Unlawful Conduct, Prevent Its Recurrence, And Restore Competition
    WASHINGTON, DC--The Department of Justice reached a 
settlement today with Microsoft Corporation that imposes a broad 
range of restrictions that will stop Microsoft's unlawful conduct, 
prevent recurrence of similar conduct in the future and restore 
competition in the software market, achieving prompt, effective and 
certain relief for consumers and businesses. The settlement reached 
today accomplishes this by: creating the opportunity for independent 
software vendors to develop products that will be competitive with 
Microsoft's middleware products on a function-by-function basis; 
giving computer manufacturers the flexibility to contract with 
competing software developers and place their middleware products on 
Microsoft's operating system; preventing retaliation against 
computer manufacturers, software developers, and other industry 
participants who choose to develop or use competing middleware 
products; and ensuring full compliance with the proposed Final 
Judgment and providing for swift resolution of technical disputes.
    "A vigorously competitive software industry is vital to 
our economy and effective antitrust enforcement is crucial to 
preserving competition in this constantly evolving high-tech 
arena," said Attorney General John Ashcroft. "This 
historic settlement will bring effective relief to the market and 
ensure that consumers will have more choices in meeting their 
computer needs." The settlement, which will be filed today in 
U.S. District Court in the District of Columbia with Judge Colleen 
Kollar-Kotelly, if approved by the court, would resolve the lawsuit 
filed by the Department on May 18, 1998.
    "This settlement will promote innovation, give consumers 
more choices, and provide the computer industry as a whole with more 
certainty in the marketplace," said Charles A. James, 
Assistant Attorney General for the Antitrust Division. "The 
goals of the government were to obtain relief that stops Microsoft 
from engaging in unlawful conduct, prevent any recurrence of that 
conduct in the future, and restore competition in the software 
market-we have achieved those goals."
    Today's proposed settlement is modeled on the conduct provisions 
in the original Final Judgment entered by Judge Jackson, but 
includes key additions and modifications that take into account the 
and anticipated changes in the computer industry, including the 
launch of Microsoft's new Windows XP operating system, and the Court 
of Appeals decision revising some of the original liability 
findings.
    The proposed Final Judgment includes the following key 
provisions:
    Broad Scope of Middleware Products- The proposed Final Judgment 
applies a broad definition of middleware products which is wide 
ranging and will cover all the technologies that have the potential 
to be middleware threats to Microsoft's operating system monopoly. 
It includes browser, e-mail clients, media players, instant 
messaging

[[Page 29134]]

software, and future new middleware developments.
    Disclosure of Middleware Interfaces- Microsoft will be required 
to provide software developers with the interfaces used by 
Microsoft's middleware to interoperate with the operating system.
    This will allow developers to create competing products that 
will emulate Microsoft's integrated functions.
    Disclosure of Server Protocols- The Final Judgment also ensures 
that other non-Microsoft server software can interoperate with 
Windows on a PC the same way that Microsoft servers do. This is 
important because it ensures that Microsoft cannot use its PC 
operating system monopoly to restrict competition among servers. 
Server support applications, like middleware, could threaten 
Microsoft's monopoly.
    Freedom to Install Middleware Software--Computer 
manufacturers and consumers will be free to substitute competing 
middleware software on Microsoft's operating system.
    Ban on Retaliation--Microsoft will be prohibited from 
retaliating against computer manufacturers or software developers 
for supporting or developing certain competing software. This 
provision will ensure that computer manufacturers and software 
developers are able to take full advantage of the options granted to 
them under the proposed Final Judgment without fear of reprisal. 
Uniform Licensing Terms- Microsoft will be required to license its 
operating system to key computer manufacturers on uniform terms for 
five years. This will further strengthen the ban on retaliation.
    Ban on Exclusive Agreements- Microsoft will be prohibited from 
entering into agreements requiring the exclusive support or 
development of certain Microsoft software. This will allow software 
developers and computer manufacturers to contract with Microsoft and 
still support and develop rival middleware products.
    The proposed Final Judgment also includes key additional 
provisions related to enforcement: Licensing of Intellectual 
Propert--Microsoft also will be required to license any 
intellectual property to computer manufacturers and software 
developers necessary for them to exercise their rights under the 
proposed Final Judgment, including for example, using the middleware 
protocols disclosed by Microsoft to interoperate with the operating 
system. This enforcement measure will ensure that intellectual 
property rights do not interfere with the rights and obligations 
under the proposed Final Judgment.
    On-Site Enforcement Monitors- The proposed settlement also adds 
an important enforcement provision that provides for a panel of 
three independent, on-site, full-time computer experts to assist in 
enforcing the proposed Final Judgment. These experts will have full 
access to all of Microsoft's books, records, systems, and personnel, 
including source code, and will help resolve disputes about 
Microsoft's compliance with the disclosure provisions in the Final 
Judgment. The core allegation in the lawsuit, upheld by the Court of 
Appeals in June 2001, was that Microsoft had unlawfully maintained 
its monopoly in computer-based operating systems by excluding 
competing software products known as middleware that posed a nascent 
threat to the Windows operating system.
    Specifically, the Court of Appeals found that Microsoft engaged 
in unlawful exclusionary conduct by using contractual provisions to 
prohibit computer manufacturers from supporting competing middleware 
products on Microsoft's operating system; prohibiting consumers and 
computer manufacturers from removing Microsoft's middleware products 
from the operating system; and reaching agreements with software 
developers and third parties to exclude or disadvantage competing 
middleware products.
    The proposed Final Judgment will be published by the Federal 
Register, along with the Department's Competitive Impact Statement, 
as required by the Antitrust Procedures and Penalties Act. Any 
person may submit written comments concerning the proposed consent 
decree within 60 days of its publication to: Renata Hesse, Trial 
Attorney, 325 7th Street, NW, Suite 500, Washington, DC 20530, 
(202-6160944). At the conclusion of the 60-day comment period, 
the Court may enter the proposed consent decree upon a finding that 
it serves the public interest. The proposed Final Judgment will be 
in effect for a five year period and may be extended for an 
additional two-year period if the Court finds that Microsoft has 
engaged in multiple violations of the proposed Final Judgment.
    6330670 Digital rights management operating system 11-Dec-
01
    6330589 System and method for using a client database to 
manage conversation threads generated from email or news messages 
11-Dec-01
    6330566 Apparatus and method for optimizing client-state 
data storage 11-Dec-01
    6330563 Architecture for automated data analysis 11-Dec-01
    6330003 Transformable graphical regions 11-Dec-01
    6327705 Method for creating and maintaining user data 04-
Dec-01
    6327702 Generation a compiled language program for an 
interpretive runtime environment 04-Dec-01
    6327699 Whole program path profiling 04-Dec-01
    6327652 Loading and identifying a digital rights management 
operating system 04-Dec-01
    6327617 Method and system for identifying and obtaining 
computer software fro a remote computer 04-Dec-01
    6327608 Server administration tool using remote file 
browser 04-Dec-01
    6327589 Method for searching a file having a format 
unsupported by a search engine 04-Dec-01
    6326964 Method for sorting 3D object geometry among image 
chunks for rendering in a layered graphics rendering system 04-Dec-
01
    6326953 Method for converting text corresponding to one 
keyboard mode to text corresponding to another keyboard more 04-Dec-
01
    6326947 Ractile character input in computer-based devices 
04-Dec-01
    6324587 Method, computer program product, and data 
structure for publishing a data object over a store and forward 
transport 27-Nov-01
    6324571 Floating single master operation 27-Nov-01
    6324546 Automatic logging of application program launches 
27-Nov-01
    6324544 File object synchronization between a desktop 
computer and a mobile device 27-Nov-01
    6324492 Server stress testing using multiple concurrent 
client simulation 27-Nov-01
    6321334 Administering permissions associated with a 
security zone in a computer system security model 20-Nov-01
    6321276 Recoverable methods and systems for processing 
input/output requests including virtual memory addresses 20-Nov-01
    6321275 Interpreted remote procedure calls 20-Nov-01
    6321274 Multiple procedure calls in a single request 20-
Nov-01
    6221243 Laying out a paragraph by defining all the 
characters as a single text run by substituting, and then 
positioning the glyphs 20-Nov-01
    6321226 Flexible keyboard searching 20-Nov-01
    6321225 Abstracting cooked variables from raw variables 20-
Nov-01
    6321219 Dynamic symbolic links for computer file systems 
20-Nov-01
    6320978 Stereo reconstruction employing a layered approach 
and layer refinement techniques 20-Nov-01
    6317880 Patch source list management 13-Nov-01
    6317818 Pre-fetching of pages prior to a hard page fault 
sequence 13-Nov-01
    6317774 Providing predictable scheduling of programs using 
a repeating precomputed schedule 13-Nov-01
    6317760 Extensible ordered information within a web page 
13-Nov-01
    6317748 Management information to object mapping and 
correlator 13-Nov-01
    6314562 Method and system for anticipatory optimization of 
computer programs 06-Nov-01
    6314533 System and method for forward custom marshaling 
event filters 06-Nov-01
    6314417 Processing multiple database transactions in the 
same process to reduce process overhead and redundant retrieval from 
database servers 06-Nov-01
    6313851 User friendly remote system interface 06-Nov-01
    6311323 Computer programming language statement building 
and information tool 30-Oct-01
    6311228 Method and architecture for simplified 
communications with HID devices 30-Oct-01
    6311216 Method, computer program product, and system for 
client-side deterministic routing and URL lookup into a distributed 
cache of URLS 30-Oct-01
    6311209 Methods for performing client-hosted application 
sessions in distributed processing systems 30-Oct-01
    6308274 Least privilege via restricted tokens 23-Oct-01
    6308273 Method and system of security location 
discrimination 23-Oct-01

[[Page 29135]]

    6308266 System and method for enabling different grades of 
cryptography strength in a product 23-Oct-01
    6308222 Transcoding of audio data 23-Oct-01
    6308173 Methods and arrangements for contro??ing resource 
access in a networked computing environment 23-Oct-01
    6307566 Methods and apparatus for performing image 
rendering and rasterization operations 23-Oct-01
    6307547 Method and system for providing enhanced folder 
racks 23-Oct-01
    6307538 EMC enhanced peripheral device 23-Oct-01
    6305008 Automatic statement completion 16-Oct-01
    6304928 Compressing/decompressing bitmap by performing 
exclusive- or operation setting differential encoding of first and 
previous row therewith outputting run-length encoding of row 16-Oct-
01
    6304918 Object interface control system 16-Oct-01
    6304917 Negotiating optimum parameters in a system of 
interconnected components 16-Oct-01
    6304914 Method and apparatus for pre-compression packaging 
16-Oct-01
    6304879 Dynamic data cache for object-oriented computing 
environments 16-Oct-01
    6304878 Method and system for improved enumeration of tries 
16-Oct-01
    6304261 Operating system for handheld computing device 
having program icon auto hide 16-Oct-01
    6304258 Method and system for adding application defined 
properties and application defined property sheet pages 16-Oct-01
    6303924 Image sensing operator input device 16-Oct-01
    6301616 Pledge-based resource allocation system 09-Oct-01
    6301612 Establishing one computer as a replacement for 
another computer 09-Oct-01
    6301601 Disabling and enabling transaction committal in 
transactional application components 09-Oct-01
    6298440 Method and system for providing multiple entry 
point code resources 02-Oct-01
    6298391 Remote procedure calling with marshaling and 
unmarshaling of arbitrary non-conformant pointer sizes 02-Oct-01
    6298373 Local service provider for pull based intelligent 
caching system 20-Oct-01
    6298342 Electronic database operations for perspective 
transformations on relational tables using pivot and unpivot columns 
02-Oct-01
    6298321 Trie compression using substates and utilizing 
pointers to replace or merge identical, reordered states 02-Oct-01
    6297837 Method of maintaining characteristics information 
about a system component either modified by an application program 
or a user initiated change 02-Oct-01
    6295608 Optimized allocation of data elements among cache 
lines 25-Oct-01
    6295556 Method and system for configuring computers to 
connect to networks using network connection objects 25-Oct-01
    6295529 Method and apparatus for indentifying clauses 
having predetermined characteristics indicative of usefulness in 
determining relationships between different texts 25-Oct-01
    6292934 Method and system for improving the locality of 
memory references during execution of a computer program 18-Oct-01
    6292857 Method and mechanism for coordinating input of 
asynchronous data 18-Oct-01
    6292840 Voice/audio data communication with negotiated 
compression scheme and data header compressed in predetermined 
scheme 18-Oct-01
    6292834 Dynamic bandwidth selection for efficient 
transmission of multimedia streams in a computer network 18-Sep-01
    6292822 Dynamic load balancing among processors in a 
parallel computer 18-Sep-01
    6292194 Image compression method to reduce pixel and 
texture memory requirements in graphics applications 18-Sep-01
    6289464 Receiving wireless information on a mobile device 
with reduced power consumption 11-Sep-01
    6289458 Perproperty access control mechanism 11-Sep-01
    6289390 System and method for performing remote requests 
with an on-line service network 11-Sep-01
    6288726 Method for rendering glyphs using a layout services 
library 11-Sep-01
    6288720 Method and system for adding application defined 
properties and application defined property sheet pages 11-Sep-01
    6286131 Debugging tool for linguistic applications 04-Sep-
01
    6286013 Method and system for providing a common name space 
for long and short file names in an operating system 04-Sep-01
    6285998 System and method for generating reusable database 
queries 04-Sep-01
    6285374 Blunt input device cursor 04-Sep-01
    6285363 Method and system for sharing applications between 
computer systems 04-Sep-01
    6282712 Automatic software installation on heterogeneous 
networked computer systems 28-Aug-01
    6282621 Method and apparatus for reclaiming memory 28-Aug-
01
    6282561 Method and system for resource management with 
independent real-time applications on a common set of machines 28-
Aug-01
    6282327 Maintaining advance widths of existing characters 
that have been resolution enhanced 28-Aug-01
    6282294 System for broadcasting to, and programming, a 
motor device in a protocol, device, and network independent fashion 
28-Aug-01
    6281881 System and method of adjusting display 
characteristics of a displayable data file using an ergonomic 
computer input device 28-Aug-01
    6281879 Timing and velocity control for displaying 
graphical information 28-Aug-01
    6279111 Security model using restricted tokens 21-Aug-01
    6279032 Method and system for quorum resource arbitration 
in a server cluster 21-Aug-01
    6279016 Standardized filtering control techniques 21-Aug-01
    6279007 Architecture for managing query friendly 
hierarchical values 21-Aug-01
    6278989 Histogram construction using adaptive random 
sampling with cross-validation for database systems 21-Aug-01
    6278462 Flexible schemes for applying properties to 
information in a medium 21-Aug-01
    6278450 System and method for customizing controls on a 
toolbar 21-Aug-01
    6278448 Composite Web page built from any web content 21-
Aug-01
    6278434 Non-square scaling of image data to be mapped to 
pixel sub-components 21-Aug-01
    6275957 Using query language for provider and subscriber 
registrations 14-Aug-01
    6275938 Security enhancement for untrusted executable code 
14-Aug-01
    6275912 Method and system for storing data items to a 
storage device 14-Aug-01
    6275868 Script Engine interface for multiple languages 14-
Aug-01
    6275857 System and method for freeing shared resources in a 
computer system 14-Aug-01
    6275829 Representing a graphic image on a web page with a 
thumbnail-sized image 14-Aug-01
    6275496 Content provider for pull based intelligent caching 
system 14-Aug-01
    6272631 Protected storage of core data secrets 07-Aug-01
    6272593 Dynamic network cache directories 07-Aug-01
    6272581 System and method for encapsulating legacy data 
transport protocols for IEEE 1394 serial bus 07-Aug-01
    6272545 System and method for interaction between one or 
more mobile devices 07-Aug-01
    6271858 Incremental update for dynamic/animated textures on 
three-dimensional models 07-Aug-01
    6271855 Interactive construction of 3D models from 
panoramic images employing hard and soft constraint characterization 
and decomposing techniques 07-Aug-01
    6271847 Inverse texture mapping using weighted pyramid 
blending and view-dependent weight maps 07-Aug-01
    6271839 Method and system for sharing applications between 
computer systems 07-Aug-01
    6269477 Method and system for improving the layout of a 
program image using clustering 31-Jul-01
    6269403 Browser and publisher for multimedia object 
storage, retrieval and transfer 31-Jul-01
    6269382 Systems and methods for migration and recall of 
data from local and remote storage 31-Jul-01
    6269377 System and method for managing locations of 
software components via a source list 31-Jul-01
    6368855 Method and system for sharing applications between 
computer systems 31-Jul-01

[[Page 29136]]

    6268852 System and method for facilitating generation and 
editing of event handlers 31-Jul-01
    6266729 Computer for encapsulating legacy data transport 
protocol for IEEE 1394 serial bus 24-Jul-01
    6266665 Indexing and searching across multiple sorted 
arrays 24-Jul-01
    6266658 Index tuner for given workload 24-Jul-01
    6266064 Coherent visibility sorting and occlusion cycle 
detection for dynamic aggregate geometry 24-Jul-01
    6266059 User interface for switching between application 
modes 24-Jul-01
    6266054 Automated removal of narrow, elongated distortions 
from a digital image 24-Jul-01
    6266043 Apparatus and method for automatically positioning 
a cursor on a control 24-Jul-01
    6263492 Run time object layout model with object type that 
differs from the derived object type in the class structure at 
design time and the ability to store the optimized run time object 
layout model 17-Jul-01
    6263491 Heavyweight and lightweight instrumentation 17-Jul-
01
    6263379 Method and system for referring to and binding to 
objects using identifier objects 17-Jul-01
    6263367 Server-determined client refresh periods for 
dynamic directory services 17-Jul-01
    6263352 Automated web site creation using template driven 
generation of active server page applications 17-Jul-01
    6263337 Scalable system for expectation maximization 
clustering of large detabases 17-Jul-01
    6263334 Density-based indexing method for efficient 
execution of high dimensional nearest-neighbor queries on large 
databases 17-Jul-01
    6262733 Method of storing and providing icons according to 
application program calls and user-prompted system metric changes 
17-Jul-01
    6262730 Intelligent user assistance facility 17-Jul-01
    6262712 Handle sensor with fade-in 17-Jul-01
    6260148 Methods and systems for message forwarding and 
property notifications using electronic subscriptions 10-Jul-01
    6260043 Automatic file format converter 10-Jul-01
    6256780 Method and system for assembling software 
components 03-Jul-01
    6256668 Method for identifying and obtaining computer 
software from a network computer using a tag 03-Jul-01
    6256650 Method and system for automatically causing 
editable text to substantially occupy a text frame 03-Jul-01
    6256642 Method and system for file system management using 
a flash-erasable, programmable, read-only memory 03-Jul-01
    6256634 Method and system for purging tombstones for 
deleted data items in a replicated database 03-Jul-01
    6256623 Network search access construct for accessing web-
based search services 03-Jul-01
    6256069 Generation of progressive video from interlaced 
video 03-Jul-01
    6256031 Integration of physical and virtual namespace 03-
Jul-01
    6256028 Dyanmic site browser 03-Jul-01
    6256013 Computer pointing device 03-Jul-01
    6256009 Method for automatically and intelligently 
scrolling handwritten input 03-Jul-01
    6253374 Method for validating a signed program prior to 
execution time or an unsigned program at execution time 26-Jun-01
    6253324 Server verification of requesting clients 26-Jun-01
    6253255 System and method for batching data between 
transport and link layers in a protocol stack 26-Jun-01
    6253241 Selecting a cost-effective bandwidth for 
transmitting information to an end user in a computer network 26-
Jun-01
    6253195 Optimized query tree 26-Jun-01
    6253194 System and method for performing database queries 
using a stack machine 26-Jun-01
    6252608 Method and system for improving shadowing in a 
graphics rendering system 26-Jun-01
    6252593 Assisting controls in a windowing environment 26-
Jun-01
    6252589 Multilingual user interface for an operating system 
26-Jun-01
    6249908 System and method for representing graphical font 
data and for converting the font data to font instructions 19-Jun-01
    6249866 Encrypting file system and method 19-Jun-01
    6249826 System and method for media status notification 19-
Jun-01
    6249822 Remote procedure call method 19-Jun-01
    6249792 On-line dynamic file shrink facility 19-Jun-01
    6249284 Directional navigation system in layout managers 
19-Jun-01
    6249274 Computer input device with inclination sensors 19-
Jun-01
    6247061 Method and computer program product for scheduling 
network communication packets originating from different flows 
having unique service requirements 12-Jun-01
    6247057 Network server supporting multiple instance of 
services to operate concurrently by having endpoint mapping 
subsystem for mapping virtual network names to virtual endpoint IDs 
12-Jun-01
    6247042 Method and system for restoring the state of 
physical memory as the focus changes among application programs in a 
computer 12-Jun-01
    6246977 Information retrieval utilizing semantic 
representation of text and based on constrained expansion of query 
words 12-Jun-01
    6246412 Interactive construction and refinement of 3D 
models from multiple panoramic images 12-Jun-01
    6246409 Method and system for connecting to, browsing, and 
accessing computer network resources 12-Jun-01
    6246404 Automatically generating code for integrating 
context-sensitive help functions into a computer software 
application 12-Jun-01
    6243825 Method and system for transparently failing over a 
computer name in a server cluster 05-Jun-01
    6243821 System and method for managing power consumption in 
a computer system 05-Jun-01
    6243766 Method and system for updating software with 
smaller patch files
    6243764 Method and system for aggregating objects 05-Jun-01
    6243753 Method, system, and computer program product for 
creating a raw data channel form an integrating component to a 
series of kernel mode filters 05-Jun-01
    6243721 Method and apparatus for providing automatic layout 
capabilities for computer forms 05-Jun-01
    6243701 System and method for sorting character strings 
containing accented and unaccented characters 05-Jun-01
    6243093 Methods, apparatus and data structures for 
providing a user interface, which exploits spatial memory in three-
dimensions, to objects and which visually groups matching objects 
05-Jun-01
    6243070 Method and apparatus for detecting and reducing 
color artifacts in images 05-June-01
    6240472 Method and system for sharing a communications port 
29-May-01
    6240465 Method and system for aggregating objects 29-May-01
    6240456 System and method for collecting printer 
administration information 29-May-01
    6239814 Method for indicating the existence of a control 
object 29-May-01
    6239783 Weighted mapping of image data samples to pixel 
sub-components on a display device 29-May-01
    6237144 Use of relational databases for software 
installation 22-May-01
    6236390 Methods and apparatus for positioning displayed 
characters 22-May-01
    6233731 Program-interface converter for multiple-platform 
computer systems 15-May-01
    6233624 System and method for layering drivers 15-May-01
    6233606 Automatic cache synchronization 15-May-01
    6233570 Intelligent user assistance facility for a software 
program 15-May-01
    6232976 Optimizing dynamic/animating textures for use in 
three-dimensional models 15-May-01
    6232974 Decision-theoretic regulation for allocating 
computational resources among components of multimedia content to 
improve fidelity 15-May-01
    6232972 Method for dynamically displaying controls in a 
toolbar display based on control usage 15-May-01
    6232966 Method and system for generating comic panels 15-
May-01
    6232958 Input device with multiplexed switches 15-May-01
    6232957 Technique for implementing an on-demand tool glass 
for use in a desktop user interface 15-May-01
    6230318 Application programs constructed entirely from 
autonomous component objects 08-May-01
    6230312 Automatic detection of per-unit location 
constraints 08-May-01
    6230269 Distributed authentication system and method 08-
May-01

[[Page 29137]]

    6230212 Method and system for the link tracking of objects 
08-May-01
    6230173 Method for creating structured documents in a 
publishing system 08-May-01
    6230172 Production of a video stream with synchronized 
annotations over a computer network 08-May-01
    6230159 Method for creating object inheritance 08-May-01
    6230156 Electronic mail interface for a network server 08-
May-01
    6229539 Method for merging items of containers of separate 
program modules 08-May-01
    6229537 Hosting windowed objects in a non-windowing 
environment 08-May-01
    6226747 Method for preventing software piracy during 
installation from a read only storage medium 01-May-01
    6226742 ciphertext message through use of a message 
authentication code formed through cipher block chaining of the 
plaintext message 01-May-01
    6226689 Method and mechanism for interprocess communication 
using client and server listening threads 01-May-01
    6226665 Application execution environment for a small 
device with partial program loading by a resident operating system 
01-May-01
    6226635 Layered query management 01-May-01
    6226628 Cross-file pattern-matching compression 01-May-01
    6226407 Method and apparatus for analyzing computer screens 
01-May-01
    6226017 Methods and apparatus for improving read/modify/
write operations 01-May-01
    6225973 Mapping samples of foreground/background color 
image data to pixel sub-components 01-May-01
    6223292 Authorization systems, methods, and computer 
program products 24-Apr-01
    6223212 Method and system for sharing negotiating 
capabilities when sharing an application with multiple systems 24-
Apr-01
    6223207 Input/output completion port queue data structures 
and methods for using same 24-Apr-01
    6223171 What-if index analysis utility for database systems 
24-Apr-01
    6222937 Method and system for tracking vantage points from 
which pictures of an object have been taken 24-Apr-01
    6222182 Apparatus and method for sampling a phototransistor 
24-Apr-01
    6219782 Multiple user software debugging system 17-Apr-01
    6219675 Distribution of a centralized database 17-Apr-01
    6219025 Mapping image data samples to pixel sub-components 
on a striped display device 17-Apr-01
    6216177 Method for transmitting text data for shared 
application between first and second computer asynchronously upon 
initiation of a session without solicitation from first computer 10-
Apr-01
    6216175 Method for upgrading copies of an original file 
with same update data after normalizing differences between copies 
created during respective original installations 10-Apr-01
    6216154 Methods and apparatus for entering and evaluating 
time dependence hypotheses and for forecasting based on the time 
dependence hypotheses entered 10-Apr-01
    6216141 System and method for integrating a document into a 
desktop window on a client computer 10-Apr-01
    6216134 Method and System for visualization of clusters and 
classifications 10-Apr-01
    6215503 Image generator and method for resolving non-binary 
cyclic occlusions with image composting operations 10-Apr-01
    6215496 Sprites with depth 10-Apr-01
    6212676 Event architecture for system management in an 
operating system 03-Apr-01
    6212617 Parallel processing method and system using a lazy 
parallel data type to reduce inter-processor communication 03-Apr-01
    6212574 User mode proxy of kernel mode operations in a 
computer operating system 03-Apr-01
    6212553 Method for sending and receiving flags and 
associated data in e-mail transmissions 03-Apr-01
    6212541 System and method for switching between software 
applications in multi-window operating system 03-Apr-01
    6212526 Method for apparatus for efficient mining of 
classification models from databases 03-Apr-01
    6212436 Dynamic inheritance of software object services 03-
Apr-01
    6209093 Technique for producing a privately authenticatable 
product copy indicia and for authenticating such an indicia 27-Mar-
01
    6209089 Correcting for changed client machine hardware 
using a server-based operating system 27-Mar-01
    6209088 Computer hibernation implemented by a computer 
operating system 27-Mar-01
    6209041 Method and computer program product for reducing 
inter-buffer data transfers between separate processing components 
27-Mar-01
    6209040 Method and system for interfacing to a type library 
27-Mar-01
    6209011 Handheld computing device with external 
notification system 27-Mar-01
    6208996 Mobile device having notification database in which 
only those notifications that are to be presented in a limited 
predetermined time period 27-Mar-01
    6208952 Method and system for delayed registration of 
protocols 27-Mar-01
    6208337 Method and system for adding application defined 
properties and application defined property sheet pages 27-Mar-01
    6205561 Tracking and managing failure-susceptible 
operations in a computer system 27-Mar-01
    6205498 Method and system for message transfer session 
management 20-Mar-01
    6205492 Method and computer program product for 
interconnecting software drivers in kernel mode 20-Mar-01
    6202202 Pointer analysis by type inference for programs 
with structured memory objects nd potetially inconsistent memory 
object accesses 13-Mar-01
    6202121 System and method for improved program launch time 
13-Mar-01
    6202089 Method for configuring at runtime, identifying and 
using a plurality of remote procedure call endpoints on a single 
server process 13-Mar-01
    6202085 System and method for incremental change 
synchronization between multiple copies of data 13-Mar-01
    6201549 System and method for drawing and painting with 
bitmap brushes 13-Mar-01
    6201540 Graphical interface components for in-dasn 
automotive accessories 13-Mar-01
    6199166 Method and system for managing data while sharing 
application programs 06-Mar-01
    6199107 Partial file caching and read range resume system 
and method 06-Mar-01
    6199082 Method for delivering separate design and content 
in a multimedia publishing system 06-Mar-01
    6199081 Automatic tagging of documents and exclusion by 
content 06-Mar-01
    6199061 Method and apparatus for providing dynamic help 
topic titles to a user 27-Mar-01
    6198852 View synthesis from plural images using a trifocal 
tensor data structure in a multi-view parallax geometry 06-Feb-01
    6195655 Automatically associating archived multimedia 
content with 27-Feb-01
    6195622 Methods and apparatus for building attribute 
transition probability models for use in pre-fetching resources 27-
Feb-01
    6192487 Method and system for remapping physical memory 20-
Feb-01
    6192432 Caching uncompressed data on a compressed drive 20-
Feb-01
    6192360 Methods and apparatus for class fying text and for 
building a text classifier 20-Feb-01
    6191790 Inheritable property shading system for three-
dimensional rendering of user interface controls 20-Feb-01
    6189146 System and method for software licensing 13-Feb-01
    6189143 Method and system for reducing an intentional 
program tree represented by high-level computational constructs 13-
Feb-01
    6189100 Ensuring the integrity of remote boot client data 
13-Feb-01
    6189069 Optimized logging of data elements to a data 
storage device 13-Feb-01
    6189019 Computer system and computer-implemented process 
for presenting document connectivity 13-Feb-01
    6189016 Journaling ordered changes in a storage volume 13-
Feb-01
    6189000 System and method for accessing user properties 
from multiple storage mechanisms 13-Feb-01
    6188405 Methods, apparatus and data structures for 
providing a user interface, which exploits spatial memory, to 
objects 13-Feb-01
    6188401 Script-based user interface implementation defining 
components using a text markup language 13-Feb-01
    6188387 Computer input peripheral 13-Feb-01
    6188358 Method and apparatus for displaying images such as 
text 13-Feb-01
    6185579 Method and system for expanding a buried stack 
frame 06-Feb-01
    6185569 Linked data structure integrity verification system 
which verifies actual

[[Page 29138]]

node information with expected node information stored in a table 
06-Feb-01
    6185568 Classifying data packets processed by drivers 
included in a stack 06-Feb-01
    6185564 Generation and validation of reference handles in a 
multithreading environment 06-Feb-01
    6184891 Fog simulation for partially transparent objects 
06-Feb-01
    6182286 Dynamic versioning system for multiple users of 
multi-module software systems 30-Jan-01
    6182160 Method and system for using editor objects to 
connect components 30-Jan-01
    6182133 Method and apparatus for display of information 
prefetching and cache status having variable visual indication based 
on a period of time since prefetching 30-Jan-01
    6182108 method and system for multi-threaded processing 30-
Jan-01
    6182029 Method and system for converting between structured 
language elements and objects embeddable in a document 30-Jan-01
    6182086 Client-server computer system with application 
recovery of server applications and client applications 30-Jan-01
    6181351 Synchronizing the moveable mouths of animated 
characters with recorded speech 30-Jan-01
    6178529 Method and system for resource monitoring of 
disparate resources in a server cluster 23-Jan-01
    6178423 System and method for recycling numerical values in 
a computer system 23-Jan-01
    6177945 Advanced graphics controls 23-Jan-01
    6175916 Common-thread inter-process function calls invoked 
by jumps to invalid addresses 16-Jan-01
    6175900 Hierarchical bitmap-based memory manager 16-Jan-01
    6175879 Method and system for migrating connections between 
receive-any and receive-direct threads 16-Jan-01
    6175878 Integration of systems management services with an 
underlying system object model 16-Jan-01
    6175863 Storage of sitemaps at server sites for holding 
information regarding content 16-Jan-01
    6175834 Consistency checker for documents containing 
Japanese text 16-Jan-01
    6175833 System and method for interactive live online 
voting with tallies for updating voting results 16-Jan-01
    6173421 Centrally handling runtime errors 09-Jan-01
    6173406 Authentication systems, methods, computer program 
products 09-Jan-01
    6173404 Software object security mechanism 09-Jan-01
    6173325 Method computer program product, and system for 
assessing the performance of a packet schedule 09-Jan-01
    6173317 Streaming and displaying a video stream with 
synchronized annotations over a computer network 09-Jan-01
    6172354 Operator input device 09-Jan-01
    6169993 Method, data structure, and computer program 
product for object state storage 02-Jan-01
    6169984 Global incremental type search navigation directly 
from printable keyboard character input 02-Jan-01
    6169983 Index merging for database systems 02-Jan-01
    6169546 Global viewer scrolling system 02-Jan-01
    6167565 Method and system of custom marshaling of inter-
language parameters 26-Dec-00
    6167423 Concurrency control of state machines in a computer 
system using cliques 26-Dec-00
    6166738 methods, apparatus and data structures for 
providing a user interface, which exploits spatial memory in three-
dimensions, to objects 26-Dec-00
    6166732 Distributed object oriented multi-user domain with 
multimedia presentations 26-Dec-00
    6163855 method and system for replicated and consistent 
modifications in a server cluster 19-Dec-00
    6163841 Technique for producing privately authenticatable 
cryptographic signatures and for authenticating such signatures 19-
Dec-00
    6163809 System and method for preserving delivery status 
notification when moving from a native network to a foreign network 
19-Dec-00
    616377 System and method for reducing location conflicts in 
a database 19-Dec-00
    6163324 Median calculation using SIMD operations 19-Dec-00
    6161176 System and method for storing configuration 
settings for transfer from a first system to a second system 12-Dec-
00
    6161130 Technique which utilizes a probabilistic classifier 
to detect "junk" e-mail by automatically updating a 
training and re-training the classifier based on the updated 
training set 12-Dec-00
    6161084 Information retrieval utilizing semantic 
representation of text by identify hyponyms and indexing multiple 
tokenized semantic structures to a same passage of text 12-Dec-00
    6160553 Methods, apparatus and data structures for 
providing a user interface, which exploits spatial memory in three-
dimensions, to objects and in which object occlusion is avoided 12-
Dec-00
    6160550 Shell extensions for an operating system 12-Dec-00
    6157942 Imprecise caching of directory download responses 
for dynamic directory services 05-Dec-00
    6157905 Identifying language and character set of data 
representing text 05-Dec-00
    6157747 3-dimensional image rotation method and apparatus 
for producing image mosaics 05-Dec-00
    6157618 Distributed internet user experience monitoring 
system 05-Dec-00
    6157383 Control polyhedra for a three-dimensional (3D) user 
interface 05-Dec-00
    6154843 Secure remote access computing system 28-Nov-00
    6154767 Methods and apparatus for using attribute 
transition probability models for pre-fetching resources 28-Nov-00
    6154220 Rectilinear layout 28-Nov-00
    6154219 System and method for optimally placing labels on a 
map 28-Nov-00
    6154205 Navigating web-based content in a television-based 
system 28-Nov-00
    6151708 Determining program update availability via set 
intersection over a sub-optical pathway 21-Nov-00
    6151632 Method and apparatus for distributed transmission 
of real-time multimedia information 21-Nov-00
    6151618 Safe general purpose virtual machine computing 
system 21-Nov-00
    6151607 Database computer system with application recovery 
and dependency handling write cache 21-Nov-00
    6151022 Method and apparatus for statically testing visual 
resources 21-Nov-00
    6148325 Method and system for protecting shared code and 
data in a multitasking operating system 14-Nov-00
    6148304 Navigating multimedia content using a graphical 
user interface with multiple display regions 14-Nov-00
    6148296 Automatic generation of database queries 14-Nov-00
    6147685 System and method for editing group information 14-
Nov-00
    6145003 Method of web crawling utilizing address" 
mapping 07-Nov-00
    6144964 Methods and apparatus for tuning a match between 
entities having attributes 07-Nov-00
    6144378 Symbol entry system and methods 07-Nov-00
    6144377 Providing access to user interface elements of 
legacy application programs 07-Nov-00
    6141722 Method and apparatus for reclaiming memory 31-Oct-
00
    6141705 System for querying a peripheral device to 
determine its processing capabilities and then offloading specific 
processing tasks from a host to the peripheral device when needed 
31-Oct-00
    6141696 Secure decentralized object exporter 31-Oct-00
    6141018 Method and system for displaying hypertext 
documents with visual effects 31-Oct-00
    6141003 Channel bar user interface for an entertainment 
System 31-Oct-00
    6138128 Sharing and organizing world wide web references 
using distinctive characters 24-Oct-00
    6138112 Test generator for database management systems 24-
Oct-00
    6137492 Method and system for adaptive refinement of 
progressive meshes 24-Oct-00
    6137491 Method and apparatus for reconstructing geometry 
using geometrically constrained structure from motion with points on 
planes 24-Oct-00
    6134658 Multi-server location-independent authentication 
certificate management system 17-Oct-00
    6134602 Application programming interface enabling 
application programs to group code and data to control allocation of 
physical memory in a virtual memory system 17-Oct-00
    6134596 Continuous media file server system and method for 
scheduling network resources to play multiple files having different 
data transmission rates 17-Oct-00
    6134594 Multi-user, multiple tier distributed application 
architecture with

[[Page 29139]]

single-user access control of middle tier objects 17-Oct-00
    6134582 System and method for managing electronic mail 
messages using a client-based database 17-Oct-00
    6134577 Method and apparatus for enabling address lines to 
access the high memory area 17-Oct-00
    6134566 Method for controlling an electronic mail preview 
pane to avoid system disruption 17-Oct-00
    6133925 Automated system and method for annotation using 
callouts 17-Oct-00
    6133917 Tracking changes to a computer software application 
when creating context-sensitive help functions 17-Oct-00
    6133915 System and method for customizing controls on a 
toolbar 17-Oct-00
    6131192 Software installation 10-Oct-00
    6131102 Method and system for cost computation of spelling 
suggestions and automatic replacement 10-Oct-00
    6131051 Interface between a base module and a detachable 
faceplate in an in-dash automotive accessory 10-Oct-00
    6128737 Method and apparatus for producing a message 
authentication code in a cipher block chaining operation by using 
linear combinations of an encryption key 10-Oct-00
    6128713 Application programming interface enabling 
application programs to control allocation of physical memory in a 
virtual memory system 03-Oct-00
    6128661 Integrated communications architecture on a mobile 
device 03-Oct-00
    6128653 Method and apparatus for communication media 
commands and media data using the HTTP protocol 03-Oct-00
    6128633 Method and system for manipulating page-breaks in 
an electronic document 03-Oct-00
    6128629 Method and apparatus, for automatically updating 
data files in a slide presentation program 03Oct-O0
    6128012 User interface for a portable data management 
device with limited size and processing capability 03-Oct-00
    6125373 Identifying a driver that is an owner of an active 
mount point 26-Sep-00
    6125369 Continuous object sychronization between object 
stores on different computers 26-Sep-00
    6125366 Implicit session context system with object state 
cache 26-Sep-00
    6125352 System and method for conducting commerce over a 
distributed network 26-Sep-00
    6122658 Custom localized information in a networked server 
for display to art end user 19-Sep-00
    6122649 Method and system for user defined and linked 
properties 19-Sep-00
    6122644 System for halloween protection in a database 
system 19-Sep-00
    6121981 Method and system for generating arbitrary-shaped 
animation in the user interface of a computer 19-Sep-00
    6121968 Adaptive menus 19-Sep-00
    6121964 Method and system for automatic persistence of 
controls in a windowing environment 19-Sep-00
    6119153 Accessing content via installable data sources 12-
Sep-00
    6119131 Persistent volume mount points 12-Sep-00
    6119120 Computer implemented methods for constructing a 
compressed data structure from a data string and for using the data 
structure to find data patterns in the data string 12-Sep-00
    6119115 Method and computer program product for reducing 
lock contention in a multiple instruction execution stream 
processing environment 12-Sep-00
    6115708 Method for refining the initial conditions for 
clustering with applications to small and large database clustering 
05-Sep-00
    6115705 Relational database system and method for query 
processing using early aggregation 05-Sep-00
    6112216 Method and system for editing a table in a document 
29-Aug-00
    6112214 Method and system for the direct manipulation of 
cells in an electronic spreadsheet program or the like 29-Aug-00
    6111574 Method and system for visually indicating a 
selection query 29-Aug-00 63111567 Seamless multimedia 
branching 29-Aug-00
    6110227 systems and methods for pre-processing variable 
initializers 29-Aug-00
    6108784 Encryption of applications to ensure authenticity 
22-Aug-00
    6108715 Method and system for invoking remote procedure 
calls 22-Aug-00
    6108706 Transmission announcement system and method for 
announcing upcoming data transmissions over a broadcast network 22-
Aug-00
    6108661 system for instance customization 22-Aug-00
    6108006 Method and system for view-dependent refinement of 
progressive meshes 22-Aug-00
    6106575 Nested parallel language preprocessor for 
converting parallel language programs into sequential code 22-Aug-00
    6105041 Using three-state references to manage garbage 
collection of referenced objects 15-Aug-00
    6105039 Generation and validation of reference, handles 15-
Aug-00
    6105038 Hysteresis System and method for achieving a mean 
constant cost per action in a computer system 15-Aug-00
    6105024 System for memory management during run formation 
for external sorting in database system 15-Aug-00
    6104377 Method and system for displaying an image at a 
desired level of opacity 15-Aug-00
    6104359 Allocating display information 15-Aug-00
    6102967 Testing a help system of a computer software 
application without executing the computer software application 15-
Aug-00
    6101546 Method and system for providing data files that are 
partitioned by delivery time and data type 08-Aug-00
    6101513 Method and apparatus for displaying database 
information according to a specified print layout and page for mat 
08-Aug-00
    6101510 Web browser control for incorporating web browser 
functionality into application programs 08-Aug-00
    6101499 Method and computer program product for 
automatically generating an internet protocol (IP) address 08-Aug-00
    6101325 Parameterized packaging system for programming 
languages 08-Aug-00
    6098081 Hypermedia navigation using soft hyperlinks 01-Aug-
00
    6097888 Method and system for reducing an intentional 
program tree represented by high-level computational constructs 01-
Aug-00
    6097854 Image mosaic construction system and apparatus with 
patch-based alignment, global block adjustment and pair-wise motion-
based local warping 01-Aug-00
    6097392 Method and system of altering an attribute of a 
graphic, object in a pen environment 01-Aug-00
    6097380 Continuous media stream control 01-Aug-00
    6097371 System and method of adjusting display 
characteristics of a displayable data file using an ergonomic 
computer input device 01-Aug-00
    6096095 Producing persistent representations of complex 
data structures 01-Aug-00
    6094680 system and method for managing distributed 
resources networks 25-Jul-00
    6094679 Distribution of software in a computer network 
environment 25-Jul-00
    6092208 System and method for waking a computer having a 
plurality of power resources from a system state using a data 
structure 18-Jul-00
    6092144 Method and system for interrupt-responsive 
execution of communications protocols 18-Jul-00
    6092067 Desktop information manager for recording and 
viewing important events data structure 18-Jul-00
    6091411 Dynamically updating themes for an operating system 
shell 18-Jul-00
    6091409 Automatically activating a browser with internet 
shortcuts on the desktop 18-Jut-00
    6088739 Method and system for dynamic, object clustering 
11-Jul-00
    6088718 Meth0ds and apparatus for using resource transition 
probability models for pre-fetching resources 11-Jul-00
    6088711 Method and system for defining and applying a style 
to a paragraph 11-Jul-00
    6088708 System and method for creating an online table from 
a layout of objects 11-Jul-00
    6088511  Nested Parallel 2D Delaunay triangulation method 
11-Jul-00
    6088041 Method of dropout control for scan conversion of a 
glyph comprising a plurality of discrete segments 11-Jul-00
    6086618 Method and computer program product for estimating 
total resource usage requirements of a server application in a 
hypothetical user configuration 11-Jul-00
    6085247 Server operating system for supporting multiple 
client-server sessions and dynamic reconnection of users to previous 
sessions using different, computers 04-Jul-00
    608522 Method and apparatus for utility-directed 
prefetching of web pages into local cache using continual 
computation and user models 04-Jul-00
    6085206 Method and system for verifying accuracy of 
spelling and grammatical composition of a document 04-Jul-00
    6084592 Interactive construction of 3D models from 
panoramic images 04-Jul-00

[[Page 29140]]

    6084582 Method and apparatus for recording a voice 
narration to accompany a slide show 04-Jul-00
    6083282 Cross-project namespace compiler and method 04-Jul-
00
    6081898 Unification of directory service with file system 
service 27-Jun-00
    6081846 Method and computer program product for reducing 
intra-system data copying during network packet processing 27-Jul-00
    6081816 Method for placing text around Polygons and other 
constraints 27-Jun-00
    6081802 System and method for accessing compactly stored 
map element information from memory 27-Jun-00
    6081775 Bootstrapping sense, characterizations of 
occurrences of polysemous words in dictionaries 27-Jun-00
    6081598 Cryptographic system and method with fast 
decryption 27-Jun-00
    6071264 optimal frame rate selection user interface 27-Jun-
00
    6078999 Recovering from a failure using a transaction table 
in connection with shadow copy transaction processing 20-Jun-00
    6078942 Resource management for multimedia devices in a 
computer 20-Jun-00
    6078746 Method and system for reducing an intentional 
program tree represented by high-level computational constructs 20-
Jun-00
    6077313 Type partitioned dataflow analyses 20-Jun-00
    6076100 Server-side chat monitor 13-Jun-00 6976051 
Information retrieval utilizing semantic representation of text 13-
Jun-00
    6075545 Methods and apparatus for storing, accessing and 
processing images through the use of row and column Pointers 13-JUn-
00
    6075540 Storage of appearance attributes in association 
with wedges in a mesh data model for computer graphics 13-Jun-00
    6075532 Efficient redrawing of animated windows 13-Jun-00
    6073226 system and method for minimizing page tattles in 
virtual memory systems 06-Jun-00
    6073214 Method and system for identifying and obtaining, 
computer software from a remote computer 06-Jun-00
    6073137 Method for updating and displaying the hierarchy of 
a data store 06-Jun-00
    6072950 Pointer analysis by type inference combined with a 
non-pointer analysis 06-Jun-00
    6072496 Method and system for capturing and representing 3D 
geometry, color and shading of facial expressions and other animated 
objects 06-Jun-00
    6072486 System and method for creating and customizing a 
deskbar 06-Jun-00
    6072485 Navigating with direction keys in an environment 
that permits navigating with tab keys 06-Jun-00
    6072480 Method and apparatus for controlling composition 
and performance of soundtracks to accompany a slide show 06-Jun-00
    6070007 Method and system for reducing an intentional 
program tree represented by high-level computational constructs 30-
May-00
    6069622 Method and system for generating comic panels 30-
May-00
    6067639 Method for integrating automated software testing 
with software development 23-May-00
    6067578 Container independent control architecture 23-May-
00
    606756 Fast-forwarding and filtering of network packets in 
a computer system 23-May-00
    6067565 Technique for prefetching a web page of potential 
future interest in lieu of continuing a current information download 
23-May-00
    6067559 Server architecture for segregation of dynamic 
content generation applications into separate process spaces 23-May-
00
    6067551 Computer implemented method for simultaneous multi-
user editing of a document 23-May-00
    6067550 Database computer system with application recovery 
and dependency handling, write cache 23-May-00
    6067547 Hash table expansion and contraction for use with 
internal searching 23-May-00
    6067541 Monitoring document changes in a file system of 
documents with the document change information stored in a 
persistent log 23-May-00
    6067412 Automatic bottleneck detection by means of workload 
reconstruction from performance measurements 23-May-00
    6067095 Method for generating mouth features of an animated 
or physical character 23-May-00
    6067087 Method for building menus during idle times 23-May-
00
    6065035 Method and system for procedure boundary detection 
16-May-00
    6065020 Dynamic adjustment of garbage collection 16-May-00
    6065012 System and method for displaying and manipulating 
user-relevant data 16-May-00
    6065011 System and method for manipulating a categorized 
data set 16-May-00
    6065008 System and method for secure font subset 
distribution 16-MAY-00
    6065003 System and method for finding the closest match 0f 
a data entry 16-May-00
    6064999 Method and system for efficiently performing 
database table aggregation using a bitmask-based index 16-May-00
    6064406 Method and system for caching presentation data of 
a source object in a presentation cache 16-MAY-00
    6064393 Method for measuring the fidelity of warped image 
layer approximations in a real-time graphics rendering pipeline 16-
May-00
    6064383 Method and system for selecting an emotional 
appearance and prosody for a graphical character 16-May-00
    6061792 System and method for fair exchange of time-
independent information goods over a network 09-May-00
    6061695 Operating system shell having a windowing graphical 
user interface with a desktop displayed as a hypertext multimedia 
document 09-MAY-00
    6061692 System and method for administering a meta database 
as an integral component of an information server 09-May-00
    6061684 Method and system for controlling user access to a 
resource in a networked computing environment 09-May-00
    6061677 Data base query system and method 09-May-00
    6059838 Method and system for licensed design and use of 
software objects 09-May-00
    6058263 Interface hardware design using internal and e 
external interfaces 02-May-00
    6057841 System and method for processing electronic 
messages with rules representing a combination of conditions, 
actions or exceptions 02-May-00
    6057837 On-screen indentification and manipulation of 
sources that an object depends upon 02-May-00
    6057836 System and method for resizing and rearranging a 
composite toolbar by direct manipulation 02-May-00
    6055548 Computerized spreadsheet with auto-calculator 25-
Apr-00
    6055314 system and method for secure purchase and very of 
video content- Programs 25-Apr-00
    6054989 Methods, apparatus and data structures for 
providing a user interface, which exploits spatial memory in three-
dimensions, to objects and which provides spatialized audio 25-Apr-
00
    6052735 Electronic mail object synchronization between a 
desktop computer and mobile device 18-Apr-00
    6052710 System and method for making function calls over a 
distributed network 18-Apr-00
    6052707 Preemptive multi-tasking with cooperative groups of 
tasks 18-Apr-00
    6052698 Reorganization of collisions in a hash bucket of a 
hash table to improve system performance 18-Apr-00
    6052697 Reorganization of collisions in a hash bucket of a 
hash table to improve system performance 18-Apr-00
    6049869 Method and system detecting and identifying text or 
data encoding system 11-Apr-00
    6049809 Replication optimization system and method 11-Apr-
00
    6049805 Dynamic event mechanism for objects with 
associational relationships 11-Apr-00
    6049671 Method for identifying and obtaining computer 
software from a network computer 11-Apr-00
    6049663 Method and facility for uninstalling a computer 
program package 11-Apr-00
    6049636 Determining a rectangular box encompassing a 
digital picture within a digital image 11-Apr-00
    6049341 Edge cycle collision detection in graphics 
environment 11-Apr-00
    6047307 Providing application programs with unmediated 
access to a contested hardware resource 04-Apr-00
    6047300 System and method for automatically correcting a 
misspelled word 04-Apr-00
    6047297 Method and- system for editing actual work records 
04-Apr-00
    6046744 Selective refinement of progressive meshes 04-Apr-
00

[[Page 29141]]

    6044408 Multimedia device interface for retrieving and 
exploiting software and hardware capabilities 28-Mar-00
    6044387 Single command editing of multiple files 28-Mar-00
    6044366 Use of the UNPIVOT relational operator in the 
efficient gathering of sufficient statistics for data mining 28-Mar-
00
    6044181 Focal length estimation method and apparatus for 
Construction of panoramic mosaic images 28-Mar-00
    6044155 Method and system for securely archiving core data 
secrets 28-Mar-00
    6043826 Transferring outline fonts to devices requiring 
raster fonts 28-Mar-00
    6043817 Method and apparatus for arranging displayed 
graphical representations on a computer interface 28-Mar-00
    6041359 Data delivery system and method for delivering 
computer data over a broad, cast network 21-Mar-00
    6041345 Active stream format for holding multiple media 
streams 21-Mar-00
    6041333 Method and apparatus for automatically updating a 
data file from a network 21-Mar-00
    6041311 Method and apparatus for item recommendation using 
automated collaborative filtering 21-Mar-00
    6040841 Method and system for virtual cinematography 21-
Mar-00
    6038628 System and method for encapsulating legacy data 
transport Protocols for IEEE 1394 serial bus 14-Mar-00
    6038610 Storage of sitemaps at server sites for holding 
information regarding content 14-Mar-00
    6038567 Method and system for propagating object properties 
in a desktop publishing program 14-Mar-00
    6038551 System and method for configuring and managing 
resources on a multi-purpose integrated circuit card using a 
personal computer 14-Mar-00
    6037932 Method for sending computer network data as part of 
vertical blanking interval 14-Mar-00
    6036495 interactive simulation including force feedback 14-
Mar-00
    6035379 Transaction processing for user data employing both 
togging and shadow copying 07-Mar-00
    6035342 Method and computer program product for 
implementing object relationships 07-Mar-00
    6035327 SMTP extension to preserve per-message and per-
recipient properties 07-Mar-00
    6035269 Method for detecting stylistic errors and 
generating replacement strings in a document containing Japanese 
text 07-Mar-00
    6035119 Method and apparatus for automatic generation of 
text and computer-executable code 07-Mar-00
    6032197 Data packet header compression for unidirectional 
transmission 29-Feb-00
    6032188 Method and system for controlling data flow 29-Feb-
00
    6031989 Method of formatting and displaying nested 
documents 29-Feb-00
    6031534 Operating system function for specifying a checked 
image representation and an unchecked image representation of a menu 
item 29-Feb-00
    6031518 Ergonomic input device 29-Feb-00
    6029200 Automatic protocol rollover in streaming multimedia 
data delivery system 22-Feb-00
    6029147 Method and system for providing an interface for 
supporting multiple formats for on-line banking services 22-Feb-00
    6028604 User friendly remote system interface providing 
previews of applications 22-Feb-00
    6026417 Desktop publishing software for automatically 
changing the layout of content-filled documents 15-Feb-00
    6026416 System and method for storing, viewing, editing, 
and processing ordered sections having different file formats 15-
Feb-00
    6026239 Run-time code compiler for data block transfer 15-
Feb-00
    6026238 Interface conversion modules based upon generalized 
templates for multiple platform computer systems 15-Feb-00
    6026233 Method and apparatus for presenting and selecting 
options to modify a programming language statement 15-Feb-00
    6025841 Method for managing simultaneous display of 
multiple windows in a graphical user interface 15-Feb-00
    6023744 Method and mechanism for freeing disk space in a 
file system 08-Feb-00
    6023714 Method and system for dynamically adapting the 
layout of a document to an output device 08-Feb-00
    6023710 System and method for long-term administration of 
archival storage 08-Feb-00
    6023523 Method and system for digital plenoptic imaging 08-
Feb-00
    6023275 System and method for resizing an input Position 
indicator for a user interface of a computer system 08-Feb-00
    6023272 Continuously accessible computer system interface 
08-Feb-00
    6021412 Method and system for automatically adding graphics 
to a document to illustrate concepts referred to therein 01-Feb-00
    6021262 System and method for detection of, notification 
of, and automated repair of problem conditions in a messaging system 
01-Feb-00
    6021203 Coercion resistant one-time-pad cryptosystem that 
facilitates transmission of messages having different levels of 
security 01-Feb-00
    6018619 Method, system and apparatus for client-side usage 
tracking of information server systems 25-Jan-00
    6018349 Patch-based alignment method and apparatus for 
construction of image mosaics 25-Jan-00
    6018340 Robust display management in a multiple monitor 
environment 25-Jan-00
    6016520 Method of viewing at a client viewing station a 
multiple media title stored at a server and containing a plurality 
of topics utilizing anticipatory caching 18-Jan-00
    6016515 Method, computer program product, and data 
structure for validating creation of and routing messages to file 
object 18-Jan-00
    6016508 Server-determined client refresh periods for 
dynamic directory services 18-Jan-00
    6016497 Methods and system for storing and accessing 
embedded information in object-relational databases 18-Jan-00
    6016492 Forward extensible property modifiers for 
formatting information in a program module 18-Jan-00
    6016488 Method arid System for constructing queries 18-Jan-
00
    6016150 Sprite compositor and method for performing 
lighting and shading operations using a compositor to combine 
factored image layers 18-Jan-00
    6016145 Method and system for transforming the geometrical 
shape of a display window for a computer system 18-Jan-00
    6014744 State governing the performance of optional booting 
operations 11-Jan-00
    6014733 and System for creating a perfect hash using an 
offset table 11-Jan-00
    6014706 Methods and apparatus for implementing control 
functions in a streamed vide display system 11-Jan-00
    6014701 Selecting a cost-effective bandwidth for 
transmitting information to an end user in a computer network 11-
Jan-00
    6014681 Method for saving a document using a background 
save thread 11-Jan-00
    6014666 Declarative and programmatic access control of 
component-based server applications using roles 11-Jan-00
    6014518 Terminating polymorphic type inference program 
analysis 11-Jan-00
    6012096 Method and system for peer-to-peer network latency 
measurement 04-Jan-00
    6012075 Method and System for background grammar checking 
an electronic document 04-Jan-00
    6012058 Scalable system for K-means clustering of large 
databases 04-Jan-00
    6012052 resources, editing resource link topology, building 
resource link topology templates, and collaborative filtering 04-
Jan-00
    6009459 Intelligent automatic searching for resources in a 
distributed environment 28-Dec-99
    6009462 Apparatus and methods for optimally using available 
computer resources for task execution during idle-time based on 
probabilistic assessment of future task instances 28-Dec-99
    6009441 Selective response to a comment line in a computer 
file 28-Dec-99
    6009190 Texture map construction method and apparatus for 
displaying panoramic image mosaics 28-Dec-99
    6009188 Method and system for digital plenoptic imaging 28-
Dec-99
    6008820 processor for controlling the display of rendered 
image layers and method for controlling same 28-Dec-99
    6008816 Method and system for managing color specification 
using attachable palettes and palettes that refer to other palettes 
28-Dec-99
    6008807 Method and system for controlling the display of 
objects in a slide show presentation 28-Dec-99
    6008806 Shell extensions for an, operating system 28-Dec-99
    6008803 System for displaying programming information 
287Dec-99
    6008799 Method and system for entering data using an 
improved on-screen keyboard 28-Dec-99

[[Page 29142]]

    600633 Recovery of online sessions for dynamic directory 
services 21-Dec-99
    6006241 Production of a video stream with synchronized 
annotations over a computer network 21-Dec-99
    6006239 Method and system for allowing multiple users to 
simultaneously edit a spreadsheet 21-Dec-99
    6006218 Methods and apparatus for retrieving and/or 
processing retrieved information as a function of a user's estimated 
knowledge 21 -Dec-99
    6005582 Method and system for texture mapping images with 
anisotropic filtering 21-Dec-99
    6005575 Foreground window determination through, process 
and thread initialization 21-Dec-99
    6005551 Offline force effect rendering 21-Dec-99
    6003108 Method and system for interrupt-responsive 
execution of communications protocols 14-Dec-99
    6003097 System for automatically configuring a network 
adapter without manual intervention by using a registry data 
structure maintained within a computer system memory 14-Dec-99
    6003061 Method and system for scheduling the use of a 
computer system resource using a resource planner and a resource 
provider 14-Dec-99
    6003050 Method for integrating a virtual machine with input 
method editors 14-Dec-9
    6002852 Method and system for confirming receipt of data 
opportunistically broadcast to client computer systems 14-Dec-99
    5999996 Adapter for wirelessly interfacing a full-size 
stand alone keyboard with a handheld computing device 07-Dec-99
    5999986 Method and system for providing an event system 
infrastructure 07-Dec-99
    5999979 Method and apparatus for determining a most 
advantageous protocol for use in a computer network 07-Dec-99
    5999938 System and method for creating a new data structure 
in memory populated with data from an existing data structure 07-
Dec-99
    5999896 Method and system for identifying and resolving 
commonly confused words in a natural language parser 07-Dec-99
    5999711 Method and system for providing certificates 
holding authentication and authorization information for users/
machines 07-Dec-99
    5995997 Apparatus and methods for optimally allocating 
currently available computer resources to future task instances 
versus continued execution of current task instances 30-Nov-99
    5995940 Method and system for editing multivalued 
properties of an object 30-Nov-99
    5995922 Identifying information related to an input word in 
an electronic dictionary 30-Nov-99
    5991804 Continuous media file server for cold restriping 
following capacity change by repositioning data blocks in the 
multiple data servers 23-Nov-99
    5991802 Method and system for invoking methods of objects 
over the internet 23-Nov-99
    5991794 Component integration system for an application 
program 23-Nov-99
    5991777 System and method for performing defined actions 
when grafting the name space of one storage medium into the name 
space of another storage medium 23-No799
    5990905 System provided child window controls 23-Nov-99
    5990904 Method and system for merging pixel fragments in a 
graphics rendering system 23-Nov-99
    5990901 Model based image editing and correction 23-Nov-99
    5990899 Method for compressing journal streams 23-Nov-99
    5990886 Graphically creating e-mail distribution lists with 
geographic area selector on map 23-Nov-99
    5990883 Unified presentation of programming from different 
physical sources 23-Nov-99
    5990871 Ergonomic pointing device 23-Nov-99
    5987517 System having a library of protocol independent 
reentrant network interface functions for providing common calling 
interface for communication and application protocols 16-Nov-99
    5987481 Method and apparatus for using label references in 
spreadsheet formulas 16-Nov-99
    5987376 System and method for the distribution and 
synchronization of data and state information between clients in a 
distributed processing system 16-Nov-99
    5987257 Metafile optimization 16-Nov-99
    5987164 Block adjustment method and apparatus for 
construction of image mosaics 16-Nov-99
    5986675 System and method for animating an object in three-
dimensional space using a two-dimensional input device 16-Nov-9
    5986668 Deghosting method and apparatus for construction of 
image mosaics 16-Nov-99
    5986623System and method for interlaced display device data 
transmission 16-Nov-99
    5983274 Creation and use of control information associated 
with packetized network data by protocol drivers and device drivers 
09-Nov-99
    5983242 Method and system for preserving document integrity 
09-Nov-99
    5983240 Method and system of converting data from a source 
file system to a target file system 09-Nov-99
    5982389 Generating optimized motion transitions for 
computer animated objects 09-Nov-99
    5982381 Method and apparatus for modifying a cutout image 
for compositing 09-Nov-99
    5978815 File system primitive Providing native file system 
support for remote storage 02-Nov-99
    5978814 Native data signatures in a file system 02-Nov-99
    5978802 System and method for providing opportunistic file 
access in a network environment 02-Nov-99
    5978795 Temporally ordered binary search method and system 
02-Nov-99
    5978566 Client side deferred actions within multiple MAPI 
profiles 02-Nov-99
    5978484 system and method for safety distributing 
executable objects 02-Nov-99
    5977977 Method and system for multi-pass rendering 02-Nov-
99
    5977973 window linking 02-Nov-99
    5977971 free view control 02-Nov-99
    5977966 System-provided window elements having adjustable 
dimensions 02-Nov-99
    5977951 System and method for substituting an animated 
character when a remote control physical character is unavailable 
02-Nov-99
    5974483 Multiple transparent access to in put peripherals 
26-Oct-99
    5974454 Method and system for installing and updating 
program module components 26-Oct-99
    5974427 Method and computer system for implementing 
concurrent accesses of a database record by multiple users 26-Oct-99
    5974421 Cache-efficient object loader 26-Oct-99
    597416 Method of creating a tabular data stream for sending 
rows of data between client and server 26-Oct-99
    5974410 Method and system for filtering in a uniform data 
interface 26-Oct-99
    5974409 System and method for locating information in an 
on-line network 26-Oct-99
    5970496 Method and system for storing information in a 
computer system memory using hierarchical data node relationships 
19-Oct-99
    5970173 Image compression and affine transformation for 
image motion compensation 19-Oct-99
    5968121 Method and apparatus for representing and applying 
network topological data 19-oct-99
    5966719 Method for inserting capitalized Latin characters 
in a non-Latin document 12-Oct-99
    5966716 Automatic spreadsheet forms 12-Oct-99
    5966705 Tracking a user across both secure and non-secure 
areas on the Internet wherein the users is initially tracked using a 
globally unique identifier 12-Oct-99
    5966686 Method and system for computing semantic logical 
forms from syntax trees 12-Oct-99
    5966140 Method- for creating progressive simplicial 
complexes 12-Oct-99
    5966133 Geomorphs and variable resolution control of 
progressive meshes 12-Oct-99
    5964886 Method and system for recovering text from a 
damaged electronic file 12-Oct-99
    5964843 System for enhancing device drivers 12-Oct-99
    5963945 Synchronization of a client and a server in a 
prefetching resource allocation system 05-Oct-99
    5963894 Method and system for bootstrapping statistical 
processing into a rule-based natural language Parser 05-Oct-99
    5963893 Identification of words in Japanese text by a 
computer system 05-Oct-99
    5963209 Encoding and progressive transmission of 
progressive meshes 05-Oct-99
    5963197 3-D cursor positioning device 05-Oct-99

[[Page 29143]]

    5961591 Downloading data while rejection of its use may be 
overridden 05-Oct-99
    5960423 Database system index selection using candidate 
index selection for a workload 28-Sep-99
    5959621 System and method for displaying data items in a 
ticker display pane on a client computer 28-Sep-99
    5958004 Disabling and enabling transaction committal in 
transactional application components 28-Sep-99
    5956724 Method for compressing a data file using a separate 
dictionary file 21-Sep-99
    5956721 Method and computer program product for classifying 
network communication packets processed in a network stack 21-Sep-99
    5956715 Method and system for controlling user access to a 
resource in a networked computing environment 21-Sep-99
    5956509 System and method for performing remote requests 
with an 0n-line service network 21-Sep-99
    5956489 Transaction replication system and method for 
supporting replicated transaction-based services 21-Sep-99
    5956483 System and method for making function calls from a 
web browser to a local application 21-Sep-99
    5956481  Method and apparatus for protecting data files on 
a computer from virus infection 21-Sep-99
    5956033 Document control interface and method for graphical 
message document software 21-Sep-99
    5953729 Using sparse file technology to stage data that 
will then be stored in remote storage 14-Sep-99
    5953012 Method and system for connecting to, browsing, and 
accessing computer network resources 14-Sep-99
    5951694 Method of redirecting a client service session to a 
second application server without interrupting the session by 
forwarding service-specific it]formation to the second server 14-
Sep-99
    5951653 Method and system for coordinating access to 
objects of different thread types in a shared memory space 14-Sep-99
    5950221 Variably-sized kernel memory stacks 07-Sep-99
    5950193 Interactive records and groups of records in an 
address book database 07-Sep-99
    5950186 Database system index selection using cost 
evaluation of a workload for multiple candidate index configurations 
07-Sep-99
    5949975 Method and system for negotiating capabilities when 
sharing an application program with multiple computer systems 07-
Sep-99
    5949430 Peripheral lenses for simulating peripheral vision 
on a display device 07-Sep-99
    5949429 Method for performing pixel addressing operations 
for a tiled image 07-Sep-99
    5949428 Method and apparatus for resolving pixel data in a 
graphics rendering system 07-Sep-99
    5949418 Operating system for handheld computing device 
having graphical window minimization/enlargement functionality 07-
Sep-99
    5948113 System and method for centrally handling runtime 
errors 07-Sep-99
    5946698 Database computer system with application recovery 
31-Aug-99
    5946697 Rapid transfer of HTML files 31-Aug-99
    5946696 Object property lists 31-Aug-99
    5946691 Method of presenting, storing, and updating a 
filing identifier for a data record 31-Aug-99
    5946648 Identification of words in Japanese text by a 
computer system 31-Aug-99
    5945987 Interactive entertainment network system and method 
for providing short sets of preview video trailers 31-Aug-99
    5945981 Wireless input device, for use with a computer, 
employing a movable light-emitting element and a stationary light-
receiving element 3-Aug-99
    5943048 Method and apparatus for testing a graphic control 
area 24-Aug-99
    5941947 System and method for controlling access to data 
entities in a computer network 24-Aug-99
    5941944 Method for providing a substitute for a requested 
inaccessible object by identifying substantially similar objects 
using weights corresponding to object features 24-Aug-99
    5940847 System and method for automatically correcting 
multi-word data entry errors 17-Aug-99
    5940833 Compressing sets of integers 17-Aug-99
    5938752 System and method for encapsulating legacy data 
transport protocols for IEEE 1394 serial bus 17-Aug-99
    5938729 System and method for monitoring server performance 
at a client computer 17-Aug-99
    5936616 Method and system for accessing and displaying a 
compressed display image in a computer system 10-Aug-99
    5935224 Method and apparatus for adaptively coupling an 
external peripheral device to either a universal serial bus Port on 
a computer or hub or a game port on a computer 10-Aug-99
    5935211 Distributed notification 10-Aug-99
    5935210 Mapping the structure of a collection of computer 
resources 10-Aug-99
    5933842 Method and system for compressing publication 
documents in a computer system by selectively eliminating redundancy 
from a hierarchy of constituent data structures 03-Aug-99
    5933838 Database computer system with application recovery 
and recovery log sequence numbers to optimize recovery 03-Aug-99
    5933822 Apparatus and methods for an information retrieval 
system that employs natural language processing of search results to 
improve overall precision 03-Aug-99
    5933599 Apparatus for presenting the content of an 
interactive on-line network 03-Aug-99
    5933535 Object-based video compression process employing 
arbitrarily-shaped features 03-Aug-99
    5933145 Method and system for visually indicating a 
selection query 03-Aug-99
    5933139 Method and apparatus for creating help functions 
03-Aug-99;
    5931935 File system primitive allowing reprocessing of I/O 
requests by multiple drivers in a layered driver I/O system 03-Aug-
99
    5929860 Mesh simplification and construction of progressive 
meshes 27-Jul-99
    5929840 System and method for computer cursor control 27-
Jul-99
    5926813 Database system index selection using cost 
evaluation of a workload for multiple candidate index configurations 
20-Jul-99
    5926807aMeth0d and system for effectively representing query 
results in a limited amount of memory 20-Jul-99
    5926805 Dual namespace client having long and short 
filenames 20-Jul-99
    5925127 Method and system for monitoring the use of rented 
software 20-Jul-99
    5924108 Document summarizer for word processors 13-ju799
    5924099 Data transfer with expanded clipboard formats 13-
Jul-99
    5923897 System for adapter with status and command 
registers to provide status information to operating system and 
processor operative to write eject command to command register 13-
Jul-99
    5923838 System and method for resolving names in an 
electronic messaging environment 13-Jul-99
    5923846 Method of uploading a message containing a file 
reference to a server and downloading a file from the server using 
the file reference 13-Jul-99
    5923328 Method and system for displaying a hierarchical 
sub-tree by selection of a user interface element in a sub-tree bar 
control 13-Jul-99
    5923307 Logical monitor configuration in a multiple monitor 
environment 13-Jul-99
    5922058 Optical transmission system for generating first-
edge-based serial data bit stream by inverting control output line 
at mark times 13-Jul-99
    5920895 Mapped file input/output with delayed zeroing 06-
Jul-99
    5920734 System for providing electrical power to a computer 
input device according to the interface types through the shared use 
of wires and a voltage clamp 06-Jul-99
    5920720 Efficient computer based virtual machine object 
structure 06-Jul-99
    5920697 Method of automatic updating and use of routing 
information by programmable and manual routing information 
configuration based on least lost routing 06-Jul-99
    5920327 Multiple resolution data display 06-Jul-99
    5920316 Taskbar with start menu 06-Jul-99
    5919264 System and method for using data structures to 
share a plurality of power resources among a plurality of devices 
06-Jul-99
    5917499 Interactive graph display system 29-Jun-99
    5917489 System and method for creating, editing, and 
distributing rules for processing electronic messages 29-Jun-99

[[Page 29144]]

    5917480 Method and system for interacting with the content 
of a slide presentation 29-Jun-99
    5915129 Method and system for storing uncompressed data in 
a memory cache that is destined for a compressed file system 22-Jun-
99
    5914717 Methods and system for providing fly out menus 22-
Jun-99
    5914716 Slide out interface bar 22-Jun-99
    5914714 System and method for changing the characteristics 
of a button by direct manipulation 22-Jun-99
    5913217 Generating and compressing universally unique 
identifiers (UUIDs) using counter having high-order bit to low-order 
bit 15-Jun-99
    5913207 Database system index selection using index 
configuration enumeration for a workload 15-Jun-99
    5913206 Database system multi-column index selection for a 
workload 15-Jun-99
    5913038 system and method for processing multimedia data 
streams using filter graphs 15-Jun-99
    5912661 Z-encoder mechanism 15-Jun-99
    5911072 Method and system for reducing an intentional 
program tree represented by high-level computational constructs 08-
Jun-99
    5911068 Container independent control architecture 08-Jun-
99
    5911066 Data transfer utilizing a single functionally 
independent data transfer mechanism 08-Jun-99
    5910802 Operating system for handheld computing device 
having taskbar auto hide 08-Jun-99
    5910800 Usage tips for on-screen touch-sensitive controls 
08-Jun-99
    5907837 Information retrieval system in an on-line network 
including separate content and layout of published titles 25-May-99
    5907685 System and method for synchronizing clocks in 
distributed computer nodes 25-May-99
    5905987 Method, data structure, and computer program 
product for object state storage in a repository 18-May-99
    5905981 Automatically associating archived multimedia 
content with current textual content 18-May-99
    5905894 Meta-programming methods and apparatus 18-May-99
    5905890 Event architecture system management in an 
operating system 18-May-99
    5905884 Method and system for registering and retrieving 
data formats for objects using a persistent registry 18-May-99
    5905522 Resource allocation method for interactive 
televideo system 18-May-99
    5905508 Method and System for dynamically plotting an 
element on an image using a table 18-May-99
    5905492 Dynamically updating themes for an operating system 
shell 18-May-99
    5903917 Method and system-for alignment of blocks in a 
program image 11-May-99
    5903905 Method for simultaneously constructing and 
displaying a dynamic preview of a document that provides an accurate 
customized document 11-May-99
    5903903 System for determining the sequence and placement 
of pages for a multiple-page document 11-May-99
    5903896 Method for installing a file on demand using a 
preview 11-May-99
    5903894 System and method for using a hierarchical data 
structure to control and identify devices and represent connections 
between the devices 11-May-99
    5903754 Dynamic layered protocol stack 11-May-99
    5903728 Plug-in control including an independent plug-in 
process 11-May-99
    5903265 System-provided window elements having adjustable 
dimensions 11-May-99
    5903255 Method and system for selecting a color value using 
a hexagonal honeycomb 11-May-99
    5901312 Providing application programs with unmediated 
access to a contested hardware resource 04-May-99
    5900905 System and method for linking video, services and 
applications in an interactive television system 04-May-99
    5900004 Method and system for interactive formatting of 
word processing documents with deferred rule evaluation and format 
editing 04-May-99
    5899999 Iterative convolution filter particularly suited 
for use in an image classification and retrieval system 04-May-99
    5898868 Method and system for file system management using 
a flash-erasable, programmable, read-only memory 27-Apr-99
    5898819 System for black and white printing of colored 
pages 27-Apr-99
    5898170 Apparatus and method for finding optimal sensitivity 
level for optical encoding circuit 27-Apr-99
    5897650 Encapsulation of extracted portions of documents 
into objects 27-Apr-99
    5897642 Method and system for integrating an object-based 
application with a version control system 27-Apr-99
    5897640 Method and system of associating, synchronizing and 
reconciling computer files in an operating system 27-Apr-99
    5897622 Electronic shopping and merchandising system 27-
Apr-99
    5893915 Local font face selection for remote electronic 
document browsing 13-Apr-99
    5893107 Method and system for uniformly accessing multiple 
directory services 06-Apr-99
    5893077 Method and apparatus for generating and collecting 
a billing event object within an on-line network 06-Apr-99
    5892917 System for log record and tog expansion with 
inserted log records representing object request for specified 
object corresponding to cached object copies 06-Apr-99
    5892904 Code certification for network transmission 06-Apr-
99
    5892521 System and method for composing a display frame of 
multiple layered graphic sprites 06-Apr-99
    5890174 Method and system for constructing a formula in a 
spreadsheet 30-Mar-99
    5890171 Computer system and computer-implemented method for 
interpreting hypertext links in a document when including the 
document within another document 30-Mar-99
    5890161 Automatic transaction processing of component-based 
server applications 30-Mar-99
    5890147 Scope testing of documents in a search engine using 
document to folder mapping 30-Mar-99
    5889952 Access check system utilizing cached access 
permissions 30-Mar-99
    5889522 System provided child window controls 30-Mar-99
    5889521 System provided child window controls 30-Mar-99
    5886701 Graphics rendering device and method for operating 
same 23-Mar-99
    5886699 Method and system for transferring data to common 
destinations using a common destination list 23-Mar-99
    5886695 System provided child window controls 23-Mar-99
    5886694 Method for automatically laying out controls in a 
dialog window 23-Mar-99
    5884316 Implicit session context system with object state 
cache 16-Mar-99
    5884306 System and method for directly manipulating fields 
for grouping items 16-Mar-99
    5883633 Method and system of variable run length image 
encoding using sub-palette 16-Mar-99
    5883627 Advanced graphics controls 16-Mar-99
    5881292 Dynamic versioning system for multiple users of 
multi-module software system 09-Mar-99
    5881252 Method and apparatus for automatically configuring 
circuit cards in a computer system 09-Mar-99
    5881230 Method and system for remote automation of object 
oriented applications 09-Mar-99
    5880744 Method and apparatus for vector transformation 
involving a transformation matrix 09-Mar-99
    5880737 Method and system for accessing texture data in 
environments with high latency in a graphics rendering system 09-
Mar-99
    5880733 Display system and method for displaying windows of 
an operating system to provide a three-dimensional workspace for a 
computer system 09-Mar-99
    5880731 Use of avatars with automatic gesturing and bounded 
interaction in on-line chat session 09-Mar-99
    5878421 Information map 02-Mar-99
    5878410 File system sort order indexes 02-Mar-99
    5878386 Natural language parser with dictionary-based part-
of-speech probabilities 02-Ma-99
    5878282 Portable information device and system and method 
for downloading executable instruction from a computer to the 
portable information device 02-Mar-99
    5877765 Method and system for displaying internet shortcut 
icons on the desktop 02-Mar-99
    5877758 System and method for using a slider control for 
controlling parameters of a display item 02-Mar-99
    5875289 Method and system for simulating auto-init mode DMA 
data transfers 23-Feb-99

[[Page 29145]]

    5874960 Method and system for sharing applications between 
computer systems 23-Feb-99
    5873660 Morphological search and replace 23-Feb-99
    5873124 Virtual memory scratch pages 16-Feb-99
    5873118 Method and system for storing file system state 
information in multiple sectors based on update frequency 16-Feb-99
    5873081 Document filtering via directed acyclic graphs 16-
Feb-99
    5872930 Load balancing between E-mail servers within a 
local area network 16-Feb-99
    5870763 Database computer system with application recovery 
and dependency handling read cache 09-Feb-99
    5870556 Monitoring a messaging link 09-Feb-99
    5870097 Method and system for improving shadowing in a 
graphics rendering system 09-Feb-99
    5867657 Distributed scheduling in a multiple data server 
system 02-Feb-99
    5867652 Method and apparatus for supporting multiple 
outstanding network requests on a single connection 02-Feb-99
    5867650 Out-of-band data transmission 02-Feb-99
    5867646 Providing secure access for multiple processes 
having separate directories 02-Feb-99
    5867175 Method and apparatus for scriping animation 02-Feb-
99
    5867173 Method for rendering a spline for scan conversion 
of a glyph comprising a plurality of discrete segments 02-Feb-99
    5867166 Method and system for generating images using 
Gsprites 02-Feb-99
    5867144 Method and system for the direct manipulation of 
information, including non-default drag and drop operation 02-Feb-99
    5864848 Goal-driven information interpretation and 
extraction system 26-Jan-99
    5864711 System for determining more accurate translation 
between first and second translator, and providing translated data 
to second computer if first translator is more accurate 26-Jan-99
    5864669 Method and system for accessing a particular 
instantiation of a server process 26-Jan-99
    5864342 Method and system for rendering graphical objects 
to image chunks 26-Jan-99
    5864337 Mehtod for automatically associating multimedia 
features with map views displayed by a computer implemented atlas 
program 26-Jan-99
    5862337 Determining throughput dynamically 19-Jan-99
    5862318 System generating a gapless series of identity 
values 19-Jan-99
    5860073 Style sheets for publishing system 12-Jan-99
    5859648 Method and system for providing substitute computer 
fonts 12-Jan-99
    5857190 Event logging system and method for logging events 
in a network system 05-Jan-99
    5854932 Compiler and method for avoiding unnecessary 
recompilation 29-Dec-91
    5854931 Method and system for accessing virtual base 
classes 29-Dec-98
    5852823 Image classification and retrieval system using a 
query-by-example paradigm 22-Dec-98
    5852443 Method and system for memory decomposition in a 
graphics rendering system 22-Dec-98
    5852441 Shell extensions for an operating system 22-Dec-98
    5852436 Notes facility for receiving notes while the 
computer system ??s in a screen mode 22-Dec-98
    5850232 Method and system for flipping images in a window 
using overlays 15-Dec-98
    5845300 Method and apparatus for suggesting completions for 
a partially entered data item based on previously-entered, 
associated data items 01-Dec-98
    5845293 Method and system of associating, synchronizing and 
reconciling computer files in an operating system 01-Dec-98
    5845280 Method and apparatus for transmitting a file in a 
network using a single transmit request from a user mode process to 
a kernel-mode process 01-Dec-98
    5845273 Method and apparatus for integrating multiple 
indexed files 01-Dec-98
    5845084 Automatic data display formatting with a networking 
application 01-DEC-98
    5845077 Method and system for identifying and obtaining 
computer software from remote c9mputer 01-Dec-98
    5844569 Display device interface including support for 
generalized flipping of surfaces 01-Dec-98
    5844551 Shell extensions for an operating system 01-Dec-98
    5842214 Distributed file system providing a unified name 
space with efficient name resolution 24-Nov-98
    5842211 Method and system for transferring a bank file to 
an application program 24-Nov-9
    5842180 Method and system for detecting and correcting 
errors in a spreadsheet formula 24-Nov-98
    5842018 Method and system for referring to and binding to 
objects using identifier objects 24-Nov-98
    5842016 Thread synchronization in a garb age-collected 
system using execution barriers 24-Nov-98
    5838963 Apparatus and method for compressing a data file 
based on a dictionary file which matches segment lengths 17-Nov-98
    5838923 Method and system synchronizing computer mail user 
directories 17-Nov-98
    5838336 Method and system for displaying images on a 
display device 17-Nov-98
    5838322 Shell extensions for an operating system 17-Nov-98
    5838320 Method and system for scrolling through data 17-
Nov-98
    5838319 System provided child window control far displaying 
items in a hierarchical fashion 17-Nov-98
    5838317 Method and apparatus for a arranging displayed 
graphical representations on a computer interface 17-Nov-98
    5838304 Packet-based mouse data protocol 17-Nov-98
    5835964 Virtual memory system with hardware TLB and 
unmapped software TLB updated from mapped task address maps using 
unmapped kernel address map 10-Nov-98
    5835908 Processing multiple database transactions in the 
same process to reduce process overhead and redundant retrieval from 
database servers 10-Nov-98
    5835904 System and method for implementing database cursors 
in a client/server environment 10-Nov-98
    5835086 Method and apparatus for digital painting 10-Nov-98
    5835084 Method and computerized apparatus for 
distinguishing between read and unread messages listed in a 
graphical message window 10-Nov-98
    5832528 Method and system for selecting text with a mouse 
input device in a computer system 03-Nov-98
    5832514 System and method for discovery based data recovery 
in a store and forward replication process 03-Nov-98
    5832502 Conversation index builder 03-Nov-98
    5832479 Method for compressing full text indexes with 
document identifiers and location offsets 03-Nov-98
    5832225 Method computer program product and system for 
maintaining replication topology information 03-Nov-98
    5831606 Shell e extensions for an operating system 03-Nov-
98
    5828885 Method and system for merging files having a 
parallel format 27-Oct-98
    5828364 One-piece case top and integrated switch for a 
computer pointing device 27-Oct-98
    5828361 Method and system for rapidly transmitting 
multicolor or gray scale display data having multiple bits per pixel 
to a display device 27-Oct-98
    5826269 Electronic mail interface for a network server 20-
Oct-98
    5826257 Method and structure for maintaining and utilizing 
a lookup value associated with a stored database value 20-Oct-98
    5826041 Method and system for buffering network packets 
that are transferred between a V86 mode network driver and a 
protected mode computer program 20-Oct-98
    5825363 Method and apparatus for determining visible 
surfaces 20-Oct-98
    5825357 Continuous?? accessible computer system interface 
20-Oct-98
    5822751 Efficient multidimensional data aggregation 
operator implementation 13-Oct-98
    5822526 system, and method for maintaining and 
administering email address names in a network 13-Oct-98
    5822525 Method and system for Presentation conferencing 13-
Oct-98
    5819293 Automatic Spreadsheet forms 06-Oct-98
    5819288 Statistically based image group descriptor 
particularly suited for use in an image classification and retrieval 
system 06-Oct-98
    5819272 Record tracking in database replication 06-Oct-98
    5819112 Apparatus for controlling an I/O port by queuing 
requests and in response to

[[Page 29146]]

a predefined condition, enabling the I/O port receive the interrupt 
requests 06-Oct-98
    5819107 Method for managing the assignment of device 
drivers in a computer system 06-Oct-98
    5819055 Method and apparatus for docking re-sizeable 
interface boxes 06-Oct-98
    5819032 Electronic magazine which is distributed 
electronically from a publisher to multiple subscribers 06-Oct-98
    5819030 System and method for configuring a server computer 
for optimal performance for a particular server type 06-Oct-98
    5818465 Fast display of images having a small number of 
colors with a VGA-type adapter 06-Oct-98
    5818447 System and method for in-place editing of an 
electronic mail message using a separate Program 06-Oct-98
    5815793 Parallel computer 29-Sep-98
    5815705 Method and computer system for integrating a 
compression System with an operating System 29-Sep-98
    5815703 Computer-based uniform data interface (UDI) method 
and system using an application programming interface (API) 29-Sep-
98
    5815689 Method and computer program product for 
synchronizing the processing of multiple data streams and matching 
disparate processing rates using a standardized clock mechanism 29-
Sep-98
    5815682 Device independent modem interface 29-Sep-98
    5815665 System and method for providing trusted brokering 
services over a distributed network 29-Sep-98
    5813013 Representing recurring events 22-Sep-98
    5813008 Single instance Storage of in formation 22-Sep-98
    5812844 Method and system for scheduling the execution of 
threads using optional time-specific scheduling constraints 22-Sep-
98
    5812793 System and method for asynchronous store and 
forward data replication 22-Sep-98
    5812784 Method and apparatus for supporting multiple, 
simultaneous services over multiple, simultaneous connections 
between a client and network server 22-Sep-98
    581278?? Method, system, and product for assessing a server 
application performance 22-Sep-98
    5812773 System and method for the distribution of 
hierarchically structured data 22-Sep-98
    5812430 Componentized digital signal processing 22-Sep-98
    5812136 System and method for fast rendering of a three 
dimensional graphical object 22-Sep-98
    5812123 System for displaying Programming information 22-
Sep-98
    5809564 Apparatus and method for swapping blocks of memory 
between a main memory area and asecondary storage area of a computer 
system 15-Sep-98
    5809329 System for managing the configuration of a computer 
system 15-Sep-98
    5809295 Method and apparatus for storing compressed file 
data on a disk where each MDFAT data structure includes an extra 
byte 15-Sep-98
    5808617 Method and system for depth complexity reduction in 
a graphics rendering system 15-Sep-98
    5808604 Apparatus and method for automatically positioning 
a cursor on a control 15-Sep-98
    5806065 Data system with distributed tree indexes and 
method for maintaining the indexes 08-Sep-98
    5805911 Word prediction system 08-Sep-98
    5805896 System for writing main memory address of object to 
secondary storage when storing object and reading main memory 
address of object when retrieving object from secondary storage 08-
Sep-98
    5805885 Method and system for aggregating objects 08-Sep-98
    5805170 Systems and methods for wrapping a closed polygon 
around an object 08-Sep-98
    5805165 Method of selecting a displayed control item 08-
Sep-98
    5805164 Data display and entry using a limited-area display 
panel 08-Sep-98
    5802590 Method and system for providing secure access to 
computer resources 01-Sep-98
    5802526 system and method for graphically displaying and 
navigating through an interactive voice response menu 01-Sep-98
    5802380 Method and system for uniform access of textual 
data 01-Sep-98
    5802367 Method and system for transparently executing code 
using a surrogate Process 01-Sep-98
    5802305 System for remotely waking a sleeping computer in 
power down state by comparing incoming packet to the list of packets 
storing on network interface card 01-Sep-98
    5802304 Automatic dialer responsive to network programming 
interface access O1-Sep-98
    5801717 Method and System in display device interface for 
managing surface memory 01-Sep-98
    5801701 Method and system for ??place interaction with 
contained objects 01-Sep-98
    5801692 Audi0-visual user interface controls 01-Sep-98
    5801664 System and method for transmitting data from a 
computer to a portable information device using RF emissions from a 
computer monitor 01-Sep-96
    5835881 Method and system for traversing linked list record 
based upon write-once predetermined bit value of secondary pointers 
25-Aug-98
    5799321 Replicating deletion information using sets of 
deleted record lbs 25-Aug-98
    5799184 System and method for identifying data records 
using solution bitmasks 25-Aug-98
    796988 Method and system using dedicated location to share 
information between real mode and protected mode drivers 18-Aug-98
    796402 Method and system for aligning windows on a computer 
screen 18-Aug-98
    794256 Pointer swizzling facility using three-state 
references to manage access to referenced objects 11-Aug-96
    5794253 Time based expiration of data objects in a store 
and forward replication enterprise 11-Aug-98
    5794230 Method and system for creating and searching 
directories on a server 11-Aug-98
    5794038 Method and system for notifiying clients using 
multicasting and for connecting objects using delayed m?? binding 
11-Aug-98
    5794006 System and method for editing content in an on-line 
network 11-Aug-98
    5793973 Method and system for opportunistic broadcasting of 
data 11-Aug-98
    5793970 Method and computer program product for converting 
message identification codes using a conversion map accesible via a 
data link 11-Aug-98
    5793374 Specialized shaders for shading objects in computer 
generated images 11-Aug-98
    5793356 System and method for the software emulation Of a 
computer joystick 11-Aug-98
    5790863 Method and system for generating and displaying a 
computer program 04-Aug-98
    5790858 Method and system for selecting instrumentation 
points in a computer program 04-Aug-98
    5790677 System and method for secure electronic commerce 
transactions 04-Aug-98
    5790126 Method for rendering, a spline for scan conversion 
of a glyph 04-Aug-98
    5790115 System for character entry a display screen 04-Aug-
91
    5787451 Method for background spell checking a word 
processing document 28-Jul-98
    5787442 Creating interobject reference links in the 
directory service of a store and forward replication computer 
network 28-Jul-98
    5787417 Method and system for selection of hierarchically 
related information using a content-variable list 28-Jul-98
    5787411 Method and apparatus for database filter generation 
by display selection 28-Jul-98
    5787262 System and method for distributed conflict 
resolution between data objects replicated across a computes network 
28-Jul-98
    5787259 Digital interconnects of a PC with consumer 
electronics devices 28-Jul-98
    5787247 Replica administration without data loss in a store 
and forward replication enterprise 28-Jul-98
    5787246 System for configuring devices for a computer 
system 28-Jul-98
    5786818 Method and system for activating focus 28-Jul-98
    5784628 Method and system for controlling power consumption 
in a computer system 21-Jul-98
    5784618 Method and system for managing ownership of a 
released synchronization mechanism 21-Jul-98
    5784616 Apparatus and methods for optimally using available 
computer resources for task execution during idle-time for future 
task instances exhibiting incremental value with computation 21-Jul-
98
    5784615 Computer system messaging architecture?? 21-Jul-98

[[Page 29147]]

    5784555 Automation and dial-time checking of system 
configuration for internet 21-Jul-98
    5781902 Method, computer program product, and system for 
extending the capabilities of an existing process to store and 
display foreign data 14-Jul-98
    5781896 Method and system for efficiently performing 
database table aggregation using an aggregation index 14-Jul-98
    5781797 Method and system for configuring device driver by 
selecting a plurality of component drivers to be included in the 
device driver 14-Jul-98
    5781723 System and method for self-identifying a portable 
information device to a computing unit ??4-Jul-98
    5781195 Method and system for rendering tw0-dimensional 
views of a three-dimensional surface 14-Jul-98
    578119 Method and System for transferring a slide 
presentation between computers 14-Jul-98
    5778403 Method for displaying text on a rendering device to 
accurately represent the text as if displayed on a target device 07-
Jul-98
    5778??02 Method and system for auto-formatting a document 
using an event-based rule engine to format a document as the user 
types 07-Jul-98
    5778375 Database normalizing system 07-Jul-98
    5778372 Remote retrieval and display management of 
electronic document with incorporated, images 07-Jul-98
    5778361 Method and system for fast indexing and searching 
of text in compound-word languages 07-Jul-98
    5778069 Non-biased pseudo random number generator 07-July-
98
    5774725 Method and computer program product for simplifying 
construction of a program for testing computer software subroutines 
in an application programming interface 30-Jun-98
    5774668 System for on-line service in which gateway 
computer uses service map which includes loading condition of 
servers broadcasted by application servers for load balancing 30-
Jun-98
    5774126 Method and apparatus for dynamically changing the 
color depth of objects displayed in a computer system 30-Jun-98
    5771399 Optical wand having an end shaped to register to 
the surface of a portable device to align respective optical element 
pairs for data transfer 23-Jun-98
    5771384 Method and system for replacement and extension of 
container interfaces 23-Jun-98
    5771381 Method and System for adding configuration files 
for a user 23-Jun-98
    5771034 Font format 23-Jun-98
    5771033 Method and system for dissolving an image displayed 
on a computer screen 23-Jun-98
    5768566 Method and facility for uninstalling a computer 
program package 16-Jun-98
    5768519 Method and apparatus for merging user accounts from 
a source security domain into a target security domain 16-Jun-98
    5768515 Method for generating and storing two segments of 
HTTP message headers with different lifetimes and combining them to 
form a single response header 16-Jun-98
    5767835 Method and system for displaying buttons that 
transition from an active state to an inactive state 16-Jun-98
    5765180 Method and system for correcting the spelling of 
misspelled words 09-Jun-98
    5765156 Data transfer with expanded clipboard formats 09-
Jun-98
    5764983 Method and system for efficiently creating a new 
file associated with an application program 09-Jun-98
    5764913 Computer network status monitoring system 09-Jun-98
    5764890 Method and system for adding a secure network 
server ??o an existing computer network 09-Jun-98
    5764241 Method and system for modeling and presenting 
integrated media with a declarative modeling language for 
representing reactive behavior 09-Jun-98
    5761689 Autocorrecting text typed into a word processing 
document 02-Jun-98
    5761669 Controlling access to objects on multiple operating 
systems 02-Jun-98
    5761510 Method for error identification in a program 
interface 02-Jun-98
    5761477 Methods for safe and efficient implementations of 
virtual machines 02-Jun-98
    5760788 Graphical Programming system and method for 
enabling a person ??o learn text-based programming 02-Jun-98
    5760773 Methods and apparatus for interacting with data 
objects using action handles 02-Jun-98
    5760770 System and method defining a view to display data 
02-Jun-98
    5760768 Method and system for customizing a user interface 
in a computer system 02-Jun-98
    575836 Meta-data structure and handling 26-May-98
    5758358 Method and system for reconciling sections of 
documents 26-May-98
    5758352 Common name space for long and short filenames 26-
May-98
    5758337 Database partial replica generation system 26-May-
98
    5758184 System for performing asynchronous file operations 
requested by runnable threads by processing completion messages with 
different queue thread and checking for completion by runnable 
threads 26-May-98
    5758154 Method and system for storing configuration data 
into a common registry 26-May-98
    5757920 Logon certification 26-May-98
    5757371 Taskbar with start menu 26-May-98
    5754890 System for automatic identification of a computer 
data entry device interface type using a transistor to sense the 
voltage generated by the interface and output a matching voltage 
level 19-May-98
    5754862 Method and System for accessing virtual base 
classes 19-May-98
    5754858 Customizable application project generation process 
and system 19-May-98
    5754854 Method and system for providing a group of parallel 
resources as a proxy for a single shared resource 19-May-98
    5754175 Method and system for in-??ace interaction with 
contained objects19-May-98
    5752252 Storage of file data on disk in multiple 
representations 12-May-98
    5752243 Computer method and storage structure for storing 
and accessing multidimensional data 12-May-98
    5752038 Method and system for determining an optimal 
placement order for code portions within a module 12-May-98
    5752031 Queue object for controlling concurrency in a 
computer system 12-May-98
    5752025 Method, computer program product, and system for 
creating and displaying a categorization table 12-May-98
    5751283 Resizing a window and an object on a display screen 
12-May-98
    5751282 System and method for calling video on demand using 
an electronic programming guide 12-May-98
    5751276 Method for calibrating touch panel displays 12-May-
98
    5748980 System for configuring a computer system 05-May-98
    5748895 transmitted from a display device while 
concurrently displaying human-readable explanation of the Pattern 
05-May-98
    5748512 Adjusting keyboard 05-May-98
    5748468 Prioritized c0-processor resource manager and 
method 05-May-98
    5748191 Method and system for creating voice commands using 
an automatically maintained log interactions performed by a user 05-
May-98
    5745904 Buffered table use index 28-Apr-98
    5745902 Method and system for accessing a file using file 
names having different filename formats 28-Apr-98
    5745767 Method and system, for testing the interoperability 
of application Programs 28-Apr-98
    5745764 Method and system for aggregating objects 28-Apr-98
    5745752 Dual namespace client having long and short 
filenames 28-Apr-98
    5745738 Method and engine for automating the creation of 
simulations for demonstrating use of software 28-Apr-98
    5745119 C01or data conversion using real and virtual 
address spaces 28-Apr-98
    5745110 Method and apparatus for arranging and displaying 
task schedule information in a calendar view format 28-Apr-98
    5745103 Real-time palette negotiations in multimedia 
presentations 28-Apr-98
    5745095 Compositing digital information on a display screen 
based on screen descriptor 28-Apr-98
    5742848 System for passing messages between source object 
and target object utilizing generic code in source object to invoke 
any member function of target object by executing the same 
instructions 21-Apr-98
    5742835 Method and system of sharing common formulas in a 
spreadsheet program and of adjusting the same to conform with 
editing operations 21-Apr-98
    5742829 Automatic software installation on heterogeneous 
networked client computer systems 21-Apr-98

[[Page 29148]]

    5742826 Compiler and method for evaluation or foreign 
syntax expressions in source code 21-Apr-98
    5742825 Operating System for office machines 21-Apr-98
    574281.8 Method and system of converting data from a source 
file system to a target file system 21-Apr-98
    5742773 Method and System for audio compression negotiation 
for multiple channels 21-Apr-98
    5742756 System and method of using smart cards to perform 
security-critical operations requiring user authorization 21-Apr-98
    5742278 Force feedback Joystick with digital signal 
processor controlled by host processor 2??-Apr-98
    5742260 System and method for transferring data using a 
frame-scanning display device 21-APr-98
    5740456 Methods and system for controlling intercharacter 
spacing as font size and resolution of output device vary 14-Apr-98
    5740439 Method and System for referring to and binding to 
objects ??sing identifier objects14-Apr-98
    5740405 Method and system for providing data compatibility 
between different versions of a software program 14-Apr-98
    5737733 Method and system for searching compressed data 07-
Apr-98
    5737611 Methods or dynamically, escalating locks On a 
shared resource 07-Apr-98
    5737591 Database view generation system 07-Apr-98
    5736987 Compression of graphic data normals 07-APr-98
    5736983 Shellextensions for an 0Perating system 07-Apr-98
    5734904 Method and system for calling one of a set of 
routines designed for direct invocation by programs of a second type 
when invoked by a program of the firs type 31-Mar-98
    5734858 Method and apparatus for simulating banked memory 
as a linear address space 31-Mar-98
    5734387 Method and apparatus for creating and performing 
graphics operations on device-independent bitmaps 31-Mar-98
    5732267 Caching/prewarming data loaded from ?? 24-Mar-98
    5732265 Storage optimizing encoder and method 24-Mar-98
    5732256 CD-ROM optimization and stream splitting 24-Mar-98
    5731844 Television scheduling system for displaying a grid 
representing scheduled layout and selecting a programming parameter 
for display or recording 24-Mar-981
    5729748 Call template builder and method17-Mar-98
    5729745 Methods and apparatus for creating a base class for 
manipulating external data connections in a computer generated 
document 17-Mar-98
    5729689 Network naming services proxy agent 17-Mar-98
    5727178 System and method for reducing stack physical 
memory requirements in a multitasking operating system 10-Mar-98 
5726687 Auto-scrolling with mouse speed computation during dragging 
10-Mar-98
    5724594 Method and system for automatically identifying 
morphological information from a machine-readable dictionary 03-Mar-
91
    5724588 Method and system for network marshaling of 
interface pointers for rem0te procedure Calls 03-Mar-98
    5724558 System and method for dynamic data packet 
configuration 03-Mar-98
    5724492 Systems and method for displaying control objects 
including a plurality of panels 03-Mar-98
    5724074 Method and system for graphically programming 
mobile toys 03-Mar-98
    5724070 common digital representation of still images for 
data transfer with both slow and fast data transfer rates 03-Mar-98
    5724068 Joystick with uniform center return force 03-Mar-98
    5721919 Method and system for the link tracking of objects 
24-Feb-98
    5721916 Method and system for shadowing file system 
structures from multiple types, of networks 24-Feb-98
    5721847 Method and system for liking controls with cells of 
a spread sheet 24-Feb-98
    5721781 Authentication system and method for smart card 
transactions 24-Feb-98
    5719941 Method for changing passwords on a remote computer 
17-Feb-98
    5717902 Method and system for selectively applying an 
appropriate object ownership model 10-Feb-98
    5717845 Method and apparatus for transferring a brush 
pattern to a destination bitmap 10-Feb-98
    5715441 Method and system for storing and accessing data in 
a compound document using object linking 03-Feb-99
    5715415 Computer application with help pane integrated into 
workspace 03-Feb-98
    5713020 Method and system for generating database queries 
containing multiple levels of aggregation 27-Jan-98
    5713003 Method and system for caching data 27-Jan-98
    5713002 Modified buddy system for managing storage space 
27-Jan-98
    5710941 System for substituting protected mode hard disk 
driver for real mode driver by trapping test transfers to verify 
matching geometric translation 20-Jan-98
    5710928 Method and system for connecting objects in a 
computer system 20-Jan-98
    5710925 Method and system for aggregating objects 20-Jan-98
    5710880 Method and system for creating a graphic image with 
geometric descriptors 20-Jan-98
    5709219 Method and apparatus to create a complex tactile 
sensation 20-Jan-9
    5708814 Method and apparatus for reducing the rate of 
interrupts by generating a single interrupt for a group of events 
13-Jan-98
    5708812 Method and apparatus for Migrating from a source 
domain network controller to a target domain network controller 13-
Jan-98
    5706505 Method and system for binding data in a computer 
system 06-Jan-98
    5706504Method and system for storing 06-Jan-98
    5706483 Run-time code compiler for data block transfer 06-
Jan-98
    5706462 Self optimizing font width cache 06-Jan-98
    5706458 Method and system for merging menus of application 
programs 06-Jan-98
    5706450 Method and system for presenting alternatives for 
selection using adaptive learning 06-Jan-98
    5706411 Printer status user interface and methods relating 
thereto 06-Jan-98
    5701511 Redbook audio sequencing 23-Dec-97
    5701499 Method and system for automatically entering a data 
series into contiguous cells of an electronic spreadsheet Program or 
the like 23-Dec-91
    5701491 Method and system for transitioning the network 
mode of a workstation 23-Dec-97
    5701469 Method and System for generating accurate search 
result using a content-index 23-Dec-97
    5701462 Distributed file system providing a unified name 
space with efficient name resolution 23-Dec-97
    5701461 Method and system for accessing a remote database 
using pass-through queries 23-Dec-97
    5701460 Intelligent joining system for a relational 
database 23-Dec-97
    5701424 Palladian menus and methods relating thereto 23-
Dec-97
    5701137 Method for separating a hierarchical tree control 
into one or more hierarchical child tree controls in a graphical 
user interface 23-Dec-97
    5699518 System for selectively setting a server node, 
evaluating to determine server node for executing server code, and 
downloading server code prior to executing if necessary??6??Dec-91
    696946 Method and apparatus for efficient transfer of data 
to memory 09-Dec-97
    5694610 Method and system for editing and formatting.data 
in a dialog window 02-Dec-97
    5694606 Mechanism for using common code to handle hardware 
interrupts in multiple processor modes 02-Dec-97
    5694563 Method and system for transferring data to common 
destinations using a common destination list 02-Dec-97
    5694561 Method and System for grouping and manipulating 
windows 02-Dec-97
    5694559 on-line help method and system utilizing free text 
query 02-Dec-97
    5694153 Input device for providing multi-dimensional 
position coordinate signals to a computer 02-Dec-97
    5692189 Method and apparatus for isolating circuit boards 
in a computer system 25-Nov-97
    5692177 Method and system for data set storage by 
iteratively searching for perfect hashing functions 25-Nov-9
    569217 Methodarid System for combining prefix and first 
character searching of a list 25-Nov-97
    5692157 Method and system for transferring data between 
objects using registered data formats 25-N0v-97

[[Page 29149]]

    5692??44 Method and System for depicting an object, 
springing back from a position 25-Now97
    5691745 Low power pixel-based visual display device having 
dynamically changeable number of grayscale shades 25-Nov-97
    5689709 Method and system for invoking methods of an object 
18-Nov-97
    5689703 Method and system for referring to and binding to 
objects using identifier objects 18-Nov-97
    5689700 Unification of directory service with file system 
services 18-Nov-97
    5689664 Interface sharing between objects 18-Nov-97
    5689663 Remote controller user interface and methods 
relating thereto 18-Nov-97
    5689662 Shell extensions for an operating system 18-Nov-97
    5689638 Method for providing access to independent network 
resources by establishing connection using an application 
programming interface function call without prompting the user for 
authentication data 18-Nov-97
    5689565 Cryptography System and method for providing 
cryptographic services for a computer application 18-N0v-97
    5687392 System for allocating buffer to transfer data when 
user buffer is mapped to physical region that does not conform to 
physical addressing limitations of controller ??-Nov-97
    5687331 Method and system for displaying an animated focus 
item 11-Nov-97
    5685003 Method and system for automatically indexing data 
in a document using a fresh index table 04-Nov-97
    5685001 Method and system for automatically entering a data 
series into contiguous cells of an electronic spreadsheet program or 
the like 04-Nov-97
    5684993 Segregation of thread-specific information from 
shared task information 04-Nov-97
    5684510 Method Of font rendering employing grayscale 
processing of grid fitted fonts 04-Nov-97
    5682536 Method and system for referring to and binding to 
objects using identifier objects 28-Oct-97
    5682532 System and method having programmable containers 
with functionality for managing objects 28-Oct-97
    5682511 Graphical viewer interface for an interactive 
network system 28-Oct-97
    5682510 Method and system for adding application defined 
properties and application defined property sheet pages 28-Oct-97
    5682478 Method and apparatus for supporting multiple, 
simultaneous services over multiple, simultaneous connections 
between a client and network server 28-Oct-97
    5682469 software platform having a real world interface 
with animated characters 28-Oct-97
    5680629 Method and system for previewing computer output 
21-Oct-97
    5680616 Method and system for generating and maintaining 
property sets with unique format identifiers 21-Oct-97
    5680582 Method for heap coalescing where blocks do not 
cross page of segment b0ur??dartes 21-Oct797
    5680559 Shell extensions for an operating system 
21-00t-97
    5680458 Root key compromise recovery 2??-Oct-97
    5678034 Accessbar arbiter 14-Oct-97
    5678014 Folder rack icons 14-Oct-97
    5678012 Method and system for selecting a video piece from 
a database 14-Oct-97
    5678007 Method and apparatus for supporting multiple 
outstanding network requests on a single connection 14-Oct-97
    5678002 System and method for providing automated customer 
support 14-Oct-97
    5677708 System for displaying a list on a display screen 
14-Oct-97
    5675833 Apparatus and method for detecting insertions and 
removals of floppy disks by monitoring write-protect signal 07-Oct-
97
    5675831 Method for automatic installation of a modem 
wherein unique identification for the device registry is computed, 
from modem responses to queries by the system 07-Oct-97
    5675813 system and method for power control in a universal 
serial bus 07-Oct-97
    5675796 Concurrency management component for use by a 
computer program during the transfer of a message 07-Oct-97
    5675793 Dynamic allocation of a common buffer for use by a 
set of software routines 07-Oct-97
    5675787 Unification of directory service with file system 
services 07-Oct-97
    5675782 Controlling access to objects on multiple operating 
systems 07-Oct-97
    5675520 Method for extending a common user interface 07-
Oct-97
    5673401 Systems and methods for a customizable sprite-based 
graphical user interface 30-Sep-97
    5673394 Method of sharing memory between an operating 
system and an application program 30-Sep-97
    5670955 Method and apparatus for generating directional and 
force vector in an input device23-Sep-97
    5668996 Rendering CD redbook audi0 using alternative 
storage, locations and formats 16-8ep-97
    5666526Method and system for supporting scrollable, updatable 
database queries 09-Sep-97
    5666523 Method and system for distributing asynchronous 
input from a system input queue to reduce context switches 09-Sep-97 
5666489 Method and apparatus for enhancing capabilities of office 
machines 09-Sep-97 Portable information device and system and method 
for downloading executable instructions from a
    5664228 computer to the portable in formation device 02-
Sep-97
    5664191 Method and system for improving the locality of 
memory references during execution of a computer program 02-Sep-97
    5664??78 Method and system for organizing internal 
structure of a file 02-Sep-97
    5664173 Method and apparatus for generating database 
queries from a meta-query pattern 02-Sep-97
    5664133 Context sensitive menu system/menu behavior 02-Sep-
97
    5659791 Encapsulation of extracted portions of documents 
into objects 19-Aug-97
    5659747 Multiple level undo/redo mechanism ??9??-Aug-97
    5659685 Method and apparatus for maintaining network 
communications on a computer capable of connecting to a WAN and LAN 
19-Aug-97
    5659674 System and method for implementing an operation 
encoded in a graphics image 19-Aug-9
    56.59336 Method and apparatus for creating and transferring 
a bitmap 1g-Aug-g??
    5657050 Distance control for displaying a cursor 12-Aug-97
    5655154 Method and system for sharing utilities between 
operating systems 05-Aug-g7
    5655148 Method for automatically configuring devices 
including a network adapter without manual intervention and without 
prior configuration information 05-Aug-97
    5655077 Method and System for authenticating access to 
heterogeneous computing services 29-Aug-97
    5652913 System for providing intercommunication of I/O 
access factors stored in a shared data structure,accessed and 
maintained by both file System and device driver 29-Jul-9
    5652901 Method and system for previewing computer Output 
29-Jul-97 System for interconnecting software components in an 
object oriented programming environment
    5652888 using a separate editor object/or each run-time 
object instantiated for each selected component 29-Jul-97
    5652883 Computer method and system for conservative-stack 
and generational heap garbage collection 29-Jul-97
    5652602 Fast serial data transmission using a CRT 29-Jul-97
    5651676 Method of organizing and storing simulated scenery 
in a flight simulation system 29-Jul-97
    5628005 System and method for providing opportunistic file 
access in a network environment 06-May-97
    5627997 Method and system for converting computer mail 
messages using an extensible set of conversion routines 06-May-97
    5625799 Method and apparatus for determining the logic and 
functionality of a changeline 29-Apr-97
    5625783 Automated system and method for dynamic menu 
construction in a graphical user interface 29-Apr-97
    5623674 Method for determining steerable interrupt request 
lines used by PCMCIA controllers 22-Apr-97
    5623651 Method and system for repairing cross-linked 
clusters an d reattaching lost directories on a storage device 22-
Apr-97
    5623613 System for displaying programming information 22-
Apr-97
    5623282 Method and system for the direct manipulation of 
cells in an electronic spreadsheet program or the like 22-Apr-97
    5621894 System and method for exchanging Computer data 
processing capabilites 15-Apr-97
    5621875 Method and system for automatic formatting of user 
selected text 15-Apr-97

[[Page 29150]]

    5619688 Method and system for constructing database queries 
using a field selection grid 05-Apr-97
    5617569 Method and system for implementing pointers to 
members in a compiler for an object-oriented programming language 
01-Apr-97
    5617526 Operating system provided notification area for 
displaying visual notifications from application programs 01-Apr-97
    5613131 Auto-formatting of tables in a spreadsheet program 
18-Mar-97
    5613124 Method and system for generating and storing 
multiple representations of a source object in object storage 18-
Mar-97
    5613123 Method and system for configuring and executing 
device drivers based on configuration requirements 18-Mar-97
    5613105 Efficient storage of objects in a file system 18-
Mar-97
    5613079 System for verifying the proper operation of a 
replication facility 18-Mar-97
    5613058 Method and system for in-place interaction with 
contained objects 18-Mar-97
    5613019 System and methods for spacing, storing and 
recognizing electronic representations of handwriting, printing and 
drawings 18-Mar-97
    5611060 Auto-scrolling during a drag and drop operation 11-
Mar-97
    5611040 Method and system for activating double click 
applications with a single click 11-Mar-97
    5608909 Method and system for caching presentation data of 
a source object in a Presentation cache 04-Mar-97
    5608901 Method and system for improving the contiguity of 
sectors of a file 04-Mar-97
    5608853 System and method for graphics scaling and 
localized color enhancement 04-Mar-97
    5604897 Method and system for correcting the spelling of 
misspelled words 18-Feb-97
    5604887 Method and system using dedicated location to share 
information between real and protected mode device drivers 18-Feb-97
    5604856 Motion compensated noise reduction method--and 
system for computer generated images 18-Feb-97
    5604850 Method and system for dynamically generating 
computer instructions for performing a logical operation 0n bit maps 
18-Feb-97
    5604849 Overlay management system, and method 18-Feb-97
    5604847 System and method of printer banding 18-Feb-97
    5603030 Method and system for destruction of objects using 
multiple destructor functions in an object-oriented computer system 
11-Feb-9
    5602981 Quickselect icon button on a computer display which 
redisplays the last view style activated by the icon button 11-Feb-
97
    5598563 Method of loading device drivers from ROM without 
requirement of system to have any harddisks or floppy drives and 
without using config.sys file 28-Jam-97
    5598520 Methods and apparatus for hinting a font for 
controlling stem width as font size and resolution of output device 
vary 28-Jan-97
    5598519 Method and system for direct cell formatting in a 
spreadsheet 28-Jan-97
    5598183 System and method for computer cursor control 28-
Jan-97
    5596755 Mechanism for using common cede to handle hardware 
interrupts in multiple processor modes 21-Jan-97
    5596726 Method and system for buffering transient data 
using a single physical buffer 21-Jan-97
    5596347 System and method for computer cursor control 21-
Jan-97
    5594905 Exception handler and method for handling 
interrupts 14-Jan-97
    5594898 Method and system for joining database tables using 
compact row mapping structures 14-Jan-97
    5594847 System and method for selecting free form objects 
associated with a selection region displayed by a computer 14-Jan-97
    5594462 Calibrating data transmission line spacing on a 
frame-scanning display device for optically transmitting data to a 
Portable programmable device 14-Jan-97
    5592670 Avoidance of deadlocks in a demand paged video 
adapter 07-Jan-97
    5590347 Method and system for specifying alternate behavior 
of a software system using alternate behavior indicia 31-Dec-96
    5590336 Method and apparatus for performing overlapping 
service of multiple IDE peripheral devices 31-Dec-96
    5590318 Method and system for tracking files pending 
processing 31-Dec-96
    5590267 Method and system for scalable borders that provide 
an appearance of depth 31-Dec-96
    5588147 Replication facility 24-Dec-96
    5588100 Method and system for creating .a freeform drawing 
object 24-Dec-96
    5588099 Method and system for automatically resizing tables 
24-Dec-96
    5586328 Module dependency based incremental compiler and 
method 17-Dec-96
    5586318 Method and system for managing ownership of a 
released synchronization mechanism 17-Dec-96
    5585838 Program time guide 17-Dec-96
    5583981 Method and system for managing the size o? edit C?? 
graphical user in interface 10-Dec-96
    5581760 Method and system for referring to and binding to 
Objects using identifier objects 03-Dec-96
    5581736 Method and system for dynamically sharing RAM 
between virtual memory and disk cache 03-Dec-96
    5581686 Method and system for in-place interaction with 
contained objects 03-Dec-96
    5579517 Common name space for long and short filenames 26-
Nov-96
    5579466 Method and system for editing and formatting data 
in a dialog window 26-Nov-96
    5579223 Method and system for incorporating modifications 
made to a computer program into a translated version of the computer 
program 26-Nov-96
    5577224 Method and system for caching data 19-Nov-96
    5577187 Method and system for tiling windows based on 
previous position and size 19-Now-96
    5577173 System and method of printer banding 19-Nov-96
    5574920 Method for controlling power down of a hard disk 
drive in a computer 12-Nov-96
    5574907 Two-pass defragmentation of compressed hard disk 
data with a single data rewrite 12-Nov-96
    5574840 Method and system for selecting text utilizing a 
plurality of text using switchable minimum granularity of selection 
12-Nov-96
    5572589 Disc serialization 05-Nov-96
    5566068 Method and system for locating field breaks within 
input data 15-Oct-96
    5565887 Method and apparatus for moving a cursor on a 
computer screen 15-Oct-96
    5565886 Method and system for rapidly transmitting 
multicolor or gray scale display data having multiple bits per pixel 
to a display device 15-Oct-96
    5561788 Method and system for executing programs using 
memory wrap in a multi-mode microprocessor 01-Oct-96
    5561786 Computer method and system for allocating and 
freeing memory utilizing segmenting and free block lists 01-Oct-96
    5561751 System and method for displaying a color image 
using vector error diffusion 01-Oct-96
    5559943 Method and apparatus customizing a dual actuation 
setting of a computer input device switch 24-Sep-96
    5559884 Method and system for generating and auditing a. 
signature for a computer program 24-Sep-96
    5557723 Method and system for customizing forms in an 
electronic mail system 17-Sep-96
    5557714 Method and system for rotating a three-dimensional 
model about two orthogonal axes 17-Sep-96
    5557440 Noise-insensitive optoencoding techniques with 
compensation for device variations 17-Sep-96
    5553215 Method and system of sharing common formulas in a 
spreadsheet program and of adjusting the same to conform with 
editing operations 03-Sep-96
    5552982 Method and System for processing fields in a 
document processor 03-Sep-96
    5551024 System for identifying data records in a database 
using a data structure with linked parameters in a search range 27-
Aug-96
    5550972 Method and apparatus for efficient transfer of data 
to memory 27-Aug-96
    5548759 System for storing executable cede within a 
resource data section of an executable file 20-Aug-96
    5548305 Method and apparatus for displaying color on a 
computer output device using dithering techniques 20-Aug-96
    5546518 System and method for composing a display frame of 
multiple layered graph sprites 13-Aug-96
    5544082 Method and system for placing a computer in a 
reduced power State 06-Aug-96
    5537628 Method for handling different code pages In text 
16-Jul-96

[[Page 29151]]

    5537589 Method and system for efficiently performing 
database table aggregation using an aggregation index 16-Jul-96
    5535324 Method and System for dragging and plotting new 
data onto an embedded graph 09-Jul-96
    5530895 System and method for computer interface board 
identification by serially comparing identification address bits and 
asserting complementary logic patterns for each match 25-Jun-96
    5530794 Method and system for handling text that includes 
p-paragraph delimiters of differing formats 25-Jun-96
    5528742 Method and system for processing documents with 
embedded fonts 18-Jun-96
    5526523 Interface between operating system and operating 
system extension 11-Jun-96
    5522068 Statistic-based reorganization of B-trees yielding 
an approximate optimal fill on substantially every page 28-May-96
    5519855 Summary catalogs 21-May-96
    5517645 Method and system for interfacing components via 
aggregate components formed by aggregating the components each with 
an instance of a comp0nent manager 14-May-96
    5517257 Video control user interface for interactive 
television systems and method for controlling display of a video 
movie 14-May-96
    5515536 Method and system for invoking methods of an object 
through a dispatching interface 07-May-96
    5512921 Visual display system having low energy data 
storage subsystem with date compression capabilities, and method f0r 
operating same 30-Apr-98
    5511197 Method and system for network marshalling of 
interface pointers for remote procedure calls 23-Apr-96
    5510980 Method and system for selecting and executing 
arithmetic functions and the like 23-Apr-96
    5510811 Apparatus and method for controlling cursor 
movement 23-Apr-96
    5506983 Method and system for transactioning of 
medifications to a tree structured file 09-Apr-96
    5504889 Method and system for monitoring file attributes 
using bitmaps to determine group membership of files and to 
determine which files have been processed 02-Apr-96
    5504500 User programmable orientation of cursor movement 
direction 02-Apr-96
    5499369 Method and system for connecting objects using 
alert and running states 12-Mar-96
    5499335 Method and system for Providing standard resources 
in different natural languages 12-Mar-96
    5499334 Method and system for displaying window 
configuration of inactive programs 12-Mar-96
    5497492 System and method for loading an operating system 
through use of a fire system 06-Mar-96
    5495571 Method and system for performing parametric testing 
of a functional programming interface 27-Feb-96
    5495566 Scrolling contents of a window 27-Feb-96
    5490274 Modified buddy system for managing disk space 06-
Feb-96
    5485617 Method and system for dynamically generating 0bject 
connections 16-Jan-9
    5485574 Operating system based performance monitoring 0f 
programs 16-Jam-96
    5485558 Method and system for displaying color on a 
computer output device using dithering techniques 16-Jan-96
    5485460 System and method for running multiple incompatible 
network protocol stacks 16-Jan-96
    5481667 Method and system for instructing a user of a 
computer system how to perform application program tasks 02-Jan-96
    5473691 System and method !or computer data transmission 
05-Dec-95
    5473344 3-D cursor positioning device 05-Dec-95
    5473343 Method and apparatus for locating a cursor on a 
computer screen 05-Dec-95
    5471564 System and method for dynamic printer timeout 28-
Nov-95
    5471563 System and method for automatic resolution 
reduction 28-Nov-95
    5467472 Method and system for generating and maintaining 
property sets with unique format identifiers 14-Nov-95
    5455600 Method and apparatus for mapping colors in an image 
through dithering and diffusion 03-Oct-95
    5452406 Method and system for scalable borders that provide 
an appearance Of depth 19-Sep-95
    5450536 Technique for automatically resizing tables 12-Sep-
95
    5446887 Optimal reorganization of a B-tree 29-Aug-95
    5442793 Method and system for locating an inherited virtual 
function member of a derived class 15-Aug-95
    5442751 Method and apparatus for processing data through a 
register potion by portion 15-Aug-95
    5437036 Text checking application programming interface 25-
Jul-95
    5437013 Method and system for network communications using 
raw mode protocols 25-Jul-95
    5437006 Spreadsheet command/function capability from a 
dynamic-link library 25-Jul-95
    5432941 Method and system for dynamically configuring a 
software System using configurati0n groups 11-Jul-95
    5432936 Method for implementing pointers to members in a 
compiler for an object-oriented programming language 11-Jul-95
    5432928 Updating objects stored in a permanent container 
while preserving logical contiguity 11-Jul-95
    5432924 Method and system for selectively applying an 
appropriate object ownership model 11-Jul-95
    5430878 Method for revising a program to obtain 
compatibility with a computer configuration 04-Jul-5
    5426760 Method and system for storing index information 
using a base number of bits 20-Jun-95
    5426729 Method and system for nonuniformly adjusting a 
predefined shape 20-Jun-95
    5418956 Method and System for avoiding selector loads 23-
May-95
    5416726 Method and system for placing a computer in a 
reduced power state 16-May-95
    5414445 Ergonomic pointing device 09-May-95
    5412807 System and method for text searching using an n-ary 
search tree 02-May-95
    5410705 Method for generating an object data structure 
layout for a class in a compiler for an object-oriented programming 
language 25-Apr-95
    5394518 Luminance sensitive palette 28-Feb-95
    5392427 System for updating data stored on a flash-
erasable, programmable, read-only memory (FEPROM) based upon 
predetermined bit value of indicating pointers 21-Feb-95
    5381521 System and method of rendering curves 10-Jan-95
    5381347 Method and system for displaying images on a 
display device using an offscreen video memory 10-Jan-95
    5375241 Method and system for dynamic-link library 20-Dec-
94
    5371891 Method for object construction in a compiler for an 
object-oriented programming language 06-Dec-94
    5371885 High performance file system 06-Dec-94
    5371847 Method and system for specifying the arrangement of 
windows on a display 06-Dec-94
    5369770 Standardized protected-mode interrupt manager 29-
Nov-94
    5367617 System and method of hybrid forward differencing to 
render Bezier splines 22-Nov-94
    5363487 Method and system for dynamic volume tracking in an 
installable file System 08-Nov-g4
    5363479 System and method for rendering bezier splines 08-
Nov-94
    5357605 Method and System for displaying patterns using a 
bitmap display 18-Oct-94
    5357603 Method and system for changing, a shape type while 
maintaining existing graphic characteristics 18-Oct-94
    5341464 Luminance emphasized color image rendering 23-Aug-
94
    5339432 Method and system for providing user control of 
device driver configuration 16-Aug-94
    5327562 Method for implementing virtual function tables in 
a compiler for an object-oriented programming language 05-Jul-94
    5301326 Method and system for controlling the execution of 
an application program 57-Apr-94
    5300946 Method for outputting transparent text 05-Apr-94
    5297284 Method and system for implementing virtual 
functions and virtual base classes and setting a this pointer for an 
object-oriented programming language 22-Mar-94
    5287514 Method and System for customizing a user interface 
in a computer system 15-Feb-94

[[Page 29152]]

    5287417 Method and system for recognizing a graphic 
object's shape, line style, and fill pattern in a pen environment 
15-Feb-94
    5281958 Pointing device with adjustable clamp attachable to 
a keyboard 25-Jan-94
    5274751 System and method for printing graphic objects 28-
Dec-93
    5272628 Method and system for aggregating tables having 
dissimilar formats 21-Dec-93
    5268675 Computer command and pointing device with multi-
axis engagement assembly 07-Dec-93
    5265261 Method and system for network communications using 
raw mode protocols 23-Nov-93
    5261101 Method for calling and returning from subroutine 
that is invoked by either a near call or a far call 09-Nov-93
    5261051 Method and system for open file caching in a 
networked computer system 09-Nov-93
    5257370 Method and system for optimizing data caching in a 
disk-based computer system 26-0ct-93
    5255356 Method for hiding and showing spreadsheet cells 
19-0ct-931
    5247658 Method and system for traversing linked list record 
based upon write-once predetermined bit value of secondary Pointers 
21-Sep-93
    5231577 Method and system for processing formatting 
information in a spreadsheet 27-Jut-93
    5220675 Method and system for customizing a an user 
interface in integrated environment 15-Jun-93
    5218697 Method and system for networking computers having 
varying file architectures 08-Jun-931
    5214755 Document processing method and system 25-May-92
    5204960 Incremental compiler 20-Apr-93
    5187468 Pointing device with adjustable clamp attachable to 
a keyboard 16-Feb-93
    5146580 Method and system for using expanded memory for 
operating system buffers and application buffers 08-Sep-92
    5138303 Method and apparatus for displaying color on a 
computer output device using dithering techniques 11-Aug-92
    5125077 Method of formatting data from am use 23-Jun-92
    5027273 Method and operating system for executing programs 
in a multi-mode microprocessor 25-Jun-91
    5021974 Method for updating a display bitmap with a 
character string or the like 04-Jun-91
    4974159 Method of transferring control in a multitasking 
computer system 27-Nov-90
    4967378 Method arid system for displaying a monochrome 
bitmap on a color display 30-Oct-90
    4866602 Power Supply for a computer peripheral device which 
positions a cursor on a computer display 12-Sep-89
    4825358Method and operating system for executing programs in a 
multi-mode microprocessor 25-Apr-89
    4779187 Method and operating system for executing programs 
in a multi-mode microprocessor 18-Oct-88
    Articles
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    Kernel
    08/09/2001
    Part 1: The Debate
    Tim:
    Sounds like some of Michael's speech was maybe a treaty with the 
free software people. [laughter]
    Anyway, there probably are divisions within Microsoft just as 
there are divisions within our community. It's kind of interesting, 
because the diversity of opinions often leads not to division but to 
strength, and I think we're going to demonstrate that strength as we 
hear from a number of people who are prominent in our community and 
are allied under the banner of the core principles of open source, 
but who do have different takes on how it works and what's important 
about it.
    Anyway, I'd like to invite up the rest of our panel. Michael and 
Craig, you may want to come back up and sit down. I have here with 
us Brian Behlendorf, who's one of the cofounders of the Apache 
Project. [applause] I'll just start down at the far end, then.
    Clay Shirky is a partner at an incubator called the Accelerator 
Group. He's also a well-known
    Panelists:
    Clay Shirky
    Accelerator Group
    Shirky.com
    Michael Tiemann,
    Multimedia
    Networking
    Programming
    Security
    Tools
    Utilities
    X Window System
    commentator on coming technologies, and he's recently done some 
very interesting thinking about some of Microsoft's new 
technologies, in particular Hailstorm. That's why he's here to talk 
to us. [applause]
    Dave Stutz is, I believe, now the program manager for the shared 
source implementation of the common language run time and so forth. 
Is that the appropriate designation?
    Dave:
    Sure. It'll work.
    Tim:
    Dave is--
    Dave:
    --Craig's Mini-Me.
    Chief Technical Officer RedHat
    David Stutz
    Software architect
    Microsoft
    Mitchell Baker
    Chief Lizard Wrangler
    Mozilla.org
    Ronald Johoston
    Partner
    Arnold & Porter
    Craig Munclie,
    Senior Vice President
    Advanced Strategies
    Microsoft
    Brian Behlendort
    Founder & CTO
    ColtabNet
    Tim O'Reilly
    Founder & President
    O'Reilly & Associates
    Tim:
    Yeah, I was going to say, I don't know, maybe something like, if 
you had the hat [reference to the red hats on heads all through the 
room], I would say, "Mini-Me. Do not chew on your hat." 
[laughter]
    Next in line is Mitchell Baker, who's known as the Chief Lizard 
Wrangler at Mozilla.org. Mitchell is also the person who wrote the 
Mozilla license, so she's done a lot of thinking about free software 
and open source licenses and the needs of corporations. [applause] 
We have with us Ron Johnson, who's an attorney at Arnold & 
Porter and the chair of the 22nd Annual Computer and Internet Law 
Institute.
    And obviously you know Craig, and I already introduced Brian. 
So, Craig, I don't know if you wanted to respond at all to any of 
Michaers comments [laughter], or whether you want to hear from a few 
other people before we get there.
    Craig:
    I'll just offer one general thought, which is, you know, in some 
sense it's easy to poke fun or think you know what is the look-in 
from the outside and to be at Microsoft.
    We're a company now of 50,000 people, and among any community of 
50,000 people, particularly fairly smart people, you're going to 
have a lot of people who think carefully about a lot of issues, and 
feel passionately as you do about a lot of issues. So I don't think 
we're embarrassed at all to find that people would come forward at 
Microsoft and ask questions or ask whether we do the right thing or 
not.
    What I can tell you is that there is a single-purpose focus in 
the management of the company. The leadership of the company is not 
uncertain about what we're doing. We welcome people asking questions 
in the company, but ultimately we recognize our job is to make 
decisions and provide consistent leadership. And so if people don't 
like what the company wants to do, there's no indentured servitude. 
You know, they're free to go do something else. But the company is 
clear about what it will do. And I can just tell you that as a 
member of a management committee of the company, and while listening 
to Michael's comments that many of the ways he characterizes what he 
thinks may go on inside the company in

[[Page 29153]]

terms of a civil war or anything, frankly [it] just doesn't exist. 
It may be fine to ruminate about what you think could exist or does 
exist. I can tell you quite specifically, there's no civil war at 
the management level and, to me, no observable civil war among the 
rank and file either. So that's one thought I'd leave with you 
today.
    Tim:
    So, Brian, you're obviously someone who has, you know, come up 
from the GPL side of the house but from the university style 
of" license regime. Clearly you have done a lot of thinking 
about what licenses you would choose and why. Do you have any 
thoughts on that, or any things you'd like to talk to Craig about 
with regard to the BSD orientation .... [laughter]
    Brian:
    Sure. [more laughter] You don't want to call on anybody else, do 
you? [laughter] One of the slides in [Craig Mundie's] presentation 
was actually a very useful slide. It showed that there is a 
relationship--a set of relationships between the public 
research through universities, corporations, users, and government. 
I think what we've seen is that it's not one-directional like that. 
What we've seen is that it's actually bi-directional in all those 
things--in fact, bi-directional across universities and 
consumers and government and business and all those directions.
    And so while Apache, for example, is under a BSD-style license, 
it was very important while we were building the Apache community 
that we not only have other corporations use it and adopt it into 
their commercial products, but also that we communicate to those 
companies the need to reinvest back, the need to build Apache itself 
as a strong force as they build up the momentum behind it. And to 
us, even though the obligation isn't there to share their code back, 
the companies that are participating in the Apache Software 
Foundation and even more broadly, within the BSD communities, 
understand the need to reinvest, to build it back up. And that's one 
thing that I think may be missing in some of this debate: the 
creation of licenses, the creation of regimes that really are bi-
directional, that really put all the participants at an equal level.
    I totally welcome Microsoft exploring shared source licenses. I 
think for proprietary software, I'd much rather have the code to it 
than not have the code to it. I think we're going to see a big 
difference in the amount of resources that people will put in to a 
shared source license regime versus one that is an open source 
license regime. So it's all a matter of experimentation. I'm all for 
experimenting with different licenses. I think history has shown 
that open source is a more efficient way to go in certain 
circumstances. At the same time, there are 10 million Microsoft 
developers out there who might have a different opinion. I think 
it's worth finding out.
    Craig:
    One thought on that. I agree with you that it is bi-directional, 
and in a way, when you look at all the different licensing regimes, 
you're correct to point out that there are many different ways to 
give back. In a sense, giving the code back is just one way. You 
know giving taxes to the government to give back is essentially 
another institutionalized way.
    Tim:
    So how much does Microsoft pay in taxes?
    [laughter]
    Craig:
    It's a lot. I don't know the exact number this year, but it's 
billions. One of the things that we've been fascinated by, and I 
guess you could say it's some benchmark of this, [is that] this 
week, as I kind of predicted in May, we actually came out with this 
Windows CE source license. I guess we actually posted it three, 
maybe four days ago. And the first three days, ten thousand people 
downloaded the entire source tree. And we had had a kit that we had 
offered to people who just wanted to use it for commercial purposes 
and we had sold about four
    Shared Source vs.
    Open Source Related
    Links
    Debate and Panel
    Discussion
    Technetcast of the debate
    Part 1: The Debate
    OSCON Conference
    Coverage
    For the bulk of the panel discussion, Dave Stutz and Craig 
Mundie defended Microsoft's business position to the other 
panelists. Do you think this conversation helped bridge the gap 
between open source and Microsoft?
    Post your comments hundred of those in the last year. I guess 
only time will tell whether people will decide that they really want 
to make an investment or whether they're just curious. But we were 
quite happy to see that when we offered it for noncommercial 
use--really targeting the academic environment, primarily -that 
ten thousand people in the first three days decided to take it and 
take a look at it.
    So we're enthused with that kind of reaction, and it is, you 
know, some way of giving back. You know, we give back financially, 
we give back in the standards world, as Michael said, with XML and 
other things. I mean, well before XML, we've been a big participant 
in the process of standardization, and so I think we will continue 
to seek ways to share and give back. Microsoft patents a threat to 
open source
    By Peter Galli, eWEEK
    August 28, 2001 10:55 AM PT
    URL: http://techupdate.zdnet.com/techupdate/stories/main/
0,14179,2808548,00.html
    Members of the open-source community are becoming increasingly 
concerned by ongoing moves from Microsoft Corp. to acquire a range 
of software patents that the company can potentially use down the 
line to attack and try to restrict the development and distribution 
of open-source software.
    And much of that concern is being directed toward open-source 
desktop company Ximian Inc.'s Mono Project, an open-source 
initiative to replace part of Microsoft's .Net product line, 
including a way to run C# programs and the .Net Common Language 
Infrastructure on Linux. Leading the charge is Bruce Perens, 
Hewlett-Packard Co.'s open-source and Linux strategist who helped to 
craft the Debian Social Contract, which later became the Open Source 
Definition. Perens told eWEEK in an interview on Monday in San 
Francisco ahead of the LinuxWorld conference that an increasing 
number of people in the open-source community are very concerned 
about the Mono Project and by Microsoft's initiative to buy software 
patents and to patent as much of its own technology as it can.
    "If I were in Microsoft's position, I would be looking 
through all the patents I had been buying that are potentially being 
infringed by open-source software," Perens said. "They 
are going to hold onto these patents until they see what happens 
with the antitrust case against them. Once that is resolved, they 
will then use them against the open-source industry." But Doug 
Miller, the director of competitive strategy for Microsoft's Windows 
division, told eWEEK he was unaware of any intended move by 
Microsoft to acquire software patents. "Not to say it isn't 
happening, but I'm not aware of any such planned attack," 
Miller said.
    "With that being said, we strive to protect our 
intellectual property, and holding patents is one of the ways we do 
that. But nothing has changed, we're certainly no more aggressive 
now about filing patents or other copyright protections than we have 
been over the past couple of decades," he said.
    But Perens isn't buying this, saying that with regard to the 
Mono Project, Ximian needs to draw up an advance agreement with 
Microsoft that states the Redmond, Wash., company does not intend to 
assert its patents on this technology.
    "If we don't get that agreement, I'll be happy to see 
Ximian implement this stuff, but I'm not sure I'll touch it," 
Perens said. "I'm also not sure I want to let it touch the 
rest of GNOME [GNU Network Object Model Environment] very much 
because if GNOME becomes dependent on it, it would have a potential 
weakness there."
    Ximian is an active contributor to the GNOME Project, which has 
built a desktop environment for the user and a powerful application 
framework for the software developer. Ximian in fact this week 
launched two versions of the boxed Ximian Desktop, which includes 
the GNOME desktop interface.
    No Linux app is safe
    But Miguel de Icaza, the chief technical officer at Ximian, 
disagreed with Perens, saying that any application that runs on 
Linux could be infringing on some hidden and unknown patent owned by 
Microsoft.
    "Microsoft has not historically used its patents in an 
aggressive way," he said. "They've previously used it to 
defend themselves. While I suppose they might use it for attack 
purposes going forward, I don't think they'll go after Mono as we 
are only in the early stages and are sticking to developing 
technology from existing concepts. There's nothing new in .Net; it's 
just a combination of existing technologies."
    Nat Friedman, Ximian's vice president of product development, 
also stressed that Ximian is not co-operating with Microsoft on the 
Mono Project. "They are not assisting us in any way," he 
said. "We have talked to them twice--that's the extent of 
it.
    "We believe this technology and infrastructure is too 
important to be

[[Page 29154]]

controlled and wholly owned by Microsoft. We believe there has to be 
a free implementation of it out there," he said. But while 
Perens acknowledged that Microsoft has largely not invoked its 
patent rights to date, he said, "Past performance is not 
predictive of future behavior. Microsoft's [senior vice president] 
Craig Mundie has previously said the company intends to enforce all 
its patents." An example of a patent held by Microsoft that 
could be detrimental to open-source initiatives going forward was 
clearly demonstrated in the password change protocol found in Samba, 
he said. Microsoft had modified the password change technology and 
then patented the new protocol of the password change.
    "This means you cannot make a compatible implementation 
without potentially infringing on a Microsoft patent," Perens 
said. "We went ahead and did it anyway, and Microsoft hasn't 
enforced that patent, but it doesn't mean they never will. This is a 
telling case as they've taken what was an open protocol and 
deliberately put in a patent to close it and then introduced the 
patented feature in all new systems."
    Samba, which develops open-source software that lets a Linux 
machine share files or manage print jobs like a Windows file server 
or print server, has included this patented technology. "In 
the climate of antitrust it would be nice to force them to overplay 
their hand, and Microsoft overplays their hand consistently, Perens 
said.
    But while Jeremy Allison, a lead developer for Samba, confirmed 
that Microsoft holds the patent for the password change protocol, he 
believed this "was done with no malicious intent at all. All 
big companies patent software for protection. I also think this is 
probably a defective patent anyway," he said.
    Microsoft's Mundie said he wasn't familiar with the Samba 
example, "but in any case where someone reverse-engineers 
technology--and there's certainly lots of this in the Linux 
world--there's always the risk they'll infringe on someone% 
patent. We highly value intellectual property and the laws created 
to protect this," he said.
    But Samba's Allison said the Mono Project is "a very bad 
idea--in fact, it's a terrible idea. By doing this they are 
helping .Net become a standard ..... Net will become important if a 
majority of the clients use it, but it will not be mandatory if 
only, say, 50 percent use it, as Web sites will then still have to 
do Java stuff," Allison said. "By implementing an open-
source version of this, they are making it easier for Microsoft to 
get to that magic monopoly figure.
    "And when they've got that on the client, all the servers 
are in trouble. Look at the way they leveraged their client base to 
take over services like authentication, e-mail with Exchange, and 
DNS services by tying Active Directory to DNS. It's a continual case 
of taking their monopoly on a client system and tying servers to 
it," he said.



MTC-00030617

January 28, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvenia Avenue, NW
Washington, DC 20630
    Dear Mr. Ashcroft:
    The intention of this letter ?? that I may express my feelings 
about the antitrust suit against Microsoft, and the settlement that 
was reached last November that ended that suit. The Department of 
Justice and Microsoft agreed to terms on a proposed settlement, and 
I support that proposition.
    I do believe however, that Microsoft should have been left alone 
In the flint place. There are many other corporations that should 
have received the attention from the government that Microsoft did. 
There are terms in the settlement that go a little far, especially 
the ones that force Microsoft to turn over their Intellectual 
property to competitors. They will be documenting various interfaces 
and source code that Is Internal to the Windows" operating 
system, and giving that to their competitors. This is a travesty of 
justice.
    The antitrust suit against Microsoft was uncalled for, but I 
guess that the settlement Is the best thing that could have 
happened. It could have been much worse. I support the settlement 
because I do not wish to see any further legal action taken against 
Microsoft. This entire law suit was brought about because of sour 
grapes on the part of a few people, namely Sunmicro system's CEO. 
With his connections with a few Senators, namely Warren Hatch from 
Utah). He was able to get a senate hearing, and the rest is history.
    Gosh darn it, the Federal Government can do us a great deal more 
good by going after such corporations as big oil. Look at what they 
are doing with the price of oil, at this very moment, with market 
control of prices almost varying by zip code. And they talk of Bill 
??ging the public for his Windows programs and getting by with It 
due to e lack of competition--please, give me a break.
    Sincerely,
    Harry Riddle
    P.O. Box 88
    No. Lakewood, WA 98259



MTC-00030618

Subj: Microsoft Settlement
Date: Monday, January 28, 2002 9:39:34 PM
To: Renata B. Hesse, Antitrust Division, US Department of Justice 
Suite 1200 Washington DC
    Ms: Renata B. Hesse
    Just a short note asking for a swift settlement of the Microsoft 
lawsuit, this whole thing started with Pres. Clinton, and Janet 
Reno, since then the landslide has taken this country economic 
situation from stable to recession. Microsoft has worked hard for 
the consumer and its stockholder, and has agreed to settle this 
situation out of court and make some competitors happy because they 
did not have the foresight and dedication to make a great product, 
and now they want the same access and market share that Microsoft 
has developd. Its time to move on with progress and settle this 
situation and get the economy moving again.
    Thank you for your time and consideration.
    Gunther Hausmann
    14311-206 St. SE
    Snohomish Wash. 98296
    425-481-0926



MTC-00030619

W. Thomas
3864 Quail Ridge Road
Lafayette, CA 94549-291Z
(925) 283-6569
Fax: (925) 284-7619
January 27, 2002
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    We five in a country that has been built upon the foundations of 
capitalism and free enterprise. The antitrust suit against Microsoft 
is a direct violation of these very ideals. When we attack free 
business we undermine the very foundation of this nation. I feel 
that the settlement that has been reached m this case must be 
accepted as soon as possible so that American business can continue 
to thrive.
    According to this settlement Microsoft will license the internal 
code of its Windows operating system to twenty of its biggest 
competitors. This basically requires Microsoft to tell their 
competition how to make their product. While I believe that this 
term is a bit extreme I feel that the rest of the settlement will 
have a positive affect on the IT industry and thus the U.S. economy. 
The fact that this litigation will now be put to rest will, l 
believe, help mend some of the damage that has been done to the 
economy since this case was instigated three years ago. Please 
continue to support this settlement and American business in 
general. Thank you for your time and consideration of this case, 
your diligence is to be commended.
    Sincerely,
    W. Thomas



MTC-00030620

344 Hedgehope Dr.
Las Vegas, NV 89123-0004
January 28, 2002
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    I am writing to express my support of the settlement in the 
antitrust case between Microsoft and the Department of Justice. 
Although I am happy to see that Microsoft will not be broken up, I 
do think that litigation should have never occurred in the first 
place. As a Microsoft user, I do not feel that my rights as a 
consumer have been infringed upon. Microsoft created a product that 
is superior to its competitors and made navigating certain systems 
much easier. This has allowed many people who were computer 
illiterate to become competent on Microsoft Windows systems.
    I regret that nine states feel the need to continue lawsuits. I 
hope the Attorney General will act to suppress this opposition 
because it is in the best interest of the American Public.
    Sincerely,
    Evan Emett
    cc: Senator Harry Reid

[[Page 29155]]



MTC-00030621

Charles W. Guildnet
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am pleased that a settlement has been reached between 
Microsoft and the U.5. Department of Justice concerning the 
antitrust lawsuit. Though this is good news, I dare not fool myself 
into thinking that this matter has come to an end. The fact that 
there are still nine States who wish to pursue litigation against 
Microsoft is simply outrageous. What has Microsoft done to deserve 
such harsh treatment? From the very beginning Microsoft has proven 
itself to be a very strong company with timeless innovations. This 
company has done much to enhance the quality of the personal and 
professional lives of consumers all over the globe. Microsoft should 
not be punished for their competitors" inability to keep with 
Microsoft very distinct strides to revolutionize the IT industry.
    Despite the harsh terms of the proposed settlement, Microsoft 
has not only agreed to these terms, they have also agreed to terms 
that were not even at issue in the lawsuit. This is the perfect 
illustration of Microsoft's willingness to comply. As part of their 
compliance efforts, Microsoft has agreed to enhance competition to 
the computer industry by granting their competitors greater access 
to their protocols and intellectual property. Microsoft has proven 
beyond a shadow of a doubt that they will do every thing they 
possibly can to prevent future antitrust violations. After oil, no 
one wants to repeat any of the events of the last three years of 
litigation. I hope that you make sincere strides to really listen to 
the public and give Microsoft the chance to continue their 
innovative and creative service to the computer industry and to as 
many consumers that want to utilize their products!
    Sincerely,



MTC-00030622

Helen B. Gamsey
6006 S River Road
Norfolk. VA 23505-4711
January 27, 2002
Attorney General John Ashcroft
US Department of Justice, 950 Peansylvania Avenue, NW
Washington, DC 20530-O001
    Dear Mr. Ashcroft:
    I am writing you today to voice my opinion in regards to the 
Mierosoft settlement issue. I feel that this debate has gone on long 
enough and that it is time to end this litigation. After three years 
of litigation, it is time to focus on more pressing issues. The 
nation is under attack and may soon be involved in a major war. In 
my opinion, this lawsuit should never have occurred in file first 
place. R was orchestrated by Microsoft's competitors like Sun 
Microsystems, Oracle, AOL, IBM, and others. I have not been a 
shareholder for almost a year but I am still very concerned about 
what I feel is gross miscarriage of justice in tiffs case.
    Microsoft should be rewarded for all the technological and 
economic advances their products allowed in the last decade, Instead 
their persecution, instigated by their competitors persists. I hoped 
the Appeals Court Judges would vacate Judge Jackson's findings. The 
Oral arguments certainly indicated this might happen, considering 
their horror upon discovering Judge Jackson's judicial misconduct, 
and the way they mocked the government's case. Even though their 
final decision admitted that "All indications are that the 
District Judge violated each of these ethical precepts. The 
violations were deliberate, repeated, egregious, and 
flagrant." Section 455(a) of the Judicial Code requires judges 
to recuse them-selves when their "impartiality might 
reasonably be questioned." The Appeals Court basically did 
nothing to remedy Jackson's inexcusable conduct beyond giving him a 
verbal tongue lasting, and they failed to hate Jackson recused 
retroactively from the first time there was evidence of judicial 
misconduct.
    Contrary to Mierosoft's competitors whinings,,,this settlement 
goes beyond that suggested by the Appeals Court. The AC court threw 
out all of Jackson's remedies which would have broken up the 
company. They rejected the remedies not only because Jackson erred 
by not allowing an evidentiary hearing on remedies: but because 
those remedies no longer applied to the violations they found; which 
were much less severe than those found by Jackson. They also said 
that a structural remedy is rarely indicated and only if there was 
actual proof that "exclusionary her words, there was no 
evidence to show that Netsape and Java would
    The Appeals Court judges threw out Judge Jackson entire remedy, 
partly because Jackson violated basic procedural rule m not allowing 
an evidentiary hearing on the remedy. In their words; "It is a 
cardinal principle of our system of justice that factual disputes 
must be heard in open court and resolved through trial-like 
evidentiary proceedings. Any other course would be contrary 
"to the spirit which imbues our judicial tribunals prohibiting 
decision without bearing." Yet the Appeals Court ignored their 
own advice, and failed to hold an evidentiary hearing to determine 
when these 'egregious ethical violations" occurred. This 
allowed them to arbitrarily select a date, which conveniently was 
after Jackson issued his Findings of Fact and Conclusions of Law, 
even though evidence was presented that revealed the violations 
occurred before the Findings of Fact were issued.. The entire 
decision should at least have been vacated and the case remanded to 
a different judge or the case should have been thrown out in toto.
    If this settlement is rejected, I only hope the Supreme Court 
does the fight thing and throws it out entirely. The respected 
mediator from the first trial, Judge Posner, is strongly opposed to 
the participation of the States Attorney Generals who are the mason 
this case was not settled during the first trial and are the reason 
why this settlement is being disputed now. Posner has recommended 
that future antitrust cases brought by the Federal government not 
allow the States Attorney Generals to participate. Unfortunately, he 
acknowledged that any change to the laws would occur too late to 
help this case be resolved.
    Further, Posner acknowledges "A complication is that it is 
difficult to find truly neutral competent experts to advise the 
lawyers judges and enforcement agencies on technical questions in 
the new economy. There aren't that many competent experts, and 
almost all of them are employed by or have financial pies to firms 
involved in or potentially affected by antitrust litigation in this 
sector. It is difficult to find a consultant in the new economy who 
is both competent and disinterested, or "find neutral experts 
they could help the judge administer a consent decree."
    "The new economy presents unusually difficult questions of 
fact, such as where a plaintiff complains that the defendant has 
changed the interface to make it more difficult for the plaintiffs 
product to work with the network or a defendant contends that it 
disclosing a protocol would allow its competitors by reverse 
engineering to copy its trade secret, that cannot be protected by 
copyright or patent law. Both questions are very technical and 
difficult." "Antitrust in the New Economy. Antitrust Law 
Jounal, 2001, 68, 920-940
    There were no impartial neutral experts to help Judge Jackge nor 
to advise file appeals Court Judges. Unfortunately, the Appeals 
Court Judges relied on the expertise of antitrust experts who they 
thought were impartial. but were actually hired by Microsoft's 
competitors. Jackson admitted to being completely completely about 
technology and the economies behind any any, dies. There is little 
doubt he had much to do with the Findings of Fact or with the 
Conclusions of Law fudge Jackson admitted frequently he was not 
competent m technology issues nor in economic issues involved in any 
remedies. In other words, Jackson was "technologically and 
economically, challenged. He admitted that his secretaries would 
explain certain issues to him. Jackson just rubber stamped the 
remedy submitted by the Government, who consulted heavily with 
Microsoft's competitors. The government in turn accepted what 
Microsoft's competitors gave them, they in turn got ProComp and 
SIIAA and CIIAA to do their work. Even the Appeals Court judges 
admitted their ignorance of basic technologicalological issues which 
were essential to the essence of this case.
    THE COURT: I mean I have to say that I have only done 
downloading of these things with the help of much more skilled 
people. So I took seriously the proposition that that was a big 
harrier. But 60 million people just downloaded it? The Appeals Court 
judges in Microsoft's appeal were astonished to learn that 160 
million copies of Netscape browsers were distributed overall, and 
that their user base doubled to 33 million 1998 when Microsoft's 
competitors were accusing Microsoft of foreclosing competion. The 
Appeals Court judges vacated Jackson's finding of attempted 
monopolization; they remanded the issue of tying to be decided under 
new standards, (even thouugh they categorically dismissed the 
charges of lying

[[Page 29156]]

during the Oral arguments. (They indicated they were told (by 
Microsoft's competitors, no doubt) that they used the wrong 
standards. The only finding they accepted, and not on all of the 
original counts was fixer of illegal monopoly maintenance. 
Curiously, this theory of monopoly maintenance was created by Susan 
Creighton in the original White Paper about Netscape in 19977 Susan 
Creighton has been a diehard foe and "card-carrying anti-
Microsoft agitator" of Microsoft from the early "90's. 
More curiously, Susan Creighton is now tile deputy director for the 
P-TC. I hope she has recused herself from any involvement in this 
case.
    The judges unknowingly relied on at least one economist's novel 
theories--whose theories were apparently created just for fills 
case. Derails Carlton was an original participant in Project 
Sherman. "The Truth, The Whole Truth, and Nothing But The 
Truth" http://www.wired.com/wired/archive/811/microsoft.html
    Mike Morris was counsel for Sun Micros)stems. "Morris had 
been in contact with Joel Klein (in 1998) as part of a three-way 
effort to nudge the government toward a case against 
Microsoft" "for the past nine months." Wired 11/
2000 Page 280. The other two parties were Netscape's Roberta Katz 
and Sabre's counsel, Andy Steinberg. Together they had founded 
ProComp, "Now Morris was plotting a solo mission: to put 
together a sort of private blue-ribbon commission of nationally 
renowned antitrust lawyers and economists, have them draw up an 
outline of the kind of Sherman Act case that would make sense for 
the DOJ to file, including a discussion of possible remedies, and 
then present the whole firing to Klein and his people. 
"According to the article, Joel Klein thought this would be 
useful. From Wired 1112000 Page 280.
    "The political sensitivity of Project Sherman was, 
needless to say, extremely high, for here was one of Microsoft's 
most ardent competitors bankrolling a costly endeavor to influence 
the DOJ--an endeavor undertaken with the department's 
encouragement." "So began a project that would span 
three months and consume $3 million of Sun's money: Project 
Sherman." "Morris look care to select people with 
impeccable credentials;--mainstream credentials, establishment 
credentials; the kind of people who spoke Joel Klein's language; the 
kind who might appear reasonably objective despite the fact that Sun 
was paying them $600 to $700 an hour." (From Wired Magazine, 
11/2000, p 280)
    "The "superstar" cast included economists from 
the firm of Lexecon; an attorney from Arnold & Porter: a 
Strafford economist and a former FTC counsel who handles Surfs 
antitrust work m Washington. "Members of Project Sherman met 
every two weeks for three months and then Morris got Gary Reback to 
assemble industry figures for a hush hush meeting, not knowing they 
had been paid by Sun. (From Wired Magazine, l 1/2000, p 280) 
"Apart from MeNeatey, Morris informed almost no one at Sun, 
and the other participants were sworn to strict 
confidentiality." (page 280, Wired November 2000).
    According to Heilemann, Reback and Creighton lobbied the FTC, 
the Senate Judiciary Committee, the European Commission, other 
Attorney Generals and anyone who would listen. A few others who 
helped out were Mike Hirshland, Republican Senate aid to Senator 
Orrin Hatch; Jim Clark and Jamcs Barksdate from Nescape, and Venture 
Capitalist John Doer. "A few weeks later, Morris and his 
"team" flew to Washington to meet with the DOJ 
attorneys: Jocl Klein, Melamed, Rubinreid, Malone, Boise for many 
hours. "Morris's team "proceeded to outline the case 
they believed the DOJ should file." The charges were straight 
from the Netscape White Paper written by Susan Creighton 
"illegal monopoly maintenance arid monopoly extension; a 
violation of Section 2 of the Sherman Act" They addressed the 
question of so called "harm to consumers;" the so called 
"damage to innovation" and "then the talk turned 
to remedies" and a range of conduct remedies" was 
presented as well as the "case for a structural remedy" 
(From Pages 282-283 of Wired Magazine, November 2000)
    "In 1975 Microsoft had 3 employees and revenues of 
$16,000. Over the next 25 years they grew to 36,000 employees and 
revenues of $20 billion by obsessively figuring out what computer 
users needed and delivering it to them." "Over the ) 
years Gates and his colleagues made a lot of people mad, especially 
their competitors. Some of those competitors delivered a 222-page 
white paper in 1996 to loci Klein, head of the Justice Department's 
antitrust division, and urged him to do to Microsoft in court what 
they couldn't do in the marketplace. (Susan Creighton wrote that 
White Paper).
    Another peculiarity of this case is the presence of U.C. 
Berkeley Haas Business School Professor Michael L. Katz as chief 
economist of the DOJ antitrust division Apart from his strong 
support for government regulation, Katz. wrote papers iii support of 
the DOJ case against Microsoft; including one co-written with Carl 
Shapiro, the economic counsel to the States Attorney Gencrals .... 
hmmmm...
    Curiously, the Department of Justice worked closely with the 
competitors like Sire Microsystems for four years, often showing 
sentences or paragraphs in drafts of the department's plans and 
soliciting their approval. The politics of the case is a far cry 
from th?? Platonic ideal of rigorous economists devising the best 
possible antitrust rules and wise, disinterested judges carefully 
weighing the, evidence." Microsoft's competitors have used the 
Department of Justice to try to take not just their money but their 
intellectual pt, well. From "The Theft of Microsoft" by 
David Boaz. http://www.cato.org/dailvs/07-27-00.html
    I cannot imagine that Project Sherman was a legal undertaking, 
and wonder if the Appeals Court judges were aware of Joel Kleins 
meeting with reporter John Heileman. I wonder if the DOJ would have 
brought the case if it was publicly acknowledged at the time that 
they were listening to testimony from hired experts paid handsomely 
by Microsoft's.
    During these difficult times, it is vital to do all we can to 
boost our economy. Restricting Microsoft will not accomplish this. 
This country is at war with a world wide network of Islamic 
extremists intent on destroying us. The Department of Justice needs 
to focus on "fixing" the FBI and improving the security 
of our nation and protecting American citizens against more 
terrorist attacks. Has this short passage of time since September 11 
dulled memories so quickly that we are back to the old games of 
using lawyers and politicians and the Department of Justice to 
squash competitors? Are things really back to normal? I don't think 
so...until the next terrorist attack. . .
    Antitrust laws are not meant to protect competitors against 
their inability to compete in the marketplace due to their own 
incompetence...Look who is suing? AOL, Sun Microsystems, Oracle, IBM 
are multibillion corporations... not more and pop outfits threatened 
by a bully...The antitrust laws were meant to protect consumers and 
to allow fair competition. Consumers are not complaining. However 
antitrust laws are now being used to protect competitors, and to 
make trial lawyers even richer,,,at the expense of consumers and the 
economy, How many companies have been forced into bankruptcy now by 
trial lawyers over asbestos? 20? 30? 50?
    AOL, Time Warner, IBM, Sun Microsystems, Oracle, etc have 
contributed heavily to politicians for years...long before Microsoft 
was forced to play tiffs game, as a result of their persistent 
efforts to prosecute and persecute Microsoft.
    Should the DOJ continue to "work" on behalf of 
Attorney Generals who are receiving large contributions and specific 
instructions from Microsoft's competitors via ProComp and other such 
organizations? After all, it was Sun Microsystems" who paid 
antitrust experts like Dennis Carlton to "produce" 
antitrust charges which would appear credible to the DOJ. Reputable 
antitrust experts like Carlson produced novel antitrust theories of 
harm from incomplete exclusionary conduct. Almost all of the 
violations upheld by the Appeals Court were based on Carlton's 
"novel" theories. Others were based on 
"novel" theories developed by Susan Creighton, an ardent 
Microsoft foe.
    I would think that the Enron scandal would make politicians and 
regulators more wary of the dangers involved from large 
contributors... I was surprised to learn the extent of Euron's 
contributions. They gave $50,000 to Paul Krugmnan, from the New York 
Times, who writes about economic matters, and not too surprisingly, 
Krugman apparently wrote positive articles in the past about Enron 
....
    It was a complaint from Sum Microsystems that lead the European 
Union to launch an antitrust case against Microsoft by the EU. There 
is something about certain American companies that run to other 
countries to crush their competition .if they can't get the DO/or 
FTC to do it... It is telling that Sun Microsystems has 200 lawyers 
in their legal department, more than many large firms, even in 
Washington. I think their shareholders might prefer they spent more 
on improving their products and competing...as their stock contire, 
es to decline.
    Microsoft was consistently been rated one of the top 
corporations to work for and one

[[Page 29157]]

of the most admired companies by Fortune until the trial lawyers and 
AG and MSFT's competitors started their hatchet jobs and made 
Microsoft into an "unsympathetic target." http://
www.tcchcentralstation.cont/1051/
techwrapper.jsp?PLD=1051-250&CID=1051-012901A
    Microsoft's competitors lobbied politicians for years before 
Microsoft was finally forced to join their game and forced to pay 
this "protection money." "For about 20 years Gates 
and his colleagues just sat out there in "the other 
Washington" creating and selling. As file company got bigger, 
Washington DC, politicians and journalists began sneering at 
Microsoft's political innocence. A congressional aide told the 
press, "They don't want to play the 1). C. game, that's clear, 
and they've gotten away with it so far. The problem is, in the long 
run they won't be able to." Politicians told Bill Gates, 
"Nice little company ya got there. Shame if anything happened 
to it." And Microsoft got the message" If you want to 
produce something in America, you'd better play the game. In 1995, 
after relocated assaults by the Federal Trade Commission mid the 
Justice Department, Microsoft broke down and started playing the 
Washington game. It hired lobbyists and Washington PR firms. Its 
executives made political contributions. And every other high-tech 
company is getting the message, too, which is great news for 
lobbyists and fundraisers." (but not for consumers or 
innovators or successful companies..) From "The Theft of 
Microsoft" by David Boaz. http://www.cato.org/dailvs/
07-27-00.html
    "What lesson should they draw? The antitrust laws are 
fatally flawed. When our antitrust laws are used by competitors to 
harm success fid companies, when our most innovative companies are 
under assault from the federal government, when lawyers and 
politicians decide to restructure the software, credit, card and 
airline industries, it's time to repeal the antitrust laws and let 
firms compete in a free marketplace.
    Microsoft's competitors and these phony front groups are using 
their influence over the media, and their power from contributions 
to politicians to give the appearance that they are concerned with 
consumers, when they are only advancing their own agenda, which is 
harmful to most of us. Microsoft's competitors claim to have the 
interest of consumers at heart, when in reality their own 
incompetence lead to their loss of market share. AOL 5 was such a 
terrible product that even computer experts could not deal with the 
changes it made to the computer. It changed your default settings 
and took over. Mossberg from the Wall Street Journal. who has never 
been a fan of Microsoft, acknowledged this at the tune and there 
were lawsuits over this which somehow failed to make the news. 
Anyone who has ever used AOL knows about their inferior products and 
their poor customer service.
    Nonetheless, it is time to end this case that should have never 
been. and to stop being influenced by Microsoft's competitors who 
have been behind the case from the beginning of Microsoft's 
persecution by the Department of Justice, starting in the early 
"90's. This settlement is the perfect means to end this 
dispute. Microsoft will remain together and continue designing and 
marketing their innovative software, while fostering competition and 
making it easier for other companies to compete. Microsoft has 
pledged to share more information about Windows operating system 
products and has agreed to be monitored for compliance.
    I sincerely hope the Department of Justice accepts this 
settlement and puts an end to this mess and turns their attention to 
real threats to the Nation- the terrorists who want to destroy the 
West. Caving into Microsoft's major competitors who are behind the 
Attorney Generals hurt consumers and the economy further. Let them 
innovate like Microsoft does, rather than litigate.
    Thank you for your attention.
    Sincerely.
    Helen B. Gamsey
    Helen Gamsey



MTC-00030623

Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington DC 20530-0001
    Dear Mr Ashcroft,
    I am writing to you about the Microsoft settlement as is 
permitted under the Tunney Act. I am now retired following a 40 year 
career in banking. I followed the daily reporting of the hearing 
before Judge Thomas Penfield Jackson and read his entire opinion by 
downloading it from the internet. The press reporting during the 
trial led me to certain conclusions, One, the judge was biased 
against Microsoft during the trial. This was born out when the press 
characterized one of the expressions of this judge as a look of 
incredulity such as "can you really believe this guy" 
when David Boles was examining a Microsoft executive during the 
case. In my opinion this bias carried over and influenced his 
findings of fact and proposed remedies. Secondly, the judge erred in 
suggesting harm to the consumer by Microsoft pricing practices
    But the purpose of this letter is not to rehash the origina; 
trial. The Federal Court of Appeals has ruled and remanded the case 
back for remedies The Department of Justice has a settlement now 
before the court. I believe that the Department of Justice's most 
recent decision to end the antitrust case is truly the right one 
Several states have agreed with thai decision. The remaining 
recalcitrant states, and that is my term, are defending not the 
consumer but vested interests of competitors of Microsoft
    During the 1980's, various competitors of Microsoft (Sun, 
Oracle, DEC, iBM) formed a consodium to ostensibly create standards 
for Personal Computer Operating Systems. It was reported in all of 
the computer trade journals from the mid 1980's on. As 1 recall they 
had several meetings over a period of a couple of years, before it 
broke down. and IBM then proceeded to create their own OS/2 
operating system
    Dunng the 1950's IBM was the dominant force in large Main Frame 
Operating systems. This did not deter Burroughs, National Cash 
Register (NCR), Wang Systems, Digital Equipment and others from 
creating competing operating systems. Sun Computers had a high-
priced engineering operating system in the 1980's and trade journals 
all reported that Scott McNeely desired to develop a competitor 
system to Microsoft for Personal Computers. There was only one 
problem. He could not develop a mass market, few priced system
    This fact has been lost in the case against Microsoft It has 
saddened me to see our courts and some politicians being used as a 
referee to reward certain competitors, not in the market place of 
commerce and ideas, but in the courts P.B2
    I am retired and do a bit of financial consulting on the side. l 
use computers quite regularly and would be hard-pressed to find a 
better set of software products than those created by Microsoft. My 
first personal computer in 1984 was a Macintosh and I enjoyed it 
very much, The only problem with it however was that most of the 
software created by others was buggy and would sometimes crash. I am 
reminded particulary of some Oracle software which was very buggy 
and was continually a problem. There was a spreadsheet program 
however, created by a little company that l had never heard of 
callled Microsoft, and if worked seamlessly on the Macintosh. I made 
the conversion to PC's in [he early 90's and would never look back, 
The affordability and stability of Microsoft products convinced me.
    Please express my views to the judge. As a retired business 
person and a consumer of computer software, f would ask the court to 
affirm the Department of Justice settlement agreed to by nine states 
and reject the continued attempts by certain other states to reward 
the competitors of Microsoft.
    Continued litigation will only threaten the Computer software 
and hardware industry and consequently, the entire economy. I ask 
that you please stop these lawsuits and let Microsoft concentrate on 
the business of business once again,
    I would greatly appreciate your reflecting my views, or a 
summary of them to the judge.
    Thank you for your time and thoughtful consideration of this 
matter.
    Cordiaily.
    Gerald G Lacey
    cc: Senator Strom Thurmond
    cc: Senator Fritz Hoilings



MTC-00030624

January 14, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    I am writing to let you know that I am in favor of the 
Department of Justice ending its antitrust case against Microsoft. I 
believe that Microsoft is operating under fair business practices, 
and that the terms of the settlement agreement reached in November 
are reasonable. Microsoft will now share information with its 
competitors about Windows, which will allow them to place their own 
programs on the operating system.
    Ending the case against Microsoft will allow them to concentrate 
on developing new technologies and services, and their continued 
success is beneficial to the overall

[[Page 29158]]

economy. Their concessions in the settlement agreement will allow 
them to continue innovating the technology industry.
    Please support finalizing the settlement under the current 
conditions.
    Sincerely,
    Jack Westbrooks 16590 Heim Road Chelsea, MI 48118
    Jack Westbrooks
    Network Consultant
    MCT, MCSE, CNE, CCNA



MTC-00030625

ATT: RENATA B. HESSE
ANTITRVST DIVISION
MICROSOFF SETTLENT
5645 Lord Cecil Street San Diego, CA 92122
January 27, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    The settlement of the antitrust case appears to me to be fair, 
workable, in the best interests of America. The new judge from the 
Federal District Court who was assigned to the case, and who 
assigned the mediator, should approve it.
    The settlement will change Microsoft is many ways, even beyond 
the scope of the original litigation. The use of exclusive marketing 
agreements with companies that build computers will be banned. A 
uniform price list, with only discounts for large volume shipments, 
will be instituted with large computer makers, instead of individual 
negotiations. A committee of experienced software engineering 
experts will see that the agreement is enforced. This settlement 
seems like it will be in the best interests of the country, because 
the technology sector has been slumping. The end of the litigation 
will help. The increased flexibility and cooperation within the 
industry will also help.
    Let's see this settlement approved as soon as legally possible. 
Let's see
    America strong again.
    Thank you for your help.
    Sincerely,
    Alvaro Munevar



MTC-00030626

Robert Sylvester . 135 Claridge Drive . Moon Twp, PA 15108
January 28, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I understand the Department of Justice is accepting and 
publishing public comments for the first time since the antitrust 
suit was brought against Microsoft more than three years ago. Here 
are some of my views on what I'd like to see happen.
    Microsoft has been cooperative throughout this lawsuit. They 
have agreed that if a third party's exercise of any options provided 
for by the settlement would infringe any of Microsoft's intellectual 
property rights, Microsoft will provide the third party with a 
license to use the necessary intellectual property on reasonable and 
non-discriminatory terms. Microsoft has also agreed to the 
establishment of a technical committee that will monitor Microsoft's 
compliance with the settlement and assist in resolving disputes.
    I urge you to do your part in ending this lawsuit. We've already 
reached an agreement. Let's move forward and deal with some of the 
more pressing issues, such as rebuilding the technology sector so 
that we can revive this economy.
    WAYNE E. QUINTON
    The Highlands
January 23, 2002
Attorney General John Ashcroft
US Department of Justice,
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft:
    I am writing to tell you what I think of the Microsoft Case. 
This case is certainly not serving the public interest; it wasn't 
even brought on by the public. It was brought on because of their 
competitors" influence and is now being paid for with tax 
money. This case is a ridiculous waste of tax money. People are 
suing Microsoft because they can't compete. I think there is 
something wrong when the law allows that.
    Microsoft is passing on their technology secrets to their 
competitors and has even promised not to retaliate when competitors 
create products from that technology that would compete with 
Microsoft. If that's not fair, then 1 don't see what would be. 
Breaking up the company would be disastrous to our country's 
economy.
    This settlement is long past due and needs to be accepted 
immediately. Accepting this settlement is the right way to end this 
mess. Thank you for your time.
    Sincerely,
    Wayn Quinton
    The Highlands
    Seattle, WA 98177



MTC-00030627

Date: Monday, January 28, 2002
To: Attorney General John Ashcroft
Company: U.S. Department of Justice, Washington, D.C
Fax Phone #: +1 (202) 307-1454
CC:
From: Lucille M. Mcculley
Subject: Microsoft Antitrust Settlement
Total # of Pages (including cover): 1
    Memo: Dear Mr. Ashcroft:
    I am writing to express support for the Microsoft antitrust 
settlement. It seems like a good plan and a fair way to resolve what 
has beeen a lengthy and unnecessary inuiry into Microsft's business 
dealings. The settlement's terms are very generous to Microsoft's 
competitors, and giving them access to Windows programming codes 
will enable them to make their programs more compatible with 
Microsoft's operating system.
    Forgoing further exclusivity agreements with computer 
manufacturers will also diversify the market more than it already 
is. The settlement should give both the government and Microsoft 
what they want to ultimarly put the situation to rest. Please 
finalize the settlement without further delay.
    Sincerely,
    Lucille M. McCulley, 221 East 78th Street, NY NY 10021
    If all pages were not received, please call back immediately:
    Jacobo Kravec
    21011 NE 34th Place
    Miami, FL 33180-3585
Attorney General John Ashcroft
U.S. Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft,
    The settlement that has been reached between the US Department 
of Justice and Microsoft is harsh to Microsoft, but should be 
implemented because it is in the best interests of the American 
public. Microsoft is one of our nation's strongest assets and we 
cannot afford to have them sitting on the sideline when there is a 
technological race for superiority in the Technology Industry. 
Microsoft's innovation has standardized the IT sector and has served 
as the leader in development for America's tech sector.
    Yes, Microsoft's marketing tactics have been heavy-handed at 
times, but the terms of the settlement should serve to appease all 
competitors, as Microsoft will be disclosing for their use 
interfaces that are internal to Windows operating system 
products--a first in an antitrust case settlement. Microsoft 
will also be granting computer makers broad new rights to configure 
Windows so that nonMicrosoft products can be more easily promoted.
    Please use your influence to finalize the settlement. It is in 
the best interests of the American public, IT sector, and our 
economy to end the dispute and allow Microsoft to focus on business, 
not politics.
    Sincerely,
    Jacobo Kravec



MTC-00030628

Carl Lochen
30010 Rancho California Road
Apartment 124
Temecula, CA 92591-2952
January 28, 2002
Attorney General John Ashcroft
U.S. Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
    Dear Mr. Ashcroft,
    As an independent developer and supporter of Microsoft, I write 
you in regard to the recent Microsoft Settlement. After three years 
of negotiations, it seems strange that there may even be more delays 
in the implementation of this plan. The process was extremely well 
thought out and well monitored throughout. Because of this, the 
terms that were reached benefit all involved. As we go through these 
economically stressful times, it is crucial that we support our 
technology at all levels. By holding up this settlement, we take a 
backseat in the global market. Our entire technology industry needs 
to get back to business, and because of the agreement, we are ready 
to do so. Let us support our IT sector and allow the terms to speak 
for themselves, including anti-retribution and retaliation acts, and 
the sharing of selected intellectual property.
    Splitting up Microsoft
    Specifically the non-Windows platform community has attacked 
Microsoft for adding

[[Page 29159]]

to much functionality to its OS, and therefore stifling competition. 
They argue splitting up Microsoft, would make it easier to compete 
with Microsoft. This ignores the large amount of developers and 
companies that have made available more than 100 000 programs 
available on the Windows platform. Splitting up Microsoft, will for 
them mean disrupting the dynamics of developing cutting edge 
technology for Windows.
    Windows Building blocks
    Splitting up Microsoft into pieces, will create smaller 
companies developing solutions/libraries that will not be included 
in Windows and therefore be keeping secrets from other independent 
developers who will have to develop their own incompatible 
solutions. Splitting up Microsoft, destroys Windows's ability to 
offer solutions for connecting together building blocks with the 
latest technology. Solutions that are now incorporated in Windows 
and documented for everyone, will end up as proprietary solutions 
outside Windows. Making it less feasible for smaller developers to 
keep up with the latest in technology.
    Microsoft is giving us pre-tested building blocks guaranteed to 
be interchangeable and compatible with each other. Developers using 
these building blocks for their own designs, know that their 
programs will be compatible with combinations of future designs 
trying to link up with or work together with their designs. Think of 
the many millions of errors windows is getting rid of for current 
and future developers of software...
    Whenever building blocks are rewritten with new interfaces, 
previous interface(s) are still available to let older designs work 
as building blocks change. This is true of COM+ and any of the API's 
that come with Windows. It beats trying to design applications to 
hook up to zillions of applications not using support from the OS.
    The Internet building blocks
    Internet technology built into Windows, assists applications 
using various Windows technologies in communicating and sharing data 
with each other over the Internet. This degree of integration 
between applications/components is only possible by having these 
technologies built into the platform they are running on. Internet 
Explorer built into Windows facilitates in building web browsers. 
Any developer can build their own Web Browser with their own 
customized controls. In less than a day they can design their own 
Web Browser that is equal in power to Internet Explorer. Just 
download the MFCIE project from Microsoft Developer Network (has 
been available a couple of years). In less than a day you implement 
remaining Internet Explorer Functions through the OLE/COM+ 
interface. In a matter of days any organization can design their own 
Internet portals that access primarily sites of their own choosing.
    Documentation for developing software
    Microsoft develops the functionality and the building blocks 
needed for applications and distributed components to interact with 
each other on the Windows platform. Microsoft also provides 
Documentation and Developer information for all developers to take 
advantage of these features. Preventing Microsoft from freely 
expanding these features to provide the latest technologies, will 
damage the industry's ability to develop comprehensive integrated 
software solutions for the Windows platform. Instead you will end up 
with incompatible proprietary solutions and a less versatile Windows 
platform.
    I urge you to support our economy at this time, and help this 
settlement go through as it stands. I thank you for your support.
    Sincerely,
    CJ
    Carl Lochen
    cc: Representative Darrell Essa



MTC-00030629

25010 42nd Avenue S Kent, WA 98032
January 25, 2002
Attorney General John Ashcroft
US Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
    Dear Mr. Ashcroft:
    I am of the opinion that the antitrust lawsuit against Microsoft 
is unnecessary. I do not believe that Microsoft was guilty of 
antitrust violations in the first place. As a computer user I want 
an operating system that is complete, and a system that does not 
include an Internet browser is incomplete. Microsoft wants to be 
able to provide the best, most complete, products on the market. The 
addition of Internet Explorer is the natural progression of the 
Windows operating system. The grounds of this suit are faulty, and 
in my opinion the best resolution to this case is the dismissal of 
the charges.
    On the other hand I feel that this case needs to come to an end, 
and the quickest way to accomplish this is to accept the terms of 
the settlement that was reached in early November. I feel that this 
settlement is a bit harsh, however Microsoft has committed 
themselves to the terms and are willing to make the necessary 
sacrifices to get this litigation finished, and themselves back to 
business. The terms require that Microsoft disclose information 
pertaining to the internal interface of the Windows operating system 
so that other companies can create products that work within the 
system. This term of the settlement in particular is extreme. It 
requires Microsoft to reveal information that was formerly known and 
kept as a trade secret. Terms of this nature have never been 
included in an antitrust settlement before, and its inclusion in 
this one is not necessary, however Microsoft has agreed to the 
settlement and therefore it should stand.
    Thank you for all of the work that you have done to bring this 
suit to a close. Please continue to support American business and 
free enterprise in the future.
    sincerely,
    Douglas Harper



MTC-00030630

www.microsoft.com/freadomtoinnovate/
www.usdoj.gov/atr/cases/ais-settie.htm
The letter follows:
January 28, 2002
Attorney General John. Ashcront
Department of Justice
950 Pennsylvania Avenue
Washington. DC 20530-0001
    Dear Mr, Ashcroft:
    My name is Ruth Burke, I am a resident of Fenton. Missount. My 
reason for writing is to let you know that I support the Justice 
Department's proposed settlement with Microsoft and that I 
appreciate your bringing this matter to at least a partial close.
    I do not feel that this case should drag on when a fall 
agreement has been reached. I am sure that people will have gripes 
with particular provisions of the settlement, but the agreement, 
when taken as a whole, is beneficial to the all involved.
    By agreeing to a more level playing held in the are as of 
pricing, distribution, and software combetition, Microsoft has 
opened the door to both increased competition and ch??e. As I 
understand it, that is the goal in any antitrust litigation. It is 
time for everyone involved to get out of Court and get back to work.
    Sincerely,



MTC-00030631

01/29/02 TUE 0l:05 FAX 2024085200 STEVENS DAVIS
MILLER MOS 001
To :
From:
VIA FACSIMILE ONLY TO 202-307-1545
Renata B. Hesse, Esq.
U.S. Department of Justice
Antitrust Division
601 D Street, NW
Suite 1200
Washington, DC 20530
Telecopier: 202-307-1545/202-616-9937
Telephone: 202-514-8276
Peter Peckarsky, Esquire
1615 L Street, NW
Suite 850
Washington, DC 20036
Telecopier: 202-408-5200
Telephone: 202-785-0100
Re: U.S.v. Microsoft, Civil Action No. 98-1232
Date: January 28, 2002
No. of pages (including this sheet):
01/29/02 TUE 01:05 FAX 2024085200 STEVENS DAVIS
MILLER MOS
002
January 28, 2002
Renata Hesse, Esq.
Trial Attorney
Antitrust Division
U.S. Department of Justice
Suite 1200
601 D Street NW
Washington, DC 20530
Facsimile: 202-616-9937 or 202-307-1545
E-mail: microsoft.atr @ usdoc.gov
The Honorable John Asbcroft
Attorney General of the United States
U.S. Department of Justice
Room 4400
950 Pennsylvania Avenue, NW
Washington, DC 20530 (without exhibits or attachments)
The Honorable Charles A. James
Assistant Attorney General
Antitrust Division
U.S. Department of Justice
901 Pennsylvania Avenue, NW
Washington, DC 20530 (without exhibits or attachments)

[[Page 29160]]

Mary Braden, Director
Departmental Ethics Office
U.S. Department of Justice
Room 6642
950 Pennsylvania Avenue, NW
Washington, DC 20530 (without exhibits or attachments)
Re:
Comments of Relpromax Antitrust Inc. with respect to the Revised 
Proposed Final
Judgment dated November 6, 2001, and filed in U.S.v. Microsoft,
Civil Action No. 98-1232, United States District Court for the 
District of Columbia
    Dear Ms. Hesse:
    Defendant Microsoft has been found liable for multiple 
violations of Section 2 of the Sherman Act, 15 U.S.C. 2. A proposal 
for a consent judgment (in the form of a Revised Proosed Final 
Judgment ("RPFJ") dated November 6, 200l, and signed for 
the United States by Charles A. James, Assistant Attorney General, 
Antitrust Division, United States Department of Justice) has been 
submitted in the captioned civil action. As will be made clear below 
and has beer made clear by others who have submitted comments, the 
RPFJ does not meet the requirement,, of law and makes a mockery of 
the judicial power.
    Assistant Attorney General James freely concedes that one of the 
products at issue is one of the necessaries of modern life. As Mr. 
James recently wrote:
    [The case] involves the signature product of the digital age, 
the Windows operating system, through which the vast majority of 
computer users worldwide interne; with what has become a basic 
appliance in human life.
    The Act was named for Senator John Sherman (R.--Ohio). The 
following is what Senator Sherman told the Senate about concentrated 
economic power controlling the necessaries of life during the debate 
that led to the passage of the Sherman Act:
    If the concentered [concentrated] powers of [a trust] are 
intrusted to a single man, it is a kingly prerogative, inconsistent 
with our fore1 of government, and should be subject to the strong 
resistance of the State and national authorities. If anything is 
wrong this is wrong. If we will not endure a king as a political 
power we should not endure a king over the production, 
transportation, and sale of any of the necessaries of life. If we 
would not submit to an emperor we should not submit to an autocrat 
of trade, with power to prevent competition and to fix the price of 
any commodity.
    INTRODUCTION
    I am the President of Relpromax Antitrust Inc. I am an economist 
by education and experience. I received a Ph.D. in economics from 
Princeton University and an A.B. in economics
    See, among others, the Comment (dated January 17, 2002) of 
Robert E. Litan, Roger D. Noll, and William D. Nordhaus on the 
Revised Proposed Final Judgment: and the letter (dated January 24, 
2002) on behalf of the American Antitrust Institute by Albert A. 
Foot, Robert H. Lande, Norman W. Hawker, and Oded Pincas.
    Charles A. James. The Real "Microsoft" Case and 
Settlement, l6 Antitrust 58 (ABA Fall 2001) (a copy of the article 
is attached as Exhibit 12). Congressional Record, Senate, March 21, 
1890, page 2457.
    01/29/02 TUE 01:05 FAX 2024085200 STEVENS DAVIS MILLER MOS from 
the University of California at Davis. I taught economics at 
Cleveland State University, Central Michigan University, and Kansas 
State University. I was a post-doctoral research fellow at Wayne 
State University. At Kansas State University, I was a Visiting 
Assistant Professor and taught a course in industrial organization 
economics. I have worked as an economic analyst at the Illinois 
Commerce Commission which regulates public utilities.
    EXECUTIVE SUMMARY
    1. My analysis of the competitive impact of the RPFJ using a 
computerized model demonstrates that the law requires a structural 
remedy splitting Microsoft into at :least two (2) competing 
companies if the compensation for the executives of these companies 
is based on relative profit maximization (RPM). A re-structuring 
into at least three (3) competing companies if the compensation for 
the executives of these firms is based on absolute profit 
maximization (APM).
    2. The conduct of the United States Department of Justice and 
Microsoft with respect to the RPFJ since about September, 200l, has 
demonstrated contempt for the Court and the statutory rights of all 
Americans.
    3. The RPFJ affirmatively declares that it creates no rights for 
Original Equipment Manufacturers (OEMs), Covered OEMs, Interact 
Access Providers (IAPs), Internet Content Providers (ICPs), 
Independent Hardware Vendors (IHVs), or Independent Software Vendors 
(ISVs).
    4. The RPFJ will not stop Microsoft's violations of the 
antitrust laws, prevent a recurrence, restore competition to the 
market, or deny Microsoft the fruits of its illegal conduct.
    5. To avoid a conflict of interest or the appearance of 
impropriety, the Attorney General, the Assistant Attorney General in 
charge of the Antitrust Division, and all other political nominees 
or appointees of the current Administration should recuse themselves 
from any further involvement in matters related to Microsoft; the 
authority to continue to represent the United States should be 
delegated to a non-political career trial attorney of the Antitrust 
Division of the Justice Department pursuant to 28 U.S.C. 510 by a 
career employee of the Justice Department acting as the delegatee of 
the Attorney General.
    DISCUSSION
    A. The Violations of Law and What The Remedy Must Do By Law
    The Antitrust Procedures and Penalties Act (Tunney Act) governs 
this court's consideration of the RPFJ.
    The Tunney Act was signed on December 21, 1974, to remedy one of 
the remy abuses of power which led to the adoption of the second of 
three Articles of Impeachment of the President by the Committee on 
the Judiciary of the United States House of Representatives on July 
27, 1974. and to the only Presidential resignation in the history of 
our nation on August 9, 1974. The Tunney Act is not merely some 
procedural nicety.
    The Tunney Act was intended to protect all Americans against an 
abuse of the antitrust settlement power. See Exhibit 10 hereto, 
pages 13-22.
    In a unanimous 7-0 decision, the United States Court of 
Appeals for .'.:he District of Columbia Circuit found Microsoft 
liable for multiple violations of 15 U.S.C. 2 due to unlawful 
maintenance of a monopoly. U.S.v. Microsoft, 253 F.3d 34 (DC Cir. 
2001).
    The violations of law related to anti-competitive restrictions 
on OEMs, the, integration of Internet Explorer with Windows, 
exclusionary agreements with IAPs, anti-competitive agreements with 
ISVs, dealings with Apple Computer, First Wave agreements with ISVs, 
the fraudulent deception of software developers using Java, and 
threats to Intel.
    By law, the remedy must stop the violations, prevent a 
recurrence, restore competitive conditions in the market, and deny 
to Microsoft the fruits of its statutory violation.
    171/29/02 TUE 01:06 FAX 2124085200 STEVENS DAVIS MILLER MOS 006
    Given that the United States won a judgment sufficient to 
support these remedies, it is not in the public interest for this 
Court to rubber stamp its approval on a sweetheart dea?? to protect 
a campaign contributor to both the Attorney Genera/and the President 
who put the Attorney General and Assistant Attorney General in 
charge of the Antitrust Division in their current offices. See 
Exhibit 10 hereto, pages 16-18, 21, and 25, and Attachments I 
and 9-43 to the Dautch Declaration which is Exhibit A to 
Exhibit 10 of this letter.
    The Court of Appeals suggests, U.S.v. Microsoft, 253 F.3d 34, 
107 (DC Cir. 2001) that: If the Court on remand is unconvinced of 
the causal connection between Micro sort's exclusionary conduct and 
the company's position in the OS market, it may well conclude that 
divestiture is not an appropriate remedy.
    It follows that if the Court is convinced of the causal 
connection, the Court may conclude that divestiture is an 
appropriate remedy.
    Pursuant to 15 U.S.C. 16(e), this Court must make a 
determination that entry of the RPFJ is in the public interest. The 
statute provides, in pertinent part, that for the purpose of making 
a decision on whether entry of the RPFJ is in the public interest, 
the court may consider:
    (1) the competitive impact of such judgment, including 
terrains*ion 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. limited to the The Court may consider other issues 
it deems relevant also

[[Page 29161]]

and is not considerations set forth in the statute. Some of these 
issues are discussed below.
    1. The Model After the United States Failed to comply with its 
legal obligation sunder the Tunney Act to provide an analysis of the 
competitive impact of the RPFJ, 1 prepared a computerized model for 
the analysis of the competitive impact of the RPFJ. The model is 
described in derail in Exhibit A hereto.
    This economic model considers and calculates the effects on 
competition of both conduct- only remedies and structural remedies. 
The model calculates, in dollar terms, the competitive impact of 
alternative remedies under various sets of assumptions. The model 
calculates the dollar value of such important economic quantities as 
consumer surplus, profits of Microsoft and competitors, and total 
surplus. The main conclusions arc 1) only a structural remedy fully 
repair the economic damage which Microsoft has caused, and 2) most 
structural remedies require additional measures to reduce or 
eliminate the "fruits" of Microsoft's unlawful 
"victories."
    2. The Conduct of the United States and Microsoft Has Been 
Contumacious As discussed in Exhibits 10 and 11 hereto, both the 
United States and Microsoft have defied the court and denied the 
public the information they are stautorily entitled to have to 
assess the RPFJ.
    3. Tile RPFJ Explicitly Denies Any Protection To Third Parties 
After purporting to create rights and protections for OEMs, ISVs, 
IHVs, ISPs, and ICPs, among others, the RPF] takes it oil away in 
the last section (section VIII) which states: 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. Entry of the RPFJ would make a mockery of the 
judicial power.
    There are a host of other problems with the RPFJ, some of which 
are due to a lack of econoic analysis.
    For example, paragraph 2 of the Revised Proposed Final Judgment 
says, "IT]his Final




MTC-OOO30631 OOO7


    STEVENS DAVIS MILLER MOS
    Judgment does not constitute any admission by any party 
regarding any issue of fact or law." This provision is not in 
the public interest, and is partial evidence that this consent 
agreement is a sweetheart deal. Microsoft has been duly convicted of 
serious antitrust violations, and many of these convictions were 
upheld by the Appeals Court. The Appeals Court for the District of 
Columbia is widely perceived to be more conservative on antitrust 
issues than the Supreme Court.
    There is virtually no chance that the Supreme Court will 
overturn those cornvictions which the Appeals Court has upheld.
    The failure to obtain an admission of guilt, under these 
circumstances, is really quite remarkable. It requires some 
explanation for why it is in the public interest to accept: an 
agreement with no admission of guilt. The Competitive Impact 
Statement provides no such explanation. Also no estoppel against 
Microsoft for private parties.
    Another example is the proposed set-up is that the work of the 
TC is completely secret. Section IV.B.9. requires that the TC's work 
be kept secret. Section IV.B.10. prohibits the TC members from 
making public statements. Section [V.D.4.d. requires that everything 
the TC does must be kept secret, and that TC members may not testify 
about their work. Section:IV.B.8.g. does allow TC members to 
communicate to third parties "how their complaints or 
inquiries might be resolved," but requires confidentiality of 
all information obtained from Microsoft. The work of the TC, whether 
good or bad, is not subject to any public check or verification. 
Such secrecy allows a corrupt DOJ to hide the fact that no 
enforcement actions against violations by Microsoft are being 
undertaken. All this secrecy gives no confidence to the public, or 
to potential complainants, that their complaints will be resolved 
fairly or expeditiously. This is especially so, giver the widespread 
perception among Microsoft's would-be competitors that this 
agreement is essentially a sweetheart deal.
01/29/02 TUE 01:07 FAX 20240.85200 STEVENS DAVIS
MILLER MOS
    By way of further example of lack of economic analysis in the 
Competitive impact Statement, consider the following.
    A thorough reading of both the Stipulation and the Competitive 
Impact Statement indicates that neither document contains any 
substantive economic analysis of any kind whatsoever. Nor is there 
any reference to may document which does contain any substantive 
economic analysis. This is a very serious omission, which is not 
permitted with respect to other types of proposed government 
regulation. This omission prevents both the Court and the public 
from having any genuine basis by which to declare this agreement to 
be in the public interest. Accordingly, for this reason alone, 
review of the proposed agreement should be postponed, at least until 
such time as the Department of Justice revises its Competitive 
Impact Statement to provide such analyses.
    The very words, "Competitive Impact Statement," 
suggest an attention to,the economic impacts of competition or lack 
of competition. The nature of these possible impacts is well knower.
    There can be competitive impacts on prices, sales quantities, 
costs, quality of products or service, number of competitors, market 
shares of competitors, the number and variety of products, and other 
impacts of competition, imperfect competition, or no competition. 
There is a whole field of economics, "industrial 
organization," which is specifically devoted to analyzing 
these impacts. Many of the economists who are employed by the 
Antitrust Division of the Department of Justice have studied 
industrial organization. The Department of Justice has access to 
numerous consulting economists. It is therefore quite surprising, 
indeed quite incongruous, that the D(c)J would issue a 
"Competitive Impact Statement" in the very major case 
before us, which is so completely devoid of any substantive economic 
analysis.
    In accordance with well-established practice, the Court should 
require prier publication of a substantive economic analysis as part 
of the government's "Competitive Impact: Statement" and 
allow 60 days for public comments thereafter.
    Certainly, there needs to be a quantitative assessment of the 
likely competitive impacts of the various remedy alternatives. 
Whether this quantitative assessment should be called cost-benefit 
analysis or something else is not the primary issue. The primary 
issue is whether the quantitative analysis of potential remedies 
illuminates the equity criteria enunciated by the Supreme Court for 
the resolution of antitrust cases. One important equity criterion is 
whether a proposed remedy eliminates the "public injury" 
from unlawful conduct. This requires a quantitative assessment of 
past and prospective injuries, and a quantitative assessment of how 
particular remedies reduce or eliminate that injury. Another 
important equity criterion is whether the monopolist has been 
deprived of the fruits of an unlawful victory. This requires a 
quantitative measure, of how large those "fruits" are 
and how effective each remedy would be in reducing or eliminating 
such fruits.
    The government provides no economic analysis at all. There are 
no facts, figures. statements, tables, or economic models concerning 
Microsoft's costs, prices, revenues, or profits. There is no 
projection of costs, prices, revenues, profits, or consumer surplus 
under various alternative scenarios or remedies. Nor is there any 
economic analysis of any other competitive impacts, real or 
imagined, which might flow from this proposed remedy or alternative 
remedies. There is, in short, no genuinely substantive 
"Competitive Impact Statement" which the public may 
either approve or critique.
    Without an economic analysis, there can be no substantive 
statement of competitive impacts. 15 U.S.C. 
16 @ ) requires filing a competitive impact 
statement. Clause (3) requires " explanation of the proposal 
.... including..the anticipated effects on competition of such 
relief."
    There are areas (1) where an economic analysis would have been 
useful, but was not provided, and (2) where weakness in the 
agreement suggests that the whole agreement is, and was perhaps 
intended to be, essentially a sweetheart deal, For example, 
Microsoft's predatory acts were undertaken for the purpose of 
maintaining its highly profitable monopoly. Microsoft's profit from 
these acts may be counted in the billions of dollars. Only multi-
billion dollar fines on Microsoft for failure to obey the terms of 
the consent agreement can fully deter rational disobedience. The 
Competitive Impact Statement provides no indication that the 
settling Plaintiffs contemplate fines of this magnitude, nor is 
there my economic analysis in the CIS which shows that fines of this 
size are not needed. If" fines in the billions of dollars are 
contemplated, the DOJ ought to say so. We may presume that Microsoft 
will gladly pay its attorneys even as much as $100 million to avoid 
a multi-billion dollar fine. Continued litigation by Microsoft is 
virtually assured. If fines of this magnitude are not contemplated, 
how does the DOJ intend to enforce this agreement?
    By way of further example, the only "penalty" 
specified in the consent agreement

[[Page 29162]]

for disobedience to the agreement is to extend the term of the 
agreement for an additional two years (Section V.B.). However, it 
would seem to be common-sense economics that if five years of an 
ineffective regime is insufficient to deter unlawful behavior, then 
an additional two years of the same ineffective regime is unlikely 
to deter the unlawful behavior. A more sensible 
"penalty" would be a five-year extension, renewable 
indefinitely, not just once. In addition, real penalties for 
disobedience should be instituted. For example, a fine equal to 
triple the value of expected profits from uncaught disobedience 
might be imposed. The proposed "penalties" of this 
agreement also constitute partial evidence that, in reality, this is 
a "sweetheart" agreement which the political leadership 
of the DOJ has no intention of seriously enforcing.
    By way of yet further example, section III.B. requires Microsoft 
to post and publicize uniform licensing terms. This affirmative 
obligation is all well and good. However there are some puzzles 
here, which the Competitive Impact Statement does little to 
elucidate.
    First, Section III.B.2. allows the schedule to "specify 
reasonable volume discounts." However, neither the agreement 
nor the Competitive Impact Statement specifies what constitutes a 
"reasonable" volume discount. Can there exist any set 
of" volume discounts which is "unreasonable"? If 
the answer is yes, presumably the DOJ can provide examples of 
"unreasonable" volume discounts, and a methodology 
(presumably based on economics) for determining whether volume 
discounts are either "reasonable" or 
"unreasonable." However, the Competitive Impact 
Statement (pages 27-29) provides neither examples nor 
methodology. If the answer is no, what is the purpose of this term 
"reasonable"? This is one place where an economic 
analysis is indicated, if only to clarify the meaning of this 
agreement.
    Second, Section III.B.3.a. makes a distraction between the top 
ten Covered OEMs, and the second ten Covered OEMs, and allows two 
different uniform schedules, Since the uniform schedules already 
permit "reasonable volume discounts," what is the 
purpose of further distinguishing the size of the OEMs? This 
additional and unneeded flexibility simply gives Microsoft further 
opportunities for discrinination and retaliatron If Microsoft is 
especially interested in punishing one particular firm, Microsoft 
may punish ten firms, while falsely daiming to be nondiscriminatory. 
While this opportunity to discriminate may not be especially J 
valuable, why offer this opportunity in the first place? Uniform 
schedules for everyone is the better approach.
    Third, Section III.B. only applies to 20 Covered OEMs. Section 
VI.D. define:; these Covered OEMs as those manufacturers of personal 
computers who had the largest purchases of Windows Operating System 
Products during the previous fiscal year. However, why are these 
uniform schedules applicable only to the top 20 OEMs? Why not simply 
apply the uniform schedules to anybody who wishes to purchase 
Windows Operating Systems, whether an OEM or not? Also, why should 
these uniform schedules apply only to OEMs who previously purchased 
Windows Products? It is the essence of non-discrimination that OEMs 
should not be penalized for using non-Microsoft products. Yet, if an 
OEM uses a competitor's product, it may find itself in the group of 
non- Covered OEMs. This does not aid the professed goal of 
preventing discrimination a, and retaliation.
    Explanations for these various oddities are required. An 
economic analysis of these oddities would be even better. What is 
the past and projected market share of the top ten OFMs? What is the 
past and projected market share of the second ten OEMS? What is the 
past and projected market share of all remaining wholesale and 
retail purchasers of Windows products? What differences in 
competitive outcomes does the DOJ expect for the various possible 
rules concerning the uniform schedules? This economic analysis 
should have been provided as part of" the Competitive Impact 
Statement.
    Another example is as follows: Section III.D. requires Microsoft 
to disclose A PIs and related documentation to all its Windows 
Operating System Products and its Microsoft Middleware. This 
affirmative obligation is also well and good. Again, however, there 
are some puzzles, which the Competitive Impact Statement does little 
to elucidate.
    First, there are the timing differences on when these 
disclosures must be made. In the case of Microsoft Middleware, it is 
the "last major beta test release," which is not farther 
defined. Presumably, the last beta test release could be a mere few 
weeks before the commercial sale of the product, which is not much 
advance notice to developers and competitors. For a: new Windows 
Operating System Product, these disclosures must occur in a 
"Timely Manner," which is further defined as the first 
beta test version that is distributed to 150,000 or more beta 
tester's. Is it possible that Microsoft might therefore choose to 
beta test future versions o fits operating systems with fewer that 
150,000 beta testers? The Competitive Impact Statement (pages 
33-35) provide's no explanation for these differences in 
timing. Nor does it provide any economic analysis concerting whether 
Microsoft will henceforth have an incentive to "game" 
these restrictions to avoid the intended competitive impact on its 
future behavior. Nor has the DOJ provided any economic analysis of 
how possible changes in the timing of API disclosures would affect 
the competitive impacts.
    Second, there is the timing of disclosures for Windows X. This 
disclosure midst occur upon release of the first Service Pack, or 
within twelve months, whichever is earlier. It is not explained 
whether or why Microsoft needs twelve months to provide its 
disclosures. If this amount of time is not needed, a lesser time 
interval should have been provided. However, if several months time 
is needed, then this necessarily delays Microsoft's issuance of 
Service Pack 1.
    Recent newspaper accounts indicate that Windows XP (and some 
prior products) has a very serious bug which can allow a malicious 
hacker to take control of thousands of computers running Windows XP. 
This circumstance would ordinarily imply that Microsoft is under 
very serious pressure to issue its first Service Pack on an 
emergency, expedited basis. However, if the required disclosures 
take too much time to prepare, then Section III.D. harms both 
Microsoft and the public. If a proper economic analysis had been 
performed, this oddity of the agreement likely would have been 
exposed and corrected before being submitted to the public. In any 
case, without a published economic analysis, it is difficult to 
decipher why the DOJ thought this provision made good sense.
    Yet another example of missing information arises from section 
VI.J. which provides a confusing definition for "Microsoft 
Middleware." In the consent agreement, the !four conditions 
within the definition are combined with the word "and." 
However, the Competitive Impact Statement (pages 17-19) 
explains this term in a manner which suggests that these four 
conditions ought to be combined with the term "or," not 
"and." The Competitive Impact Statement (pages 
18-19) discusses the situation where Microsoft might choose to 
divide up its redistributables in such manner that the fourth 
condition is not met, or even not provide a redistributable, yet the 
Competitive Impact Statement suggests that such non-qualifying 
software code is included under the definition. Either all four of 
the conditions must be present to qualify as "Microsoft 
Middleware" (an "and" requirement) or only some of 
the four conditions need be present (an "or" 
requirement). If the Competitive Impact Statement is correct, then 
the language of the Stipulation requires revision (or vice versa). 
Very, likely, if the Competitive Impact Statement is correct, then 
the language of the Stipulation needs to be more extensively revised 
than simply replacing "and" with "or."
    Since this defined term "triggers Microsoft's 
obligations" (page 17 of the,. Competitive Impact Statement), 
it is important that the public and the Court be provided with a 
clear conception of what this term means, it is difficult for me, or 
any other member of the public, t comment on the suitability of an 
agreement which might mean one thing, or might mean another thing. 
In view of this apparent error regarding a key matter, I would 
suggest that the DOJ revise the Stipulation, revise the Competitive 
Impact Statement, or both, and resubmit to the public for further 
comment.
    Section VI.T. provides a definition of "Trademarked" 
as used in the consent agreement. Pages 22-23 of the 
Competitive Impact Statement elucidate this definition further. The 
Competitive Impact Stateroom makes much of the supposition that 
Middleware is Trademarked, or if not Trademarked then it is not 
Middleware. Is this a distinction with a difference, or that will 
make a difference? Here is one place where an economic analysis 
would be useful, both to clarify whether this is a substantive part 
of the agreement, and if it is substantive, the likely competitive 
impacts of this provision of the agreement.

[[Page 29163]]

    Obviously, there are many other provisions of this consent 
agreement for which an economic analysis of competitive impacts 
would have been useful. Such economic analysis, would have been 
useful, both to clarify the meaning of the agreement, and to help 
educate the Court and the public on the expected or intended 
competitive impacts of the agreement. In addition, such economic 
analyses would have provided a framework upon which the public, in 
its commentary on the alleged competitive impacts, might accept, 
modify, or reject. As it is, the public is left with many questions 
and no answers; the public is given the unfair burden of developing 
its own economic models for
    4, The RPFJ Does Not Meet The Minimum Requirements Of Law
    As many commentators have noted, the RPFJ does not accomplish 
the four goals of antitrust remedies.
    Further, by not entering an admission of guilt, Microsoft is 
presumably free to. engage ha the same anti-competitive practices 
enjoined by the agreement, after the five (or sever:) year term is 
completed. This means that if Microsoft continues these anti-
competitive practices, after the term of the agreement is finished, 
the antitrust authorities must prove anew that these: are unlawful 
practices. Since there is no assurance that a competitive market 
will be restored within five years, and no assurance that Microsoft 
will no longer be the dominant firm in these markets, renewal of 
these practices would be detrimental to the public. Also, the 
expectation that these practices may be renewed at the end of the 
five-year term puts a damper on competitors" beliefs that 
Microsoft is truly enjoined from retaliation, since Microsoft can 
simply wait before retaliating. This consent agreement essentially 
throws away Microsoft's conviction.
    The proposed five-year term is by no means long enough. A Final 
Judgment was entered in 1995 and expires on February 21, 2002. 
Exhibits 2, 3, and 4 hereto explain the problems with the prior FJ. 
From the Declaration of grain Dautch attached hereto as Exhibit 5, 
it appears that Microsoft may still be engaging in the banned per 
processor licensing. In any event: the prior FJ did not restore 
competition to the market for operating systems.
    Microsoft has maintained its dominant monopoly position for a 
period of over ten years. There is no reason to suppose that 
Microsoft's dominant position will suddenly evaporate as a result of 
this consent agreement. So long as Microsoft remains the dominant 
firm, restrictions on its conduct will continue to be necessary. A 
far better approach for the conduct remedy is to institute a ten-
year term, renewable indefinitely at ten-year intervals. If during 
the term of the conduct remedy Microsoft no longer has dominance in 
the industry (e.g., has less than 30% market share), Microsoft may 
petition the Court for relief from the conduct restrictions.
    Further, even assuming that the notion of setting up a Technical 
Committee to investigate complaints is inherently justifiable, there 
are obvious problems with this particular proposed set-up. The first 
problem is that Microsoft is allowed to choose half the 
investigators (Section IV.B.3.). Microsoft's appointment of an 
internal Compliance Officer (Section 1V.C.), as well as its own 
regular attorneys, should be sufficient protection for Microsoft; 
Microsoft does not need to appoint half the investigators. I am 
unaware of any administrative agency for investigating, 
discrimination and retaliation complaints which is set up in such a 
manner that the accused discriminator or retaliator is allowed to 
choose half the investigators. This provision by itself constitutes 
partial evidence that this is a corrupt, sweetheart deal between DOJ 
and Microsoft. Microsoft should play no role in the selection of TC 
members,
    Further, with regard to discrimination, the consent agreement 
appears deficient, because it does not overflow with objectively 
verifiable, affirmative obligations upon Microsoft. In the whole of 
Section Ill, "Prohibited Conduct," only sub-sections 
III.B. and III..D. require any affirmative obligation by Microsoft. 
The remaining sub-sections of Section III either do not impose 
obligations (Sub-section J) or are suffused with anti-discrimination 
and anti-retaliatory language (Sub-sections A, C, E, F, G, I-t, and 
I). In the absence of considerable amounts of trust and goodwill by 
both Microsoft and its competitors, such provisions may prove either 
unenforceable or enforceable only after extensive litigation. The 
delays inherent in a) first having a TC investigation, and b) 
perhaps followed by litigation, provide cold comfort to any 
competitor or would-be competitor who may experience or fear 
discrimination or retaliation by Microsoft.
    Labor economists have analyzed discrimination for decades. One 
economic proposition concerning discrimination is that its effects 
are likely to be worse in monopoly markets roan in competitive 
markets. If a monopolist discriminates, one must suffer the 
discrimination, because there is no one else to do business with. 
However, if one of many competitors discriminates, one may still 
attempt to do business with the others. Even if half of all 
employers discriminate, minorities may still find employment on 
favorable terms with the other half of the employers.
    This simple economic proposition has a clear application in this 
case. If :toe's primary concern is to prevent discrimination and 
discriminatory retaliation by Microsoft, the best way to achieve 
this objective is through a structural remedy: Break up Microsoft 
into two or more firms. Eliminate the monopoly, and the threat of 
discrimination and retaliation loses its fearsome power, and also 
becomes mostly unprofitable. Not performing a structural remedy 
means that discrimination and retaliation is both profitable for 
Microsoft and fearsome to Microsoft's would-be competitors. This 
consent agreement fails to use the most efficacious means to achieve 
its primary objective. The most likely result of the consent 
agreement is continued fear, continued discrimination, continued 
retaliation, continued litigation, and continued monopoly.
    Labor economists also know that under a wide variety of economic 
assumptions and circumstances, discrimination against minority 
workers is an unprofitable activity for employers. 4 In a 
competitive market, the result is segregation of minority workers 
into separate firms, but not lower wages, assuming equal skill by 
the minority workers.
    The outlawing of unprofitable activities is easier to enforce 
than the outlawing of profitable activities. Even though the laws 
against discriminatory motives are inherently difficult to enforce, 
their enforcement is aided by the fact that employment 
discrimination is normally not profitable. This is not the 
circumstance for discriminatory acts by Microsoft.
    5. Appearance Of A Conflict Of Interest
    Microsoft has made an investment of about $23 million in 
politicians from 199:7 to 2001. See Exhibit A (Dautch Dec. and 
attachments) to Exhibit 10 hereto.
    Given an estimated value of AOL's private antitrust suit against 
Microsoft in the neighborhood of $20 billion, Microsoft may be about 
to earn close to a 1000 to I on just the AOL suit.
    The Attorney General and Assistant Attorney General along with 
the Other political nominees or appointees of the current 
Administration should consider recusing themselves and leaving 
further consideration of this matter to the career employees of the 
Antitrust Division.
    LIMITED COPYRIGHT LICENSE
    For the sole purpose of allowing the United States (including 
all three branches of the government) to analyze these comments, to 
publish these comments in the Federal Fegister and to file a copy of 
these comments with any courts it deems appropriate (including the: 
United States District Court for the District of Columbia), l hereby 
grant the United States a time-limited non-transferable royalty free 
non-exclusivc license without the right to sublicense and without 
the right to enforce limited to the purposes stated herein to make 
such copies of the copyrighted material as are necessary; 1) to 
publish the copyrighted computer programs submitted as part of these 
comments in the Federal Register; 2) to make such copies of the 
computer programs as are necessary to: file a copy of these comments 
with the United States District Court for the District of Columbia; 
and, 3) to run and modify only the inputs and source code to the 
computer programs for the purpose of preparing a response to these 
comments or for the purpose of analyzing these comments (no license 
to create a derivative work is granted by his license).
    The limited copyright license granted hereby terminates one day 
after the last possible clay to file any appeal in any court from 
the entry of the RPFJ or termination of consideration of the RPFJ in 
U.S.v. Microsoft, Civil Action No. 98-1232, presently pending 
in the U.S. District Court for the District of Columbia.
    B. The Public Interest The Public interest is in seeing that the 
laws are fairly and fully enforced by mpartial law enforces without 
regard to the political or other connections of the alleged 
violators of the law. Entry of the RPFJ is not in the public 
interest for many reasons as discussed above and by many of the 
other commentators on the RPFJ such as

[[Page 29164]]

Drs. Litan, Nell, and Nordhaus and the American Antitrust Institute. 
The RPFJ will not stop the antitrust violations. The RPFJ will not 
prevent a recurrence of the current violations or very similar 
violations. The RPFJ will not unfetter the market from predatory 
anti-competitive conduct. The RPFJ will not deny to Microsoft the 
flints of it illegal conduct.
    The RPFJ, if entered, will make a mockery of the judicial power. 
The RPFJ may send a clear message to all Americans that if you 
violate the law and then contribute enough money to the party in 
power, you may be able to operate outside the law indefinitely and 
profitably. ".[he RPFJ may undermine public confidence in the 
fairness and agility of the Department of Justice It is not in the 
public interest to achieve the ends set forth in this paragraph.
    Entry of file RPFJ is not in the public interest. The court 
should refuse to approve or enter the RPFJ. in order to avoid a 
conflict of interest or the appearance of impropriety due t,) the 
massive amount of campaign contributions by Microsoft to the current 
Administration and its leaders, the Attorney General and the other 
nominees or appointees of the current President or Attorney General 
should recuse themselves from any further consideration of this 
matter and delegate further consideration to career lawyers in 
Antitrust Division all of whom should be protected by this Court in 
advance (in addition to any statutory rights they may have) against 
reprisals by the political nominees and appointees.
    While many issues are raised by these comments, we hereby 
specifically request a response to questions and issues including, 
but not in any way limited to, the following:
    1. Does Attorney General Ashcroft intend to recuse himself from 
any further involvement in matters involving Microsoft and, in 
particular, U.S.v. Microsoft, Civil Action No. 98-1232, 
presently pending before the U.S. District Court for the District of 
Columbia? If so, when? if not, why not?
    2. Does Attorney General Ashcroft intend to recuse (or remove) 
any political appointees serving under him in the Department of 
Justice from any further involvoment in matters involving Microsoft 
and, in particular, U.S. v. Microsoft, Civil Action No. 
98-1232, presently pending before the U.S. District Court for 
the District of Columbia? If so, which appointee or appointees? If 
so, when? If not, why not?
    3. Does Assistant Attorney General James intend to recuse 
himself from any further involvement in matters involving Microsoft 
and, in particular, U.S.v. Microsoft, Civil Action No. 
98-1232, presently pending before the U.S. District Court for 
tile District of Columbia? If so, when?
    If not, why not?
    4. lf he remains involved in U.S.v. Microsoft, does Assistant 
Attorney G moral James who has personal "knowledge that a non-
counsel of record (e.g. Charles f". Rule, Esq.) engaged in 
undisclosed written and/or oral communications on behalf of 
Microsoft with officers and/or employees of the United States 
(specifically officers and/or employees of the Department of 
Justice) concerning or relevant to the RPFJ (including negotiations 
leading to agreement on the terms of, and the signing of, the RPFJ) 
intend to sign and file with the United States District Court for 
the District of Columbia a certification of compliance (as ordered 
by the Court on November 8, 2001) with the requirements of the 
Antitrust Procedures and Penalties Act (Turnkey Act).: 15 U.S.C. 
16(b)-(h)? If he remains involved in U.S.v. Microsoft and Microsoft 
does not amend !he Microsoft Description and Assistant Attorney 
General James does not sign and file a certificate of compliance 
himself, does he intend to order or allow one of his subordinates to 
sign and file such a certificate of compliance? Why did Assistant 
Attorney General James sign the Stipulation and RPFJ (both dated) 
November 6, 2001, but not the CIS?
    5. Does the United States intend to amend and publish in the 
Federal Register an amended Competitive Impact Statement 
("CIS")? If so, when? If not, what is the basis for the 
United States" position that the current CIS complies with 15 
U.S.C. 16(b)(3), (4), and (6!I?
    PROTEST AND RESERVATION OF RIGHTS
    This letter including the exhibits, attachments, and enclosures 
to and with this letter all of which are hereby incorporated fully 
by reference herein constitute the comments by Relpromax Antitrust 
Inc. ("Relproma") pursuant to the notice published by 
the United States at Fed. Reg. 59452, Vol. 66, No. 229 (Nov. 28, 
2001) and pursuant to 15 U.S.C. 16@) with respect to the 
Revised Proposed Final Judgment dated November 6, 2001, and filed in 
U.S.v. Microsoft, Civit Action No. 98-1232, presently pending 
before the United States District Court for the District of 
Columbia.
    Relpromax has filed with the United States District Court for 
the District of Columbia two motions related to these comments, 
certain statutory deadlines, and a court Order related to these 
comments. The first motion seeks, among other things, an order to 
compel Microsoft to meet its disclosure obligations under 15 U.S.C. 
16(g). A copy of the brief (including exhibits and attachments) in 
support of the first motion ("Memorandum Of Points And 
Authorities in Support Of The Motion Of Relpromax Antitrust Inc. For 
Limited Participation As An Amicus Curiae And For An Extension Of 
Time") is attached hereto as Exhibit 10 and incorporated 
herein fully by reference. The second motion seeks, among other 
things, an order to compel the United States of America 
("United States") to meet its obligations with respect 
to a Competitive Impact Statement ("CIS") under 15 
U.S.C. 16@). A copy of the brief in support of the second 
motion ("Memorandum Of Points And Authorities In Support Of 
The Motion Of Relpromax Antitrust Inc. For Limited Participation As 
An Amicus Curiae And For An Extension Of Time On The Grounds That 
The United States Has Not Provided A Competitive Impact Statement In 
Compliance With The Requirements Of 15 U.S.C. 16(b) ") is 
attached hereto as Exhibit 11 and incorporated herein rally by 
reference.
    The failures of the United States and Microsoft to comply fully 
with the requirements of the Antitrust Procedures and Penalties Act 
("Tunney Act"), 15 U.S.C. 16(b)-(h), have kept Relpromax 
and the public generally from receiving all the information that is 
required by statute to be provided no less than sixty (60) days (in 
the case of the CIS) and fifty (50) days (in the case of Microsoft's 
disclosures) before the deadline for filing these comments. 
Accordingly, these comments are filed under protest, with a full 
reservation of all rights available to Relprornax, and must be 
viewed as preliminary and subject to amendment or expansion if and 
when additional public disclosures are made by the United States or 
Microsoft or by third parties making available information which 
should have been made available by either the United States or 
Microsoft.
    We look forward to receiving the response of the United States 
to the foregoing and to the publication of all of these comments 
(including the exhibits and attachments submitted herewith all of 
which are again incorporated by reference) in the Federal Register 
and to the submission of these comments to the court by the United 
States.
    Thank you very much for your attention to this matter.
    Sincerely,
    President
    Relpromax Antitrust Inc.
    Exhibit 1
    Exhibit 2
    Exhibit 3
    Exhibit 4
    Exhibit 5
    Exhibit 6
    Exhibit 7
    Exhibit 8
    Exhibit 9
    Exhibit 10
    Exhibit 11
    Exhibit 12
    Exhibit 13
    EXHIBIT LIST
    Discussion of computerized model, data inputs to model, and 
computer source code for model for analysis of competitive impact of 
the RPFJ consisting of:
    a. Explanation, model inputs, and intermediate outputs used as 
inputs to final calculations: Attachments A-l, A-2, B-F, and R-S
    b. Results: Attachments G-J
    c. Source code for model: Attachments K-Q
    d. Article by Carl Lundgren, Review of Industrial Organization, 
Volume 1 I, Number 4, August 1996, pp. 533-550: Attachment T
    Proposed Final Judgment dated on or about July 15, 1994, in U.S. 
v.Microsoft, Civil Action No. 94-1564, U.S. District Court for 
the District of Columbia
    Competitive impact Statement dated July 27, 1994 Memorandum Of 
Amici Curiae In Opposition To Proposed Final Judgment, signed by 
Gary L. Reback and dated January 10, 1995
    Declaration of Brian Dautch dated January 27, 2002
    Declaration of Paul M. Romer (Redacted Public Version) dated 
April .27, 2000
    Declaration of Carl Shapiro dated April 28, 2000
    Affidavit of former Senator John Tunney dated January 22, 2002

[[Page 29165]]

    Letter dated August 9, 2001, from 88 Members of Congress to The 
Honorable John Ashcroft (Attorney General of the United States), 
Steven Ballmer (Chief Executive Officer of Microsoft), and The 
Honorable Tom Miller (Attorney General of Iowa) Memorandum Of Points 
And Authorities In Support Of The Motion 05 Relpromax Antitrust Inc. 
For Limited Participation As An Amicus Curiae And For An Extension 
Of Time Memorandum Of Points And Authorities In Support Of The 
Motion Of Relpromax Antitrust Inc. For Limited Participation As An 
Amicus Curiae And For An Extension Of Time On The Grounds That The 
United States Has Not Provided A Competitive Impact Statement In 
Compliance With The Requirements Of 15 U.S.C. 16(b)
    Charles A. James, The Real "Microsoft" Case and 
Settlement,
    16 Antitrust 58 (ABA Fall 2001)
    Dan Eggen, Enron Executives Contributed to Ashcroft Campaign, 
The/Washington Post, January 11, 2002, p. A7
    EXHIBIT 1 TO THE COMMENTS OF RELPROMAX ANTITRUST INC.
    ATTACHMENT A- 1
    ECONOMIC MODEL FOR ANALYSIS OF COMPETITIVE IMPACT OF THE RPFJ
    A. THE MODELING PROBLEMS CAUSED BY THE SHORTCOMINGS OF THE 
COMPETITIVE IMPACT STATEMENT
    As indicated above, the Competitive Impact Statement provides no 
economic analysis or economic modeling of any kind. The Competitive 
Impact Statement does not even provide raw economic data upon which 
an economic analysis might be made. It provides no information 
concerning revenues, costs, profits, quantities, or product 
qualities of Microsoft, its competitors, or potential competitors 
which might usefully be incorporated into an economic model. The CIS 
does not indicate the United States reviewed or considered any such 
items (i. e. revenues, costs, profits, quantities, or product 
qualities of Microsoft, its competitors, or potential competitors ) 
in connection with the RPFJ or the CIS. The DOJ's "Competitive 
Impact Statement" may be a "statement" of sorts, 
but it is clearly not a statement of "competitive 
impacts," about which the statement truly says nothing at all.
    This places a heavy burden on the public. Members of the public 
who wish to critique the consent agreement, must not only devise 
their own economic models and collect their own economic data, they 
can only guess at what economic models and economic analysis the D0J 
is hiding from the public.
    Accordingly, a member of the public who wishes to comment is 
forced to devise her own economic models and collect her own 
economic data. In the case of this model, the work has been 
performed by a professional economist. It would be preferable to use 
or critique the DOJ's own economic models of the software -industry. 
However, the DOJ has provided no such economic models and no 
analysis of the competitive impact of the Revised Proposed Final 
Judgment.
    B. How an Economist Analyzes Competition
    To an economist, an assessment of the competitive impacts of a 
remedy proposal requires an assessment of the factors impacting on 
competition. Competition can be measured or understood in a variety 
of ways. One paradigm that is often used by economists is the 
Structure-Conduct-Performance paradigm. The Structure of an industry 
concerns such matters as the number of firms in a market and the 
market shares of firms in a market. For example, if an industry has 
twenty business firms, and no firm has more than a twenty percent 
market share, the industry is probably competitive. If the industry 
has only two firms, and one of the firms has an eighty percent 
market share, the industry is probably not competitive.
    The Conduct of an industry refers to the behavior of business 
firms within an industry. How do they conduct business? Are they 
actively colluding? Do they frequently share price information? Does 
one firm normally set prices, while the other firms simply set the 
same price in response? These are all behaviors which may indicate 
lack of competition. Some of these behaviors may also be a violation 
of the antitrust laws.
    Finally, the Performance of an industry refers to how well the 
industry serves the interests of consumers (or society generally). 
For example, are prices high or low relative to the costs of 
production? Is the quality of goods and services high or low 
relative to the cost of producing quality, and relative to what 
consumers are willing to pay for quality? Is the variety of goods 
and services high or low relative to the value which variety and 
choice have for consumers, and relative to the extra costs (if any) 
associated with producing and selling that variety?
    Economists typically measure the interests of consumers using a 
concept called "consumer surplus" ("CS"). 
Consumer surplus is a dollar measure of the value which consumers 
receive by being able to purchase goods at a low price rather than a 
high price, by being able to purchase goods they want, and by 
obtaining good quality from what they purchase. For example, if a 
consumer would have been willing to pay $200 for an operating 
system, but only paid $50, then that consumer receives a consumer 
surplus of $150. If a second consumer would have been willing to pay 
$75, but only pays $50, then the second consumer receives a consumer 
surplus of $25.
    Economists also typically evaluate the performance of an 
industry using a related concept called "total surplus" 
("TS"). Total surplus is simply the sum of 
"consumer surplus" and "producer surplus" 
("PS"). Producer surplus is a dollar measure of the 
value which producers receive by being able to sell their land, 
labor, or capital at a higher price rather than a lower price. For 
example, if a worker would have been willing to sell his labor for 
$35,000 a year, but is paid $50,000 a year, that worker receives a 
producer surplus of $15,000 a year. If a capitalist is willing to 
lend or invest his money for a 10% return, but receives a 25% 
return, that capitalist receives a producer surplus of 15%.
    When an industry is competitive, its performance in terms of 
"total surplus" will be at a maximum. Its performance 
for consumers will also be near a maximum. When an industry is 
competitive, the only way to improve consumer surplus is to lower 
prices still further, but this would cause producers to suffer 
losses. Hence, when an industry is competitive, consumer surplus is 
at a practical maximum, because there must either be government 
subsidies or unhappy producers, if consumer surplus is to be 
..increased still further.
    When an industry is not competitive, its performance in terms of 
total surplus is reduced. When an industry is not competitive, 
prices are higher and output is lower, than what would occur if the 
industry were competitive. Because prices are higher, consumer 
surplus is lower, but producer surplus is higher. However, the total 
surplus is reduced, because the producer surplus is increased by 
less than the amount by which consumer surplus falls, so the sum of 
the two surpluses is reduced. Hence, whether we measure industry 
performance by the metric of "consumer surplus" or by 
the metric of "total surplus", more competition is 
better than less competition.
    C. How an Economic Analysis Impacts this Case
    Industry performance can be poor, either because the industry 
structure is bad, because the industry conduct is bad, or because 
both structure and conduct are bad. A well-designed competition 
policy would attempt to remedy or prevent both bad structure and bad 
conduct.
    However, the antitrust law as it is presently formulated is not 
a well-designed competition policy. The antitrust law attacks bad 
conduct, but does not attack bad structure per se. A monopoly is 
usually a bad industry structure, which frequently leads to bad 
competitive performance, but a monopoly as such is not illegal under 
the antitrust laws. A monopoly is only illegal if it is acquired or 
maintained through anti-competitive conduct. Hence, even though 
Microsoft is a monopoly, if Microsoft never does anything illegal, 
Microsoft is perfectly free to record its monopoly profits at the 
expense of consumers.
    However, Microsoft did act unlawfully.
    It is, of course, the primary aim of the antitrust laws to 
protect consumers and competition, not competitors as such. 
Naturally, competition requires competitors, and consumers are 
better off when competitors are protected from certain types of 
anti-competitive conduct. Nevertheless, the interests of consumers 
are paramount when fashioning a remedy. The interests of competitors 
are of secondary importance. A disinterested economic analysis will 
always keep this goal in mind when comparing remedies for the 
Court's consideration.
    D. Preliminary Data for the Economic Model
    In order to be useful, an economic model must have as close a 
relationship to reality as possible given the constraints inherent 
in any model. An economic model cannot mimic economic reality 
entirely, because economic reality is too complex to model in its 
entirety, many aspects of economic reality are not humanly known, 
and such an exacting economic model would be far too complex for 
either humans or computers to calculate in a reasonably timely 
fashion. Hence, all economic models (like all

[[Page 29166]]

scientific models) are a simplification of reality.
    The first consideration is the basic economic data and 
assumptions. The primary data of interest are costs, revenues, 
profits, and market shares for each of Microsoft's three monopolies. 
These three monopolies are the Windows operating system monopoly, 
the Internet Explorer browser monopoly, and the Office (e.g., word 
processing, spreadsheet, and database) software monopoly. Each of 
these three monopolies is implicated in antitrust violations 
committed by Microsoft. The Windows operating system monopoly is 
especially implicated in these violations. There is the question of 
whether we should model all three monopolies, or only one monopoly, 
for purposes of corrective action. This problem is solved by running 
one version of the model for Platform revenues only and another 
version of the model for all types of product revenue.
    Neither Microsoft nor the DOJ has provided data on costs, 
revenues, and profits for each of Microsoft's three monopolies, or 
for any of them. The DOJ has not provided such data as part of its 
Competitive Impact Statement, nor has Microsoft provided such data 
on its Investor Relations website. However, Microsoft does provide 
data for revenues for various business units since July 1997. These 
business units are "Desktop Platforms", "Desktop 
Applications", "Enterprise Software and Services", 
and a few other misce1Ianeous units. The "Platforms" 
unit corresponds most closely to Microsoft's operating system 
monopoly. The "Applications" unit corresponds most 
closely to its Office, and possibly its browser, monopoly. It is 
unclear at this time whether, and to what extent, the 
"Enterprise Software" unit corresponds to either 
competitive or monopoly markets, including operating systems for 
server markets, the browser market, or commercial services based on 
the Internet.
    Hence, as initial data for the economic model, four sets of 
revenue figures for Microsoft's monopolies were used. The first set 
of revenue figures is based solely on Microsoft's Platform Revenues, 
which most closely conforms to a narrow vision of Microsoft's 
monopoly. The second set of revenue figures is a summation of 
Platforms & Enterprise Software. The third set of revenue 
figures is a summation of Platforms & Applications. The fourth 
set of revenue figures is a summation of Platforms, Applications 
& Enterprise Software. The revenue figures are arranged in 
increasing order of size, with the first set of figures being the 
smallest, and the fourth set of figures being the largest. This 
information is shown in Attachment A-2 which immediately follows 
this Attachment A-1.
    As it turns out upon analyzing the results produced by the 
model, the qualitative conclusions of the economic model are 
basically unaffected by whether the model uses Platform revenues as 
a base or essentially all product revenues as a base. Quantitative 
results will change, of course, because the fourth set of figures 
roughly triples the calculated values compared with the first set of 
figures. Nevertheless, the qualitative conclusions remain the same. 
In order to p1ace these historical figures into useful format, the 
revenue figures are projected backwards in time through calendar 
year 1995. This is done by computing quarterly revenues for each 
business unit as a percentage of total revenues. A statistical 
regression on these percentages was used to determine if these 
percentages were growing or shrinking. These statistical tests 
indicated modest, but statistically significant, changes in these 
percentages over the time interval July 1997 through September 2001. 
Hence, similar percentage changes were used to determine the missing 
historical data for January 1995 through June 1997. These projected 
percentage changes for the three business units were multiplied by 
Microsoft's reported total quarterly revenues for the quarters of 
these prior years to obtain estimated values for the revenues of 
each of Microsoft's three main business units for each such quarter.
    These data were converted from nominal dollars to real dollars. 
Nominal dollars are simply the actual reported dollars, without any 
adjustment for changes in purchasing power due to inflation. Real 
dollars are nominal dollars as of a given year, but adjusted for 
inflation for years other than the base year in which the real 
dollars are being reported. In order to convert the nominal dollars 
into real dollars, the U.S. Bureau of Labor Statistics" (BLS) 
Consumer Price Index (CPI) for "All Urban Consumers (Current 
Series)" was used. This is the most commonly used inflation 
index. The nominal dollars were converted to real dollars using 2001 
as the base year.
    Next, the real quarterly revenues were projected into the 
future. For each of the three business units, the 1995-2001 
historical growth rates were calculated using log-linear statistical 
regressions. Revenue growth rates were very high, 19.8% annual 
growth for Platforms, 18.5% annual growth for Applications, and 
28.9% for Enterprise Software, all expressed in real dollars. 
However, revenues did falter a bit in the last year of data. Hence, 
I used the average of the last four quarters of the data available 
to me as the baseline to estimate the last quarter of revenue data 
for calendar year 2001.5 Upon this baseline estimate of revenue for 
the fourth quarter of 2001, I projected all future growth.
    In order to project future growth, I assumed that software 
Downloaded December 5, 2001 from the BLS's CPI web page, available 
at http://stats.bls.gov/cpi/home.htm . The average CPI for 2001 was 
computed as the eight- month, mid-year average for 2001. Since the 
last two months of 2001 were not yet available, the first two months 
were dropped for symmetry.
    Microsoft's accountants use a fiscal year which differs from the 
calendar year. I re-dated all Microsoft figures to their true 
calendar years. production would eventually become a 
"mature" industry. As a mature industry, real growth 
rates are unlikely to exceed some modest figure, such as 3% per 
year. However, computer software has not yet reached this stage of 
maturity. Software growth is very much driven by the phenomenal 
growth in computer hardware capabilities. The growth rate of 
computer hardware capacity is -unlikely to taper off anytime soon, 
even if we restrict our attention to foreseeable technological 
developments.
    However, revenue growth rates for software are unlikely to be 
sustained indefinitely into the future at annual rates of 18%-30%, 
no matter how amazing these future developments in computer hardware 
may be. Accordingly, I project that the current rapid growth in 
monopoly revenues will gradually slow down to the more modest growth 
rate of 3% a year. In my projections, I allow the historically-
observed, rapid growth rates to converge towards the slower 
"mature industry" growth at the convergence rate of 5% 
per quarter. That is, if the growth rate in quarter I is 20%, then 
the growth rate in quarter 2 is assumed to be (20% x 0.95) + (3% x 
.05) = 19.15%. Alternative projections for Microsoft's future 
monopoly revenues may also be reasonable. However, it is unlikely 
that alternative projections will fundamentally alter the 
qualitative conclusions.
    These quarterly estimates and projections for Microsoft's 
revenues by business division were then summed into annual figures 
for each calendar year from 1995-2025. Attachment A-2 provides 
the real revenue figures and projections which were used in the 
computerized economic model.
    The next main piece of data is data on costs. Data on costs were 
also obtained from Microsoft's Investor Relations website. Data on 
Microsoft's expenses are available for the company as a whole, but 
do not appear to be available by business division. Hence, the only 
option is to take an average across business divisions as being 
representative of Microsoft's three main business divisions.
    Microsoft's spreadsheets available on the microsoft website list 
their expense items as a percentage of revenue for each microsoft 
Fiscal Year. The percentages from the last ten fiscal years were 
used to compute ten-year averages for each expense item as a percent 
of revenue. These 10-year averages are listed in Attachment B.
    These expense items were then classified as either short-run 
costs or long-run costs. Microsoft's profit and loss sheet does not 
show capital expenses as such. However, it does show Research and 
Development (R&D) expense. It is assumed that R&D for its 
software products is Microsoft's main long-term cost. "General 
and administrative" expense is also classified as a long-term 
cost. The other expenses I classify as short-run costs. According to 
this classification, Microsoft spends 41.01% of its revenue on 
short-term costs, and 18.55% of its revenue on long-term costs. 
These percentages have held fairly steady over the years, with some 
variations.
    To the extent that long-term costs take time to develop their 
respective revenues, and to the extent that Microsoft's revenues are 
growing, these long-term costs as a percent of revenue are probably 
overstated. For example, if Microsoft's revenue in Year I is $100, 
and its R&D expense in Year 1 is $20, that is 20% of revenue. 
However, suppose that it takes 4 years for Microsoft's R&D 
expenditure to pay off. Suppose that in the

[[Page 29167]]

same 4 years Microsoft's revenue has doubled to $200. Microsoft's 
$20 R&D expenditure in Year I has helped to create $200 of 
revenue in Year 5. This is a percent of revenue of only 10%, not 
20%.
    However, to the extent that investors require a positive return 
on their capital investments, these long-term costs as a percent of 
revenue may be understated. For example, if investors require a 
return of 50% on their capital over a 4-year period, then an 
investment of $20 in Year I will require repayment of $30 in year 5. 
If Microsoft's revenues had remained at $100 in Year 5, this would 
be a percent of revenue of 30%, not 20%. If Microsoft's revenues 
rose to $200 in Year 5, this would be a percent of revenue of 15%, 
and not 10%, 20%, or 30%.
    For purposes of the computerized economic model, it is assumed 
that these two effects offset each other, and accordingly the model 
uses the raw percentage, 18.55%, as Microsoft's long-term cost of 
production. These two effects will exactly offset each other only if 
investors" required return on capital exactly matches 
Microsoft's growth rate. This is unlikely to happen exactly. It is 
most likely that the investors" required real rate of return 
on capital investment is less than Microsoft's phenomenally rapid 
growth rates in revenue. Hence, Microsoft's long-term cost of 
production is probably somewhat less than 18.55%.
    Finally, we consider Microsoft's market share. In the Findings 
of Fact, Judge Jackson indicated that Microsoft's market share in 
operating systems was over 90% for over a decade.7 More recent 
market share data indicates that Microsoft has approached or Finding 
of Fact number 35. U.S. v. Microsoft, 84 F.Supp.2d 9, 19 (D.DC 1999) 
exceeded a 90% market share in all three of Microsoft's monopolies: 
Since the beginning of the trial, Microsoft's share of the web 
browser market has increased from less than %5% to more than B7%, 
its position in the desktop operating system market has risen to 92% 
(a 3% increase in the last year) and its market share for business 
productivity applications, such as word processing and e- mail, is 
now over 96%.
    E. Equations for the Economic Model
    An economic model must model both the demand side and the supply 
side of the markets in question. However, to keep the model simple 
and tractable, it is best to use equations that are fairly easily 
solved and calculated. For the demand side, I assume that the 
product being produced is "homogenous". This means that 
the product is essentially the same, in the eyes of the consumer, 
whether the product is produced by one firm or another firm.
    Software products produced by different firms are probably not 
completely homogenous, either because a firm's reputation, or its 
product quality, or other product features may differ across firms. 
However, the assumption of product similarity across firms is often 
& true enough for modeling purposes. In addition, even though 
product quality may differ, a simple reinterpretation of the model 
can handle such situations. To the extent that people are willing to 
pay more for higher quality, we can interpret this situation as if 
the higher quality is equivalent to higher quantity.
    Another simplifying assumption for the demand side is that the 
industry demand curve (graph of the price of a product vs. quantity 
of a product demanded at each price) is linear. A demand curve is 
unlikely to be linear (that is, it is unlikely to be a straight 
line). However, the only range of prices worth considering for the 
competitive analysis is the prices and outputs that lie between the 
monopoly price and output and the competitive price and output. Over 
a small range of prices and outputs, the demand curve is likely to 
be close to a straight line. Therefore, it is unlikely that assuming 
curvature or lack of curvature in the demand curve will play any 
significant qualitative role in the conclusions of such a 
competitive analysis.
    Accordingly, the demand side assumes that products are 
homogenous and that demand curves are linear, according to the 
equation:
    P = A--bQ  (1)
    Where P=Price (same for all firms), Q=Industry Output Quantity, 
and A and b are positive parameters (intercept and slope of the 
demand curve) .
    We now turn to the supply side. Technically, only competitive 
firms have supply curves (graph of the price of a product vs. 
quantity of a product supplied at each price). Monopoly firms have 
only marginal cost curves. In this industry, we assume that firms 
are few in number, either one or a very few firms. Hence, the 
industry at all times is either a monopoly or an oligopoly. Standard 
textbook theory tells us how to analyze the production decisions of 
a monopoly firm. However, there is no single textbook model for how 
to analyze an oligopoly. This is because there are multiple ways in 
which an oligopoly industry might behave.
    In order to analyze the production decisions of either a 
monopoly or an oligopoly, it is necessary to posit the nature of the 
cost curves which they face. It is assumed that different firms may 
have different costs of production. However, for simplification, it 
is assumed that each firm (subscripted i for each firm i, where i = 
1, 2, 3 .... ) has both a fixed cost (Fi) and a marginal cost (Ci). 
It is assumed the marginal cost is constant (but different) for each 
firm. Since the fixed cost has an effect only on entry decisions, 
exit decisions, and shut-down decisions, rather than pricing 
decisions, it is assumed that the fixed cost is the same for all 
firms (Fi=F for all i). These simplifying assumptions are unlikely 
to have a significant qualitative impact on the conclusions.
    Hence, the total cost or cost curve for each firm is assumed to 
be:
    TCi = Fi + QiCi   (2)
    Where TCi = Total Cost for firm i, Fi = Fixed Cost for firm i, 
Qi = Quantity of output for firm i, and Ci is the constant marginal 
cost for firm i. In addition, we assume that Fi = F for all firms 
which are producing and Fi = 0 for all firms which are not 
producing.
    For a monopoly firm, it is sufficient to know the cost side and 
the demand side to obtain a prediction for the production decision. 
The monopolist's profit is:
    Profiti = TRi--TCi
    = PQi--(Fi + QiCi)
    = PQi--QiCi--Fi (3)
    Where TRi = Total Revenue for firm i = PQi, and TCi comes from 
equation (2).
    Assuming that the fixed cost is not so high as to make 
production not profitable, the monopolist finds it most profitable 
to produce at the output level where marginal cost (MC) equals 
marginal revenue (MR). On a graph showing a plot (or curve) of 
dollars of profit per unit vs. the quantity of units produced, this 
output level (where MC = MR) is the highest point on the curve. The 
eye can determine this point at a glance.* To determine this output 
-level by computer, calculus is used and this output level is 
determined by obtaining the partial derivative of Profits with 
respect to the firm's choice of Qi and setting these derivatives 
equal to zero:
    (d Profiti / d Qi) =
    (d P / d Qi)Qi + P--Ci = 0
    bQi + P--Ci = 0 (4)
    Where we substitute (d P / d Qi) = b from the derivative of the 
demand curve in equation (1).
    For an oligopoly firm, we must make a choice from many possible 
oligopoly models, a model which is reasonable for the situation at 
hand. A standard oligopoly model, first developed by a French 
economist named Cournot over 150 years ago, is still frequently used 
by economists today because it is fairly easy to compute. The 
Cournot model assumes that each oligopoly firm makes its output 
decision under the assumption that rival firms will not change their 
output in response to its own change in output. The Cournot model 
yields an oligopoly price and output which is intermediate between 
competition and monopoly. Also in the Cournot model (when firms have 
the same marginal cost), an increase in the number of firms causes 
prices to fall and output to rise. When there are a very large 
number of firms, the Cournot model predicts competitive pricing, 
which is what we would expect.
    When all firms attempt to maximize their absolute level of 
profits, the profit-maximizing equations for each firm under the 
Cournot model are:
    Profiti = PQi--QiCi--Fi (4)
    (d Profiti / d Qi) =
    (d P / d Qi)Qi + P--Ci = 0
    bQi + P--Ci = 0 (5)
    The Cournot model is reasonable for the circumstances of this 
industry. Given a fairly significant level of fixed costs for this 
industry, it is unlikely that more than two or three firms can 
survive as major players in this industry. Fixed costs for software 
production (i.e., for research and development) require that firms 
must have significant sales simply to break even. This limits the 
number of firms which can survive as major players in the industry.
    Microsoft's long-run costs appear to be about 18.55% of 
revenues. If all of these costs are fixed costs, then no more than 
five firms can exist in the industry, because fixed costs for six 
firms would eat up 18.55% x 6=111.3% of the industry's 
total revenue. This is unviable. In addition, there are also the 
short- run costs that must be covered. Furthermore, when there are 
two or more firms in the industry, we expect prices to fall, which 
allows firms to sell more, but only at a lower profit margin.

[[Page 29168]]

    Computer results from a preliminary economic model, which 
allowed up to five firms in the industry, indicated that if fixed 
costs are either 75% or 100% of the long-run costs, then only two 
firms can survive in this industry. If fixed costs are either 25% or 
50% of the long-run costs, then only three firms can survive in this 
industry. If fixed costs are 0% of the long-run costs (i.e., all 
long-run costs are variable costs), then it is possible for four or 
five firms to survive in this industry. Accordingly, the computer 
model was revised to consider a maximum of three firms in the 
industry.
    Given that only two or three firms can successfully survive, 
under Cournot assumptions, we may ask if the Cournot model is a 
reasonable description. Alternative oligopoly models do exist, and 
these may suggest either higher prices or lower prices than what the 
Cournot model would predict.
    Under the circumstances of an industry structure with only two 
or three firms, it is more reasonable to assume that prices may be 
higher than the Cournot model would predict. This is so for two 
reasons. First, software products are likely to be somewhat 
differentiated, rather than homogenous, as the computer model 
assumes. If products are differentiated, then consumers see the 
products of different firms as being somewhat different from each 
other, albeit also similar to each other. For example, Corel 
WordPerfect and Microsoft Word have their differences, as well as 
their similarities. Within a small range of prices, each software 
product can act as a kind of "mini-monopolist" with 
respect to its own product price.
    Second, when there are only two or three firms, tacit collusion 
which raises prices is easier to implement, and difficult to prove. 
Moreover, unlawful conspiracies to raise prices are less easily 
discovered. However, it is the general experience that oligopolies 
with very few firms rarely collude by means of unlawful conspiracies 
(which could net jail time), presumably because tacit collusion is 
so much easier.
    For both these reasons, it is substantially more likely that 
oligopoly prices would be higher than what the simple Cournot model 
would predict, than that the oligopoly prices would be lower. If we 
assume that prices would be higher, this means that more firms can 
survive in the industry. For example, if the Cournot model would 
predict that only one firm can be profitable, it may be that two 
firms can be profitable. If the Cournot model predicts only two 
firms can survive, it may be that three firms can survive. And so 
forth.
    Hence, the Cournot model is probably a bit cautious in its 
predictions about how many firms can actually compete and survive in 
this industry. This is probably a good thing. One of the issues in 
this case, at least implicitly, is whether or not Microsoft is a 
"natural monopoly." If Microsoft is a natural monopoly, 
someone might argue, then Microsoft caused little or no harm by 
keeping out the competition, since the competitors could not have 
survived anyway. The computerized model does not in any way lend 
support to this type of argument. Hence, the Court should not be 
reluctant to consider structural remedies which divide Microsoft 
into two or more firms.
    F. Equations For a Relative Profit Maximizing Firm
    One of the options for a structural remedy is to change the 
incentives of the business managers of the successor firms to 
Microsoft when Microsoft is re-structured. The incentives of the 
business managers can be altered by changing the method of 
compensation for the officers of the business firm. A method of 
incentives for preventing collusion is further explained in a paper 
published in a refereed academic journal.
    For purposes of this comment and the computer economic model, 
attention is restricted to the simplest possible methods for 
implementing this incentive system. More complex methods for 
implementing the incentive system are certainly possible, and some 
of these more complex implementations may even be better or more 
effective than the simple implementation discussed here. In its 
purest implementation, the incentive scheme sets up a zero-sum game 
for two or more firms in an industry. In the zero-sum game, there is 
no incentive for all firms in the industry to engage in any type of 
collusion. The method even prevents tacit collusion, which may be 
hard to detect, and difficult or impossible to prosecute. The method 
accomplishes this amazing feat simply by changing the financial 
incentives of business managers, not by passing strict new antitrust 
laws with draconian penalties.
    The method sets up a set of incentives called Relative Profit 
Maximizing (RPM) incentives. Business firms whose managers are 
motivated by these incentives may be called Relative Profit 
Maximizing (RPM) firms. Each business manager is assumed to be 
motivated by at least some desire to increase his wealth. In a well-
run business firm, managers are normally paid in a manner which 
motivates them to increase their wealth by increasing the profits of 
their firm. RPM incentives alter these common methods of financial 
compensation by additionally motivating the manager to maximize the 
firm's profits relative to competing firms' profits.
    In its most general form, the goal of the RPM manager is to 
maximize his profits relative to the profits of rival firm(s). It is 
only be achieving this goal that the RPM manager can attain maximum 
financial satisfaction, because that is how the manager is being 
paid. In its simplest form, the goal functions for two rival RPM 
farms look as follows:
    Goal1=Profit1--z(Profit2)
    Goal2=Profit2--z(Profit1)
    When z=1.0 in the above two goal functions, we set up the 
pure zero-sum game. In the zero-sum game there is no incentive to 
collude. If instead, z = 0.0 in the above two goal functions, then 
both firms are motivated by Absolute Profit Maximizing (APM) 
incentives. APM incentives are simply the incentives we normally 
expect to find in business firms. Absolute Profit Maximizing (APM) 
firms simply try to maximize their own level of profits, regardless 
of the level of other firms" profits. APM firms-which are the 
most common type of business firm in a capitalist economy--do 
have an incentive to collude, if an opportunity arises.
    In simple terms in a two firm industry using RPM incentives, if 
a manager increases his firm's annual profits by 10% which is 
equivalent to $1 billion he only gets a bonus (or salary in the case 
of absolute dependence on RPM) if the profits of the other firm in 
the industry increase by less than 10%. In a two firm industry using 
APM incentives, the manager would get a bonus for the extra $1 
billion even if his firm's profits increased less than the other 
firm's profits in terms of annual percentage gain.
    The parameter z in the above goal functions can also take on 
additional values. For example, if z is set less than zero, the two 
firms would have Joint Profit Maximizing (JPM) incentives. JPM 
incentives would likely create less vigorous competition between the 
two business firms than would otherwise occur with APM incentives.
    If z in the above goal functions is between 0.0 and 1.0, this 
creates an impure system of relative profit maximizing incentives. 
For example, if z=0.3, this creates a mixture of two 
incentive schemes which might be described as "30% RPM plus 
70% APM." An impure RPM incentive scheme partially reduces the 
incentive for collusion, but does not completely eliminate the 
incentive for collusion. An RPM firm, even one with an impure RPM 
incentive, can normally be expected to compete more vigorously than 
an APM firm. For this reason, the Court should consider using RPM 
incentives as part of an overall structural remedy.
    For purposes of illustration with the computerized economic 
model, only values of z between -0.3 and 0.9 are used. 
Generally, z is in the range of 0.0 to 0.9 in the model and no 
preferred solution has z less than 0.0. The value of 1.0 (pure RPM) 
is avoided, because with this simple illustrative model (with no 
mechanism for avoiding losses), pure RPM would practically guarantee 
that one or both firms will lose money. This is because if the 
industry has little or no product differentiation, pure RPM causes 
prices to be set to the average of marginal costs. If in addition, 
software firms have high fixed costs, pure RPM practically 
guarantees that at least one firm, and possibly both firms, will be 
unable to recover their fixed costs of production. Pure RPM may 
still be useful and beneficial, but only if additional mechanisms 
are instituted to avoid this outcome.
    The goal-maximizing outputs for the goal functions listed in 
equations (6) and (7) are:
    (d Goall / d Q1)
    (d P / d Q1)Q1 + p--C1 + (d P / d Q1)Q2 = 0
    bQ1 + p--C1 + bQ2 = 0 (8)
    (d Goal2 / d Q2) =
    (d P / d Q2)Q2 + p--C2 + (d P / d Q2)Q1 = 0
    bQ2 + p--C2 + bQ1 = 0 (9)
    G. Basics of Scenario Analysis
    The purpose of a scenario analysis is to provide a projection of 
a range of possible futures. The basic parameters of an economic 
model are usually not known, although they can often be estimated 
(through empirical or theoretical analysis). These estimates may be 
arrived at with a greater or lesser degrees of confidence, accuracy, 
and reliability. Additionally, even if the basic parameters of

[[Page 29169]]

an economic model were known with certainty, most economic models 
allow for uncertainty in how those basic parameters will vary for 
particular firms or individuals. For example, even if it were known 
with certainty that the probability of bankruptcy for a particular 
firm in a particular industry was exactly 3% a year, this would not 
tell us whether that particular firm will be bankrupt in twenty 
years.
    In a well-done scenario analysis, one should vary the parameters 
through a reasonable range of values, including both moderate values 
and extreme values. In addition, the fate of individual firms (given 
the assumed parameters for a particular scenario) is varied 
according to the laws of probability governing that particular 
scenario.
    There are two basic ways of conducting a scenario analysis. One 
way is to compute all the possibilities (appropriately weighted by 
probabilities) for a limited number of parameters that are allowed 
to vary through a small number of reasonable values for each 
parameter, including both moderate and extreme values. The second 
method is called a "Monte Carlo" study. The Monte Carlo 
study allows a large number of parameters to be varied, randomly, 
through a large set of possible values. The Monte Carlo study 
necessarily uses random numbers, which are available in many 
computer packages. The first type of study might or might not use 
random numbers.
    The computer model used for these comments employs the first 
method of scenario analysis. Probabilities for every scenario are 
exhaustively computed and assigned. No random numbers or random 
number generators were used in the analysis.
    The computer model computes probabilities and outcomes for two 
distinct types of scenarios. One type is a static scenario. The 
static scenario occurs at a particular period of time, within a 
single transition period. These transition periods (for a change or 
transition from one short run cost level to another as is discussed 
further in section H below) are assumed to have a length of three, 
five, or eight years.
    The other type is a dynamic scenario, which is a path that links 
two or more static scenarios occurring in two or more time periods. 
For each set of initial conditions and basic parameters, the 
computer starts with a single scenario in transition period zero. 
The computer then calculates the probability that various additional 
static scenarios will be reached in transition periods one through 
ten. The probability that one static scenario will turn into another 
static scenario depends on how similar or dissimilar are the two 
scenarios. The computer calculates the outcomes for every static 
scenario, and weights those outcomes by the probability that the 
static scenario will occur in each of the eleven transition periods 
(periods zero through ten).
    H. Details of Static Scenarios
    The static scenarios assume that firms differ only by level of 
cost. The computerized economic model assumes that there are three 
firms and five levels of short-run cost. These five levels of cost 
are level one (lowest cost), level two, level three, level four, and 
level five (highest cost). These five levels of cost are assumed, 
over the long run, to have differing probabilities of occurrence. In 
particular, the probability of cost level one (lowest cost, 10% 
chance) is assumed be lower than the probability of cost level five 
(highest cost, 30% chance). This reflects the plausible assumption 
that it is easier to be a high-cost firm than a low-cost firm.
    All possible combinations of the five cost levels for three 
firms are computed. These possible combinations are organized into 
35 static scenarios. Whenever a static scenario has the same cost 
level for two or more firms, the costs of each firm are adjusted 
slightly so that no two firms have the same level of cost. A list of 
the cost levels associated with each static scenario is shown in 
Attachment C. The weighted average of cost levels over all firms and 
scenarios is 3.5.
    The basic parameters for static scenarios are varied along two 
dimensions. The first dimension is the cost spread for short- run 
costs. The cost spread is defined as the ratio of cost level one to 
cost level five. For example, if the lowest cost level is twice as 
efficient as the highest cost level, then the cost spread is 50%. 
Five different ratios for the cost spread were chosen for the 
analyses. These cost spread ratios were 25%, 33%, 40%, 50%, and 67%.
    The second dimension for variation is the portion of long-run 
cost which is allocated to fixed cost. The portion of long-run cost 
which is actually a fixed cost is open to some question or 
interpretation. The mere fact that a software firm has spent $X 
billion on software development does not mean that the whole 
expenditure was necessary to develop the software in question. Five 
different values for the fixed-cost portion of long-run costs were 
computed. These percentages were 0%, 25%, 50%, 75%, and 100%. In all 
cases, the remainder of the long-run cost was classified as a 
variable cost.
    Thus, twenty-five static variations on the basic parameters were 
computed. For each of these variations, the computer programs 
computed the prices, quantities, profits, and consumer surplus 
outcomes for each of the thirty-five static scenarios. These static 
numbers were applied to the probabilities computed for each static 
scenario for each of the eleven transition periods. The computer 
model uses the static figures and the associated probabilities for 
each transition period to compute the expected profit and consumer 
surplus outcomes for each transition period.
    I. Details of Dynamic Transitions
    The basic parameters for determining the probabilities of 
transition effectively vary along only one dimension: The speed with 
which transitions occur from one cost level to another. This speed 
variable is implemented in two different ways.
    The first method is relatively straightforward. The length of 
time for the transition periods is allowed to vary. A three-year 
length for the transition period implies a fast transition speed. A 
five-year length implies moderate transition speed, and an eight- 
year length implies a slow transition speed.
    The second method influences the speed of transition by 
determining the extent by which one static scenario may change into 
another static scenario, from one transition period to the next 
transition period. For all transition speeds, the model assumes that 
one static scenario is more likely to change to another static 
scenario, the more similar are the two scenarios. The measure of 
similarity or dissimilarity between two scenarios is determined by 
how similar or dissimilar the short-run costs are for each firm in 
the industry.
    In the slow speed for transition, the second method presumes 
that a firm's short-run cost cannot change more than one level at a 
time. For example, a firm whose cost level is four, can change to 
cost levels five or three, and it can stay at cost level four, but 
it cannot move to cost levels one or two in only one period of 
transition. In the slow transition, the firm is more likely to stay 
at the same cost level, from one transition period to the next, than 
to move to the cost level above or below.
    In the moderate speed for transition, the second method presumes 
that a firm's short-run cost cannot change more than two levels at a 
time. For example, a firm whose cost level is four, can change to 
cost levels two, three, or five, and it can stay at cost level four, 
but it cannot move to cost level one in only one period of 
transition. In the moderate speed transition, the firm is more 
likely to move only one cost level, rather than two cost levels, 
from one transition period to the next.
    In the fast speed for transition, the second method presumes 
that a firm's short-run cost can change as many as four levels at a 
time. For example, a firm whose cost level is one, can change to 
cost levels two, three, four, or five, and it can also stay at cost 
level one. In the fast transition, a firm is more likely to move 
only one cost level than two cost levels, more likely to move two 
levels than three levels, and more likely to move three levels than 
four levels, from one transition period to the next.
    The computer model also causes the exit of firms from the 
industry when their short-run costs become too high. If a firm's 
short-run costs reach the adjusted cost level of five or greater, 
the firm is presumed to exit the industry. This is because an 
experienced firm which cannot keep its costs down (or quality up) 
has no competitive advantage over potential competitors, and has 
presumably lost its ability to compete profitably. The model 
presumes that the exiting firm is replaced by a new firm which is 
equally high cost. The new firm then has the opportunity to reduce 
its cost in future transition periods. Hence, all new entrants to 
the industry are presumed to enter with high short-run costs.
    The computer model starts transition period zero, either with 
Microsoft as a monopoly, or with Microsoft divided into two or three 
firms. If Microsoft starts as a monopoly, Microsoft is presumed to 
start at cost level three. Cost level three is midway between cost 
level one (lowest cost) and cost level five (highest cost). Cost 
level three is slightly more efficient than the long- term average 
cost level of three and a half. Although some may argue that 
Microsoft acquired its monopoly because it was so much more 
efficient than its competitors,

[[Page 29170]]

that monopoly acquisition happened at least ten years ago and was 
probably due to the arguably per processor licensing which was the 
subject of a prior consent judgment (attached as Exhibit 2 to this 
comment letter). There is no reason to suppose, today, that 
Microsoft has anything other than about average efficiency for an 
incumbent firm.
    If Microsoft is split into two or three firms, we may suppose 
that there could be some cost-efficiency losses due to initial 
disorganization. To see this possibility in extremis, suppose that 
the Court ordered Microsoft divided into ten competing firms. We 
might consider ourselves lucky if three of the ten firms were 
equally efficient as Microsoft is today. However, we should not 
exaggerate the likely cost-inefficiency impacts of dividing a very 
large company into two or three very large companies. If Microsoft 
is split into two firms, the model assumes that one of the Microsoft 
successor firms starts at cost level three, while the other starts 
at cost level four. If Microsoft is split into three firms, the 
model assumes that one of the Microsoft successor firms starts at 
cost level three, while the other two successor firms start at cost 
level four.
    The computerized economic model also treats the initial period 
(period zero) differently from the subsequent transition periods. In 
the initial period, potential competitors do not produce; only 
Microsoft or Microsoft's successors produce. In subsequent periods, 
both Microsoft and competitors can produce. This is because, at 
least initially, major competitors do not exist, because their entry 
has been blocked by anti-competitive acts. However, under the 
presumption that an effective conduct or structural remedy creates 
the opportunity for entry, competitors can produce in subsequent 
transition periods.
    J. Construction and Computation of Remedy Alternatives
    The computerized economic model developed for these comments is 
best suited for analyzing structural remedies. Nevertheless, the 
model can be applied to analyze conduct remedies, albeit with some 
caveats.
    The model computes several alternative basic outcomes for the 
industry. The first basic alternative is "no remedy". If 
there is no remedy, it is assumed that Microsoft is a monopoly in 
all years from 1995 through 2025.
    The second basic alternative is a 100% effective conduct remedy, 
starting in 2002. To calculate the results in terms of CS, TS, and 
the profits of Microsoft and its competitors in the case of a 100% 
effective conduct remedy, the model assumes all barriers to entry 
are removed and there is no anti-competitive conduct in the market. 
Under the assumption that there are no barriers to entry into the 
market, Microsoft starts as a monopoly in 2002, but is subject to 
entry from competitors thereafter. The choice of an early date for a 
conduct remedy is due to the timing of the negotiated conduct 
remedy, or alternatively the timing of the conduct remedy offered by 
the Litigating States. Hence, either conduct remedy can go into 
effect almost immediately.
    In practice, no conduct remedy is likely to be 100% effective. 
The Litigating States" strong conduct remedy may be perhaps 
60% to 80% effective as a conduct remedy. The DOJ's weak conduct 
remedy may be about 20% effective. If we optimistically assume that 
the DOJ has hidden all the convincing and persuasive evidence which 
should have been in the Competitive Impact Statement, the DOJ might 
someday provide evidence to the public and the Court that the 
negotiated agreement with Microsoft may be 40% effective.
    The model does not specifically compute the effects which any 
particular provision of a conduct remedy may have on future 
competition. Rather, it is up to the Court or the analyst to 
subjectively assess the overall effectiveness of a particular 
proposed conduct remedy, and to judge it accordingly. The computer 
model simply combines the two basic alternatives, "no 
remedy" and "100% effective conduct remedy" to 
compute estimated outcomes for conduct remedies with only partial 
effectiveness. For example, to compute a "60% effective 
conduct remedy" the program computes a weighted average of the 
two basic remedies, with a 60% weight on "100% effective 
conduct remedy" and a 40% weight on "no remedy."
    The outcomes in the case of other partially effective remedies 
are calculated in a similar manner.
    The third set of basic alternatives is a structural remedy in 
which Microsoft is divided into two or three competing firms. If we 
accept the DOJ's pessimistic appraisal, no structural remedy can 
reasonably go into effect before 2005. More optimistically, if the 
Court follows the road maps laid out by the Appeals Court and the 
Supreme Court, there is at least a 50% chance that a structural 
remedy could take effect in 2003, without such remedy being 
overturned or stayed.
    In any case, the computer model pessimistically assumes that a 
structural remedy is not available before 2005. This time delay 
somewhat disadvantages the structural remedy, but the structural 
remedy is sufficiently superior to the conduct remedy, that it is 
not much of a disadvantage. Without the time delay, a structural 
remedy would always be superior to a conduct remedy.
    The model computes several variations on a structural remedy. 
The first main variations are the division of Microsoft into two or 
three absolute profit maximizing (APM) firms. An APM firm is simply 
the conventional profit-maximizing firm that we see everyday in the 
business world. This type of division of Microsoft into two or more 
firms has been advocated by several economists, including four 
economists who filed an amicus brief before this Court.
    The second main variations are the use of relative profit 
maximizing (RPM) incentives after Microsoft is split up into two 
firms. A primary advantage of the RPM incentives is that competition 
can be maintained even if there are only two RPM firms in the 
industry. RPM incentives can be applied to two firms, three firms, 
or even more firms, but this computer model only applies RPM 
incentives to two Microsoft successor firms. The RPM incentives are 
assumed to be An effect so long as both Microsoft successor firms 
are still in the industry. If either RPM firm exits the industry, 
the goal function of the remaining Microsoft successor firm returns 
to the usual APM incentives.
    The computer model also prints out estimates for the two- 
monopolies remedy previously proposed by the Plaintiffs in this 
case. If Plaintiffs" remedy worked as planned, it would be 
akin to a conduct remedy with enhanced effectiveness. In addition to 
removing the applications barrier to entry, the proposal would 
possibly introduce some measure of extra competition, because the 
two monopolists might decide to compete with each other. The 
computer model does not specifically analyze this remedy, but simply 
estimates its value as being a third of the distance between a 
"100% effective conduct remedy" and a 2-firm APM 
structural remedy. This is calculated as a weighted average of these 
two basic remedies, with a 2/3 weight on the "100% effective 
conduct remedy" and a 1/3 weight on the 2-firm APM structural 
remedy.
    Finally, the model computes what might have happened along a 
"Lawful Path." The lawful path assumes that Microsoft 
starts as a lawful monopoly in the year 1995, and commits no 
antitrust violations at any time. Although some private lawsuits 
allege antitrust violations which occurred before 1995, this case 
does not concern those allegations. This case concerns anti-
competitive acts committed by Microsoft in the browser wars, which 
did not start until 1995. To simulate the lawful path, Microsoft 
starts as a monopoly in 1995, but is subject to potential 
competition in 1996 and later years.
    The purpose of calculating the "Lawful Path" is to 
serve as an equity standard for evaluating alternative remedies. The 
Lawful Path tells us what Microsoft likely would have earned, if 
Microsoft committed no violations. To the extent that Microsoft's 
profits exceed those lawful earnings, we may refer to those excess 
earnings as the fruits of its unlawful actions. Likewise, to the 
extent that consumer surplus exceeds (or falls short) of what would 
occur along the Lawful Path, this is the extent to which consumers 
benefit (or remain harmed) as a result of a particular remedy. K. 
Weighting of Alternative Scenario Parameters
    The computerized economic model computes and weights 225 sets of 
scenarios, which differ by the basic parameters assumed for each 
scenario. These differ along four dimensions. Not all scenarios are 
equally likely. Hence, in the reporting of results, they are 
weighted by their likelihood of occurring. Attachment D shows the 
four basic parameters, the sixteen parameter values, the point 
values of their weighting, and their implied probability of 
occurring.
    The first dimension of parameter variation is the cost-spread 
for short-run cost. Five different ratios for the cost spread were 
used: 25%, 33%, 40%, 50%, and 67%. In Attachment D these are labeled 
"Cost-Spread Ratio."
    Studies of production efficiency between firms suggest that some 
firms can be only half as efficient as other firms. So that cost-
spread ratios of 50% and 67% are certainly within the realm of 
plausibility. In addition, the

[[Page 29171]]

short-run cost variable is doing double duty as a stand-in for 
possible differences in software quality between firms. If we assume 
similar ratios for differences in quality, then a 25% cost spread is 
certainly possible, though less likely. Such a cost spread implies 
that the inefficient firm has both double the costs and half the 
quality; it is an unlucky combination of extremes that is therefore 
less likely. Hence, I weight the 25% and 33% cost-spread ratios with 
a point value of 1, and weight the 40%, 50%, and 67% ratios with a 
point value of 2.
    The second dimension of parameter variation is the portion of 
long-run cost which is allocated to fixed cost. Five different 
percentages for the fixed-cost portion were used: 0%, 25%, 50%, 75%, 
and 100%. In Attachment D these are labeled "Fixed-Cost 
Portion of Long-Run Cost." At this point, there is no 
particular reason to suppose that one allocation of the fixed-cost 
portion is better than another. Hence, I assume a uniform 
distribution over the interval, 0% to 100%. This implies assigning 
point values of 1 to the two extremes (0% and 100%) and a point 
value of 2 to the in-between values (25%, 50%, and 75%).
    The third and fourth dimensions for parameter variation are the 
speed of transition and the length of transition periods. In 
Attachment D "Transition Speed" takes on values of 1.5 
(slow), 2.5 (moderate), and 4.5 (fast). In Attachment D, the length 
of transition periods is given by "Transition Length" of 
3 years (short), 5 years (moderate), or 8 years (long). Extremes may 
either amplify each other (e.g., slow and long) or offset each other 
(e.g., slow, but short). Hence, even if we do not weight these 
values further, moderate combinations are more likely than genuinely 
extreme combinations. Hence, all transition speeds and transition 
length receive the same point value of 1.
    Finally, for each of the 225 combinations of parameters, the 
points assigned to each parameter value are multiplied together. 
This yields a total of 576 points. Based on these point values, the 
computer model assigns each combination of parameter values an 
assumed probability of occurrence. These probabilities are used to 
weight the outcomes of the various calculations when reporting the 
final results, which we come to shortly.
    L. Method of Computing Remedy Alternatives
    For each remedy alternative, dollar values for costs, revenue, 
profits, and consumer surplus are calculated by the model in real 
dollars for each of the years, 1995-2025. These dollar values 
are calculated in real terms, in dollars of constant purchasing 
power, as of the year 2001.
    It is generally standard practice to assume that money has at 
least some time value. That is, a dollar now is preferable to a 
dollar ten years from now, even if both dollars otherwise have the 
same purchasing power. One reason people prefer the dollar now is 
that money can be invested and earn interest. Another reason is that 
people are impatient.
    In regulatory analysis of U.S. government regulations (e.g., 
under Executive Order 12886), it is standard practice to use a 7% 
real discount rate. This discount rate is somewhat akin to an 
interest rate. This means that future dollars will be discounted 
compared with present dollars, while past dollars will accumulate 
interest compared to present dollars.
    Attachment E provides an example of how the 7% real discount 
rate can be applied to Microsoft's real monopoly revenues. In 
Attachment E it can be seen that Microsoft's revenues for its 
Windows monopoly were rather small, compared to what they will be if 
Microsoft operating systems continue to be a rapidly growing 
monopoly. In 1995 Microsoft's revenues for its Windows monopoly were 
only $3.0 billion in 2001 dollars. In 2002 they were estimated at 
$9.1 billion. In 2025 they are projected to be $34.1 billion in 2001 
dollars.
    When we apply the 7% discount factor, the picture changes 
somewhat. Revenues for 1995 "earn interest" of 50% when 
brought to 2001, while revenues from 2025 are discounted 80.3% from 
the value of equivalent purchasing power in of 2001. Discounted 
revenues for 1995 become larger ($4.5 billion) while discounted 
revenues for 2025 become smaller ($6.7 billion). The projected 
undiscounted revenues always grow, but the discounted revenues are 
projected to reach a peak in 2008, with $17.1 billion in 
undiscounted revenues and $10.65 billion in discounted revenues.
    This illustrates an important cause of one of the more 
interesting results which emerge from the economic analysis: Because 
Microsoft's monopoly revenues are growing rapidly, we may anticipate 
worse damage to consumers in the future than what has already 
occurred in the past. Attachment F provides some comparisons for the 
Windows operating system monopoly which illustrate this result.
    In Attachment F, the values for consumer surplus, 
competitors" profits, Microsoft's profits, and for the sum of 
these, total surplus, are provided for the past (1995-2001), 
the future (2002- 2025), and in total (1995-2025). The top 
half of the Attachment shows the aggregated values of these 
quantities. The bottom half shows how these quantities compare with 
the same quantities along the Lawful Path. All quantities from the 
past earned interest at 7% per year, while all quantities from the 
future are discounted at the rate of 7% per year back to 2001 
dollars.
    Looking at the top half of Attachment F, we see both past and 
future values for "No Remedy," a "100% Effective 
Conduct Remedy," and a "3-firm APM Structural 
Remedy." In all cases, the future values for consumer surplus, 
Microsoft profits, and Total Surplus are substantially larger in the 
future, than in the past. In all these cases, the future values are 
more than double the size of the past values, even though the future 
is discounted and the past is inflated.
    In the middle of Attachment F, we see the aggregated values for 
Lawful Path. Again all the future values are at least double the 
past values. If Microsoft had always pursued the Lawful Path, its 
profits would be lower, both in the past and in the future. Even on 
the Lawful Path, Microsoft's future profits are more than double its 
lawful past profits. Again, this is true even though past profits 
are inflated and future profits are discounted.
    In the bottom half of Attachment F, the various aggregates in 
the top half of the Attachment are compared with the Lawful Path. If 
we compare "No Remedy" with the Lawful Path, we see very 
interesting differences between past and future. These differences 
are on the order of 10 to 1. Consumers in the past lost $4.1 billion 
in consumer surplus, but are scheduled to lose $35.0 billion in the 
future. Competitors lost $2.6 billion profit in the past, but are 
scheduled to lose $31.5 billion profit in the future.
    Microsoft, by contrast, does extremely well. Microsoft gained 
$6.7 in unlawful extra profit in the past, but is scheduled to 
receive $60.4 billion in unlawful extra profit in the future. These 
numbers should give the Department of Justice and the Court some 
pause before adopting any settlement which effectively endorses 
continued extraction of profits from consumers due to anti-
competitive conduct by Microsoft.
    We may compare these numbers with what may happen under two 
alternative remedies. In the past (which no remedy can change), 
consumers lost $4.1 billion. In the future, they will lose an 
additional $4.7 billion under a 100% effective conduct remedy, but 
only an additional $0.3 billion under a 3-firm structural split-up 
of Microsoft Corporation.
    Under a 100% effective conduct remedy, competitors in the future 
will still lose $6.7 billion while Microsoft gains $9.1 billion, 
relative to the Lawful Path. By contrast, under the 3-firm 
structural remedy, competitors lose $26.4 billion in the future, 
while Microsoft gains $26.5 billion in the future, relative to the 
lawful path. In other words, competitors benefit more from a 100% 
effective conduct remedy, while both consumers and Microsoft gain 
more from a structural remedy. This is an amazing result, which has 
some startling implications for how best to resolve this case.
    This result does not appear to be an artifact of making peculiar 
assumptions in the economic model. The result is most likely due to 
the limited space available in the market for more than two or three 
firms. If Microsoft remains intact, competitors have room to enter 
the market and earn profits. However, if Microsoft is split into two 
or three firms, there is less room in the market for competitors to 
enter. Accordingly, under a structural remedy, the Microsoft 
successor firms all presumably initially owned by current Microsoft 
shareholders earn much of the profits which competitors might 
otherwise be able to take away.
    This does not mean, as a practical matter, that competitors are 
necessarily better off with a conduct remedy than with a structural 
remedy. In actual practice, a pure conduct remedy cannot be 100% 
effective. A weak conduct remedy might be worse for competitors, 
while a strong conduct remedy may be better for competitors, as 
compared with a structural remedy. Likewise, Microsoft is not 
necessarily worse off with a conduct remedy than with a structural 
remedy. In comparison with a structural remedy, Microsoft may fare 
better with a weak conduct remedy than with a with a strong conduct 
remedy
    M. Analysis of Computed Remedy Alternatives

[[Page 29172]]

    Attachments G, H, I, and J provide a summary of the computations 
for several remedy alternatives. These summaries provide estimates 
of consumer surplus, profits for both Microsoft and its competitors, 
and total surplus. Total surplus is simply the sum of consumer 
surplus and the profits of all firms in the industry. These figures 
are aggregated for all the years, 1995- 2025. They are expressed in 
real dollars, as of 2001. They are also appropriately discounted to 
the year 2001 at the standard 7% real discount rate which is 
commonly used in the analysis of United States government 
regulations.
    The first page of each of these Attachments provides the total 
values for each of the quantities, Consumer Surplus, 
Competitors" Profits, Microsoft's Profits, and Total Surplus. 
These figures are computed and summarized for each of the 
alternative circumstances. These circumstances are "No 
Remedy," conduct remedies with various levels of 
effectiveness, thirteen structural remedies which split Microsoft 
into two or more firms, and the "Lawful Path" in which 
Microsoft never disobeyed the antitrust laws.
    The second page of each of these attachments compares each of 
the alternative circumstances with the Lawful Path. These numbers 
are calculated by subtracting the total quantities under the Lawful 
Path from the total quantities available under each alternative 
circumstance.
    For example, in Attachment G Consumer Surplus under the Lawful 
Path is $105.9 billion, but under "No Remedy" the 
Consumer Surplus is only $66.7 billion. On the second page of the 
Attachment these two numbers are subtracted, so that we can see that 
consumers were/will be deprived of $39.2 billion in consumer value, 
if there is no remedy. Likewise, Microsoft has obtained/will obtain 
$108.5 billion under "No Remedy", but would have 
obtained only $41.3 billion under Lawful Path. The difference of 
$67.2 billion in profit is shown on the second page of the 
Attachment. This figure is representative of the unjust gain (the 
fruits of Microsoft's unlawful conduct) that Microsoft has obtained 
or will obtain if there is no remedy.
    Attachments G and I calculate the remedy alternatives under the 
assumption that the only monopoly of concern is the Operating System 
("Desktop Platforms") monopoly. Attachments H and J 
calculate the remedy alternatives under the assumption that all of 
Microsoft's monopolies ("Platforms" + 
"Applications" + "Enterprise Software") 
are of concern. The figures in Attachments H and J are approximately 
three times as large as the figures in Attachments G and I.
    Clearly, "No Remedy" is not an option for this 
Court. These attachments also provide bottom line information on 
various conduct and structural remedies which the Court is entitled 
to consider. The first eight remedies are conventional remedies of a 
conduct or structural variety. In all four attachments, it may be 
seen that "APM, 3-firms" is the best of the conventional 
(non-RPM) remedies in the sense that best means maximum CS or TS. 
The "APM, 3-firms" remedy is simply a split-up of 
Microsoft Corporation into three competing successor companies, of 
the ordinary absolute profit maximizing (APM) variety.
    The three-firm split-up is similar to what other economists have 
advocated.
    We may confirm this conclusion by reading the first nine entries 
in the columns for "Consumer Surplus" and in the columns 
for "Total Surplus," on either the first or second page 
of each attachment. Of the first nine entries, the 3-firm APM remedy 
always has the largest consumer surplus, and also has the largest 
total surplus. It may also be noted that this 3-firm remedy restores 
most, but not all, of the consumer surplus and total surplus that 
would otherwise be wrongfully taken by Microsoft.
    This may be seen by the negative numbers for this remedy on the 
second page of each attachment.
    Also of note for the 3-firm structural remedy is that Microsoft 
profits considerably from its unlawful acts, relative to the Lawful 
Path. This may be seen from the large positive numbers for 
Microsoft's Profits for this remedy on the second page of each 
attachment. For Attachments G and I, Microsoft achieves an unlawful 
gain of $33.2 billion, even with the 3-firm split up. For 
Attachments H and J, Microsoft achieves an unlawful gain of $96.2 
billion. Most of these remaining unlawful profits come from the 
pockets of competitors and would-be competitors (many of whom are 
not identifiable) who were excluded or deterred from competition by 
Microsoft's anti-competitive acts.
    The consideration of structural remedies involving relative 
profit maximizing (RPM) incentives is as follows. In all cases, the 
RPM remedy is applied to only two Microsoft successor farms, after 
Microsoft is split into two competitors. These are shown in the 
attachments as "RPM, z=0.000" through "RPM, 
z=0.900". "z" is the value of the parameter z in 
the RPM firm's goal function. "z" tells us the extent to 
which a firm's business managers are financially motivated to 
maximize the relative profits of their business firm, rather than 
absolute profits. If z=0.0, there is no RPM incentive. If z=1.0, 
managers are solely motivated to maximize relative profits. For 
purposes of these comments, only the outcomes for values of z 
generally between 0.0 and 0.9 are illustrated. However, in the 
scenarios shown on Attachments I and J which allow a change in z 
(referred to as zbump=0.3) some percentage of all scenarios listed 
as having z values from 0.0 to 0.2 will have a z value of less than 
0.0.
    Attachments G and H assume that the value of z remains fixed, 
and that it does not respond to changing circumstances. In both 
attachments, consumer surplus is maximized when z=0.4 and total 
surplus is maximized when z=0.5. In Attachment G, the RPM solution 
can improve consumer surplus by $2.9 billion, and can improve total 
surplus by $4.6 billion over the 3-firm split up, which is the best 
conventional remedy. In Attachment H, the RPM solution can improve 
consumer surplus by $8.6 billion, and can improve total surplus by 
$13.5 billion over the 3-firm split up.
    Attachments I and J assume that the value of z is more flexible, 
and can change in response to changing circumstances.
    The circumstance to which z is allowed to respond is the 
circumstance where one (or both) RPM firms are experiencing losses.
    These losses, of course, should not simply be short-term or even 
annual losses, but losses that are more chronic or long-term. In 
these computer runs, z is allowed to vary through a small range of 
values. In these attachments, z was allowed to range from the 
indicated value of z down to the smaller value of z which is 0.3 
lower.
    In Attachments I and J, consumer surplus is maximized when 
z=0.6, but this line includes some scenarios which can range down to 
z=0.3 due to the effect of a change in z as large as 0.3 (i.e., 
zbump = 0.3). Total surplus is maximized when z=0.8, but can range 
down to z=0.5 in the same manner due to a change in z as large as 
0.3. In Attachment I, the RPM solution can improve consumer surplus 
by $9.3 billion, and can improve total surplus by $5.2 billion over 
the 3-firm split up, which is the best conventional remedy. In 
Attachment J, the RPM solution can improve consumer surplus by $27.2 
billion, and can improve total surplus by $15.2 billion over the 3-
firm split up.
    In each of the Attachments, the 2-firm RPM remedy also reduces 
Microsoft's unlawfully acquired profits by a few billion dollars, 
relative to what Microsoft would obtain from the conventional 3- 
firm APM remedy. Hence, in all respects, whether measured in terms 
of increasing consumer surplus, increasing total surplus, or in the 
diminution of Microsoft's unjust fruits of its unlawful conduct, the 
RPM incentive system is capable of doing better than the best of the 
conventional economic remedies (APM).
    N. Equity Analysis in Light of the Economic Analysis
    The primary objectives of the antitrust laws, expressed in 
economic terms, is either to maximize consumer surplus or to 
maximize total surplus (or perhaps both, though it may not be 
possible to maximize both simultaneously). The Court should select a 
remedy according to whichever objective best fits the equity 
requirements of the antitrust law. According to the economic 
analysis just provided, a structural remedy combined with an RPM 
incentive, is better than any conventional structural or conduct 
remedy. Among the conventional remedies, the 3-firm split-up is 
better than any conceivable conduct remedy, including even a 100% 
effective conduct remedy. And, of course, among the conduct 
remedies, a strong conduct remedy (such as the Litigating States 
have proposed)is better than the weak conduct remedy which the DOJ 
has proposed.
    A secondary objective is to assure that Microsoft does not gain 
extra profit in the future as a result of the future effect of its 
past (and continuing) unlawful behavior.
    The computerized economic model (whose source code is attached 
as Attachments K-S) only models the price effects of Microsoft's 
anti-competitive acts. An additional harm caused by Microsoft in 
this case includes losses of innovation in the software industry.
    Due to the failure of the United States to address this issue 
analytically in the CIS resource constraints precluded modeling 
these additional losses in consumer surplus and total surplus. It is 
possible that the dollar value of this damage to the consuming 
public (in the form of innovation which did not

[[Page 29173]]

occur) caused by Microsoft's unlawful conduct exceeds the unlawful 
profits calculated by the model. Thus, it is unlikely that consumers 
and the public will ever regain that to which they are entitled as a 
matter of equity.

       Attachment A-2.--Microsoft Corporation, Annual Revenue by Business Division, Real 2001 dollars
                                            [In billions] Platforms,
----------------------------------------------------------------------------------------------------------------
                                                                                                     Platforms,
                                                              Desktop     Platforms     Platforms   Applications
                       Calendar Year                         Platforms      &         &         &
                                                                          Enterprise  Applications   Enterprise
----------------------------------------------------------------------------------------------------------------
1995......................................................     3.003532     4.207892      6.855180      8.059541
1996......................................................     3.727131     5.347350      8.460443     10.080662
1997......................................................     5.035883     7.458570     11.217205     13.639892
1998......................................................     6.454595     9.391382     14.204543     17.141330
1999......................................................     7.693463    12.210871     17.149630     21.667038
2000......................................................     8.186612    13.192271     17.729841     22.735500
2001......................................................     7.204304    11.348110     16.786433     20.930239
2002......................................................     9.142475    14.955194     19.792872     25.605591
2003......................................................    10.588836    17.711490     22.821122     29.943776
2004......................................................    12.001410    20.453823     25.771053     34.223466
2005......................................................    13.364562    23.136215     28.613009     38.384662
2006......................................................    14.670118    25.728773     31.332338     42.390993
2007......................................................    15.915669    28.215390     33.925832     46.225553
2008......................................................    17.102945    30.590792     36.398387     49.886235
2009......................................................    18.236419    32.857597     38.760186     53.381363
2010......................................................    19.322209    35.023736     41.024499     56.726025
2011......................................................    20.367255    37.100384     43.206070     59.939200
2012......................................................    21.378745    39.100399     45.319994     63.041648
2013......................................................    22.363742    41.037214     47.380985     66.054457
2014......................................................    23.328943    42.924094     49.402933     68.998085
2015......................................................    24.280557    44.773678     51.398672     71.891793
2016......................................................    25.224251    46.597717     53.379885     74.753351
2017......................................................    26.165138    48.406960     55.357103     77.598925
2018......................................................    27.107806    50.211128     57.339763     80.443086
2019......................................................    28.056353    52.018953     59.336296     83.298896
2020......................................................    29.014438    53.838247     61.354226     86.178035
2021......................................................    29.985331    55.675990     63.400283     89.090942
2022......................................................    30.971962    57.538426     65.480504     92.046967
2023......................................................    31.976974    59.431156     67.600333     95.054514
2024......................................................    33.002757    61.359227     69.764708     98.121178
2025......................................................    34.051497    63.327217     71.978146   101.253866
----------------------------------------------------------------------------------------------------------------
Source: Computed from spreadsheet data provided on Microsoft's Investor Relations website (downloaded December
  5, 2001 from http://www.microsoft.com/msft/history.htm) and CPI indices from the BLS website (Downloaded
  December 5, 2001 from http://stats.bls.gov/cpi/home.htm).


Attachment B.--Microsoft Corporation, Profit & Loss Items, As a Percent of Revenue, Ten-Year Average of
  Percentages (Microsoft Fiscal Years 1992-2001) & Classification of Expense Items Into Short-Run and
                                                  Long-Run Cost
                                      [FY 1992-2001 ten-year average]
----------------------------------------------------------------------------------------------------------------
                                                    As a
            Profit & Loss Item               Percent of                     Categorized as
                                                  Revenue
----------------------------------------------------------------------------------------------------------------
Revenue.......................................      100.00%
Operating expenses:
    Cost of revenue...........................       18.51%  Short-Run Cost
    Research and development..................        14.73  Long-Run Cost
    In-process R&D........................         0.19  Long-Run Cost
    Sales and marketing.......................        22.14  Short-Run Cost
    General and administrative................         3.63  Long-Run Cost
Other expenses................................         0.36  Short-Run Cost
    Total operating expenses..................        59.59
        Total Short-Run Cost..................       41.01%
        Total Long-Run Cost...................       18.55%
Operating income..............................       40.41%
Losses on equity investees and other..........  -0.55
Investment income.............................         6.04
Noncontinuing items...........................  -0.27
Income before income taxes....................        45.97
Provision for income taxes....................        15.67
Net income....................................       30.29
----------------------------------------------------------------------------------------------------------------
Source: Computed from spreadsheet data provided on Microsoft's Investor Relations website (downloaded December
  5, 2001 from http://www.microsoft.com/msft/history.htm).


[[Page 29174]]


      Attachment C.--Adjusted and Unadjusted Cost Levels For Firms in 35 Static Scenarios And Long-Run
                                             Probability of Scenario
----------------------------------------------------------------------------------------------------------------
                                             Unadjusted       Adjusted Cost Level
                                  Long-Run      Cost    -------------------------------
        Static Scenario         Propability    Levels                                      Firm 1       Firm 2
                                                Firm      Firm 1   Firm 2     Firm 3
----------------------------------------------------------------------------------------------------------------
1.............................      2.7000%          5         5        5       4.7500       5.0000       5.2500
2.............................      6.7500%          4         5        5       4.0000       4.8333       5.1667
3.............................      5.6250%          4         4        5       3.8333       4.1667       5.0000
4.............................      1.5625%          4         4        4       3.7500       4.0000       4.2500
5.............................      5.4000%          3         5        5       3.0000       4.8333       5.1667
6.............................      9.0000%          3         4        5       3.0000       4.0000       5.0000
7.............................      3.7500%          3         4        4       3.0000       3.8333       4.1667
8.............................      3,6000%          3         3        5       2.8333       3.1667       5.0000
9.............................      3.0000%          3         3        4       2.8333       3.1667       4.0000
10............................      0.8000%          3         3        3       2.7500       3.0000       3.2500
11............................      4.0500%          2         5        5       2.0000       4.8333       5.1667
12............................      6.7500%          2         4        5       2.0000       4.0000       5.0000
13............................      2.8125%          2         4        4       2.0000       3.8333       4.1667
14............................      5,4000%          2         3        5       2.0000       3.0000       5.0000
15............................      4.5000%          2         3        4       2.0000       3.0000       4.0000
16............................      1.8000%          2         3        3       2.0000       2.8333       3.1667
17............................      2.0250%          2         2        5       1.8333       2.1667       5.0000
18............................      1.6875%          2         2        4       1.8333       2.1667       4.0000
19............................      1.3500%          2         2        3       1.8333       2.1667       3.0000
20............................      0,3375%          2         2        2       1.7500       2.0000       2.2500
21............................      2,7000%          1         5        5       1.0000       4.8333       5.1667
22............................      4,5000%          1         4        5       1.0000       4.0000       5.0000
23............................      1,8750%          1         4        4       1.0000       3.8333       4.1667
24............................      3,6000%          1         3        5       1,0000       3.0000       5.0000
25............................      3,0000%          1         3        4       1.0000       3.0000       4.0000
26............................      1,2000%          1         3        3       1.0000       2.8333       3.1667
27............................      2.7000%          1         2        5       1.0000       2.0000       5.0000
28............................      2.2500%          1         2        4       1.0000       2.0000       4.0000
29............................      1,8000%          1         2        3       1.0000       2.0000       3.0000
30............................      0.6750%          1         2        2       1.0000       1.8333       2.1667
31............................      0,9000%          1         1        5       0.8333       1.1667       5.0000
32............................      0.7500%          1         1        4       0.8333       1.1667       4.0000
33............................      0.6000%          1         1        3       0.8333       1.1667       3.0000
34............................      0.4500%          1         1        2       0.8333       1.1667       2.0000
35............................      0.1000%          1         1        1       0.7500       1.0000      1.2500
----------------------------------------------------------------------------------------------------------------
Source: Adapted from file "CostList.txt" generated by the computer program
  "MS1File.bas".


  Attachment D.--Point Values and Equivalent Probabilities for the
  Weighting of Alternative Basic Parameters for the Scenario Analyses.
------------------------------------------------------------------------
                                                    Point     Equivalent
                                              Values    Probability
------------------------------------------------------------------------
Cost-Spread Ratio (Low Cost/High Cost):
    25.00%....................................            1        12.5%
33.33%........................................            1        12.5%
40.00%........................................            2        25.0%
50.00%........................................            2        25.0%
    66.67%....................................            2        25.0%
Fixed-Cost Portion Point Equivalent Of Long-
 Run Cost:
    0.00%.....................................            1        12.5%
    25.00%....................................            2        25.0%
    50.00%....................................            2        25.0%
    75.00%....................................            2        25.0%
    100.00%...................................            1        12.5%
Transition Speed (Allowed Cost Level Jumps):
    1.5.......................................            1        33.3%
    2.5.......................................            1        33.3%
    4.5.......................................            1        33.3%
Transition Length (Number of Years):
    3.........................................            1        33.3%
    5.........................................            1        33.3%
    8.........................................            1        33.3%
------------------------------------------------------------------------


[[Page 29175]]


     Attachment E.--Microsoft's Real Monopoly Revenues by Year
            Discounted at 7% Rate per Year, Real 2001 dollars
                              [In billions]
------------------------------------------------------------------------
                                  Undiscounted    Discount    Discounted
              Year                  Revenues       Factor      Revenue
------------------------------------------------------------------------
1995............................      3.003532     1.500731     4.507492
1996............................      3.727131     1.402552     5.227496
1997............................      5.035883     1.310796     6.601017
1998............................      6.454595     1.225043     7.907158
1999............................      7.693463     1.144900     8.808247
2000............................      8.186612     1.070000     8.759675
2001............................      7.204304     1.000000     7.204304
2002............................      9.142475     0.934579     8.544368
2003............................     10.588836     0.873439     9.248699
2004............................     12.001410     0.816298     9.796724
2005............................     13.364562     0.762895    10.195759
2006............................     14.670118     0.712986    10.459589
2007............................     15.915669     0.666342    10.605279
2008............................     17.102945     0.622750    10.650851
2009............................     18.236419     0.582009    10.613758
2010............................     19.322209     0.543934    10.509997
2011............................     20.367255   0.508349 1     0.353674
2012............................     21.378745     0.475093    10.156882
2013............................     22.363742     0.444012     9.929763
2014............................     23.328943     0.414964     9.680676
2015............................     24.280557     0.387817     9.416412
2016............................     25.224251     0.362446     9.142423
2017............................     26.165138     0.338734     8.863031
2018............................     27.107806     0.316574     8.581630
2019............................     28.056353     0.295864     8.300855
2020............................     29.014438     0.276508     8.022726
2021............................     29.985331     0.258419     7.748772
2022............................     30.971962     0.241513     7.480127
2023............................     31.976974     0.225713     7.217616
2024............................     33.002757     0.210947     6.961821
2025............................     34.051497     0.197146    6.713130
------------------------------------------------------------------------
Source: Adapted from the "Rev--Disc.txt" file generated
  by the "MS6Summ.bas" program using RevStream=1
  (Microsoft's Platform-only revenues) and the data in Attachment A.


  Attachment F.--Consumer Surplus & Profits For Past (1995-2001) & Future (2002-2025)
                        Time Intervals, Comparisons for Selected Remedies and Lawful Path
----------------------------------------------------------------------------------------------------------------
                                                     Consumer       Competitor       Microsoft
                  Time Interval                       Surplus         Profits         Profits      Total Surplus
----------------------------------------------------------------------------------------------------------------
                                          Aggregates for No Remedy Path
----------------------------------------------------------------------------------------------------------------
Past......................................      12.1839999       0.0000000      19.8218227      32.0058226
Future..........................................      54.4862867       0.0000000      88.6422783     143.1285650
Total...........................................      66.6702866       0.0000000     108.4641010     175.1343876
-------------------------------------------------
                               Aggregates for 100% Effective Conduct Remedy
----------------------------------------------------------------------------------------------------------------
Past......................................      12.1839999       0.0000000      19.8218227      32.0058226
Future..........................................      84.8797426      24.7805427      37.2686222     146.9289075
Total...........................................      97.0637425      24.7805427      57.0904448     178.9347301
-------------------------------------------------
                               Aggregates for 3-firm APM Structural Remedy
----------------------------------------------------------------------------------------------------------------
Past......................................      12.1839999       0.0000000      19.8218227      32.0058226
Future..........................................      89.2098711       5.1158769      54.7189826     149.0447306
-------------------------------------------------
Total.....................................     101.3938710       5.1158769      74.5408053     181.0505532
                                                                                                  Aggregates for
                                                                                                     Lawful Path
-------------------------------------------------
Past......................................      16.3216726       2.6242527      13.0930073      32.0389326
Future..........................................      89.5353459      31.5087389      28.2007864     149.2448711
Total...........................................     105.8570185      34.1329915      41.2937937     181.2838037
-------------------------------------------------

[[Page 29176]]

 
                                      Comparing: No Remedy minus LawfulPath
----------------------------------------------------------------------------------------------------------------
Past......................................  -4.13767  -2.62425       6.7288153  -0.03311
                                                              27              27                              01
Future..........................................  -35.0490  -31.5087      60.4414920  -6.11630
                                                             592             389                              61
Total...........................................  -39.1867  -34.1329      67.1703073  -6.14941
                                                             319             915                              61
-------------------------------------------------
                        Comparing: 100% Effective Conduct Remedy minus LawfulPath
----------------------------------------------------------------------------------------------------------------
Past......................................  -4.13767  -2.62425       6.7288153  -0.03311
                                                              27              27                              01
Future..........................................  -4.65560  -6.72819       9.0678358  -2.31596
                                                              32              61                              36
Total...........................................  -8.79327  -9.35244      15.7966511  -2.34907
                                                              59              88                              36
-------------------------------------------------
                         Comparing: 3-firm APM Structural Remedy minus LawfulPath
----------------------------------------------------------------------------------------------------------------
Past......................................  -4.13767  -2.62425       6.7288153  -0.03311
                                                              27              27                              01
Future..........................................  -0.32547  -26.3928      26.5181963  -0.20014
                                                              47             620                              04
Total...........................................  -4.46314  -29.0171      33.2470116  -0.23325
                                                              74             147                             05
----------------------------------------------------------------------------------------------------------------
Source: Adapted from output file "AGGRWTD8.txt" from Lundgren's six computer programs, where
  revstream=1 in "MS6Summ.bas".


                    Attachment G.--Summary Output of Alternative Remedies for Microsoft
                                   [Total Aggregates for Alternative Remedies]
----------------------------------------------------------------------------------------------------------------
                                                     Consumer       Competitor       icrosoft
                     Remedy                           Surplus        Profits M        Profits      Total Surplus
----------------------------------------------------------------------------------------------------------------
No-Remedy:......................................      66.6702866       0.0000000     108.4641010     175.1343876
20% Conduct:....................................      72.7489789       4.9561086      98.1893712     175.8944587
40% Conduct:....................................      78.8276711       9.9122172      87.9146414     176.6545298
60% Conduct:....................................      84.9063629      14.8683262      77.6399093     177.4145984
80% Conduct:....................................      90.9850527      19.8244345      67.3651770     178.1746642
100% Conduct:...................................      97.0637425      24.7805427      57.0904448     178.9347301
2-Monopolies:...................................      97.2443831      20.0995342      61.7667505     179.1106678
APM, 2-firms:...................................      97.6056643      10.7375170      71.1193619     179.4625432
APM, 3-firms:...................................     101.3938710       5.1158769      74.5408053     181.0505532
RPM, z=0.000:...................................      97.6056643      10.7375170      71.1193619     179.4625432
RPM, z=0.100:...................................     100.0494922      10.5198190      70.1711669     180.7404781
RPM, z=0.200:...................................     101.7502572      10.2983154      70.2577918     182.3063644
RPM, z=0 300:...................................     104.1852610      10.0963259      69.3834217     183.6650087
RPM, z=0 400:...................................     104.3235767       9.9646972      70.6687936     184.9570675
RPM, z=0 500:...................................     103.6437601       9.8490147      72.1858682     185.6786430
RPM, z=0 600:...................................     100.2265622       9.7727729      75.5755929     185.5749280
RPM, z=0 700:...................................      95.5628679       9.7447668      79.3962211     184.7038557
RPM, z=0 800:...................................      89.8870594       9.7966324      83.5152687     183.1989605
RPM, z=0 900:...................................      84.3841146      10.0564241      87.0578989     181.4984376
Lawful Path:....................................     105.8570185      34.1329915      41.2937937    181.2838037
----------------------------------------------------------------------------------------------------------------
Revenue Stream = Platforms only.
The value of z in the RPM scenarios is fixed as indicated.
Figures are in billions of real 2001 dollars (7% discount rate).
Figures are aggregated for the years 1995-2025.
Figures are a weighted average of all computed scenarios.


                      Attachment G--Comparing Remedies: Each remedy minus Lawful Path:
----------------------------------------------------------------------------------------------------------------
                                                     Consumer       Competitor       icrosoft
                     Remedy                           Surplus        Profits M        Profits      Total Surplus
----------------------------------------------------------------------------------------------------------------
No-Remedy: 39.1867319...........................  -34.1329  -67.1703
                                                             915             073
                                                                  D-6.1494
                                                                             161
20% Conduct:....................................  -33.1080  -29.1768  -6.89557  -5.38934
                                                             412             834              69              77
40% Conduct:....................................  -27.0293  -24.2207  -46.6208  -4.62927
                                                             505             753             465              93
60% Conduct:....................................  -20.9506  -19.2646  -36.3461  -3.86921
                                                             588             663             144              07
80% Conduct:....................................  -14.8719  -14.3085  -26.0713  -3.10914
                                                             674             576             827              22
100% Conduct:...................................  -8.79327  -9.35244  -15.7966  -2.34907
                                                              59              88             511              36
2-Monopolies:...................................  -8.61263  -14.0334  -20.4729  -2.17313
                                                              54             574             568              59
APM, 2-firms:...................................  -8.25135  -23.3954  -29.8255  -1.82126
                                                              42             745             682              05
APM, 3-firms:...................................  -4.46314  -29.0171  -33.2470  -0.23325
                                                              74             147             116              05
RPM, z=0.000:...................................  -8.25135  -23.3954  -9.82556  -1.82126
                                                              42             745              82              05
RPM, z=0.100:...................................  -5.80752  -23.6131  -28.8773  -0.54332
                                                              63             726             732              56
RPM, z=0.200:...................................  -4.10676  -23.8346      28.9639981       1.0225607
                                                              13             762

[[Page 29177]]

 
RPM, z=0.300:...................................  -1.67175  -24.0366  -28.0896       2.3812049
                                                              75             656             281
RPM, z=0.400:...................................  -1.53344  -24.1682  -29.3749       3.6732638
                                                              18             943             999
RPM, z=0.500:...................................  -2.21325  -24.2839  -30.8920       4.3948392
                                                              84             768             745
RPM, z=0.600:...................................  -5.63045  -24.3602      34.2817992       4.2911243
                                                              63             186
RPM, z=0.700:...................................  -i0.2941  -24.3882      38.1024274       3.4200520
                                                             506             248
RPM, z=0.800:...................................  -15.9699  -24.3363  -42.2214       1.9151568
                                                             591             591             750
RPM, z=0.900:...................................  -21.4729  -24.0765      45.7641052      0.2146339
                                                             039             674
----------------------------------------------------------------------------------------------------------------
Source: Adapted from output file "AGGCWTD8.txt" from Lundgren's six computer programs, where
  zbump=0.0 in "MS5TranR.bas" and revstream=l in "MS6Summ.bas".


                    Attachment H.--Summary Output of Alternative Remedies for Microsoft
                                   [Total Aggregates for Alternative Remedies]
----------------------------------------------------------------------------------------------------------------
                                                     Consumer       Competitor       Microsoft
                     Remedy                           Surplus         Profits         Profits      Total Surplus
----------------------------------------------------------------------------------------------------------------
No-Remedy.......................................     193.2538881       0.0000000     314.3995669     507.6534549
20% Conduct.....................................     211.1377498      14.6052416     284.1619090     509.9049004
40% Conduct.....................................     229.0216116      29.2104832     253.9242510     512.1563459
60% Conduct.....................................     246.9054718      43.8157260     223.6865862     514.4077840
80% Conduct.....................................     264.7893265      58.4209665     193.4489212     516.6592142
100% Conduct....................................     282.6731812      73.0262070     163.2112562     518.9106443
2-Monopolies..............................     283.2511215      59.2815132     176.9034634     519.4360981
APM, 2-firms....................................     284.4070022      31.7921257     204.2878778     520.4870056
APM, 3-firms....................................     295.4965492      15.1737142     214.5194539     525.1897174
RPM, z=0.000....................................     284.4070022      31.7921257     204.2878778     520.4870056
RPM, z=0.100....................................     291.5721057      31.1496087     201 5156026     524.2373169
RPM, z=0.200....................................     296.5683886      30.4958291     201 7670167     528.8312345
RPM, z=0.300....................................     303.7018786      29.8995957     199 2199958     532.8214701
RPM, z=0.400....................................     304.1242099      29.5110516     202 9787968     536.6140583
RPM, z=0.500....................................     302.1262579      29.1695258     207 4368322     538.7326159
RPM, z=0.600....................................     292.1012489      28.9444187     217 3834949     538.4291624
RPM, z=0.700....................................     278.4197409      28.8617920     228 5928304     535.8743633
RPM, z=0.800....................................     261.7511839      29.0150366     240 6874245     531.4536450
RPM, z=0.900....................................     245.5925757      29.7822425     251.0843904     526.4592086
Lawful Path.....................................     307.5699061      99.8842184     118.3262301    525.7803546
----------------------------------------------------------------------------------------------------------------
Revenue Stream = Platforms+Applications+Enterprise.
The value of z in the RPM scenarios is fixed as indicated.
Figures are in billions of real 2001 dollars (7% discount rate).
Figures are aggregated for the years 1995-2025.
Figures are a weighted average of all computed scenarios.


                      Attachment H.--Comparing Remedies Each remedy minus Lawful Path
----------------------------------------------------------------------------------------------------------------
                                                               Competitor         Microsoft
                 Remedy                   Consumer Surplus       Profits           Profits        Total Surplus
----------------------------------------------------------------------------------------------------------------
No-Remedy...............................  -114.31601  -99.884218       196.0733368  -18.126899
                                                        80                 4                                   6
20% Conduct.............................  -96.432160  -85.278978       165 8356771  -15.875462
                                                         9                 3                                   0
40% Conduct.............................  -78.548303  -70.673738       135 5980175  -13.624024
                                                         7                 1                                   4
60% Conduct.............................  -60.664443  -56.068495       105 3603526  -11.372586
                                                         5                 4                                   3
80% Conduct.............................  -42.780584  -41.463253        75 1226894  -9.1211483
                                                         2                 4
100% Conduct............................  -24.896724  -26.858011        44 8850261  -6.8697102
                                                         9                 4
2-Monopolies......................  -24.318784  -40.602705        58 5772333  -6.3442565
                                                         6                 2
APM, 2-firms............................  -23.162904  -68.092092        85 9616478  -5.2933489
                                                         0                 7
APM, 3-firms............................  -12.073356  -84.710504        96.1932238  -0.5906372
                                                         9                 2
RPM, z=0.000............................  -23.162904  -68.092092        85.9616478  -5.2933489
                                                         0                 7
RPM, z=0.100............................  -15.997800  -68.734609        83.1893726  -1.5430376
                                                         5                 8
RPM, z=0.200............................  -11.001517  -69.388389        83.4407867         3.0508799
                                                         5                 3
RPM, z=0.300............................  -3.8680276  -69.984622        80.8937657         7.0411155
                                                                           7
RPM, z=0.400............................  -3.4456962  -70.373166        84.6525667        10.8337037
                                                                           8
RPM, z=0.500............................  -5.4436482  -70.714692        89.1106021        12.9522613
                                                                           6
RPM, z=0.600............................  -15.468657  -70.939799        99.0572648        12.6488078
                                                         2                 7
RPM, z=0.700............................  -29.150165  -71.022426       110.2666003        10.0940087
                                                         2                 4
RPM, z=0.800............................  -45.818722  -70.869181       122.3611945         5.6732904
                                                         3                 8
RPM, z=0.900............................  -61.977330  -70.101975       132.7581603        0.6788540
                                                         4                 9
----------------------------------------------------------------------------------------------------------------
Source: Adapted from output file "AGGCWTD8.txt" from Lundgren's six computer programs, where
  zbump=0.0 in "MS5TranR.bas" and revstream=4 in "MS6Summ.bas".


[[Page 29178]]


                    Attachment I.--Summary Output of Alternative Remedies for Microsoft
                                  [Total Aggregates for Alternative Remedies:]
----------------------------------------------------------------------------------------------------------------
                                                     Consumer       Competitor       Microsoft
                     Remedy                           Surplus         Profits         Profits      Total Surplus
----------------------------------------------------------------------------------------------------------------
No-Remedy.......................................      66.6702866       0.0000000     108.4641010     175.1343876
20% Conduct.....................................      72.7489789       4.9561086      98.1893712     175.8944587
40% Conduct.....................................      78.8276711       9.9122172      87.9146414     176.6545298
60% Conduct.....................................      84.9063629      14.8683262      77.6399093     177.4145984
80% Conduct.....................................      90.9850527      19.8244345      67.3651770     178.1746642
100% Conduct....................................      97.0637425      24.7805427      57.0904448     178.9347301
2-Monopolies..............................      97.2443831      20.0995342      61.7667505     179.1106678
APM, 2-firms....................................      97.6056643      10.7375170      71.1193619     179.4625432
APM, 3-firms....................................     101.3938710       5.1158769      74.5408053     181.0505532
RPM, z=0.000....................................      97.6178004      i0.7375170      71.0922687     179.4475861
RPM, z=0.100....................................     100.0792119      10.5200355      70.1142454     180.7134929
RPM, z=0.200....................................     102.4749421      10.3041911      69.0645211     181.8436543
RPM, z=0.300....................................     105.5117884      10.1207266      67.4459993     183.0785144
RPM, z=0.400....................................     107.9097123      10.0131838      66.0581453     183.9810414
RPM, z=0.500....................................     109.3712929       9.9176811      65.7228881     185.0118620
RPM, z=0.600....................................     110.6707337       9.8362632      65.0862391     185.5932361
RPM, z=0.700....................................     109.3070756       9.7864170      67.0511494     186.1446421
RPM, z=0.800....................................     106.7436886       9.7342133      69.7748845     186.2527864
RPM, z=0.900....................................     101.4498564       9.7168714      74.5723925     185.7391203
Lawful Path.....................................     105.8570185      34.1329915      41.2937937    181.2838037
----------------------------------------------------------------------------------------------------------------
Revenue Stream = Platforms only.
The actual value of z in the RPM scenarios varies between the indicated z and z-0.3.
Figures are in billions of real 2001 dollars (7% discount rate).
Figures are aggregated for the years 1995-2025.
Figures are a weighted average of all computed scenarios.


                      Attachment I.--Comparing Remedies: Each remedy minus Lawful Path
----------------------------------------------------------------------------------------------------------------
                                                             Competitor
               Remedy                  Consumer Surplus       Profits       Microsoft Profits    Total Surplus
----------------------------------------------------------------------------------------------------------------
No-Remedy...........................  -39.1867319  -34.1329915         67.1703073   -6.1494161
20% Conduct.........................  -33.1080412  -29.1768834         56.8955769   -5.3893477
40% Conduct.........................  -27.0293505  -24.2207753         46.6208465   -4.6292793
60% Conduct.........................  -20.9506588  -19.2646663         36.3461144   -3.8692107
80% Conduct.........................  -14.8719674  -14.3085576         26.0713827   -3.1091422
100% Conduct........................   -8.7932759   -9.3524488         15.7966511   -2.3490736
2-Monopolies..................   -8.6126354  -14.0334574         20.4729568   -2.1731359
APM, 2-firms........................   -8.2513542  -23.3954745         29.8255682   -1.8212605
APM, 3-firms........................   -4.4631474  -29.0171147         33.2470116   -0.2332505
RPM, z=0.000........................   -8.2392181  -23.3954745         29.7984750   -1.8362176
RPM, z=0.100........................   -5.7778066  -23.6129560         28.8204517   -0.5703108
RPM, z=0.200........................   -3.3820764  -23.8288004         27.7707274          0.5598506
RPM, z=0.300........................   -0.3452300  -24.0122649         26.1522056          1.7947106
RPM, z=0.400:.......................          2.0526938  -24.1198077         24.7643516          2.6972377
RPM, z=0.500:.......................          3.5142744  -24.2153105         24.4290944          3.7280583
RPM, z=0.600:.......................          4.8137152  -24.2967283         23.7924455          4.3094323
RPM, z=0.700:.......................          3.4500571  -24.3465745         25.7573557          4.8608383
RPM, z=0.800:.......................          0.8866701  -24.3987783         28.4810908          4.9689827
RPM, z=0.900........................   -4.4071621  -24.4161201         33.2785988         4.4553166
----------------------------------------------------------------------------------------------------------------
Source: Adapted from output file "AGGCWTD8.txt" from Lundgren's six computer programs, where
  zbump=0.3 in "MS5TranR.bas" and revstream=l in "MS6Summ.bas".


                    Attachment J.--Summary Output of Alternative Remedies for Microsoft
                                   [Total Aggregates for Alternative Remedies]
----------------------------------------------------------------------------------------------------------------
                                                     Consumer       Competitor       Microsoft
                     Remedy                           Surplus         Profits         Profits      Total Surplus
----------------------------------------------------------------------------------------------------------------
No-Remedy.......................................     193.2538881       0.0000000     314.3995669     507 6534549
20% Conduct:....................................     211.1377498      14.6052416     284.1619090     509 9049004
40% Conduct:....................................     229.0216116      29.2104832     253.9242510     512 1563459
60% Conduct:....................................     246.9054718      43.8157260     223.6865862     514 4077840
80% Conduct:....................................     264.7893265      58.4209665     193.4489212     516 6592142
100% Conduct:...................................     282.6731812      73.0262070     163.2112562     518 9106443
2-Monopolies:...................................     283.2511215      59.2815132     176.9034634     519.4360981
APM, 2-firms:...................................     284.4070022      31.7921257     204.2878778     520.4870056
APM, 3-firms:...................................     295.4965492      15.1737142     214.5194539     525.1897174
RPM, z=0.000:...................................     284.4427827      31.7921257     204.2079998     520.4429082

[[Page 29179]]

 
RPM, z=0.100:...................................     291.6597578      31.1502485     201.3477301     524.1577365
RPM, z=0.200:...................................     298.6895994      30.5131724     198.2740901     527.4768619
RPM, z=0.300:...................................     307.5955291      29.9716086     193.5330233     531.1001609
RPM, z=0.400:...................................     314.6358118      29.6541255     189.4628042     533.7527415
RPM, z=0.500:...................................     318.9329183      29.3722039     188.4709348     536.7760570
RPM, z=0.600:...................................     322.7383754      29.1318953     186.6145056     538.4847762
RPM, z=0.700:...................................     318.7571699      28.9848037     192.3609534     540.1029270
RPM, z=0.800:...................................     311.2289728      28.8306843     200.3597163     540.4193734
RPM, z=0.900:...................................     295.6928896      28.7794391     214.4391657     538.9114945
Lawful Path:....................................     307.5699061      99.8842184     118.3262301    525.7803546
----------------------------------------------------------------------------------------------------------------
Revenue Stream = Platforms+Applications+Enterprise.
The actual value of z in the RPM scenarios varies between the indicated z and z-0.3.
Figures are in billions of real 2001 dollars (7% discount rate).
Figures are aggregated for the years 1995-2025.
Figures are a weighted average of all computed scenarios.


                      Attachment J.--Comparing Remedies: Each remedy minus Lawful Path
----------------------------------------------------------------------------------------------------------------
                                                             Competitor
               Remedy                  Consumer Surplus       Profits       Microsoft Profits    Total Surplus
----------------------------------------------------------------------------------------------------------------
No-Remedy:..........................  -114.316018  -99.8842184        196.0733368  -18.1268996
                                                      0
20% Conduct:........................  -96.4321609  -85.2789783        165.8356771  -15.8754620
40% Conduct:........................  -78.5483037  -70.6737381        135.5980175  -13.6240244
60% Conduct:........................  -60.6644435  -56.0684954        105.3603526  -11.3725863
80% Conduct:........................  -42.7805842        ,41.4632534         75.1226894   -9.1211483
100% Conduct:.......................  -24.8967249  -26.8580114         44.8850261   -6.8697102
2-Monopolies:.......................  -24.3187846  -40.6027052         58.5772333   -6.3442565
APM,2-firms:........................  -23.1629040  -68.0920927         85.9616478   -5.2933489
APM, 3-firms:.......................  -12.0733569  -84.7105042         96.1932238   -0.5906372
RPM, z=0.000:.......................  -23.1271235  -68.0920927         85.8817698   -5.3374464
RPM, z=0.100:.......................  -15.9101483  -68.7339699         83.0215001   -1.6226181
RPM, z=0.200:.......................   -8.8803067  -69.3710460         79.9478600          1.6965073
RPM, z=0.300:.......................          0.0256230  -69.9126099         75.2067932          5.3198063
RPM, z=0.400:.......................          7.0659057  -70.2300929         71.1365742          7.9723870
RPM, z=0.500:.......................         11.3630122  -70.5120145         70.1447047         10.9957024
RPM, z=0.600:.......................         15.1684692  -70.7523231         68.2882755         12.7044217
RPM, z=0.700:.......................         11.1872638  -70.8994147         74.0347234         14.3225724
RPM, z=0.800:.......................          3.6590666  -71.0535341         82.0334862         14.6390188
RPM, z=0.900:.......................  -11.8770165  -71.1047793         96.1129357        13.1311399
----------------------------------------------------------------------------------------------------------------
Source: Adapted from output file "AGGCWTD8.txt" from Lundgren's six computer programs, where
  zbump=0.3 in "MS5TranR.bas" and revstream=4 in "MS6Summ.bas".

    Documentation for BASIC Programs to Simulate Antitrust Remedies 
for Microsoft Case.
    This document, "MS--Sim--Doc.txt", simply 
describes and documents six programs for the Microsoft antitrust 
remedy simulations.
    These six programs are named:
    MS1File.bas (0.2 seconds)
    MS2ProbA.bas (10.3 minutes)
    MS3ProbR.bas (18.1 minutes)
    MS4TranA.bas ( 1.6 minutes)
    MS5TranR.bas (24.9 minutes)
    MS6Summ.bas ( 1.7 minutes)
    The programs should be run in the order indicated, since files 
generated by one program are used by subsequent programs. The 
running times are approximate, based on the running times for a 1.6 
GHz home computer. The programs were coded and run in Microsoft 
QuickBASIC. The programs may require some recoding, if it is desired 
to run them in other versions of the BASIC computer language.
    Below is a summary description of what each program does. Each 
program has its own more detailed description.
    Program MS1File.bas: This program generates files needed by 
subsequent programs. The program generates the 
"COSTLIST.txt" file, which details the assumed cost 
levels for each scenario. For 3 firms and 5 levels of cost, 35 cost 
scenarios are generated. The program also generates the 
"Ordering.txt" and "OrderRPM.txt" files.
    These files generate the permutations by which the ranking of 
firms can be reordered. For 3 firms, there are 6 permutations. 
"OrderRPM.txt" allows the "MS3ProbR.bas" 
program to track the rankings of two Microsoft successor firms 
simultaneously. Program MS2ProbA.bas:
    This program computes the probabilites associated with each 
scenario, as the industry transitions from a particular starting 
point, and gradually converges towards a long-run stochastic 
equilibrium. This program assigns probabilities for equilibria 
consisting only of Absolute Profit Maximizing ("APM") 
firms. The starting point varies by the number of Microsoft firms 
(msfirms) in period zero. If msfirms=l, Microsoft starts as a 
monopoly.
If msfirms=2, Microsoft is split into two firms.

ATTACHMENT K

PAGE 2 OF 4

If msfirms=3, Microsoft is split into three firms. The program uses 
three different speeds (speed=l,2,3) for the transition. Probability 
files are outputted for each msfirms=l,2,3 starting point, and each 
speed=l,2,3 for the transition speed. Program MS3ProbR.bas:
This program is similar to "MS2ProbA.bas", since it 
computes probabilites associated with each scenario, as the industry 
transitions from a particular starting point, and gradually 
converges towards a long-run stochastic equilibrium. This program 
differs from "MS2ProbA.bas", because it assigns 
probabilities for equilibria consisting of two Relative Profit 
Maximizing ("RPM") firms, along

[[Page 29180]]

with such APM firms as may be involved in the transitions. The 
equilibria automatically convert to APM equilibria if one or both 
RPM firms exits the industry.
The program uses three different speeds (speed=l,2,3) for the 
transition.
Probability files are outputted for the one starting point 
(msfirms=2), and each speed=l,2,3 for the transition speed. This 
program is more complex than "MS2ProbA.bas" because it 
must simultaneously track the rankings of two Microsoft-successor 
firms simultaneously. Program MS4TranA.bas:
This program uses the probability data computed by 
"MS2ProbA.bas" to compute Consumer Surplus and Profits 
for both Microsoft and Microsoft's competitors. These are determined 
for transition period zero (iter=0) under the assumption that 
Microsoft has no competitors in period zero. In transition periods 
one through ten, Microsoft is assumed to have (at least potentially) 
one or more competitors. This program only calculates APM 
equilibria.
The 225 outputted transition (TRAN .... txt) files are computed for 
three speeds of transition (speed=l,2,3), five cost ratios for 
short-run cost (cratio=l,2,3,4,5), five assumptions concerning the 
portion of long-run costs allocated to fixed costs (port=0,1,2,3,4), 
and three starting points (msfirms=l,2,3).

ATTACHMENT K

PAGE 3 OF 4

    Program MS5TranR.bas:
    This program uses the probability data computed by 
"MS3ProbR.bas" to compute Consumer Surplus and Profits 
for both Microsoft and Microsoft's competitors. These are determined 
for transition period zero (iter=0) under the assumption that 
Microsoft has no competitors in period zero. In transition periods 
one through ten, Microsoft is assumed to have (at least potentially) 
one or more competitors. This program calculates both RPM and APM 
equilibria.
    The 750 outputted transition (TRPM .... txt) files are computed 
for three speeds of transition (speed=l,2,3), five cost ratios for 
short-run cost (cratio=l,2,3,4,5), five assumptions concerning the 
portion of long-run costs allocated to fixed costs (port=0,1,2,3,4), 
and ten starting points (z = 0.0, 0.i, 0.2, 0.3, 0.4, 0.5, 0.6, 0.7, 
0.8, 0.9).
    The starting point always has Microsoft divided into two RPM 
firms, where the goal functions for the two firms are:
    Goal1 = Profit1--z * Profit2
    Goal2 = Profit2--z * Profit1
    An additional feature of the program allows the value of z to 
change in response to circumstances. If zbump=0.0, then z is fixed, 
and does not change in response to circumstances. If zbump > 0, 
then z changes in response to circumstances. In the program, z 
responds to the circumstance that one of the RPM firms is not 
producing, because it is achieving negative absolute profit.
    In this circumstance, the program automatically "bumps 
down" the value of z for both RPM firms by the amount of 
zbump. For example, if z=0.7 and zbump=0.4, then if one or both RPM 
firms would shut down, then the value of z is automatically bumped 
down to z=0.3.
    In many circumstances, this allows both RPM firms to continue 
producing.
    Program MS6Summ.bas:
    This program computes and summarizes the data produced by prior 
programs, including both "MS4TranA.bas" and 
"MS5TranR.bas" The program produces data summarized for 
particular scenarios in files marked "AGGC .... txt", 
"AGGR .... txt", and "YEAR .... txt". The 
"AGGC .... txt" files (which are most user friendly) 
summarize all past and future data, appropriately discounted, into a 
single set of figures which may be compared across remedy proposals. 
The "AGGR .... txt" files categorize the aggregate data 
into past and future amounts of consumer surplus, profits, and total 
surplus for each remedy proposal, and how these amounts compare with 
the same amounts along the lawful path. The "YEAR .... 
txt" files (which are least user friendly) output the 
calculated amounts, by year, for each remedy proposal and the lawful 
path.

ATTACHMENT K

PAGE 4 OF 4

ATTACHMENT L

PAGE 1 OF 10

Attachment L.

"BASIC Program "MS1File.bas".

"Program Number 1 in a series of six programs "designed 
to simulate alternative antitrust "remedies for the Microsoft 
software industry. "Copyright, January 23, 2002, Carl 
Lundgren. "This program, "MS1File.bas", generates 
files "needed by the subsequent computer programs "for 
the Microsoft antitrust remedy simulations. "This program 
generates the "COSTLIST.txt" file, "which details 
the assumed cost levels for each scenario. "For 3 firms and 5 
levels of cost, 35 cost scenarios are generated. "This program 
also generates the "Ordering.txt" "and 
"OrderRPM.txt" files. These files generate the 
"permutations by which the ranking of firms can be reordered. 
"For 3 firms, there are 6 permutations. "The file 
"OrderRPM.txt" allows the "MS3ProbR.bas" 
program to track "the rankings of two Microsoft successor 
firms simultaneously.
DEFDBL A-Z
DIM broadscen(1023), class(5), cost(5)
DIM weight(50), newclass1(50), newclass2(50), newclass3(50)
DIM newclass4(50) , newclass5(50)
DIM c1(50), c2 (50), c3 (50), c4(50) , c5(50)
DIM pv(50, 3), finprob(50)
DIM new(5), ORDER(6, 3), 0RDERRPM(6, 15)
timex = TIMER
CLS
GOSUB GENERATE:
GOSUB COLLAPSE:
GOSUB COSTIT:
GOSUB PVASSIGN:
GOSUB FINALPROB:
GOSUB PRINTCOST:
GOSUB ORDER:
GOSUB PRINTORDER:
GOSUB PRINTORDERRPM:



MTC-00030631--O1O5

ATTACHMENT L

PAGE 2 OF i0

PRINT TIMER--timex END GENERATE:
"Submodule to generate possible scenarios.
FOR scennum = 0 TO 215
broadscen(scennum) = 0
NEXT scennum FOR firm1 = 1 TO 5
FOR firm2 = 1 TO 5
FOR firm3 = 1 TO 5
GOSUB CLASSIFY:
NEXT firm3
NEXT firm2
NEXT firm1
RETURN
"*****END of Generate Submodule*****
CLASSIFY:
"Submodule of Generate submodule" to classify the 
generated scenarios.
class (1) = 0
class (2) = 0
class(3) = 0
class (4) = 0
class (5) = 0
class(firm1) =
class(firm1) + 1
class(firm2) = class(firm2) + 1
class(firm3) = class(firm3) + 1
scennum = 256 * class(l) + 64 * class(2) + 16 * class(3) + 4 *
class(4) + class(5)
broadscen(scennum) = broadscen (scennum) + 1
RETURN
"*****END of Classify Submodule*****
COLLAPSE:
"Submodule to collapse the number of scenarios" to a 
more manageable number.
newnum = 0
FOR class1 = 0 TO 3
FOR class2 = 0 TO 3

ATTACHMENT L

PAGE 3 OF 10

FOR class3 = 0 TO 3
FOR class4 = 0 TO 3
FOR class5 = 0 TO 3
scennum = 256 * class1 + 64 * class2 + 16 * class3 + 4 *
class4 + class5
broadnum = broadscen(scennum)
IF broadnum > 0 THEN
newnum = newnum + 1 weight(newnum) = broadnum
newclass1(newnum) = class1
newclass2(newnum) = class2
newclass3(newnum) = class3
newclass4(newnum) = class4
newclass5(newnum) = class5
END IF
NEXT class5
NEXT class4
NEXT class3
NEXT class2
NEXT class1
newtot = newnum
RETURN
"*****END of Collapse Submodule*****
COSTIT:
"Submodule to assign cost levels to firms," with lowest-
cost firms ordered first.
FOR scen = 1 TO newtot

[[Page 29181]]

n1 = newclass1(scen)
n2 = newclass2(scen) + n1
n3 = newclass3(scen) + n2
n4 = newclass4(scen) + n3
FOR n = 1 TO n1
cost(n) = 1
NEXT n
FOR n = n1 + 1 TO n2
cost(n) = 2
NEXT n
FOR n = n2 + 1 TO n3
cost(n) = 3
NEXT n
FOR n = n3 + 1 TO n4
cost(n) = 4

ATTACHMENT L

PAGE 4 OF 10

NEXT n
FOR n = n4 + 1 TO 3
cost(n) = 5
NEXT n
c1(scen) = cost(1)
c2(scen) = cost(2)
c3(scen) = cost(3)
NEXT scen
RETURN
"*****END of Costit Submodule*****
PVASSIGN:
"Submodule to assign point values for firm cost levels, with 
lowest-cost firms ordered first. The point values are 60 times the 
cost level, with some adjustment in point values, when two or more 
firms share the same cost level.
FOR scen = 1 TO newtot
pv(scen, 1) = c1(scen) * 60
pv(scen, 2) = c2(scen) * 60
pv(scen, 3) = c3(scen) * 60
NEXT scen FOR scen = I TO newtot
n1 = newclass1(scen)
n2 = newclass2(scen) +
n1 n3 = newclass3(scen) + n2
n4 = newclass4(scen) + n3
"Assign point values to level one costs.
ns = 0
nc = newclass1(scen)
IF nc = 2 THEN
pv(scen, ns + 1) = pv(scen, ns + 1)--10
pv(scen, ns + 2) = pv(scen, ns + 2) + 10
END IF
IF nc = 3 THEN
pv(scen, ns + 1) = pv(scen, ns + 1) 15
pv(scen, ns + 3) = pv(scen, ns + 3) + 15
END IF
"Assign point values to level two costs.
us = ns + nc
nc = newclass2(scen)
IF nc = 2 THEN
pv(scen, ns + 1) = pv(scen, ns + 1) 10

ATTACHMENT L

PAGE 5 OF 10

pv(scen, ns + 2) = pv(scen, ns + 2) + 10
END IF
IF nc = 3 THEN
pv(scen, ns + 1) = pv(scen, ns + 1)--15
pv(scen, ns + 3) = pv(scen, ns + 3) + 15
END IF
Assign point values to level three costs.
ns = ns + nc
nc = newclass3 (scen)
IF nc = 2 THEN
pv(scen, ns + 1) = pv(scen, ns + 1)--10
pv(scen, ns + 2) = pv(scen, ns + 2) + 10
END IF
IF nc = 3 THEN
pv(scen, ns + 1) = pv(scen, ns + 1)--15
pv(scen, ns + 3) = pv(scen, ns + 3) + 15
END IF
"Assign point values to level four costs.
ns = ns + nc
nc = newclass4(scen)
IF nc = 2 THEN
pv(scen, ns + 1) = pv(scen, ns + 1)--10
pv(scen, ns + 2) = pv(scen, ns + 2) + 10
END IF
IF nc = 3 THEN
pv(scen, ns + 1) = pv(scen, ns + 1)--15
pv(scen, ns + 3)--pv(scen, ns + 3) + 15
END IF
"Assign point values to level five costs.
ns = ns + nc
nc = newclass5(scen)
IF nc = 2 THEN
pv(scen, ns + 1) = pv(scen, ns + 1) 10
pv(scen, ns + 2) = pv(scen, ns + 2) + 10
END IF
IF nc = 3 THEN
pv(scen, ns + I) = pv(scen, ns + 1)--15
pv(scen, ns + 3)--pv(scen, ns + 3) + 15
END IF NEXT scen
RETURN
"*****END of PVassign Submodule*****

ATTACHMENT L

PAGE 6 OF 10

FINALPROB:
"This submodule computes the final probability "for each 
scenario--the probability toward which "each scenario 
tends to converge over the long run.
"cost(s,f) = short-run marginal cost of firm f in scenario s.
"finprob(s) = final probability assumed for scenario s.
"weight(s) = number of permutations of scenario s.
"finprob is computed as weight(s) * assumed probabilities
for each cost level:
Prob(cost level one) = 10% (low cost)
Prob(cost level two) = 15% (low-middle cost)
 Prob(cost level three) = 20% (middle cost)
 Prob(cost level four) = 25% (middle-high cost)
 Prob(cost level five) = 30% (high cost)
FOR scen = I TO newtot fprob = weight(scen)
L1 = newclass1(scen)
L2 = newclass2 (scen)
L3 = newclass3 (scen)
L4 = newclass4 (scen)
L5 = newclass5 (scen)
IF L1 > 0 THEN fprob = fprob * .1#
IF L1 > 1 THEN fprob = fprob * .1#
IF L1 * 2 THEN fprob = fprob * .1#
IF L2 * 0 THEN fprob = fprob * .15#
IF L2 * 1 THEN fprob = fprob * .15#
IF L2 * 2 THEN fprob = fprob * .15#
IF L3 * 0 THEN fprob = fprob * .2#
IF L3 > 1 THEN fprob = fprob * .2#
IF L3 > 2 THEN fprob = fprob * .2#
IF L4 > 0 THEN fprob = fprob * .25#
IF L4 * 1 THEN fprob = fprob * .25#
 IF L4 > 2 THEN fprob = fprob * .25#
IF L5 > 0 THEN fprob = fprob * .3#
IF L5 > 1 THEN fprob = fprob * .3#
IF L5 > 2 THEN fprob = fprob * .3#
finprob (scen) = fprob
NEXT scen
RETURN
"***** END OF FinalProb SUBMODULE *****
PRINTCOST:
"Submodule to print out the collapsed scenarios

ATTACHMENT L

PAGE 7 OF 10

"and the ordered cost assignments
"as part of file "CostList.txt".
costs = 
":-bsbasic-bs
ms--sim-bscostlist.txt" 
"Output cost list
OPEN costs FOR OUTPUT AS #1
 PRINT #1, "Scen"; "L1 L2 L3 L4 L5"; 
"Wgt"; "Fin-Prob";
PRINT #1, "C1 C2 C3"; "PV1 PV2 PV3"
FOR scennum = 1 TO newtot
PRINT #1, USING "##"; scennum;
PRINT #1, "";
PRINT #1, USING "###"; 
newclass1(scennum);
 PRINT #1, USING "###"; 
newclass2(scennum);
 PRINT #1, USING "###"; newclass3 
(scennum);
 PRINT #1, USING "###"; 
newclass4(scennum);
 PRINT #1, USING "###"; 
newclass5(scennum);
 PRINT #1, USING "#####"; 
weight(scennum);
 PRINT #1, USING 
"###.######"; 
finprob(scennum);
 PRINT #1, "";
 PRINT #1, USING "###"; c1(scennum);
 PRINT #1, USING "###"; c2(scennum);
 PRINT #1, USING "###"; c3(scennum);
 PRINT #1, "";
 PRINT #1, USING "####"; pv(scennum, 
1);
 PRINT #1, USING "####"; pv(scennum, 
2);
 PRINT #1, USING "####"; pv(scennum, 
3);
 PRINT #1, NEXT scennum
CLOSE #1
RETURN
"*****END of PrintCost Submodule*****
ORDER:
"Submodule to compute all possible orderings" of three 
firms (six permutations total).
ordernum = 0
FOR o3 = 5 TO 1 STEP -1
FOR o2 = 5 TO 1 STEP -1
FOR o1 = 5 TO 1 STEP -1
GOSUB TESTORDER:
NEXT o1
NEXT o2
NEXT 03
ordertot = ordernum
RETURN



MTC-00030631 0111

ATTACHMENT L

PAGE 8 OF 10

"*****END of Order Submodule*****
TESTORDER:
 "Submodule of Order submodule to test" whether proposed 
ordering is acceptable.
IF o1 + 02 + 03 <> 6 THEN RETURN
IF o1 * o2 * 03 <> 6 THEN RETURN
ordernum = ordernum + 1
ORDER(ordernum, 1) = o1
ORDER(ordernum, 2) = o2
ORDER(ordernum, 3) = o3
GOSUB ORDERRPM:
RETURN
"*****END of Order Submodule*****

[[Page 29182]]

ORDERRPM:
Submodule to provide ordering information to track location of two 
MS firms among five firms, for purpose of determining costs of such 
two firms for calculating RPM remedy.
There are six basic permutations of three firms, among which the 
rankings of two firms must be tracked simultaneously.
new(O) = 0
FOR old = 1 TO 3
new(old) = ORDER(ordernum, old)
NEXT old
FOR old1 = 0 TO 3
FOR old2 = 0 TO 3
oldnum = old1 * 4 + old2
new1 = new(old1)
new2 = new(old2)
newnum = new1 * 4 + new2
ORDERRPM(ordernum, oldnum) = newnum
NEXT old2
NEXT old1
RETURN
"*****END of OrderRPM Submodule*****
PRINTORDER:
"Submodule to print out the 6 permutations



MTC-00030631 0112

ATTACHMENT L

PAGE 9 OF 10

" in which 3 firms can be ordered.
"Printing is to the file ,,Ordering.txt".
ORDERS = 
,,c:-bsbasic-bsms
--sim-bsordering.txt" 
"Output ordering list
OPEN ORDERS FOR OUTPUT AS #1
PRINT #1, ,'Onum"; "o1 o2 03"
FOR ordernum = 1 TO ordertot
PRINT #1, USING "###"; ordernum;
PRINT #1, "";
PRINT #1, USING "###"; 0RDER(ordernum, 
1);
PRINT #1, USING "###"; ORDER(ordernum, 
2);
PRINT #1, USING "###"; ORDER(ordernum, 
3);
PRINT #1,
NEXT ordernum
CLOSE #1
RETURN
*****END of PrintOrder Submodule*****
PRINTORDERRPM:
"Submodule to print out the 6 permutations in which 3 firms 
can be ordered, with further information to track two firms 
simultaneously, for further use in later programs to calculate the 
effects of RPM firms.
Printing is to the file ,,OrderRPM.txt"
ORDERRPM$ = "c: 
-bsbasic-bsms
sim-bsorderrpm.txt" "Output 
RPM ordering
list
PEN ORDERRPM$ FOR OUTPUT AS #1
    PRINT #1, "Onum"; "o00 o01 o02 o03";
PRINT #1, "o10 o11 o12 o13";
PRINT #1, "020 o21 022 023";
PRINT #1, "o30 o31 032 o33";
PRINT #1,
FOR ordernum = 1 TO ordertot
PRINT #1, USING "###"; ordernum;
PRINT #1, "";
FOR oldnum = 0 TO 15
PRINT #1, USING "####"; 
0RDERRPM(ordernum, oldnum);
NEXT oldnum
PRINT #1,
NEXT ordernum
CLOSE #1
RETURN
*END of PrintOrderRPM Submodule*

ATTACHMENT L

PAGE 10 OF 10

END OF Program "MS1File.bas".

ATTACHMENT M

PAGE 1 OF 14

Attachment M.
"BASIC Program "MS2ProbA.bas"
"Program Number 2 in a series of six programs "designed 
to simulate alternative antitrust "remedies for the Microsoft 
software industry. "Copyright, January 23, 2002, Car1 
Lundgren.
    This program, "MS2ProbA.bas", computes the 
probabilites associated with each scenario, as the industry 
transitions from a particular starting point, and gradually 
converges towards a long-run stochastic equilibrium.
    This program assigns probabilities for equilibria consisting 
only of Absolute Profit Maximizing ("APM") firms. The 
starting point varies by the number of
"Microsoft firms (msfirms) in period zero:
If msfirms=1, Microsoft starts as a monopoly.
If msfirms=2, Microsoft is split into two firms.
If msfirms=3, Microsoft is split into three firms.
"The program uses three different speeds (speed=l,2,3) for the 
transition.
"Probability files are outputted for each starting point 
(msfirms=l,2,3),
"and for each transition speed (speed=l,2,3).
    The parameters controlling the transition speed (pvmax in 
submodule InitProb10) are supplied by the user.
    The program reads in 35 possible cost structures for the 
industry, each with 3 firms.
    The program assigns probabilities for each scenario, and for 
whether a Microsoft firm (either Microsoft or a successor to 
Microsoft after divestiture) is ranked as firm 1, 2, or 3, or is 
firm 0 (with zero market share).
DEFDBL A-Z
DIM pvtot0(35, 3), pvtot1(35, 3), pvtot2(35, 3)
DIM pvtot3 (35, 3)
DIM prob2 (35, 3)
DIM diff(3, 3)
DIM finprob (35)

ATTACHMENT M

PAGE 2 OF 14

" CONTROL MODULE
CLS
timex--TIMER
"This section calls the main module 3 times.
"This control module chooses speed for cost shifts:
"speed = 1 "Slow speed for cost shifts.
"speed = 2 "Moderate speed for cost shifts.
"speed = 3 "High speed for cost shifts.
FOR speed = 1 TO 3
GOSUB MAINMODULE:
NEXT speed
PRINT TIMER--timex
END
MAINMODULE:
GOSUB FILENAMES: "Assign file names to input/output files.
PRINT "Computing transition weights (deviation):,,
GOSUB INITIALIZE0: "Initialize transition weights.
endcomp = 0
FOR iter = 1 TO 100
GOSUB TRANSCOMP: "Iterate transition weights.
IF endcomp = 1 THEN 99
NEXT iter
99 GOSUB PRINTPROBT: "Print last computed transition weights.
CLOSE #2
PRINT "Computing transitions from MS=1 APM firm:"
msfirms = 1
iter = 0
GOSUB INITIALIZE1: "Microsoft starts as monopoly.
iter = 1
GOSUB TRANSIT0:
GOSUB PRINTPROB:
FOR iter = 2 TO 10
GOSUB TRANSFERPROB:
GOSUB TRANSIT1:
GOSUB PRINTPROB:
NEXT iter
CLOSE #2
PRINT "Computing transitions from MS=2 APM firms:"
msfirms = 2

ATTACHMENT M

PAGE 3 OF 14

iter = 0
GOSUB INITIALIZE2: "Microsoft split into 2 firms.
iter = 1
GOSUB TRANSIT0:
GOSUB PRINTPROB:
FOR iter = 2 TO 10
GOSUB TRANSFERPROB:
GOSUB TRANSIT1:
GOSUB PRINTPROB:
NEXT iter
CLOSE #2
PRINT "Computing transitions from MS=3 APM firms:"
msfirms = 3
iter = 0
GOSUB INITIALIZE3: "Microsoft split into 3 firms.
iter = 1
GOSUB TRANSIT0:
GOSUB PRINTPROB:
FOR iter = 2 TO 10
GOSUB TRANSFERPROB:
GOSUB TRANSIT1:
GOSUB PRINTPROB:
NEXT iter
CLOSE #2
CLOSE
RETURN
"***** END OF MAIN MODULE *****
FILENAMES:
costs = 
"c:-bsbasic-bs
ms--sim-bscostlist.txt" 
"Input scenario costs
orders = 
"c:-bsbasic-bs
ms--sim-bsordering.txt" 
"Input firm re-orderings
prob0$ = 
"c:-bsbasic-bs
ms--sim-bsout-bs
prob00.txt" "Output iwgt
convergence
prob1$ = 
"c:-bsbasic-bs
ms--sim-bsout-bs
prob10.txt" "Output 1-firm APM
transition probs
prob2$ = 
"c:-bsbasic-bs
ms--sim-bsout-bs
prob20.txt"

[[Page 29183]]

"Output 2-firm APM
transition probs
prob3$ = 
"c:-bsbasic-bs
ms--sim-bsout-bs
prob30.txt" "Output 3-firm APM
transition probs
IF speed = 1 THEN sp$ = "1"
IF speed = 2 THEN sp$ = "2"

ATTACHMENT M

PAGE 4 OF 14

IF speed = 3 THEN sp$ = "3"
replaces = sp$
MID$(prob0$, 26, 1) = replaces
MID$(prob1$, 26, 1) = replaces
MID$(prob2$, 26, 1) = replaces
MID$(prob3$, 26, 1) = replaces
RETURN
"***** END OF FileNames SUBMODULE *****
INITIALIZE0:
"Submodule to find transition weights.
GOSUB SCENREAD: "Read in scenario list.
GOSUB ORDERREAD: "Read in ordering list.
GOSUB INITPROB10:
iter = 0
GOSUB TRANSCOMP: "Computes transition weights to scenarios.
OPEN prob0$ FOR OUTPUT AS #2
RETURN
"***** END OF Initialize0 SUBMODULE *****
INITPROB10:
"This submodule sets the prob1 variables to zero," and 
then sets initial values for non-zero prob1.
DIM prob1(35, 3), cost(35, 3), herf(35)
DIM iwgt(35), iwgt0(35)
"****User supplies pvmax, which controls transition speed.****
IF speed = I THEN pvmax = 1.5 "Slow speed for cost shifts.
IF speed = 2 THEN pvmax = 2.5 "Moderate speed for cost shifts.
IF speed = 3 THEN pvmax = 4.5 "High speed for cost shifts.
FOR scen1 = 0 TO 35
FOR firm1 = 0 TO 3
prob1(scen1, firm1) = 0
NEXT firm1
NEXT scen1
"This section sets initial values to reflect" 
distribution of final probabilites.
FOR scen1 = I TO 35
prob1(scen1, 0) = finprob(scen1)
iwgt(scen1) = finprob(scen1)
NEXT scen1
RETURN
"***** END OF InitProb10 SUBMODULE *****

ATTACHMENT M

PAGE 5 OF 14

TRANSCOMP:
Submodule to compute transition weights.
Transitions are from any scenario (scen1)
to any same or different scenario (scen2).
Goal is to find transition weights (iwgt) such that if prob1 is set 
at final probabilities, then computed prob2 also reflects final 
probabilities. The transition weights are iteratively adjusted, 
until there is convergence. Such convergence means that the long-run 
distribution of scenarios will reflect the final probabilities 
selected.
GOSUB INITPROB2: "Initialize prob2 variables.
PRINT speed; iter; "*";
FOR scen1 = 1 TO 35
PRINT "";
iprob0 = prob1(scen1, 0)
iprob1 = prob1(scen1, 1)
iprob2 = prob1(scen1, 2)
iprob3 = prob1(scen1, 3)
FOR scen2 = 1 TO 35
GOSUB PVADD:
NEXT scen2
GOSUB PVADJUST:
NEXT scen1
devtot = 0
itotal = 0
FOR scen = 1 TO 35
iwgt0(scen) = iwgt(scen)
iwgt(scen) = iwgt(scen) * prob1(scen, 0) / prob2(scen, 0)
itotal = itotal + iwgt(scen)
dev = prob1(scen, 0)--prob2(scen, 0)
devtot = devtot + ABS(dev)
NEXT scen
FOR scen = 1 TO 35
iwgt(scen) = iwgt(scen) / itotal
NEXT scen
IF devtot < .000001 THEN endcomp = 1
PRINT USING###"; devtot
RETURN
This submodule finds transition weights (iwgt) to each scenario,
that cause convergence to the assumed final probabilities
(FinProb)
attached to the various possible market outcomes

ATTACHMENT M

PAGE 6 OF 14

" in a very long-run stochastic equilibrium.
"***** END OF TransComp SUBMODULE *****
INITIALIZE1:
"Submodule to initialize Microsoft starts as monopoly.
GOSUB INITPROB11:
OPEN prob1$ FOR OUTPUT AS #2
GOSUB PRINTPROB0:
RETURN
"***** END OF Initializel SUBMODULE *****
INITPROB11:
"This submodule of Initialize1 sets the prob1 variables to 
zero,
" and then sets initial values for non-zero prob1.
FOR scen1 = 0 TO 35
FOR firm1 = 0 TO 3
 prob1(scen1, firm1) = 0
NEXT firm1
NEXT scen1
"This section sets initial scenario to
" Microsoft is a monopoly,
" Scenario 5, Cost levels 3(MS), 5(comp), 5(comp).
scen0 = 5
prob1(0, 1) = 1
FOR firm = 1 TO 3
cost(O, firm) = cost(scen0, firm)
NEXT firm
RETURN
"***** END OF InitProb11 SUBMODULE *****
INITIALIZE2:
"Submodule to initialize splitting Microsoft into two firms.
GOSUB INITPROB12:
OPEN prob2$ FOR OUTPUT AS #2
GOSUB PRINTPROB0:
RETURN
"***** END OF Initialize2 SUBMODULE *****
INITPROB12:
"This submodule sets the prob1 variables to zero,

ATTACHMENT M

PAGE 7 OF 14

and then sets initial values for non-zero prob1.
FOR seen1 = 0 TO 35
FOR firm1 = 0 TO 3
prob1(scen1, firm1) = 0
NEXT firm1
NEXT scen1
This section sets initial scenario to
Microsoft is split into two equal-sized firms,
Scenario 6, Cost levels 3(MS-1), 4(MS-2), 5(comp).
scen0--6
prob1(0, 1) = 1# / 2#
prob1(0, 2) = 1# / 2#
FOR firm = 1 TO 3
cost(0, firm) = cost(scen0, firm)
NEXT firm
RETURN
"***** END OF InitProb12 SUBMODULE *****
INITIALIZE3:
"Submodule to initialize splitting Microsoft into three firms.
GOSUB INITPROB13:
OPEN prob3$ FOR OUTPUT AS #2
GOSUB PRINTPROB0:
RETURN
"***** END OF Initialize3 SUBMODULE *****
INITPROB13:
"This submodule sets the prob1 variables to zero,
" and then sets initial values for non-zero prob1.
FOR scen1 = 0 TO 35
FOR firm1 = 0 TO 3
prob1(scen1, firm1) = 0
NEXT firm1
NEXT scen1
"This section sets initial scenario to
" Microsoft is split into three equal-sized firms,
" Scenario 7, Cost levels 3(MS-l), 4(MS-2), 
4(MS-3).
scen0 = 7
prob1(0, 1) = 1# / 3#
prob1(0, 2) = 1# / 3#
prob1(0, 3) = 1# / 3#
FOR firm = I TO 3



MTC-00030631--0121

ATTACHMENT M

PAGE 8 OF 14

cost(0, firm) = cost(scen0, firm)
NEXT firm
RETURN
"***** END OF InitProb13 SUBMODULE *****
SCENREAD:
"This submodule reads in the scenario costs list.
OPEN costs FOR INPUT AS #1
LINE INPUT #1, dummy$
"cost(s,f) = short-run marginal cost of firm f

[[Page 29184]]

in scenario s.
"finprob(s) = final probability assumed for scenario s.
"wgt(scen) = number of permutations of scenario s.
FOR scen = 1 TO 35
INPUT #1, scen2, L1, L2, L3, L4, L5, wgt, finprob(scen)
IF scen <> scen2 THEN PRINT "Scenario mismatch", 
scen, scen2
INPUT #1, c1, c2, c3
FOR firm = 1 TO 3
INPUT #1, ctemp
cost(scen, firm) = ctemp / 60#
NEXT firm
NEXT scen
CLOSE #1
RETURN
"***** END OF ScenRead SUBMODULE *****
ORDERREAD:
 "This Submodule reads in the ordering list,
" which is a list of 6 permutations by which firms 1-3
" may become firms 1-3 in the same or a different order.
OPEN orders FOR INPUT AS #1
LINE INPUT #1, dummy$
"ordnum = number of ordering.
"order(o,f) = ordering number o for firm f,
" the firm number which firm f becomes in ordering o.
DIM order(6, 3)
FOR ordnum = 1 TO 6
INPUT #1, ordnum2
IF ordnum <> ordnum2 THEN PRINT "Order Number 
mismatch",
ordnum, ordnum2
FOR firm = 1 TO 3
INPUT #1, order(ordnum, firm)
NEXT firm

ATTACHMENT M

PAGE 9 OF 14

NEXT ordnum
CLOSE #1
RETURN
"***** END OF OrderRead SUBMODULE *****
TRANSIT0:
"This submodule controls the initial transitions.
" Transitions are from scenario zero (scen1)
" to the other possible scenarios (scen2).
GOSUB INITPROB2: "Initialize prob2 variables.
PRINT speed; iter; ,,*,,;
scen1 = 0
PRINT -.-;
iprob0 = prob1(scen1, 0)
iprob1 = prob1(scen1, 1)
iprob2 = prob1(scen1, 2)
iprob3 = prob1(scen1, 3)
FOR scen2 = 1 TO 35
GOSUB PVADD:
NEXT scen2 GOSUB PVADJUST:
GOSUB MSEXITS:
PRINT
RETURN
"***** END OF Transit0 SUBMODULE *****
TRANSIT1:
"This submodule controls the subsequent transitions.
 "Transitions are from any scenario (scen1)
" to any same or different scenario (scen2).
GOSUB INITPROB2: "Initialize prob2 variables.
PRINT speed; iter; "*',;
FOR scen1 = 1 TO 35
PRINT ".,,;
iprob0 = prob1(scen1, 0)
iprob1 = prob1(scen1, 1)
iprob2 = prob1(scen!, 2)
iprob3 = prob1(scen1, 3)
IF iprob0 + iprob1 + iprob2 + iprob3 = 0 THEN 10
FOR scen2 = 1 TO 35
GOSUB PVADD:
NEXT scen2

ATTACHMENT M

PAGE 10 OF 14

 GOSUB PVADJUST:

10 NEXT scen1
GOSUB MSEXITS:
PRINT
RETURN
"***** END OF Transit1 SUBMODULE *****
INITPROB2:
"This submodule of TRANSIT sets the prob2 variables to zero.
FOR scen2 = 0 TO 35
FOR firm2 = 0 TO 3
prob2(scen2, firm2) = 0
NEXT firm2
NEXT scen2
RETURN
"***** END OF InitProb2 SUBMODULE *****
PVADD:
This submodule adds up point values (pv) for transition from a 
single scenario (scen1) to a single scenario (scen2).
pvtot0(s,f) = point value for probability of transition from 
scenario with Microsoft=firm 0 (zero market share), to scenario s 
and to Microsoft=firm f.
"pvtot1(s,f) = same, but from Microsoft=firm 1.
"pvtot2(s,f) = same, but from Microsoft=firm 2.
"pvtot3(s,f) = same, but from Microsoft=firm 3.
FOR firm1 = 1 TO 3
FOR firm2 = 1 TO 3
diff(firm1, firm2) = ABS(cost(scen1, firm1) cost(scen2, firm2))
NEXT firm2
NEXT firm1
FOR firm2 = 0 TO 3
pvtot0(scen2, firm2) = 0
pvtot1(scen2, firm2) = 0
pvtot2(scen2, firm2) = 0
pvtot3(scen2, firm2) = 0
NEXT firm2
sprob = iwgt(scen2)
sprob3 = sprob / 6#

ATTACHMENT M

PAGE 11 OF 14

GOSUB PVADD3:
RETURN
"***** END OF PVadd SUBMODULE *****
PVADD3:
"This submodule of PVADD adds up point values for transition 
from a single scenario (scen1) to a single scenario (scen2), where 
scen1 and scen2 both have 3 firms.
FOR o = 1 TO 6
o1 = order(o, 1)
o2 = order(o, 2)
o3 = order(o, 3)
pv = 1
pvtemp = pvmax--diff(1, o1)
IF pvtemp < 0 THEN pvtemp = 0
pv = pv * pvtemp
pvtemp = pvmax--diff(2, o2)
IF pvtemp < 0 THEN pvtemp = 0
pv = pv * pvtemp
pvtemp = pvmax--diff(3, o3)
IF pvtemp < 0 THEN pvtemp = 0
pv = pv * pvtemp
pvtot0(scen2, 0) = pvtot0(scen2, 0) + pv * iprob0 * sprob3
pvtot1(scen2, o1) = pvtot1(scen2, o1) + pv * iprob1 * sprob3
pvtot2(scen2, 02) = pvtot2(scen2, 02) + pv * iprob2 * sprob3
pvtot3(scen2, o3) = pvtot3(scen2, 03) + pv * iprob3 * sprob3
NEXT o
RETURN
"***** END OF PVadd3 SUBMODULE *****
PVADJUST:
 "This module adjusts computed point values (pv)
" to reflect true probability measures (prob2).
pvtota10 = 0
pvtotal1 = 0
pvtota12 = 0
pvtota13 = 0
FOR scen = 1 TO 35
FOR firm2 = 0 TO 3
pvtota10 = pvtota10 + pvtot0(scen, firm2)
pvtotal1 = pyrotal1 + pvtot1(scen, firm2)

ATTACHMENT M

PAGE 12 OF 14

pvtota12 = pvtota12 + pvtot2(scen, firm2)
pvtota13 = pvtota13 + pvtot3(scen, firm2)
NEXT firm2
NEXT scen
ratio0 = 0
ratio1 = 0
ratio2 = 0
ratio3 = 0
20 IF pvtota10 = 0 THEN 21
ratio0 = prob1(scen1, 0) / pvtota10
21 IF pvtotal1 = 0 THEN 22
ratio1 = prob1(scen1, 1) / pyrotal1
22 IF pvtota12 = 0 THEN 23
ratio2 = prob1(scen1, 2) / pvtota12
23 IF pvtota13 = 0 THEN 24
ratio3 = prob1(scen1, 3) / pvtota13
24 REM
FOR scen = 1 TO 35
FOR firm2 = 0 TO 3
pvtemp = pvtot0(scen, firm2) * ratio0
pvtemp = pvtemp + pvtot1(scen, firm2) * ratio1
pvtemp = pvtemp + pvtot2(scen, firm2) * ratio2
pvtemp = pvtemp + pvtot3(scen, firm2) * ratio3
prob2(scen, firm2) = prob2(scen, firm2) + pvtemp
NEXT firm2
NEXT scen
RETURN
"***** END OF PVadjust SUBMODULE *****
MSEXITS:
"This submodule determines which

[[Page 29185]]

prob2(s,f) and cost(s,f)
numbers imply zero market share for Microsoft.
Where this occurs for f>0 (MS still in market),
the probability values are transferred
to f=0 (Microsoft not in market).
The criterion for exit is that the firm in question
has very high short-run costs.
FOR scen = 1 TO 35
FOR firm = 1 TO 3
IF cost(scen, firm) > 4.999 THEN

ATTACHMENT M

PAGE 13 OF 14

prob2(scen, 0) = prob2(scen, 0) + prob2(scen, firm)
prob2(scen, firm) = 0
END IF
NEXT firm
NEXT scen
RETURN
"***** END OF MSexits SUBMODULE *****
PRINTPROBT:
"This submodule prints the last iteration (presumed 
convergence)
" computed for the the transition weights for each scenario.
PRINT #2, "Iter "; "Scen ";
PRINT #2, "Init-weight(0) "; "Prob1(target) 
"; "Prob2(result)
"; "Init-weight(1) "
FOR scen= 1 TO 35
PRINT #2, USING "#####"; iter; 
scen;
PRINT #2, USING ;###" iwgt0(scen); prob1(scen, 
0); prob2(scen, 0); iwgt(scen)
NEXT scen
RETURN
"***** END OF PrintProbT SUBMODULE *****
PRINTPROB0:
 "This submodule prints the probabilities for scenario zero.
PRINT #2, "Iter "; "Scen ";
PRINT #2, "Prob(firm0) "; "Prob(firm1) 
"; "Prob (firm2)
PRINT #2, "Prob(firm3)
scen = 0
PRINT #2, USING "#####"; iter; 
scen0;
FOR firm = 0 TO 3
PRINT #2, USING #"; prob1(scen, firm);
NEXT firm
PRINT #2,
RETURN
"***** END OF PrintProb0 SUBMODULE *****
PRINTPROB:
"This submodule prints the probabilities for each subsequent
" scenario and MS firm number.
FOR scen= 1 TO 35

ATTACHMENT M

PAGE 14 OF 14

PRINT #2, USING "#####"; iter; 
scen;
FOR firm = 0 TO 3
PRINT #2, USING #####"; prob2(scen, 
firm);
NEXT firm
PRINT #2,
NEXT scen
RETURN
 "***** END OF PrintProb SUBMODULE *****
TRANSFERPROB:
"This submodule transfers the prob2 values to prob1,
" so that the next transition iteration can proceed.
FOR scen = 0 TO 35
FOR firm = 0 TO 3
prob1(scen, firm) = prob2(scen, firm)
NEXT firm
NEXT scen
RETURN
"***** END OF TransferProb SUBMODULE *****
"**********END OF Program "MS2ProbA.bas" 
.**********

ATTACHMENT N

PAGE 1 OF 11

Attachment N.
"BASIC Program .MS3ProbR.bas".
"Program Number 3 in a series of six programs
"designed to simulate alternative antitrust
"remedies for the Microsoft software industry.
"Copyright, January 23, 2002, Carl Lundgren.
" This program, "MS3ProbR.bas", computes the 
probabilites
"associated with each scenario, as the industry transitions
"from a particular starting point, and gradually converges
"towards a long-run stochastic equilibrium.
"This program assigns probabilities for equilibria consisting
"of two Relative Profit Maximizing ("RPM") firms, 
along with
"such Absolute Profit Maximizing "APM" firms as 
may be involved
"in the transitions. The equilibria automatically convert to
"APM equilibria if one or both RPH firms exits the industry.
"The program uses three different speeds (speed=1,2,3) for the 
transition.
"Probability files are outputted for the one starting point
"(msfirms=2), and each transition speed (speed=1,2,3).
" This program is similar to "MS2ProbA.bas",
"since it computes probabilites associated with each scenario,
"for a total of 11 transition periods.
"This program differs from "MS2ProbA.bas",
"because it assigns probabilities for equilibria consisting
"of both RPM and APM firms, rather than APM firms only.
"This program is more complex than "MS2ProbA.bas"
"because it must simultaneously track the rankings
"of two Microsoft-successor firms simultaneously.
" This program calculates transition probabilities
"where Microsoft starts as two firms, and simultaneously
"tracks the outcomes and rankings for both firms.
" The parameters controlling the transition speed
"(pvmax in submodule InitProb10) are supplied by the user.
"The program reads in 35 possible cost structures
"for the industry, each with 3 firms.
"The program assigns probabilities for each scenario,
"and also tracks whether Microsoft #1 is ranked as
"firm 1, 2, or 3, or is firm 0 (with zero market share).

ATTACHMENT N

PAGE 2 OF 11

"Likewise, the program tracks whether Microsoft #2 is
"ranked as firm 1, 2, or 3, or is firm 0.
DEFDBL A-Z
DIM pvtot(35, 15), prob1t(35, 15), prob2r(35, 15)
DIM diff(3, 3), iwgt(35), cost(35, 3)
"CONTROL MODULE
CLS
timex = TIMER
"This section calls the main module 3 times.
"This control module chooses speed for cost shifts:
"speed = 1 "Slow speed for cost shifts.
"speed = 2 "Moderate speed for cost shifts.
"speed = 3 "High speed for cost shifts.
FOR speed = 1 TO 3
GOSUB MAINMODULE:
NEXT speed
PRINT TIMER--timex
END
MAINMODULE:
IF speed = 1 THEN pvmax = 1.5 "Slow speed for cost shifts.
IF speed = 2 THEN pvmax = 2.5 "Moderate speed for cost shifts.
IF speed = 3 THEN pvmax = 4.5 "High speed for cost shifts.
GOSUB FILENAMES: "Assign file names to input/output files.
GOSUB SCENREAD: "Read in scenario costs.
GOSUB ORDERREAD: "Read in ordering list.
GOSUB ORDERRPMREAD: "Read in orderRPM list.
GOSUB READIWGT: "Read in values for transition weights.
PRINT "Computing transitions from MS=2 RPM firms:"
msfirms = 2
iter = 0
GOSUB INITIALIZER: "Microsoft split into 2 RPM firms.
iter = 1
GOSUB TRANSITOR:
GOSUB PRINTPROBR:
FOR iter = 2 TO 10
GOSUB TRANSFERPROBR:
GOSUB TRANSITIR:
GOSUB PRINTPROBR:

ATTACHMENT N

PAGE 3 OF 11

NEXT iter
CLOSE #2, #3
CLOSE
RETURN
"***** END OF MAIN MODULE *****
FILENAMES:
costs = 
"c:-bsbasic-bs
ms--sim-bscostlist.txt" 
"Input scenario costs
orders = 
"c:-bsbasic-bs
ms--sim-bsordering.txt" 
"Input firm re-orderings
orderrpm$ = 
"c:-bsbasic-bs
ms--sim-bsorderrpm.txt" 
"Input RPM firm-pair
re-orderings
prob0$ = 
"c:-bsbasic-bs
ms--sim-bsout-bs
prob00.txt"

[[Page 29186]]

"Input 2 RPM firms I- weight probs
probr$ = 
"c:-bsbasic-bs
ms--sim-bsout-bs
probr0.txt" "Output 2 RPM firms
transition probs
IF speed = 1 THEN sp$ = "1"
IF speed = 2 THEN sp$ = "2"
IF speed = 3 THEN sp$ = "3"
replaces = sp$ MID$(prob0$, 26, 1) = replaces
MID$(probr$, 26, 1) = replaces
RETURN
"***** END OF FileNames SUBMODULE *****
READIWGT:
"This submodule reads in the transition weights (iwgt)
" previously computed by the "MS2ProbA.bas" 
program.
OPEN prob0$ FOR INPUT AS #1
LINE INPUT #1, temps
FOR scen = 1 TO 35
INPUT #1, iter2, scen2, iwgt0, prob1scen, prob2scen,
iwgt(scen)
IF scen2 <> scen THEN PRINT "Scenario mismatch:"; 
scen; scen2
NEXT scen
CLOSE #1
RETURN
"***** END OF ReadIwgt SUBMODULE *****
INITIALIZER:
"Submodule to initialize Microsoft split into 2 RPM firms.

ATTACHMENT N

PAGE 4 OF 11

GOSUB INITPROB1R:
OPEN probr$ FOR OUTPUT AS #2
GOSUB PRINTPROBOR:
RETURN
"***** END OF InitializeR SUBMODULE *****
INITPROB1R:
"This submodule sets the prob1r variables to zero,
" and then sets initial values for non-zero prob1.
FOR scen1 = 0 TO 35
FOR pair1 = 0 TO 15
prob1r(scen1, pair1) = 0
NEXT pair1
NEXT scen1
"This section sets initial scenario to
"Microsoft is split into two RPM firms,
" Scenario 6, Cost levels 3(MS-1), 4(MS-2), 5(comp).
scen0 = 6
firm1 = 1
firm2 = 2
pair = firm1 * 4 + firm2
prob1r(0, pair) = 1
FOR firm = 1 TO 3
cost(0, firm) = cost(scen0, firm)
NEXT firm
RETURN
"***** END OF InitProb12 SUBMODULE *****
SCENREAD:
"This submodule reads in the scenario costs list.
OPEN costs FOR INPUT AS #1
LINE INPUT #1, dummy$
"cost(s,f) = marginal cost of firm f in scenario s.
"finprob = final probability assumed for scenario s.
"wgt = number of permutations of scenario s.
FOR scen= 1 TO 35
INPUT #1, scen2, L1, L2, L3, L4, L5, wgt, finprob
IF scen <> scen2 THEN PRINT "Scenario mismatch", 
scen, scen2
INPUT #1, c1, c2, c3
FOR firm = 1 TO 3
INPUT #1, ctemp
cost(scen, firm) = ctemp / 60#

ATTACHMENT N

PAGE 5 OF 11

NEXT firm
NEXT scen
CLOSE #1
RETURN
"***** END OF SCENREAD SUBMODULE *****
ORDERREAD:
"This Submodule reads in the ordering list,
"which is a list of 6 permutations by which firms 1-3
" may become firms 1-3 in the same or a different order.
OPEN orders FOR INPUT AS #1
LINE INPUT #1, dummy$
"ordnum = number of ordering.
"order(o,f) = ordering number o for firm f,
"the firm number which firm f becomes in ordering o.
DIM order(6, 3)
FOR ordnum = 1 TO 6
INPUT #1, ordnum2
IF ordnum <> ordnum2 THEN PRINT "Order Number 
mismatch",
ordnum, ordnum2
FOR firm = 1 TO 3
INPUT #1, order(ordnum, firm)
NEXT firm
NEXT ordnum
CLOSE #1
RETURN
"***** END OF OrderRead SUBMODULE *****
ORDERRPMREAD:
This Submodule reads in the orderRPM list, which is a list of 6 
permutations by which firms 1-3 may become firms 1-3 in 
the same or a different order.
The orderRPM list simultaneously tracks the cost rankings of two RPM 
firms.
OPEN orderrpm$ FOR INPUT AS #1
LINE INPUT #1, dummy$
ordnum = number of ordering.
orderrpm(o,f) = ordering number o for pair of firms p,
the firm-pair number to which the firm-pair p
becomes in ordering o.
p is firm-pair where p=4*firm1+firm2.
Firm1 and firm2 take on values (0, 1, 2, 3).



MTC-00030631--0133

ATTACHMENT N

PAGE 6 OF 11

DIM orderrpm(6, 15)
FOR ordnum = 1 TO 6
INPUT #1, ordnum2
IF ordnum <> ordnum2 THEN PRINT "Order Number 
mismatch",
ordnum, ordnum2
FOR pair--0 TO 15
INPUT #1, orderrpm(ordnum, pair)
NEXT pair
NEXT ordnum
CLOSE #1
RETURN
"***** END OF OrderRPMread SUBMODULE *****
TRANSITOR:
This submodule controls the initial transitions.
Transitions are from scenario zero (scen1)
to the other possible scenarios (scen2).
GOSUB INITPROB2R: "Initialize prob2 variables.
PRINT speed; iter; "*";
scen1 = 0
PRINT ".";
FOR pair1 = 0 TO 15
iprob = prob1r (ecen1, pair1)
IF iprob = 0 THEN 10
FOR scen2 = 1 TO 35
GOSUB PVADDR:
NEXT scen2
GOSUB PVADJUSTR:
10 NEXT pair1
GOSUB MSEXITSR:
PRINT
RETURN
***** END OF Transit0R SUBMODULE *****
TRANSIT1R:
This submodule controls the subsequent transitions.
Transitions are from any scenario (scen1)
to any same or different scenario (scen2).
GOSUB INITPROB2R: "Initialize prob2 variables.
PRINT speed; iter; "*";
FOR scen1 = 1 TO 35
PRINT ".";



MTC-00030631--0134

ATTACHMENT N
PAGE 7 OF 11
FOR pair1 = 0 TO 15
iprob = prob1r(scen1, pair1)
IF iprob = 0 THEN 11
FOR scen2 = 1 TO 35
GOSUB PVADDR:
NEXT scen2
GOSUB PVADJUSTR:
11 NEXT pair1
NEXT scen1
GOSUB MSEXITSR;
PRINT
RETURN
***** END OF Transit1R SUBMODULE *****
INITPROB2R:
This submodule of TRANSIT sets the prob2r variables to zero.
FOR scen2 = 0 TO 35
FOR pair2 = 0 TO 15
prob2r(scen2, pair2) = 0
NEXT pair2
NEXT scen2
RETURN
***** END OF InitProb2R SUBMODULE *****
PVADDR:
This submodule initializes the variables in preparation
for submodule PVADD3R,
which adds up point values (pv) for transition
from a single scenario (scen1) and firm pair (pair1)
to a single scenario (scen2) and multiple

[[Page 29187]]

pairs (pair2).
pvtot(s,p) = point value for probability of transition
from current scenario and current MS firm pair
to scenario s and to MS firm pair p.
FOR firm1 = 1 TO 3
FOR firm2 = 1 TO 3
diff(firm1, firm2) = ABS(cost(scen1, firm1)--cost(scen2,
firm2) )
NEXT firm2
NEXT firm1
FOR pair2 = 0 TO 15
pvtot(scen2, pair2) = 0

ATTACHMENT N

PAGE 8 OF 11

NEXT pair2
sprob = iwgt(scen2)
sprob3 = sprob / 6#
GOSUB PVADD3R:
RETURN
***** END OF PVaddR SUBMODULE *****
PVADD3 R:
This submodule of PVADDR adds up point values for transition from a 
single scenario (seen1) and firm pair (pair1) to a single scenario 
(scen2) and multiple firm pairs (pair2).
FOR o = 1 TO 6
o1 = order(o, 1)
o2 = order(o, 2)
o3 = order(o, 3)
pv = 1
pvtemp = pvmax--diff(1, o1)
IF pvtemp < 0 THEN pvtemp = 0
pv = pv * pvtemp
pvtemp = pvmax--diff(2, o2)
IF pvtemp < 0 THEN pvtemp = 0
pv = pv * pvtemp
pvtemp = pvmax--diff(3, o3)
IF pvtemp < 0 THEN pvtemp = 0
pv = pv * pvtemp
orpm = orderrpm(o, pair1)
pvtot(scen2, orpm) = pvtot(scen2, orpm) + pv * iprob * sprob3
NEXT o
RETURN
***** END OF PVadd3R SUBMODULE *****
PVADJUSTR:
This module adjusts computed point values (pv) to reflect true 
probability measures (prob2).
pvtotal = 0
FOR scen = 1 TO 35
FOR pair2 = 0 TO 15
pvtotal = pvtotal + pvtot(scen, pair2)
NEXT pair2
EXT scen

ATTACHMENT N

PAGE 9 OF 11

ratio = 0
20 IF pvtotal = 0 THEN 21
ratio = prob1r(scen1, pair1) / pvtotal
21 REM
FOR scen= 1 TO 35
FOR pair2 = 0 TO 15
probtemp = pvtot(scen, pair2) * ratio
prob2r(scen, pair2) = prob2r(scen, pair2) + probtemp
NEXT pair2
NEXT scen
RETURN
***** END OF PVadjustR SUBMODULE *****
MSEXITSR:
This submodule determines which prob2r(s,f) and cost(s,f) numbers 
imply exiting the industry for Microsoft or a Microsoft successor.
Where this occurs for firm1>0 (MS #1 still in market) or for 
firm2>0 (MS #2 still in market), the probability values are 
transferred respectively to firm1=0 (Microsoft #1 not in market) 
or to firm2=0 (Microsoft #2 not in market).
The criterion for exit is that the firm in question has very high 
short-run costs.
FOR scen = 1 TO 35
FOR firm1 = 1 TO 3
FOR firm2 = 0 TO 3
pair = firm1 * 4 + firm2
IF cost(scen, firm1) > 4.999 THEN
pair0 = firm2'firm1=0
prob2r(scen, pair0) = prob2r(scen, pair0) + prob2r(scen,
pair)
prob2r(scen, pair) = 0
END IF
NEXT firm2
NEXT firm1
FOR firm1 = 0 TO 3
FOR firm2 = 1 TO 3
pair = firm1 * 4 + firm2
IF cost(scen, firm2) > 4.999 THEN
pair0 = firm1 * 4 "firm2=0

ATTACHMENT N

PAGE 10 OF 11

prob2r(scen, pair0) = prob2r(scen, pair0) + prob2r(scen, pair)
prob2r(scen, pair) = 0
END IF
NEXT firm2
NEXT firm1
NEXT scen
RETURN
***** END OF MSexitsR SUBMODULE *****
PRINTPROB0R:
This submodule prints the probabilities for each firm-pair number 
for scenario zero.
PRINT #2, "Iter "; "Scen "; "Firm 
";
PRINT #2, "Prob(firm0) "; "Prob(firm1) 
"; "Prob(firm2) ";
PRINT #2, "Prob(firm3) "
seen = 0
FOR firm1 m 0 TO 3
PRINT #2, USING "#####"; iter; 
scen0; firm1;
FOR firm2 = 0 TO 3
pair = 4 * firm1 + firm2
PRINT #2, USING
"##.###########
##"; prob1r(scen, pair);
NEXT firm2
PRINT #2,
NEXT firm1
RETURN
***** END OF PrintProb0 SUBMODULE *****
PRINTPROBR:
This submodule prints the probabilities for each MS firm-pair number 
for each subsequent scenario.
FOR scen= 1 TO 35
FOR firm1 = 0 TO 3
PRINT #2, USING "#####"; iter; 
scen; firm1;
FOR firm2 = 0 TO 3
pair = 4 * firm1 + firm2
PRINT #2, USING 
###.###########
##"; prob2r(scen, pair);
NEXT firm2
PRINT #2,
NEXT firm1

ATTACHMENT N

PAGE 11 OF 11

NEXT scen
RETURN
***** END OF PrintProb SUBMODULE *****
TRANSFERPROBR:
This submodule transfers the prob2 values to prob1, so that the next 
transition iteration can proceed.
FOR scen = 0 TO 35
FOR pair = 0 TO 15
prob1r(scen, pair) = prob2r(scen, pair)
NEXT pair
NEXT scen
RETURN
***** END OF TransferProbR SUBMODULE *****
**********END OF Program "MS3ProbR.bas".**********

ATTACHMENT O

PAGE 1 OF 14

Attachment O.
BASIC Program "MS4TranA.bas".
Program Number 4 in a series of six programs designed to simulate 
alternative antitrust remedies for the Microsoft software industry.
Copyright, January 23, 2002, Carl Lundgren.
This program, "MS4TranA.bas", uses the probability data 
computed by "MS2ProbA.bas" to compute Consumer Surplus 
and Profits for both Microsoft and Microsoft's competitors.
In transition period zero (iter=0), Microsoft (and its successor 
firms after divestiture) are assumed to have no competitors.
In subsequent transition periods (iter=1 to 10), Microsoft has 
(potentially) one or more competitors.
This program only calculates Absolute Profit Maximizing 
("APM") equilibria.
The program uses the computed probabilities for each scenario that 
was previously outputted by the "MS2ProbA.bas" program 
as various "PROB....txt" files.
This program outputs as "TRAN....txt" files the computed 
transition factors for several alternative timepaths for the 
software industry, under several alternative assumptions.
These transition factors are computed as a fraction of the revenues 
which Microsoft would earn if it remained a monopoly. The 
assumptions for the transitions are:
(Tran1) Strong conduct remedy & Lawful Path: Microsoft is not 
broken up, but competitive conditions start in transition period 
zero. A companion program, "MS6Summ.bas", uses the 
transition factors to compute the lawful path (starting in 1995) and 
a conduct remedy (starting in 2002).
Tran2-Tran3) APM Structural remedies: Microsoft is broken up into 
two or three competing APM firms, beginning in transition period 
zero. The companion program uses these transition factors to compute 
the effects of structural remedies starting in 2005.

[[Page 29188]]

The 225 outputted transition (TRAN....txt) files are computed for 
three speeds of transition (speed=1,2,3),

ATTACHMENT O

PAGE 2 OF 14

five cost ratios for short-run cost (cratio=1,2,3,4,5), five 
assumptions concerning the portion of long-run costs allocated to 
fixed costs (port=0,1,2,3,4), and three starting points 
(msfirms=1,2,3).
DEFDBL A-Z
DIM proh1(35, 3), herf(35), mshare(35, 3), pnum(35)
DIM quant(35, 3), cost(35, 3), pv(35, 3), price(35)
DIM pims(35, 3), picomp(35, 3)
CONTROL MODULE
CLS
timex = TIMER
GOSUB SCENREAD:
This section calls the main module 225 times.
This control module chooses market tendency:
cratio=1 Ratio for low/high short-run cost is 0.2500 (1/4.0).
cratio=2 Ratio for low/high short-run cost is 0.3333 (1/3.0).
cratio=3 Ratio for low/high short-run cost is 0.4000 (1/2.5).
cratio=4 Ratio for low/high short-run cost is 0.5000 (1/2.0).
cratio=5 Ratio for low/high short-run cost is 0.6667 (1/1.5).
This control module chooses speed for market share shifts:
speed = 1 Slow speed for market share shifts.
speed = 2 Moderate speed for market share shifts.
speed = 3 High speed for market share shifts.
This control module chooses # of msfirms at iteration zero.
msfirms = 1 Microsoft starts as a monopoly.
msfirms = 2 Microsoft split into 2 APM firms.
msfirms = 3 Microsoft split into 3 APM firms.
This control module chooses proportion of long-run cost which is 
assumed to be a fixed cost.
port = 0 Fixed cost is 0% of long-run cost.
port = 1 Fixed cost is 25% of long-run cost.
port = 2 Fixed cost is 50% of long-run cost.
port = 3 Fixed cost is 75% of long-run cost.
port = 4 Fixed cost is 100% of long-run cost.

ATTACHMENT O

PAGE 3 OF 14

FOR cratio = 1 TO 5
FOR speed = 1 TO 3
FOR port = 0 TO 4
FOR msfirms = 1 TO 3
GOSUB MAINMODULE:
NEXT msfirms
NEXT port
NEXT speed
NEXT cratio
PRINT TIMER--timex
END
MAINMODULE:
GOSUB FILENAMES: "Assign file names to input/output files.
GOSUB INITIALIZE:
FOR iter = 1 TO 10
GOSUB PROBREAD:
GOSUB PRINTTRAN:
NEXT iter
CLOSE
RETURN
***** END OF MAIN MODULE *****
FILENAMES:
prob$ = 
"c:-bsbasic-bs
ms--sim-bsout-bs
prob00.txt" "Input transition
probabilities
trans = 
"c:-bsbasic-bs
ms--sim-bsout-bs
tran0000.txt" "Output transition factors
IF cratio = 1 THEN crt$ = "1"
IF cratio = 2 THEN crt$ = "2"
IF cratio = 3 THEN crt$ = "3"
IF cratio = 4 THEN crt$ = "4"
IF cratio = 5 THEN crt$ = "5"
IF speed = 1 THEN sp$ = "1"
IF speed = 2 THEN sp$ = "2"
IF speed = 3 THEN sp$ = "3"
IF msfirms = 1 THEN msf$ = "1"
IF msfirms = 2 THEN msf$ = "2"
IF msfirms = 3 THEN msf$ = "3"
IF port = 0 THEN prt$ = "0"
IF port = 1 THEN prt$ = "1"

ATTACHMENT O

PAGE 4 OF 14

IF port = 2 THEN prt$ = "2"
IF port = 3 THEN prt$ = "3"
IF port = 4 THEN prt$ = "4"
replacep$ = msf$ + sp$
replacet$ = msf$ +crt$ + sp$ + prt$
MID$(prob$, 25, 2) = replacep$
MID$(tran$, 25, 4) = replacet$
PRINT replacet$; "";
RETURN
***** END OF FileNames SUBMODULE *****
INITIALIZE:
Submodule to perform various initialization tasks.
OPEN prob$ FOR INPUT AS #2
OPEN trans FOR OUTPUT AS #3
GOSUB ZEROPROB:
GOSUB PROBREAD0:
GOSUB SCENREAD: "Read scenario list.
GOSUB COSTCOMPUTE: "Compute costs.
GOSUB PQZERO: "Iteration 0 prices, quantities, profits & 
Consumer
Surplus.
GOSUB PQCOMPUTE: "Compute prices, quantities, profits & 
Consumer Surplus.
GOSUB HHI: "Compute HHI and market shares.
GOSUB PROFITS: "Assign profits to MS and competitors.
GOSUB PRINTTRAN0: "Print transition files.
RETURN
***** END OF Initialize SUBMODULE *****
ZEROPROB:
This submodule sets the prob1(0, .) and mshare(0, .) variable values 
to zero.
FOR firm1 = 0 TO 3
prob1(0, firm1) = 0
NEXT firm1
RETURN
***** END OF ZEROPROB SUBMODULE *****
SCENREAD:
This submodule reads in the scenario costs list.

ATTACHMENT O

PAGE 5 OF 14

costs = 
"c:-bsbasic-bs
ms--sim-bscostlist.txt" 
"Input scenario costs
OPEN costs FOR INPUT AS #1
LINE INPUT #1, dummy$
cost(s,f) = short-run marginal cost of firm f in scenario s.
finprob(s) = final probability assumed for scenario s.
wgt(scen) = number of permutations of scenario s.
FOR scen = 1 TO 35
INPUT #1, scen2, L1, L2, L3, L4, L5, wgt, finprob
IF scen <> scen2 THEN PRINT "Scenario mismatch", 
scen, scen2
INPUT #1, c1, c2, c3
FOR firm = 1 TO 3
INPUT #1, pv(scen, firm)
NEXT firm
NEXT scen
CLOSE #1
RETURN
***** END OF SCENREAD SUBMODULE *****
COSTCOMPUTE:
Submodule to compute short-run costs, long-run costs, and assumed 
elasticity of demand.
This section computes parameters for long-run costs under the 
assumption that each firm has the same long-run cost function.
Assume that one portion of Microsoft's long-run cost (LRC) is a 
long-run fixed cost (FC), while the other portion is a long-run 
variable cost (VC), which is proportional to output.
1rc = .1855 "computed as MS long-run cost divided by MS 
monopoly revenue.
IF port = 0 THEN portion = 01!
IF port = 1 THEN portion = .25
IF port = 2 THEN portion = .5
IF port = 3 THEN portion = .75
IF port = 4 THEN portion = 1!
fc = 1rc * portion
vc = 1rc * (1--portion)
This section computes elasticity of demand (Elas) at monopoly profit 
maximum, as a function of marginal cost, which is composed of short-
run marginal cost (SRC)

ATTACHMENT O

PAGE 6 OF 14

plus long-run variable cost (VC).
src = .4101 "computed as MS short-run cost divided by MS 
monopoly revenue.
mc= src + vc
elas = 1/(mc--1)
elasminus = elas--1
elasplus = elas + 1
A = elasminus / elas "Intercept of linear demand curve with 
price axis.
b = -1/elas "Slope of linear demand curve.
cbase = src "Base level of short-run marginal cost (cost level 
2).
logcbase = LOG(cbase / (A--vc--cbase)) "Chase 
converted to log-ratios.
This section computes short-run costs and marginal costs for a given 
cost spread.
IF cratio = 1 THEN cspread = .950980935#
IF cratio = 2 THEN cspread = .748669813#
IF cratio = 3 THEN cspread = .622288438#
IF cratio = 4 THEN cspread = .469161475#
IF cratio = 5 THEN cspread = .273626703#
FOR scen = 1 TO 35
FOR firm = 1 TO 3
pvtemp = (pv(scen, firm)--180) / 120
logpv = logcbase + pvtemp * cspread
pvratio = EXP(logpv)

[[Page 29189]]

cost(scen, firm) = vc + (A--vc) * pvratio / (1 + pvratio)
NEXT firm
NEXT scen
RETURN
***** END OF CostCompute SUBMODULE *****
PQZERO:
Submodule to compute prices, quantities, profits, and consumer 
surplus for selected scenarios, for iteration zero, where 1, 2, or 3 
Microsoft APM firms are assumed initially to have no competitors.
Pi(s,f) is long-run profit for firm f within scenario s.
CS(s) is Consumer Surplus parameter for scenario s.
DIM cs(35), pi(35, 3)
num = msfirms

ATTACHMENT O

PAGE 7 OF 14

costsum = 0
FOR firm = 1 TO num
cost(0, firm) = cost(scen0, firm)
costsum = costsum + cost(0, firm)
NEXT firm
price = (A + costsum) /(num + 1)
qtot = 0
FOR firm = 1 TO num
qtemp = (price--cost(0, firm)) / b
qtot = qtot + qtemp
quant(0, firm) = qtemp
pitemp = (price--cost(0, firm)) * qtemp
pitemp = pitemp--fc
pi(0, firm) = pitemp
NEXT firm
FOR firm = num + 1 TO 3
quant(0, firm) = 0
pi(0, firm) = 0
NEXT firm
cs(0) = qtot * (A--price) / 2
pdummy = 1 "Is last firm producing?
IF quant(0, num)< 0 THEN pdummy = 0
IF pi(0, num) < 0 THEN pdummy = 0
IF pdummy = 0 THEN scen = 0
IF msfirms = 3 THEN GOSUB PQSUB2:
IF msfirms = 2 THEN GOSUB PQSUB1:
IF msfirms = 1 THEN GOSUB PQSUB0:
END IF
price(0) = price
pnum(0) = num
RETURN
***** END OF PQzero SUBMODULE *****
PQCOMPUTE:
Submodule to compute prices, quantities, profits, and consumer 
surplus for each scenario.
Pi(s,f) is long-run profit for firm f within scenario s.
CS(s) is Consumer Surplus parameter for scenario s.
FOR scen = 1 TO 35
num = 3
costsum = 0

ATTACHMENT O

PAGE 8 OF 14

FOR firm = 1 TO num
costsum = costsum + cost(scen, firm)
NEXT firm
price = (A + costsum) /(num + 1)
qtot = 0
FOR firm = 1 TO num
qtemp = (price--cost(seen, firm)) / b
qtot = qtot + qtemp
quant(scen, firm) = qtemp
pitemp = (price--cost(scen, firm)) * qtemp
pitemp = pitemp--fc
pi(scen, firm) = pitemp
NEXT firm
cs(scen) = qtot * (A--price) / 2
pdummy = 1 "Is last firm producing?
IF quant(scen, num) < 0 THEN pdummy = 0
IF pi(scen, num) < 0 THEN pdummy = 0
IF pdummy = 0 THEN GOSUB PQSUB2:
price(scen) = price
pnum(scen) = num
NEXT scen
RETURN
***** END OF PQcompute SUBMODULE *****
PQSUB2:
Submodule of PQcompute/PQsub4/PQsub3 submodule, to compute prices 
and quantities when fewer than 3 firms are producing.
num = 2
quant(scen, num + 1) = 0
pi(scen, num + 1) = 0
costsum = 0
FOR firm = 1 TO num
costsum = costsum + cost(scen, firm)
NEXT firm
price = (A + costsum) /(num + 1)
qtot = 0
FOR firm = 1 TO num
qtemp = (price cost(scen, firm)) / b
qtot = qtot + qtemp
quant(scen, firm) = qtemp
pitemp = (price--cost(scen, firm)) * qtemp

ATTACHMENT O

PAGE 9 OF 14

pitemp = pitemp--fc
pi(scen, firm) = pitemp
 NEXT firm
 cs(scen) = qtot * (A--price) / 2
 pdummy = 1 "Is last firm producing?
IF quant(scen, num) < 0 THEN pdummy = 0
IF pi (scen, num) < 0 THEN pdummy = 0
IF pdummy = 0 THEN GOSUB PQSUB1:
RETURN
.***** END OF PQsub2SUEMODULE *****
PQSUB1:
"Submodule of PQcompute/PQsub4/PQsub3/PQsub2 submodule, 
"to compute prices and quantities " when fewer than 2 
firms are producing.
num = 1
quant(scen, hum + 1) = 0
pi(scen, hum + 1) = 0
costsum = 0
FOR firm = 1 TO num
costsum = costsum + cost(scen, firm)
NEXT firm
price = (A + costsum) / (hum + 1)
qtot = 0
FOR firm = 1 TO num
qtemp = (price- cost(scen, firm)) / b
qtot = qtot + qtemp
quant(scen, firm) = qtemp
pitemp = (price--cost(scen, firm) ) * qtemp
pitemp = pitemp fc
pi (scen, firm) = pitemp
NEXT firm
cs(scen) = qtot * (A--price) / 2
pdummy = I "Is last firm producing?
IF quant(scen, num)< 0 THEN pdummy = 0
IF pi(scen, num)< 0 THEN pdummy = 0
IF pdummy = 0 THEN GOSUB PQSUB0:
RETURN
"***** END OF PQsub1 SUBMODULE *****
PQSUB0:

ATTACHMENT 0

PAGE 10 OF 14

"Submodule of PQcompute/PQsub4,3,2,1 submodules, " to 
compute prices and quantities " when no firms are producing.
num = 0
quant(scen, hum + 1) = 0
pi(scen, hum + 1) = 0
price = A
cs (scen) = 0
RETURN
"***** END OF PQsub0 SUBMODULE *****
HHI:
"Submodule to compute Herfindahl-Herschmann Indices "for 
each given cost spread.
FOR scen = 0 TO 35 qtot = 0
FOR firm = 1 TO 3
qtot = qtot + quant(scen, firm)
NEXT firm
IF qtot = 0 THEN
HHI = 10000
mshare(scen, 1) = 1
mshare(scen, 2) = 0
mshare(scen, 3) = 0
GOTO 333
END IF
HHI = 0
FOR firm = 1 TO 3
mtemp = quant(scen, firm) / qtot
mshare(scen, firm) = mtemp
HHI = HHI + mtemp * mtemp * 10000
NEXT firm
herf(scen) = HHI
333 NEXT scen
RETURN
"***** END OF HHI SUBMODULE *****
PROFITS:
"This submodule assigns the previously computed " long-
run business profits for each firm " to Microsoft and 
Microsoft's competitors.

ATTACHMENT O

PAGE 11 OF 14

"PiMS(s,f) = Microsoft's profit in scenario s, "assuming 
that Microsoft is firm f.
"PiComp(s,f) = Competitors" profits in scenario s, 
"assuming that Microsoft is firm f.
"If f=0, Microsoft has zero market share.
FOR scen = 0 TO 35
pitot = 0
FOR firm = 1 TO 3
pitot = pitot + pi(scen, firm)
NEXT firm
pims(scen, 0) = 0
picomp(scen, 0) = pitot
FOR firm = 1 TO 3
pitemp = pi (scen, firm)
pitemp = pitemp * msfirms
pins(scen, firm) = pitemp
picomp(scen, firm) = pitot pitemp
NEXT firm
NEXT scen
"Microsoft profit (pitemp) is multiplied by the number of 
Microsoft firms.
"When MSfirms=1, all profit calculations are accurate. 
"When MSfirms=2 or 3, pims is accurate, but picomp is not 
accurate

[[Page 29190]]

for "particular scenario/firm #, because this APM program 
"does not simultaneously track more than one Microsoft firm.
"However, probability-weighted averages over all firm #s 
"for a given scenario are an accurate average for both pims 
and picomp.
RETURN
"***** END OF PROFITS SUBMODULE *****
PRINTTRAN0:
"This submodule prints the transition factors for iteration 
zero, including average consumer surplus, average profits for 
Microsoft and its competitors, average market share for Microsoft, 
the industry-wide Herfindahl-Hershman Index (HHI), and the average 
number of main firms in the industry.
"These transition factors must be multiplied by Microsoft's 
"annual monopoly revenues to determine dollar values.
cstot = 0

ATTACHMENT O

PAGE 12 OF 14

pimstot = 0
picomptot = 0
mktshare = 0
herfindahl = 0
firmnum = 0
scen = 0 "Choose scen=scen0 to assume competitors in period 0.
FOR firm = 0 TO 3
tempprob = prob1 (0, firm)
cstot = cstot + cs(scen) * tempprob
pimstot = pimstot + pims(scen, firm) * tempprob
picomptot = picomptot + picomp(scen, firm) * tempprob
mktshare = mktshare + mshare(scen, firm) * tempprob
herfindahl = herfindahl + herf(scen) * tempprob
firmnum = firmnum + pnum(scen) * tempprob
NEXT firm
PRINT #3, "Iter";
PRINT #3, "ConsumerSurpls ";
PRINT #3, "Profit (MS) ";
PRINT #3, "Profit(comp) ";
PRINT #3, "MktShare(1-MS)";
PRINT #3, "MktShare (n-MS) ";
PRINT #3, "Herfindahl ";
PRINT #3, "# firms
PRINT #3, USING "###"; 0;
PRINT #3, USING 
"###.##########
###,,; cstot; pimstot; picomptot;
PRINT #3, USING 
"####.#########
##,,; mktshare * 100; msfirms *
mktshare * 100;
PRINT #3, USING 
"######.#######
##.; herfindahl;
PRINT #3, USING 
"##.###########
##.; firmnum
RETURN
"***** END OF PRINTTRAN0 SUBMODULE *****
PRINTTRAN:
This submodule prints the transition factors for each subsequent 
iteration, including average consumer surplus, average profits for 
Microsoft and its competitors, average market share for Microsoft, 
the industry-wide Herfindahl-Hershman Index (HHI), and the average 
number of main firms in the industry.
These transition factors must be multiplied by Microsoft's annual 
monopoly revenues to determine dollar values.
cstot = 0

ATTACHMENT 0

PAGE 13 OF 14

pimstot = 0
picomptot = 0
mktshare = 0
herfindahl = 0
firmnum = 0
FOR scen = 1 TO 35
FOR firm = 0 TO 3
tempprob = prob1(scen, firm)
cstot = cstot + cs(scen) * tempprob
pimstot = pimstot + pims(scen, firm) * tempprob
picomptot = picomptot + picomp(scen, firm) * tempprob
mktshare = mktshare + mshare(scen, firm) * tempprob
herfindahl = herfindahl + herf(scen) * tempprob
firmnum = firmnum + pnum(scen) * tempprob
NEXT firm
NEXT scen
PRINT #3, USING "###,,; iter;
PRINT #3, USING 
"###.##########
###,,; cstot; pimstot; picomptot;
PRINT #3, USING 
"####.#########
##,,; mktshare * 100; msfirms *
mktshare * 100;
PRINT #3, USING 
"######.#######
##,,; herfindahl;
PRINT #3, USING 
,,##.############
#,,; firmnum
RETURN
"***** END OF PRINTTRAN SUBMODULE *****
PROBREAD0:
"Submodule to read iteration 0 transition probabilities.
LINE INPUT #2, temps
INPUT #2, iter2, scen0
IF 0 <> iter2 THEN PRINT "Iteration 0 mismatch:,; 0, 
iter2
FOR firm = 0 TO 3
INPUT #2, prob1(0, firm)
NEXT firm
RETURN
"***** END OF PROBREAD0 SUBMODULE *****
PROBREAD:
"Submodule to read subsequent iteration transition 
probabilities
FOR scen = I TO 35
INPUT #2, iter2, scen2
IF iter <> iter2 THEN PRINT "Iteration S mismatch:,,; 
iter,

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iter2
IF scen <> scen2 THEN PRINT "Scenario S mismatch:,; 
scen;
scen2
FOR firm = 0 TO 3
INPUT #2, prob1(scen, firm)
NEXT firm
NEXT scen
RETURN
"***** END OF PROBREAD SUBMODULE *****
"**********END OF Program "MS4TranA.bas,,.**********

ATTACHMENT P

PAGE I of 21

Attachment P.

"BASIC Program "MS5TranR.bas". "Program 
Number 5 in a series of six programs "designed to simulate 
alternative antitrust "remedies for the Microsoft software 
industry.
"Copyright, January 23, 2002, Carl Lundgren.
" This program, "MS5TranR.bas", uses the 
probability data "computed by "MS3ProbR.bas" to 
compute Consumer Surplus and "Profits for both Microsoft and 
Microsoft's competitors.
"In transition period zero (iter=0), Microsoft (and its 
"successor firms after divestiture) are assumed to have no 
competitors.
"In subsequent transition periods (iter=1 to 10), 
"Microsoft has (potentially) one or more competitors.
"This program calculates both Relative Profit Maximizing 
("RPM") "and Absolute Profit Maximizing 
("APM") equilibria.
" The program uses the computed probabilities for each 
"scenario that was previously outputted by the 
""MS3ProbR.bas" program as various "PROB 
.... txt" files.
" This program outputs as "TRPM .... txt" files 
the "computed transition factors for several alternative 
timepaths "for the software industry, under several 
alternative assumptions.
"These transition factors are computed as a fraction "of 
the revenues which Microsoft would earn if it remained "a 
monopoly.
" This program computes transition factors "for 
alternative timepaths for the software industry, "under the 
assumption that Microsoft is split into two firms, "and these 
two firms adopt relative profit maximizing (RPM) "incentives 
in either a pure or impure form.
"The goal functions for the two RPM firms are:
Goal1 = Profit1--z * Profit2
Goal2 = Profit2 z * Profit1
"All other (non-Microsoft, competitor) firms are assumed 
"to have absolute profit maximizing (APM) incentives.
"The assumed values for z in the transitions are:
" TRPM0) The value of z=0.0 "Same as Absolute Profit

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Maximizing (APM).
TRPM1) The value of z=0.1 "10% RPM, 90% APM.
TRPM2) The value of z=0.2 "20% RPM, 80% APM.
TRPM3) The value of z=0.3 "30% RPM, 70% APM.
TRPM4) The value of z=0.4 "40% RPM, 60% APM.
TRPM5) The value of z=0.5 "50% RPM, 50% APM.

[[Page 29191]]

TRPM6) The value of z=0.6 "60% RPM, 40% APM.
TRPM7) The value of z=0.7 "70% RPM, 30% APM.
TRPM8) The value of z=0.8 "80% RPM, 20% APM.
TRPM9) The value of z=0.9 "90% RPM, 10% APM.
This program differs from the MS4TranA.bas program in that it 
considers only two successor firms for Microsoft, and simultaneously 
tracks the rankings of both firms.
The 750 outputted transition (TRPM .... txt) files are computed for 
three speeds of transition (speed=l,2,3), five cost ratios for 
short-run cost (cratio=l,2,3,4,5), five assumptions concerning the 
portion of long-run costs allocated to fixed costs (port=0,1,2,3,4), 
ten different values of z
(z = 0.0, 0.1, 0.2, 0.3, 0.4, 0.5, 0.6, 0.7, 0.8, 0.9).
"The starting point for the transitions in this program 
"always has Microsoft divided into two RPM firms (msfirms=2). 
"An additional feature of the program allows the value of z to 
"change in response to circumstances. If zbump=0.0, then z is 
fixed, "and does not change in response to circumstances. If 
zbump > 0, "then z changes in response to circumstances. In 
the program, "z responds to the circumstance that one of the 
RPM firms "is not producing, because it is achieving negative 
absolute profit.
"In this circumstance, the program automatically "bumps 
down" the value "of z for both RPM firms by the amount 
of zbump. For example, "if z=0.7 and zbump=0.3, then if one or 
both RPM firms would shut down, "then the value of z is 
automatically bumped down to z=0.4.
"In many circumstances, this allows both RPM firms to continue 
producing.
"The user determines the value of zbump as part of the control 
module.
DEFDBL A-Z

ATTACHMENT P

PAGE 3 of 21

DIM problr(35, 15), herf(35, 15), sharems(35, 15), pnum(35, 15)
DIM qtotal(35, 15), cost(35, 3), pv(35, 3), price(35, 15)
DIM pims(35, 15), picomp(35, 15)
DIM cs(35, 15), pi(35, 15)
"CONTROL MODULE
CLS
timex = TIMER
"*****User Determines amount by which z should be bumped down, 
if RPM firm2 is not producing when z=zhold(zcount).*****
zbump = 0! "*****User determines zbump.*****
"*****If zbump=0, then z is fixed and never changes.
"*****zbump >= 0. Recommended value is zbump=0.3.****
GOSUB PRINTZCOUNT:
GOSUB SCENREAD:
"This section calls the main module 750 times.
"This control module chooses market tendency:
"cratio=1 "Ratio for low/high short-run cost is 0.2500 
(1/4.0) .
"cratio=2 "Ratio for low/high short-run cost is 0.3333 
(1/3.0).
"cratio=3 "Ratio for low/high short-run cost is 0.4000 
(1/2.5) .
"cratio=4 "Ratio for low/high short-run cost is 0.5000 
(1/2.0).
"cratio=5 "Ratio for low/high short-run cost is 0.6667 
(1/1.5).
"This control module chooses speed for market share shifts:
"speed = 1 "Slow speed for market share shifts.
"speed = 2 "Moderate speed for market share shifts.
"speed = 3 "High speed for market share shifts.
"In this program, # of msfirms at iteration zero is always 
two.
msfirms = 2
"This control module chooses z (weight on rival firm's 
profits).
zcount=0   "z = 0.0
zcount=1  z = 0.1
zcount=2  z = 0.2
zcount=3  z = 0.3
zcount=4  z = 0.4
zcount=5  z = 0.5
zcount=6  z = 0.6
zcount=7  z = 0.7
zcount=8  z = 0.8

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"zcount=9   "z = 0.9
"This control module chooses proportion of long-run cost 
" which is assumed to be a fixed cost.
"port = 0 "Fixed cost is 0% of long-run cost.
"port = I "Fixed cost is 25% of long-run cost.
"port = 2 "Fixed cost is 50% of long-run cost.
"port = 3 "Fixed cost is 75% of long-run cost.
"port = 4 "Fixed cost is 100% of long-run cost.
FOR cratio = 1 TO 5
FOR speed = 1 TO 3
FOR port = 0 TO 4
FOR zcount = 0 TO 9
GOSUB MAINMODULE:
NEXT zcount
NEXT port
NEXT speed
NEXT cratio
PRINT TIMER--timex
END
PRINTZCOUNT:
"This submodule assigns values of z to each zcount, " 
and prints these z values for transfer to " the subsequent 
"MS6Summ.bas" program.
DIM zhold(9)
zcount$ = 
"c:-bsbasic-bs
ms--sim-bsout-bs
zcount.txt" "Output zcount data.
OPEN zcount$ FOR OUTPUT AS #1
PRINT #1, "Zcount Z"
FOR zcount = 0 TO 9
IF zcount = 0 THEN z = 01
IF zcount = I THEN z = .1
IF zcount = 2 THEN z = .2
IF zcount = 3 THEN z = .3
IF zcount = 4 THEN z = .4
IF zcount = 5 THEN z = .5
IF zcount = 6 THEN z = .6
IF zcount = 7 THEN z = .7
IF zcount = 8 THEN z = .8
IF zcount = 9 THEN z = .9
zhold(zcount) = z
PRINT #1, USING "######"; 
zcount;
PRINT #1, USING 
"###.######"; z

ATTACHMENT P

PAGE 5 of 21

NEXT zcount
CLOSE #1
RETURN
"***** END OF PrintZcount SUBMODULE *****
MAINMODULE:
z = zhold(zcount)
GOSUB FILENAMES: "Assign file names to input/output files.
GOSUB INITIALIZE:
FOR iter = I TO 10
GOSUB PROBREAD:
GOSUB PRINTTRAN:
NEXT iter
CLOSE
RETURN
"***** END OF MAIN MODULE *****
FILENAMES:
prob$ = "c: 
-bsbasic-bsms-
sim-bsout-bspr
obr0. txt" "Input RPM transition
probabilities
tran$ = 
"c:-bsbasic-bs
ms--sim-bsout-bs
tRPM0000.txt" "Output RPM transition factors
IF cratio = I THEN crt$ = "1"
IF cratio = 2 THEN crt$ = "2"
IF cratio = 3 THEN crt$ = "3"
IF cratio = 4 THEN crt$ = "4"
IF cratio = 5 THEN crt$ = "5"
IF speed = 1 THEN sp$ = "1"
IF speed = 2 THEN sp$ = "2"
IF speed = 3 THEN sp$ = "3"
IF zcount = 0 THEN zc$ = "0"
IF zcount = 1 THEN zc$ = "1"
IF zcount = 2 THEN zc$ = "2"
IF zcount = 3 THEN zc$ = "3"
IF zcount--4 THEN zc$ = "4"
IF zcount = 5 THEN zc$ = "5"
IF zcount = 6 THEN zc$ = "6"
IF zcount = 7 THEN zc$ = "7"
IF zcount = 8 THEN zc$ = "8"
IF zcount = 9 THEN zc$ = "9"
IF port = 0 THEN prt$ = "0"
IF port = 1 THEN prt$ = "1"

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IF port = 2 THEN prt$ = "2"
IF port = 3 THEN prt$ = "3"
IF port = 4 THEN prt$ = "4"
replacep$ = sp$
replacet$ = zc$ + crt$ + sp$ + prt$
MID$(prob$, 26, 1) = replacep$
MID$(tran$, 25, 4) = replacet$
PRINT replacet$; "";
RETURN
"***** END OF FileNames SUBMODULE *****
INITIALIZE:
"Submodule to perform various initialization tasks.
OPEN prob$ FOR INPUT AS #2
OPEN tran$ FOR OUTPUT AS #3
GOSUB ZEROPROB:
GOSUB PROBREAD0:
GOSUB SCENREAD: "Read scenario list.

[[Page 29192]]

GOSUB COSTCOMPUTE: "Compute costs.
GOSUB PQZERO: "Iteration 0 prices, quantities, profits a 
Consumer Surplus.
GOSUB PQCOMPUTE: "Compute prices, quantities, profits & 
Consumer Surplus.
GOSUB PRINTTRAN0: "Print transition files.
RETURN
"***** END OF Initialize SUBMODULE *****
ZEROPROB:
"This submodule sets the prob1r(0, .)
" variable values to zero.
FOR pair = 0 TO 15
prob1r(0, pair) = 0
NEXT pair
RETURN
"***** END OF ZeroProb SUBMODULE *****
SCENREAD:
"This submodule reads in the scenario costs list.
cost$ = 
"c:-bsbasic-bs
ms--sim-bscostlist.txt" 
"Input scenario costs
OPEN costs FOR INPUT AS #1
LINE INPUT #1, dummy$

ATTACHMENT P

PAGE 7 of 21

"cost(s,f) = short-run marginal cost of firm f in scenario s.
"finprob(s) = final probability assumed for scenario s.
"wgt(scen) = number of permutations of scenario s.
FOR scen = 1 TO 35
INPUT #1, scen2, L1, L2, L3, L4, L5, wgt, finprob
IF scen <> scen2 THEN PRINT "Scenario mismatch", 
scen, scen2
INPUT #1, c1, c2, c3
FOR firm = I TO 3
INPUT %1, pv(scen, firm)
NEXT firm
NEXT scen
CLOSE #1
RETURN
"***** END OF ScenRead SUBMODULE *****
COSTCOMPUTE:
"Submodule to compute short-run costs, long-run costs, " 
and assumed elasticity of demand.
"This section computes parameters for long-run costs 
"under the assumption that each firm has "the same long-
run cost function.
"Assume that one portion of Microsoft's long-run cost (LRC) is 
a long-run fixed cost (FC), while the other portion is a long-run 
variable cost (VC), which is proportional to output.
lrc = .1855 "computed as MS long-run cost divided by MS 
monopoly revenue.
IF port = 0 THEN portion = 01
IF port = 1 THEN portion = .25
IF port = 2 THEN portion = .5
IF port = 3 THEN portion = .75
IF port = 4 THEN portion = 1!
fc = lrc * portion
vc = lrc * (1--portion)
"This section computes elasticity of demand (Elas) at monopoly 
profit maximum, as a function of marginal cost, which is composed of 
short-run marginal cost (SRC) plus long-run variable cost (VC).
src = .4101 "computed as MS short-run cost divided by MS 
monopoly revenue.
mc = src + vc

ATTACHMENT P

PAGE 8 of 21

elas = 1 / (mc--1)
elasminus = elas 1
elasplus = elas + 1
A = elasminus / elas "Intercept of linear demand curve with 
price axis.
b = -1 / elas "Slope of linear demand curve.
cbase = src "Base level of short-run marginal cost (cost level 
2).
logcbase = LOG(cbase / (A--vc--cbase)) "Cbase 
converted to log- ratios.
"This section computes short-run costs and marginal costs 
"for a given cost spread.
IF cratio = I THEN cspread = .950980935#
IF cratio = 2 THEN cspread = .748669813#
IF cratio = 3 THEN cspread = .622288438#
IF cratio = 4 THEN cspread = .469161475#
IF cratio = 5 THEN cspread = .273626703#
FOR scen = 1 TO 35
FOR firm = 1 TO 3
pvtemp = (pv(scen, firm)--180) / 120#
logpv = logcbase + pvtemp * cspread
pvratio = EXP(logpv)
cost(scen, firm) = vc + (A--vc) * pvratio / (1 + pvratio)
NEXT firm
NEXT scen
RETURN
"***** END OF CostCompute SUBMODULE *****
PQZERO:
"Submodule to compute prices, quantities, profits, and 
consumer surplus for selected scenarios, for iteration zero, where 
two Microsoft RPM firms are assumed initially to have no 
competitors.
This program assumes that the two MS firms use relative profit 
maximizing (RPM) incentives, according to the goal functions for 
each firm:
Goal(firm1)=profit(firm1)-z*profit(firm2)
Goal(firm2)=profit(firm2)-z*profit(firm1)
scen = 0
firm1 = 1
firm2 = 2
pair1 = firm1 * 4 + firm2

ATTACHMENT P

PAGE 9 of 21

pair2 = firm2 * 4 + firm1
FOR firm = 1 TO 2
cost(0, firm) = cost(scen0, firm)
NEXT firm
FOR firm = 3 TO 3
qtemp(firm) = 0
pitemp(firm) = 0
cost(0, firm) = A
NEXT firm
bump = 0 "Dummy variable to determine if z should be bumped 
down.
z = zhold(zcount)
GOSUB RPMSUB0:
IF bump = 1 THEN
z = z--zbump
GOSUB RPMSUB0:
END IF
GOSUB ASSIGN:
RETURN
"***** END OF PQzero SUBMODULE *****
PQCOMPUTE:
"Submodule to compute prices, quantities, profits, " and 
consumer surplus for all scenarios and firm pairs.
FOR scen = 1 TO 35
FOR firm1 = 0 TO 3
firm2 = 0
pair1 = firm1 * 4 + firm2
pair2 = firm2 * 4 + firm1
delfirm = 0
bump = 0 "Dummy variable to determine if z should be bumped
z = zhold(zcount)
GOSUB APMCOMPUTE:
GOSUB ASSIGN:
NEXT firm1
FOR firm1 = I TO 3
FOR firm2 = 1 TO 3
IF firm2 <= firm1 THEN 357
pair1 = firm1 * 4 + firm2
pair2 = firm2 * 4 + firm1
bump = 0 "Dummy variable to determine if z should be bumped 
down.
z = zhold(zcount)

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PAGE 10 of 21

GOSUB RPMCOMPUTE:
IF bump = I THEN
z = z--zbump
GOSUB RPMCOMPUTE:
END IF
GOSUB ASSIGN:
357 NEXT firm2
NEXT firm1
     NEXT scen
     RETURN
"***** END OF PQcompute SUBMODULE *****
ASSIGN:
"Submodule to assign computed numbers for each scenario 
" and combination of firms.
qtotal(scen, pair1) = qtot
price(scen, pair1) = price
pnum(scen, pair1) = tnum
cs(scen, pair1) = cstemp
qtotal(scen, pair2) = qtot
price(scen, pair2) = price
pnum(scen, pair2) = tnum
cs(scen, pair2) = cstemp
IF qtot = 0 THEN
share (1) = 1
share(2) = 0
share(3) = 0
GOTO 333
END IF
FOR firm = 1 TO 3
share(firm) = qtemp(firm) / qtot
NEXT firm
333 pitot = 0
herf = 0
FOR firm = I TO 3
pitot = pitot + pitemp(firm)
herf = herf + share(firm) * share(firm)
NEXT firm
herf = herf * 10000
herf(scen, pair1) = herf
herf(scen, pair2) = herf
ms1share = share(firm1)
ms2share = share(firm2)

ATTACHMENT P

PAGE 11 of 21

msavgshare = (ms1share + ms2share) / 2
sharems(scen, pair1) = msavgshare
sharems(scen, pair2) = msavgshare
mspi1 = pitemp(firm1)
mspi2 = pitemp(firm2)

[[Page 29193]]

IF firm1 = 0 THEN mspi1 = 0
IF firm2 = 0 THEN mspi2 = 0
mspitot = mspi1 + mspi2
comppitot = pitot--mspitot
pims(scen, pair1) = mspitot
ims(scen, pair2) = mspitot
picomp(scen, pair1) = comppitot
picomp(scen, pair2) = comppitot
ms1goal = mspi1--z * mspi2 "Firm 1's RPM goal function.
ms2goal = mspi2--z * mspi1 "Firm 2's RPM goal function.
RETURN
"***** END OF Assign SUBMODULE *****
RPMCOMPUTE:
"Submodule to compute prices, quantities, profits, and 
consumer surplus for each RPM scenario. This submodule assumes that 
two RPM firms choose to produce.
anum = 1 "anum = number of producing APM firms.
num = anum "hum = last producing APM firm.
IF num = firm1 THEN num = hum + 1
IF num = firm2 THEN num = num + 1
IF num = firm1 THEN num = num + 1
tnum = anum + 2 "tnum = total number of producing firms.
FOR firm = I TO 3
qtemp(firm) = 0
pitemp(firm) = 0
NEXT firm costsum = 0
FOR firm = I TO num
IF firm <> firm1 AND firm <> firm2 THEN
costsum = costsum + cost(scen, firm)
END IF
NEXT firm
costsum = (A + Costsum) * (1--z)
costsum = costsum + cost(scen, firm1) + cost(scen, firm2)
price = costsum / (3--anum* z + anum--z)
qtot = (A--price) / b

ATTACHMENT P

PAGE 12 of 21

qapm = 0
FOR firm = 1 TO num
IF firm <> firm1 AND firm <> firm2 THEN
qtemp(firm) = (price cost(scen, firm)) / b
qapm = qapm + qtemp (firm)
pitemp = (price cost(scen, firm)) * qtemp(firm)
pitemp(firm) = pitemp--fc
END IF
NEXT firm
qrpm = qtot--qapm
qgap = (cost(scen, firm2)--cost(scen, firm1)) / b / (1 + z)
qtemp(firm1) = (qrpm + qgap) / 2
pitemp = (price cost(scen, firm1)) * qtemp(firm1)
pitemp(firm1) = pitemp--fc
qtemp(firm2) = (qrpm--qgap) / 2
pitemp = (price--cost(scen, firm2)) * qtemp(firm2)
pitemp(firm2) = pitemp--fc
cstemp = qtot * (A--price) / 2
     "Must choose which firm (if any) to shut down,
" based on quantities and profits.
     "First, test for negative quantities.
     aq = 1 "quantity dummy for APM firm.
IF qtemp(num) < 0 THEN aq = 0
rq = 1 "quantity dummy for RPM firm.
IF qtemp(firm2) < 0 THEN rq = 0
     IF aq = 0 AND rq = I THEN
GOSUB RPMSUB0:
RETURN
END IF
IF aq = 1 AND rq = 0 THEN
IF bump = 0 THEN
bump = 1
RETURN
END IF
delfirm = firm2
GOSUB APMCOMPUTE:
RETURN
END IF
IF aq = 0 AND rq = 0 THEN
IF firm2 > hum THEN
IF bump = 0 THEN
bump = 1
RETURN
END IF

ATTACHMENT P

PAGE 13 of 21

delfirm = firm2
GOSUB APMCOMPUTE:
RETURN
END IF
IF firm2 < num THEN
GOSUB RPMSUB0:
RETURN
END IF
END IF
"Second, test for negative profits.
api = 1 "profit dummy for APM firm.
IF pitemp(num) < 0 THEN api = 0
rpi = 1 "profit dummy for RPM firm.
IF pitemp(firm2) < 0 THEN rpi = 0
IF api = 0 AND rpi = 1 THEN
GOSUB RPMSUB0:
RETURN
END IF
IF api = I AND rpi = 0 THEN
IF bump = 0 THEN
bump = 1
RETURN
END IF
delfirm = firm2
GOSUB APMCOMPUTE:
RETURN
END IF
IF api = 0 AND rpi = 0 THEN
IF pitemp(firm2) < pitemp(num) THEN
IF bump = 0 THEN
bump = 1
RETURN
END IF
delfirm = firm2
GOSUB APMCOMPUTE:
RETURN
ELSE
GOSUB RPMSUB0:
RETURN
END IF
END IF
"If program reaches here, then all firms are producing.
RETURN
"***** END OF RPMcompute SUBMODULE *****

ATTACHMENT P

PAGE 14 of 21

RPMSUB0:
Submodule of RPMcompute submodule, to compute prices and quantities 
when zero APM firms are producing.
num = 0
anum = hum "anum = number of producing APM firms
tnum = anum + 2 "tnum = total number of producing firms
FOR firm = 1 TO 3
qtemp(firm) = 0
pitemp(firm) = 0
NEXT firm
qtemp(num + 1) = 0
pitemp(num + 1) = 0
costsum = 0
costsum = (A + costsum) * (1--z)
costsum = costsum + cost(scen, firm1) + cost(scen, firm2)
price = costsum / (3--anum * z + anum--z)
qtot = (A--price) / b
qapm = 0
qrpm = qtot--qapm
qgap = (cost(scen, firm2)--cost(scen, firm1)) / b / (1 + z)
qtemp(firm1) = (qrpm + qgap) / 2
pitemp = (price--cost(scen, firm1)) * qtemp(firm1)
pitemp(firm1) = pitemp--fc
qtemp(firm2) = (qrpm--qgap) / 2
pitemp = (price--cost(scen, firm2)) * qtemp(firm2)
pitemp(firm2) = pitemp fc
cstemp = qtot * (A--price) / 2
r2dummy = 1 "Is RPM firm2 producing?
IF qtemp(firm2) < 0 THEN r2dummy = 0
IF pitemp(firm2) < 0 THEN r2dummy = 0
IF r2dummy = 0 THEN
IF firm1 = 1 THEN
IF bump = 0 THEN
bump = 1
RETURN
END IF
delfirm = 0
GOSUB APMSUB1:
RETURN
END IF
IF firm1 = 2 THEN
IF bump = 0 THEN

ATTACHMENT P

PAGE 15 of 21

bump = 1
RETURN
END IF
delfirm = 1
GOSUB APMSUB2:
RETURN
END IF
END IF
"If program reaches here, then both RPM firms are producing.
RETURN
"***** END OF RPMsub0 SUBMODULE *****
APMCOMPUTE :
" Submodule to compute prices, quantities, profits, "and 
consumer surplus for each APM scenario.
"The delfirm variable is used to determine whether to 
"delete one of the firms from the APM scenario.
If delfirm=0, no firms are deleted from the computation.
If delfirm=1, then firm 1 is deleted from the computation.
If delfirm=2, then firm 2 is deleted from the computation.
" If delfirm--3, then firm 3 is deleted from the 
computation. num = 3
IF delfirm s num THEN GOTO APMSUB2:
anum -num ,anum z number of producing

[[Page 29194]]

APM firms.
IF delfirm > 0 THEN
IF delfirm <= num THEN anum =num--1
END IF
tnum--anum "tnum = total number of producing firms
FOR firm = 1 TO 3
qtemp
(firm) = 0
pitemp (firm) = 0
NEXT firm costsum = 0
FOR firm = 1 TO hum
IF firm <> delfirm THEN
costsum--costsum + cost(scen, firm)
END IF
NEXT firm
price = (A + costsum) / (anum + 1)
qtot = 0
FOR firm = 1 TO num
IF firm <> delfirm THEN
qtemp(firm) = (price- cost(scen, firm)) / b

ATTACHMENT P

PAGE 16 of 21

qtot = qtot + qtemp (firm)
pitemp = (price- cost(scen, firm)) * qtemp(firm)
pitemp(firm) = pitemp--fc
END IF
IF firm = delfirm THEN
qtemp(firm) = 0
pitemp(firm) = 0
END IF
NEXT firm
cstemp = qtot * (A--price) / 2
pdummy = 1 "Is last firm producing?
IF qtemp(num) < 0 THEN pdummy = 0
IF pitemp(num) < 0 THEN pdummy = 0
IF pdummy = 0 THEN GOSUB APMSUB2:
RETURN
"***** END OF APMcompute SUBMODULE *****
APMSUB2:
"Submodule of APMcompute submodule, " to compute prices 
and quantities " when fewer than 3 firms are producing.
num = 2
IF delfirm =num THEN GOTO APMSUB1:
anum =num "anum = number of producing APM firms.
IF delfirm > 0 THEN
IF delfirm <5 num THEN anum = hum--1
END IF
tnum = anum "tnum = total number of producing firms
FOR firm = 1 TO 3
qtemp(firm) = 0
pitemp (firm) = 0
NEXT firm costsum = 0
FOR firm = 1 TO num
IF firm <> delfirm THEN
costsum = costsum + cost(scen, firm)
END IF
NEXT firm
price = (A + costsum) / (anum + 1)
qtot = 0
FOR firm = 1 TO num
IF firm <> delfirm THEN
qtemp(firm) = (price--cost(scen, firm)) / b

ATTACHMENT P

PAGE 17 of 21

qtot = qtot + qtemp(firm)
pitemp--(price--cost(scen, firm)) * qtemp(firm)
pitemp(firm) = pitemp--fc
END IF
IF firm = delfirm THEN
qtemp(firm) = 0
pitemp(firm) = 0
END IF
NEXT firm
cstemp = qtot * (A--price) / 2
pdummy = 1 "Is last firm producing?
IF qtemp(num) < 0 THEN pdummy = 0
IF pitemp(num) < 0 THEN pdummy = 0
IF pdummy = 0 THEN GOSUB APMSUB1:
RETURN
"***** END OF APMsub2SUBMODULE *****
*
*
APMSUB1:
"Submodule of APMcompute/APMsub2 submodules, " to 
compute prices and quantities " when fewer than 2 firms are 
producing.
num = 1
IF delfirm -num THEN GOTO APMSUB0:
anum = hum "anum = number of producing APM firms.
IF delfirm > 0 THEN
IF delfirm <= num THEN anum =num--1
END IF
tnum = anum "tnum = total number of producing firms
FOR firm = 1 TO 3
qtemp(firm) = 0
pitemp(firm) = 0
NEXT firm costsum = 0
FOR firm = 1 TO hum
IF firm <> delfirm THEN
costsum = costsum + cost(scen, firm)
END IF
NEXT firm
price = (A + costsum) / (anum + 1)
qtot = 0
FOR firm = 1 TO num
IF firm <> delfirm THEN
qtemp(firm) = (price- cost(scen, firm)) / b
qtot = qtot + qtemp(firm)
pitemp = (price--cost(scen, firm)) * qtemp(firm)
pitemp(firm) = pitemp--fc
END IF
IF firm = delfirm THEN
qtemp(firm) = 0
pitemp(firm) = 0
END IF
NEXT firm
cstemp = qtot * (A--price) / 2
pdummy = 1 "Is last firm producing?
IF qtemp(num) < 0 THEN pdummy = 0
IF pitemp(num) < 0 THEN pdummy = 0
IF pdummy--0 THEN GOSUB APMSUB0:
RETURN
"***** END OF APMsub1 SUBMODULE *****
APMSUB0:
"Submodule of APMcompute/APMsub2,1 submodules, to compute 
prices and quantities when no firms are producing.
hum = 0
anum =num "anum = number of producing APM firms.
tnum t anum "tnum--total number of producing firms
FOR firm--1 TO 3
qtemp(firm)--0
pitemp(firm) = 0
NEXT firm
price = A
cstemp = 0
RETURN
"***** END OF APMsub0 SUBMODULE *****
PRINTTRAN0:
This submodule prints the transition factors for iteration zero, 
including average consumer surplus, average profits for Microsoft 
and its competitors, average market share for Microsoft, the 
industry-wide Herfindahl-Hershman Index (HHI), and the average 
number of main firms in the industry.
"These transition factors must be multiplied by Microsoft's 
"annual monopoly revenues to determine dollar values.

ATTACHMENT P

PAGE 19 of 21

cstot = 0
pimstot = 0
picomptot = 0
mktshare = 0
herfindahl = 0
firmnum--0
scen = 0 .Choose scen=scen0 to assume competitors in period 0.
FOR firm1 = 0 TO 3
FOR firm2--0 TO 3
pair = 4 * firm1 + firm2
tempprob = problr(scen, pair)
cstot = cstot + cs(scen, pair) * tempprob
pimstot = pimstot + pims(scen, pair) * tempprob
picomptot = picomptot + picomp(scen, pair) * tempprob
mktshare s mktshare + sharems(scen, pair) * tempprob
herfindahl--herfindahl + herf(scen, pair) * tempprob
firmnum = firmnum + pnum(scen, pair) * tempprob
NEXT firm2
NEXT firm1
PRINT #3, "Iter";
PRINT #3, . ConsumerSurpls ";
PRINT #3, "Profit(MS) ";
PRINT #3, "Profit(comp) ";
PRINT #3, . MktShare(l-MS)";
PRINT #3, . MktShare(n-MS)";
PRINT #3, "Herfindahl ";
PRINT #3, .. # firms "
PRINT #3, USING "###"; 0;
PRINT #3, USING
"###.##########
###"; cstot; pimstot; picomptot;
PRINT #3, USING 
"####.#########
##"; mktshare * I00; msfirms *
mktshare * I00;
PRINT #3, USING 
"######.#######
##"; herfindahl;
PRINT #3, USING 
"##.###########
##"; firmnum
RETURN
,***** END OF PrintTran0 SUBMODULE *****
PRINTTRAN:
"This submodule prints the transition factors for each 
subsequent iteration, including average consumer surplus, average 
profits for Microsoft and its competitors, average market share for 
Microsoft, the industry-wide Herfindahl-Hershman Index (HHI), and 
the average number of main firms in the industry.

[[Page 29195]]

ATTACHMENT P

PAGE 20 of 21

 "These transition factors must be multiplied by Microsoft's 
" annual monopoly revenues to determine true dollar values.
cstot = 0
pimstot--0
picomptot = 0
mktshare--0
herfindahl = 0
firmnum = 0
FOR seen = 1 TO 35
FOR firm1--0 TO 3
FOR firm2 = 0 TO 3
pair--4 * firm1 + firm2
 tempprob = problr(scen, pair)
cstot = cstot + cs(scen, pair) * tempprob
pimstot = pimstot + pims (scen, pair) * tempprob
picomptot = picomptot + picomp(scen, pair) * tempprob
mktshare--mktshare + sharems (scen, pair) * tempprob
herfindahl--herfindahl + herf(scen, pair) * tempprob
firmnum = firmnum + pnum(scen, pair) * tempprob
NEXT firm2
NEXT firm1
NEXT scen
PRINT #3, USING "###"; iter;
PRINT #3, USING
"###.########
####
m;#"; cstot; pimstot; picomptot;
PRINT #3, USING
"####. #######
####"; mktshare * i00; msfirms *
mktshare * 100t
PRINT #3, USING 
"######. #####
####"; herfindahl;
PRINT #3, USING 
"##.###########
##"; firmnum
RETURN
"***** END OF PrintTran0 SUBMODULE *****
PROBREAD0 :
LINE INPUT #2, temps
FOR firm1 = 0 TO 3
INPUT #2, iter2, scen0, firm
IF 0 <> iter2 THEN PRINT "Iteration mismatch:"; 0; 
iter2
IF firm <> firm1 THEN PRINT "Firm1 mismatch:"; 
firm1; firm
FOR firm2 = 0 TO 3
pair = firm1 * 4 + firm2
INPUT #2, problr(0, pair)
NEXT firm2
NEXT firm1
RETURN

ATTACHMENT P

PAGE Z1 of 21

"***** END OF ProbRead0 SUBMODULE *****
PROBREAD:
FOR scen- 1 TO 35
FOR firm1 = 0 TO 3
INPUT #2, iter2, scen2, firm
IF iter <> iter2 THEN PRINT "Iteration mismatch:"; 
iter;
iter2
IF scen <> scen2 THEN PRINT "Scenario mismatch:"; 
scen;
cen2
IF firm <> firm1 THEN PRINT "Firm1 mismatch:"; 
firm1; firm
"FOR firm2--0 TO 3
pair = firm1 * 4 + firm2
INPUT #2, problr(scen, pair)
NEXT firm2
NEXT firm1
NEXT scen
RETURN
,***** END OF ProbRead SUBMODULE *****
"**********END OF Program .MS5TranR.bas".**********

ATTACHMENT Q

PAGE 1 of 24

Attachment Q.

"BASIC Program "MS6Summ,bas".
"Program Number 6 in a series of six programs "designed 
to simulate alternative antitrust "remedies for the Microsoft 
software industry.
"Copyright, January 23, 2002, Carl Lundgren.
" This program, ,,MS6Summ.bas", computes and summarizes 
the data "produced by prior programs, including both 
"MS4TranA.bas" "and "MS5TranR.bas".
" This program summarizes in the form "of aggregates and 
comparisons the economic meaning "of the transitions data that 
were outputted by "the "MS4TranA.bas and 
"MS5TranR.bas" programs. "This program reads in 
the various "TRAN .... txt" "and "TRPM .... 
txt" files produced by the prior programs "in order to 
create summary files for the aggregates:
(0) No remedy at all, continued monopoly by Microsoft.
(I) 100% effective conduct remedy starting in 2002.
(la) Intermediate conduct remedies, varying in effectiveness: 20%, 
40%, 60%, 80%.
(1b) Structural two-monopolies remedy, computed as having outcomes 
equivalent to one-third value of 2-firm competitive APM structural 
remedy and two-thirds value of 1004 conduct remedy.
(2) Structural 2-firm APM remedy starting in 2005.
(3) Structural 3-firm APM remedy starting in 2005.
    (4-15) Structural 2-firm RPM remedies for z=0.1 through 
z=0.9, starting in 2005.
    (16) Lawful behavior since 1995. and for the comparisons:
    (17) Aggregates for all the above alternatives, minus the 
aggregates for the lawful path.
    The program uses the transition data to estimate consumer 
surplus and profits in each of the years 1995-2025. 
Transitions are assumed to take place over a period of 3, 5, or 8 
years each. Years in between the transition years are linearly 
interpolated. These four time paths are aggregated and compared for 
three sums over three time periods: I) Sum of consumer surpluses.
    (2) Sum of non-Microsoft profits.
    (3) Sum of Microsoft profits.
    (4) Sum of total surpluses.
    (A) Time period 1995-2001.
    (B) Time period 2002-2025.
    (C) Time period 1995-2025.
    The program reads in data for Microsoft's monopoly revenues by 
year, multiplies them by the relevant factor multipliers given by 
the Transition files (TRAN & TRPM), and computes interest or 
discounts at 7% real annual interest rate to billions of year 2002 
real dollars.
    The program produces data summarized for particular scenarios in 
files marked "AGGC .... txt", "AGGR .... 
txt", and "YEAR .... txt".
    The "AGGC .... txt" files (which are most user 
friendly) summarize all past and future data, appropriately 
discounted, into a single set of figures which may be compared 
across remedy proposals.
    The "AGGR .... txt" files categorize the aggregate 
data into past and future amounts of consumer surplus, profits, and 
total surplus for each remedy proposal, and how these amounts 
compare with the same amounts along the lawful path.
    The "YEAR .... txt" files (which are least user 
friendly) output the calculated amounts, by year, for each remedy 
proposal and the lawful path.
    DEFDBL A-Z
DIM aggcs(16, 3), aggcomp(16, 3), aggms(16, 3), aggts(16, 3)
Aggregates
DIM compcs(16, 3), compcomp(16, 3), compms(16, 3), compts(16, 3)
Comparisons
DIM aggcsmin(16, 3), aggcompmin(16, 3), aggmsmin(16, 3),
aggtsmin(16, 3) ,Minimums
DIM compcsmin(16, 3), compcompmin(16, 3), compmsmin(16, 3),
comptsmin(16, 3) "Minimums
DIM aggcsmax(16, 3), aggcompmax (16, 3), aggmsmax(16, 3),
aggtsmax(16, 3) "Maximums
DIM compcsmax(16, 3), compcompmax(16, 3), compmsmax(16, 3),
comptsmax(16, 3) "Minimums
DIM aggcsavg(16, 3), aggcompavg(16, 3), aggmsavg(16, 3),
aggtsavg(16, 3) ,Averages
DIM compcsavg(16, 3), compcompavg(16, 3), compmsavg(16, 3),
IF port >= 0 THEN "Always true; change to restrict 
statistics gathering.
pvtotal--pvtotal + pvtemp
avgtotal--avgtotal + 1
FOR p = 0 TO 14
FOR t = 1 TO 3
First put numbers into temporary variable slots.
    aggcstemp = aggcs (p, t)
    aggcomptemp--aggcomp(p, t)
    aggmstemp = aggms(p, t)
    aggtstemp = aggts(p, t)
    compcstemp--compcs (p, t)
    compcompttemp = compcomp(p, t)
    compmstemp = compms(p, t)
    comptstemp = compts(p, t)
Second compute minimum values
    IF aggcstemp < aggcsmin(p, t) THEN aggcsmin(p, t) = aggcstemp
    IF aggcomptemp < aggcompmin(p, t) THEN aggcompmin(p, t) 
aggcomptemp
    IF aggmstemp < aggmsmin(p, t) THEN aggmsmin(p, t) = aggmstemp
    IF aggtstemp < aggtsmin(p, t) THEN aggtsmin(p, t) = aggtstemp
    IF compcstemp < compcsmin(p, t) THEN compcsmin(p, t) 
compcstemp

[[Page 29196]]

    IF compcompttemp < compcompmin(p, t) THEN compcompmin(p, t) = 
compcompttemp
    IF compmstemp < compmsmin(p, t) THEN compmsmin(p, t) = compms 
temp
    IF comptstemp < comptsmin(p, t) THEN comptsmin(p, t) = 
comptstemp
Third compute maximum values
    IF aggcstemp * aggcsmax(p, t) THEN aggcsmax(p, t) s aggcstemp
    IF aggcomptemp * aggcompmax(p, t) THEN aggcompmax(p, t)-- 
aggcomptemp
    IF aggmstemp * aggmsmax(p, t) THEN aggmsmax(p, t) -aggmstemp
    IF aggtstemp * aggtsmax(p, t) THEN aggtsmax(p, t) = aggtstemp
    IF compcstemp * compcsmax(p, t) THEN compcsmax(p, t) = 
compcstemp
    IF compcompttemp * compcompmax(p, t) THEN compcompmax(p, t) = 
compcompttemp
    IF compmstemp * compmsmax(p, t) THEN compmsmax(p, t)-- 
compmstemp
    IF comptstemp > comptsmax(p, t) THEN comptsmax(p, t)-- 
comptstemp
Fourth compute average values
comptsavg(16, 3), Averages
DIM aggcswtd(16, 3), aggcompwtd(16, 3), aggmswtd(16, 3), 
aggtswtd(16, 3) "Weighted Averages
DIM compcswtd(16, 3), compcompwtd(16, 3), compmswtd(16, 3), 
comptswtd(16, 3) ,Weighted Averages
CONTROL MODULE
CLS
timex = TIMER
    ystart = 1995 "Start year for antitrust analysis.
    yend--2025 "End year for antitrust analysis.
    cstart = 2002 "Year to start conduct remedies.
    sstart = 2005 "Year to start structural remedies.
GOSUB PVSETUP:
    revstream = 1 ,****User chooses revenue stream = 1,2,3,4.
GOSUB READREVENUES : "Read in Microsoft" s revenues by 
year.
GOSUB READZCOUNT:
This control module calls the main module 75 times.
    FOR cratio--1 TO 5
    FOR speed = 1 TO 3
    FOR port--0 TO 4
GOSUB MAINMODULE :
NEXT port
NEXT speed
NEXT cratio
GOSUB PRINTSTATS: "Print Macro Statistics
PRINT TIMER--timex
END
f
MAINMODULE:
GOSUB FILENAMES1: "Assign file name to input & output 
files.
GOSUB TRANSREAD: "Read in transitions data.
FOR length = 1 TO 3
    Tyears--Number of years between transitions.
    This program chooses Tyears=3, 5, or 8.
IF length--1 THEN tyears = 3
IF length = 2 THEN tyears = 5
IF length--3 THEN tyears z 8
GOSUB NOREMEDY: ,Compute outcomes for unlawful monopoly path.
GOSUB LAWFUL: ,Compute outcomes for lawful competitive path.
GOSUB CONDUCT: "Compute outcomes for conduct remedy path.
GOSUB STRUCTURAL: "Compute outcomes for structural remedy 
paths.
GOSUB PRINTYEARS: ,Compute and print year data into files.
GOSUB AGGREGATE: "Aggregate years for each path.
GOSUB COMPARE: ,Compare aggregates between paths.
GOSUB MACROSTATS: "Compute averages, weighted averages, 
minimums, maximums.
GOSUB PRINTAGGCOMP: "Print individual aggregates and 
comparisons.
GOSUB PRINTAGGSHORT: "Print one-page individual aggregates and 
comparisons.
GOSUB PRINTAGGSUMM: "Print summary of all aggregates & 
comparisons
NEXT length
RETURN
***** END OF MAIN MODULE *****
PVSETUP:
Submodule to open file and set initial values
    for MACROSTATS submodule.
pvfile$ = "c:/basic/ms _sim/PointVal.csv" Input 
Point Values for weighted averages.
OPEN pvfile$ FOR INPUT AS #21
LINE INPUT #21, temps
pvtotal = 0
avgtotal = 0
FOR p = 0 TO 14
FOR t =I TO 3
    Initialize minimum values at high number.
    aggcsmin(p, t) = 999999999999#
    aggcompmin(p, t)--999999999999#
    aggmsmin(p, t) = 999999999999#
    aggtsmin(p, t) = 999999999999#
    compcsmin(p, t) = 999999999999#
    compcompmin(p, t) = 999999999999#
    compmsmin(p, t) = 999999999999#
    comptsmin(p, t)--999999999999#
    Initialize maximum values at low number.
    aggcsmax(p, t) = -999999999999#
    aggcompmax(p, t) m-999999999999#
    aggmsmax(p, t) --999999999999#
    aggtsmax(p, t) = -999999999999#
    compcsmax(p, t) = -999999999999#
    compcompmax(p, t) = -999999999999#
    compmsmax(p, t) = -999999999999#
    comptsmax(p, t) --999999999999#
Initialize average values at zero.
    aggcsavg(p, t)--0
    aggcompavg(p, t) = 0
    aggmsavg(p, t) = 0
    aggtsavg(p, t) = 0
    compcsavg(p, t) , 0
    compcompavg(p, t) = 0
    compmsavg(p, t) = 0
    comptsavg(p, t) = 0
Initialize weighted average values at zero.
    aggcswtd(p, t) --0
    aggcompwtd(p, t) = 0
    aggmswtd(p, t) --0
    aggtswtd(p, t) -0
    compcswtd(p, t) = 0
    compcompwtd(p, t) = 0
    compmswtd(p, t) = 0
    comptswtd(p, t) -0
NEXT t
NEXT p
RETURN ,***** END OF PVsetup SUBMODULE ***** READREVENUES:
Read in Microsoft's revenues by year.
    Revenues should only pertain to the monopoly portions of 
Microsoft's revenues.
Revenues should be converted to real dollars (relative to general 
prices) prior to input. Future revenues are projections, under the 
assumption that Microsoft remains a monopoly. rev$ = .c:/basic/
ms_sim/ms_rev.csv" "Input revenues data.
DIM rev(30), discount(30)
"First read in revenue data.
OPEN rev$ FOR INPUT AS #1
FOR n = 1 TO 5
    LINE INPUT #I, temp$
NEXT n
FOR year--ystart TO yend ysub = year--ystart
    INPUT #I, year2, rev1, rev2, rev3, rev4
    IF year2 <> year THEN PRINT "Year mismatch for 
revenue data:";
year; year2
IF revstream = 1 THEN rev(ysub) = rev1
IF revstream = 2 THEN rev(ysub) = rev2
IF revstream = 3 THEN rev(ysub) = rev3
IF revstream = 4 THEN rev(ysub) = rev4
NEXT year
CLOSE #I
"Second compute adjustments to revenue data for computing 
aggregates.
, adjustment uses 7% per annum real interest/discount rate,
, adjusted to 2002 (cstart) dollars.
adjust = 1
    ysub = (cstart--1)--ystart
    discount(ysub) = adjust
FOR year = cstart--2 TO ystart STEP -1
    ysub = year--ystart
    adjust--adjust * 1.07
    discount(ysub) = adjust
NEXT year
    adjust = 1
FOR year = cstart TO yend
    ysub = year--ystart
    adjust = adjust / 1.07
    discount(ysub) = adjust
    NEXT year
"Third (optional) output adjusted revenue data.
rev2$--,,c:/basic/ms_sim/out/
disc_rev.txt"Output adjusted revenues data.
OPEN rev2$ FOR OUTPUT AS #I
FOR year--ystart TO yend ysub = year--ystart
    PRINT #1, USING "####"; year;
    PRINT #1, USING 
"#####.######"
; rev(ysub);
    PRINT #1, USING 
"#####.######"
; discount(ysub);
    PRINT #1, USING 
"#####.######"
; rev(ysub) * discount(ysub)
NEXT year
CLOSE #I
RETURN
***** END OF ReadRevenues SUBMODULE *****
READZCOUNT:
Submodule to read in the relationship between
    zcount and z from previous program, "MS5TranR.bas".
    DIM zpath(14)
    zcount$ = "c:/basic/ms sim/out/zcount.txt" 
"Input zcount data.

[[Page 29197]]

    OPEN zcount$ FOR INPUT AS #I
     LINE INPUT #I, temps
    FOR zcount = 0 TO 9
     INPUT #1, zcount2, zpath(zcount + 4)
     IF zcount2 <> zcount THEN PRINT "Zcount 
mismatch"; zcount;
    zcount2
    NEXT zcount
    CLOSE #I
    RETURN
    ,***** END OF ReadZcount SUBMODULE *****
    f
    f
    FILENAMES1:
    tran1$ = ,,c:/basic/ms--sim/out/tranl000.txt" 
"Input 1-firm
    transition summary
    tran2$ = ,,c:/basic/ms--sim/out/tran2000.txt" Input 
2-firm
    transition summary
    tran3$ = "c:/basic/ms--sim/out/tran3000.txt" 
Input 3-firm
    transition summary
    tran4$ = ,,c:/basic/ms--sim/out/tran4000.txt" Input 
4-firm
    transition summary
    tran5$ = ,,c:/basic/ms--sim/out/tranS000.txt" Input 
5-firm
    transition summary
    trpm0$ = .c:/basic/ms--sim/out/trpm0000.txt" Input 
z=0.0 RPM
    transition summary
    trpm1$ = "c:/basic/ms--sim/out/trpml000.txt" 
Input z=0.1 RPM
    transition summary
    trpm2$ = .c:/basic/ms--sim/out/trpm2000.txt" Input 
z=0.2 RPM
    transition summary
    trpm3$ = .c:/basic/ms--sim/out/trpm3000.txt" Input 
z=0.3 RPM
    transition summary
    trpm4$ = .c:/basic/ms--sim/out/trpm4000.txt" Input 
z=0.4 RPM
    transition summary
    trpm5$ = ,,c:/basic/ms--sim/out/trpmS000.txt" Input 
z=0.5 RPM
    transition summary
    trpm6$ = ,,c:/basic/ms--sim/out/trpm6000.txt" Input 
z=0.6 RPM
    transition summary
    trpm7$ = .c:/basic/ms sim/out/trpmT000.txt" Input z=0.7 
RPM
    transition summary
    trpm8$ = .c:/basic/ms--sim/out/trpmS000.txt" Input 
z=0.8 RPM
    transition summary
    trpm9$ = .c:/basic/ms--sim/out/trpmg000.txt" 
"Input z=0.9 RPM



MTC-00030631--0182

    ATTACHMENT Q
    PAGE 8 of 24
     transition summary year3$ = ,,c:/basic/ms--sim/out/
year0003.txt" "Output 3-year factors by year
    year5$ = "c:/basic/ms--sim/out/year0005.txt" 
"Output 5-year factors by year
    year8$ = ,,c:/basic/ms--sim/out/year0008.txt" 
"Output 8-year factors by year
    aggr3$ = ,,c:/basic/ms sim/out/aggr0003.txt" "Output 
aggregate 3- year factors
    aggr5$ = .c:/basic/ms--sim/out/aggr0005.txt" 
"Output aggregate 5- year factors
    aggr8$ = ,,c:/basic/ms--sim/out/aggr0008.txt" 
"Output aggregate 8- year factors
    aggc3$ = ,,c:/basic/ms--sim/out/aggc0003.txt" 
"One-page aggregate 3-year factors
    aggc5$--.c:/basic/ms--sim/out/aggc0005.txt" 
"One-page aggregate 5-year factors
    aggc8$ = .c:/basic/ms sim/out/aggc0008.txt" "One-
page aggregate 8-year factors
IF cratio = 1 THEN crt$ = "1"
IF cratio = 2 THEN crt$ = "2"
IF cratio = 3 THEN crt$ = "3"
IF cratio--4 THEN crt$--"4"
IF cratio = 5 THEN crt$ = "5"
IF speed = 1 THEN sp$ = "1"
IF speed = 2 THEN sp$ = "2"
IF speed = 3 THEN sp$ = "3"
IF port = 0 THEN prt$ = "0"
IF port = 1 THEN prt$ = "I"
IF port = 2 THEN prt$ = "2"
IF port = 3 THEN prt$ = "3"
IF port = 4 THEN prt$ = "4"
replaces =crt$ + sp$ + prt$
MID$(tran1$, 26, 3) = replace$
MID$(tran2$, 26, 3) = replace$
MID$(tran3$, 26, 3)--replace$
MID$(tran4$, 26, 3)--replace$
MID$(tran5$, 26, 3) = replace$
MID$(trpm0$, 26, 3) = replace$
MID$(trpm1$, 26, 3)--replace$
MID$(trpm2$, 26, 3)--replace$
MID$(trpm3$, 26, 3) = replace$
MID$(trpm4$, 26, 3) = replace$
MID$(trpm5$, 26, 3)--replace$
MID$(trpm6$, 26, 3) = replace$
MID$(trpm7$, 26, 3) = replace$
MID$(trpm8$, 26, 3)--replace$
MID$(trpm9$, 26, 3) = replace$
MID$(year3S, 25, 3) = replace$
MID$(year5$, 25, 3) = replace$
MID$(year8$, 25, 3) = replace$
MID$(aggr3$, 25, 3) = replace$
MID$(aggr5$, 25, 3)--replace$
MID$(aggr8$, 25, 3) = replace$
MID$(aggc3$, 25, 3) . replace$
MID$(aggc5$, 25, 3) = replace$
MID$(aggc8$, 25, 3) = replace$
 PRINT replace$; "";
 RETURN
 "***** END OF FileNames1 SUBMODULE *****
TRANSREAD:
,Submodule to read in transitions data for time paths:
" 1) Microsoft starts as monopoly.
" 2) Microsoft starts as two APM firms.
" 3) Microsoft starts as three APM firms.
" 4-13) Microsoft starts as two RPM firms (z varies).
FOR p = 1 TO 13
IF p = 1 THEN filein$--tran1$
IF p = 2 THEN filein$ = tran2$
IF p = 3 THEN filein$ = tran3$
IF p = 4 THEN filein$ = trpm0S
IF p = 5 THEN filein$ = trpm1$
IF p = 6 THEN filein$--trpm2$
IF p = 7 THEN filein$--trpm3$
IF p = 8 THEN filein$ = trpm4$
IF p--9 THEN filein$ = trpm5$
IF p = I0 THEN filein$--trpm6$
IF p = ii THEN filein$ = trpm7$
IF p = 12 THEN filein$--trpm8S
IF p = 13 THEN filein$ = trpm9$
OPEN filein$ FOR INPUT AS #30
LINE INPUT #30, temp$
DIM cstot(15, ii), pimstot(15, 11), picomptot(15, 11), herf(15, 11)
F0R iter = 0 TO I0
    INPUT #30, iter2, cstot(p, iter), pimstot(p, iter), 
picomptot(p, iter)
    INPUT #30, mktshare1, mktshare2, herf(p, iter), firmnum1
    IF iter <> iter2 THEN PRINT "Iteration mismatch 
#", p, iter, iter1
NEXT iter
CLOSE #30
cstot(p, ii) = 0
pimstot(p, ii) E 0
picomptot(p, 11) = 0
herf(p, 11) = 0
NEXT p
RETURN
***** END OF TransRead SUBMODULE *****
NOREMEDY:
Submodule to compute outcomes for unlawful monopoly path, where 
Microsoft begins as monopoly in 1995, and continues as a monopoly 
through 2025. (Path p=0)
DIM csy(30, 14), pimsy(30, 14), picompy(30, 14), hhi(30, 14)
FOR year--ystart TO yend
    ysub = year--ystart
    tsub = 0
    csy(ysub, 0) = cstot(l, tsub)
    pimsy(ysub, 0) -pimstot(l, tsub)
    picompy(ysub, 0) = picomptot(l, tsub)
    hhi(ysub, 0) = herf(l, tsub)
    NEXT year
    RETURN
    ***** END OF NoRemedy SUBMODULE *****
    LAWFUL:
    Submodule to compute outcomes for lawful competitive path, where 
Microsoft begins as monopoly in 1995, but competitive conditions 
exist whereby competitors are free to enter. (Path p=14)
    plaw = 14
FOR year--ystart TO yend
    ysub = year--ystart
    tsub--ysub / tyears
    tsub1 = INT(tsub)
    tsub2 = tsub1 + 1
    tfrac1 = tsub--tsub1
    tfrac2 = tsub2 tsub
    csy(ysub, plaw) = cstot(l, tsub1) * tfrac2 + cstot(l, tsub2) *
    tfrac1
    pimsy(ysub, plaw) = pimstot(l, tsub1) * tfrac2 + pimstot(1, 
tsub2) * tfrac1
    picompy(ysub, plaw) = picomptot(l, tsub1) * tfrac2 + 
picomptot(l, tsub2) * tfrac1
    hhi(ysub, plaw) = herf(1, tsub1) * tfrac2 + herf(l, tsub2) * 
tfrac1
NEXT year
RETURN
***** END OF Lawful SUBMODULE *****
CONDUCT:
Submodule to compute outcomes for conduct remedy path, where 
Microsoft exists as a monopoly in 1995-2001, but competitive 
conditions begin in 2002 (cstart) whereby competitors are free to

[[Page 29198]]

enter. (Path p=1)
FOR year = ystart TO cstart--1
    ysub = year--ystart
    tsub = 0
    csy(ysub, I) = cstot(l, tsub)
    pimsy(ysub, I) = pimstot(l, tsub)
    picompy(ysub, 1) = picomptot(1, tsub)
    hhi(ysub, 1) = herf(l, tsub)
NEXT year
    Cstart1--cstart--1
FOR year = cstart TO yend
    ysub = year--ystart
    tsub = (year--cstart1) / tyears
    tsub1 = INT(tsub)
    tsub2 = tsub1 + 1
    tfrac1= tsub--tsub1
    tfrac2 = tsub2--tsub
    csy(ysub, I) = cstot(l, tsub1) * tfrac2 + cstot(l, tsub2) * 
tfrac1
    pimsy(ysub, I) = pimstot(1, tsub1) * tfrac2 + pimstot(1, tsub2) 
* tfrac1
    picompy(ysub, 1) = picomptot(1, tsub1) * tfrac2 + picomptot(l, 
tsub2) * tfrac1
    hhi(ysub, 1) = herf(l, tsub1) * tfrac2 + herf(l, tsub2) * tfrac1
NEXT year



MTC-00030631 0186

RETURN
***** END OF Conduct SUBMODULE *****
STRUCTURAL:
Submodule to compute outcomes for structural remedy paths, where 
Microsoft exists as a monopoly in 1995-2004, but Microsoft is 
divided into 2 or 3 firms in 2005 and competitive conditions exist 
thereafter.
    Path p=2, Microsoft divided into 2 APM firms.
    Path p=3, Microsoft divided into 3 APM firms.
    Paths p=4 thru p=13, Microsoft divided into 2 RPM firms, where z 
is allowed to vary.
    FOR p = 2 TO 13
    FOR year = ystart TO sstart--1
    ysub = year--ystart
    tsub = 0
    csy(ysub, p) = cstot(l, tsub)
    pimsy(ysub, p) = pimstot(1, tsub)
    picompy(ysub, p) = picomptot(l, tsub)
    hhi (ysub, p) = herf (I, tsub)
    NEXT year
FOR year = sstart TO yend
    ysub = year--ystart
    tsub = (year--sstart) / tyears
    tsub1 = INT(tsub)
    tsub2 = tsub1 + 1
    tfrac1 = tsub--tsub1
    tfrac2 = tsub2--tsub
    csy(ysub, p) = cstot(p, tsub1) * tfrac2 + cstot(p, tsub2) * 
tfrac1
    pimsy(ysub, p) = pimstot(p, tsub1) * tfrac2 + pimstot(p, tsub2) 
* tfrac1
    picompy(ysub, p) = picomptot(p, tsub1) * tfrac2 + picomptot(p, 
tsub2) * tfrac1
    hhi(ysub, p) = herf(p, tsub1) * tfrac2 + herf(p, tsub2) * tfrac1
NEXT year
NEXT p
RETURN
***** END OF Structural SUBMODULE *****
PRINTYEARS:



MTC-00030631--0187

    Submodule to compute and print the data by year into files.
    Computed data consists of consumer surplus (cs), profits for 
Microsoft (pims), profits for competitors (picomp), and Herfindahl-
Hershman Index (HHI).
    Data is computed for several time paths:
No remedy (continued monopoly) path=0;
Perfect conduct remedy starting in 2002 (path=l);
Structural remedies starting in 2005 (paths=2-13);
Lawful path (competitive behavior) since 1995 (path=f4).
First adjust year factors by multiplying with revenue data.
The computed year data is expressed in real terms, but is not 
adjusted for 7% interest/discount rate.
FOR year = ystart TO yend
    ysub = year--ystart
    FOR path = 0 TO 14
    csy(ysub, path) = csy(ysub, path) * rev(ysub)
    pimsy(ysub, path) = pimsy(ysub, path) * rev(ysub)
    picompy(ysub, path) = picompy(ysub, path) * rev(ysub)
    NEXT path
NEXT year
Second (optional) print the year data into files.
IF tyears = 3 THEN OPEN year3$ FOR OUTPUT AS #6
IF tyears = 5 THEN OPEN year5$ FOR OUTPUT AS #6
IF tyears = 8 THEN OPEN year8$ FOR OUTPUT AS #6
FOR year = ystart TO yend
    ysub = year--ystart
    PRINT #6, USING "####"; year;
    FOR path = 0 TO 14
    PRINT #6, USING 
"#####.########
##"; csy(ysub, path);
    NEXT path
    PRINT#6,
NEXT year
    PRINT #6,
FOR year = ystart TO yend ysub = year--ystart
    PRINT #6, USING "####"; year;
    FOR path = 0 TO 14
    PRINT #6, USING 
"#####.########
##"; pimsy(ysub, path);
    NEXT path
    PRINT #6,
NEXT year
    PRINT #6,
FOR year = ystart TO yend
    ysub = year--ystart



MTC-00030631--0188

PRINT #6, USING "####"; year;
FOR path = 0 TO 14
    PRINT #6, USING 
"#####.########
##"; picompy(ysub, path);
NEXT path
PRINT #6,
NEXT year
PRINT #6,
FOR year = ystart TO yend ysub = year--ystart
PRINT #6, USING "####"; year;
FOR path = 0 TO 14
    tstot = csy(ysub, path) + pimsy(ysub, path) + picompy(ysub, 
path)
PRINT #6, USING 
"#####.########
##"; tstot;
NEXT path
PRINT #6,
NEXT year
PRINT #6,
FOR year = ystart TO yend ysub = year--ystart
PRINT #6, USING "####"; year;
FOR path = 0 TO 14
PRINT #6, USING 
"######.#######
##"; hhi(ysub, ;
NEXT path
PRINT #6,
NEXT year
CLOSE #6
RETURN
***** END OF PrintYears SUBMODULE *****
AGGREGATE:
    Submodule to aggregate years for each path.
    Agg.. (p,t) is the aggregate for path p, time period t.
    p=0, no remedy path;
    p=1, 1-firm conduct remedy path;
    p=2, 2-firm structural remedy path.
    p=3, 3-firm structural remedy path.
    p=4 to p=13, 2-firm RPM structural remedy path.
    p=14, lawful path;
    t=1, 1995-2001; t=2, 2002-2025; t=3, 
1995-2025.
    AggCS = Aggregate for consumer surplus.
    AggComp = Aggregate for non-Microsoft profits.
    AggMS = Aggregate for Microsoft's profits.



MTC-00030631--0189

    AggTS = Aggregate for total surplus.
    First adjust the year data for 7% discount/interest rate.
FOR year = ystart TO yend
    ysub = year--ystart
FOR path = 0 TO 14
    csy(ysub, path) = csy(ysub, path) * discount(ysub)
    pimsy(ysub, path) = pimsy(ysub, path) * discount(ysub)
    picompy(ysub, path) = picompy(ysub, path) * discount(ysub)
NEXT path
NEXT year
    Second aggregate the data for the three time periods.
FOR path = 0 TO 14
    cstemp = 0
    picomptemp = 0
    mstemp = 0
FOR year = ystart TO cstart--1
    ysub = year--ystart
    cstemp = cstemp + csy(ysub, path)
    picomptemp = picomptemp + picompy(ysub, path)
    mstemp = mstemp + pimsy(ysub, path)
NEXT year
    aggcs(path, 1) = cstemp
    aggcomp (path, 1) = picomptemp
    aggms (path, 1) = mstemp
    aggts(path, 1) = cstemp + picomptemp + mstemp
    cstemp = 0
    picomptemp = 0
    mstemp = 0
FOR year = cstart TO yend
    ysub = year ystart
    cstemp = cstemp + csy(ysub, path)

[[Page 29199]]

    picomptemp = picomptemp + picompy(ysub, path)
    mstemp = mstemp + pimsy(ysub, path)
NEXT year
    aggcs(path, 2) = cstemp
    aggcomp(path, 2) = picomptemp
    aggms(path, 2) = mstemp
    aggts(path, 2) = cstemp + picomptemp + mstemp
    aggcs(path, 3) = aggcs(path, I) + aggcs(path, 2)
    aggcomp(path, 3) = aggcomp(path, 1) + aggcomp(path, 2)
    aggms(path, 3) = aggms(path, 1) + aggms(path, 2)
    aggts(path, 3) = aggts(path, I) + aggts(path, 2)
NEXT path
RETURN



MTC-00030631--0190

END OF Aggregate SUBMODULE *****
COMPARE:
    Submodule to compare aggregates between different time paths.
    Comp.. (c,t) is comparison c for time period t.
    c=0, no remedy path minus lawful competitive path.
    c=1, 1-firm conduct remedy path minus lawful competitive path.
    c=2, 2-firm structural remedy path minus lawful competitive 
path.
    c=3, 3-firm structural remedy path minus lawful competitive 
path.
    c=4, 4-firm structural remedy path minus lawful competitive 
path.
    c=5, 5-firm structural remedy path minus lawful competitive 
path.
    t=1 1995-2001; t=2, 2002-2025; t=3, 1995-2025;
    CompCS = Comparison for consumer surplus.
    CompComp = Comparison non-Microsoft profits.
    CompMS = Comparison for Microsoft's profits.
    CompTS = Comparison for total surplus.
FOR c = 0 TO 13
FOR t = 1 TO 3
    compcs(c, t) = aggcs(c, t) -aggcs(plaw, t)
    compcomp(c, t) = aggcomp(c, t) aggcomp(plaw, t)
    compms(c, t) = aggms(c, t) -aggms(plaw, t)
    compts(c, t) = aggts(c, t)--aggts(plaw, t)
NEXT t
NEXT c
RETURN
***** END OF Compare SUBMODULE *****
MACROSTATS:
    Submodule to compute averages, weighted averages, minimums, 
maximums.
INPUT #21, cratio2, speed2, port2, tyears2, pvtemp
    IF cratio <> cratio2 THEN PRINT "Cost-ratio 
mismatch:"; cratio; cratio2
    IF speed <> speed2 THEN PRINT "Speed 
mismatch:"; speed; speed2
    IF tyears <> tyears2 THEN PRINT "Tyears 
mismatch:"; tyears; tyears2
    IF port <> port2 THEN PRINT "Portion 
mismatch:"; port; port2



MTC-00030631--0191

    IF port >= 0 THEN "Always true; change to restrict 
statistics gathering.
    pvtotal = pvtotal + pvtemp
    avgtotal = avgtotal + 1
FOR p = 0 TO 14
FOR t = 1 TO 3
    First put numbers into temporary variable slots.
    aggcstemp = aggcs(p, t)
    aggcomptemp = aggcomp(p, t)
    aggmstemp = aggms(p, t)
    aggtstemp = aggts(p, t)
    compcstemp = compcs(p, t)
    compcompttemp = compcomp(p, t)
    compmstemp = compms(p, t)
    comptstemp = compts(p, t)
    Second compute minimum values
    IF aggcstemp < aggcsmin(p, t) THEN aggcsmin(p, t) = aggcstemp
    IF aggcomptemp < aggcompmin(p, t) THEN aggcompmin(p, t) = 
aggcomptemp
    IF aggmstemp < aggmsmin(p, t) THEN aggmsmin(p, t) = aggmstemp
    IF aggtstemp < aggtsmin(p, t) THEN aggtsmin(p, t) = aggtstemp
    IF compcstemp < compcsmin(p, t) THEN compcsmin(p, t)-- 
compcstemp
    IF compcompttemp < compcompmin(p, t) THEN compcompmin(p, t) = 
compcompttemp
    IF compmstemp < compmsmin(p, t) THEN compmsmin(p, t) = 
compmstemp
    IF comptstemp < comptsmin(p, t) THEN comptsmin(p, t) = 
comptstemp
    Third compute maximum values
    IF aggcstemp > aggcsmax(p, t) THEN aggcsmax(p, t) = aggcstemp
    IF aggcomptemp > aggcompmax(p, t) THEN aggcompmax(p, t) = 
aggcomptemp
    IF aggmstemp > aggmsmax(p, t) THEN aggmsmax(p, t) = aggmstemp
    IF aggtstemp > aggtsmax(p, t) THEN aggtsmax(p, t) = aggtstemp
    IF compcstemp > compcsmax(p, t) THEN compcsmax(p, t) = 
compcstemp
    IF compcompttemp > compcompmax(p, t) THEN compcompmax(p, t) = 
compcompttemp
    IF compmstemp > compmsmax(p, t) THEN compmsmax(p, t) = 
compmstemp
    IF comptstemp > comptsmax(p, t) THEN comptsmax(p, t) = 
comptstemp
    Fourth compute average values



MTC-00030631--0192

    aggcsavg(p, t) = aggcsavg(p, t) + aggcstemp
    aggcompavg(p, t) = aggcompavg(p, t) + aggcomptemp
    aggmsavg(p, t) = aggmsavg(p, t) + aggmstemp
    aggtsavg(p, t) = aggtsavg(p, t) + aggtstemp
    compcsavg(p, t) = compcsavg(p, t) + compcstemp
    compcompavg(p, t) = compcompavg(p, t) + compcompttemp
    compmsavg(p, t) = compmsavg(p, t) + compmstemp
    comptsavg(p, t) = comptsavg(p, t) + comptstemp
    Fifth compute weighted average values
    aggcswtd(p, t) = aggcswtd(p, t) + aggcstemp * pvtemp
    aggcompwtd(p, t) = aggcompwtd(p, t) + aggcomptemp * pvtemp
    aggmswtd(p, t) = aggmswtd(p, t) + aggmstemp * pvtemp
    aggtswtd(p, t) = aggtswtd(p, t) + aggtstemp * pvtemp
    compcswtd(p, t) = compcswtd(p, t) + compcstemp * pvtemp
    compcompwtd(p, t) = compcompwtd(p, t) + compcompttemp * pvtemp
    compmswtd(p, t) = compmswtd(p, t) + compmstemp * pvtemp
    comptswtd(p, t) = comptswtd(p, t) + comptstemp * pvtemp
NEXT t
NEXT p
END IF
RETURN
"***** END OF MacroStats SUBMODULE *****
PRINTAGGCOMP :
"Submodule to print aggregates and comparisons.
IF tyears = 3 THEN OPEN aggr3$ FOR OUTPUT AS #7
IF tyears = 5 THEN OPEN aggr5$ FOR OUTPUT AS #7
IF tyears = 8 THEN OPEN aggr8$ FOR OUTPUT AS #7
"First print aggregates.
FOR path = 0 TO 14
    IF path = 0 THEN PRINT #7, "Aggregates for
No Remedy Path: "
    IF path = 1 THEN PRINT #7, "Aggregates for
Conduct Remedy: "
    IF path = 2 THEN PRINT #7, "Aggregates for
APM, 2- firms Remedy : "
    IF path = 3 THEN PRINT #7, "Aggregates for
APM, 3 -firms Remedy: "
    IF path >= 4 AND path <= 13 THEN
    PRINT #7, "Aggregates for RPM, z=";
    PRINT #7, USING "#.###"; 
zpath(path);
    PRINT #7, "Remedy: "
    END IF



MTC-00030631--0193

    IF path = 14 THEN PRINT #7, "Aggregates for
    Lawful Path: "
    PRINT #7, "Time "; "CS "; 
"nonMSpi ,,; ,,
 MSpi "; "TS "
    FOR t = 1 TO 3
    IF t = 1 THEN PRINT #7, "Past: ";
    IF t = 2 THEN PRINT #7, "Future: ";
    IF t = 3 THEN PRINT #7, "Total: -;
    PRINT #7, USING 
"#####.#######,
,; aggcs(path, t) ; aggcomp(path, t) ; aggms(path, t) ; aggts(path, 
t)
 NEXT t
 PRINT #7,
 NEXT path
    "Second print comparisons.
 FOR c = 0 TO 13
    IF c = 0 THEN PRINT #7, "Comparing No Remedy minus 
LawfulPath: "
    IF c = 1 THEN PRINT #7, "Comparing Conduct minus 
LawfulPath: "
    IF c = 2 THEN PRINT #7, "Comparing APM, 2-firms minus 
LawfulPath: "
    IF c = 3 THEN PRINT #7, "Comparing APM, 3-firms minus 
LawfulPath: "
    IF c >= 4 AND c <= 13 THEN
    PRINT #7, "Comparing RPM, z=" ;
    PRINT #7, USING "#.###"; 
zpath(c);
 PRINT #7, "minus LawfulPath: "
 END IF
 PRINT #7, "Time "; "CS "; 
"nonMSpi "; ,,

[[Page 29200]]

MSpi "; "TS "
 FOR t = 1 TO 3
    IF t = 1 THEN PRINT #7, "Past: ",;
    IF t = 2 THEN PRINT #7, "Future: ";
    IF t = 3 THEN PRINT #7, "Total: ";
    PRINT #7, USING 
"#####.#######.
; compcs(c, t); compcomp(c, t); compms(c, t); compts(c, t)
 NEXT t
 PRINT #7,
 NEXT c
 CLOSE #7
 RETURN
"***** END OF PrintAggComp SUBMODULE *****



MTC-00030631--0194

 PRINTAGGSHORT:
    "Submodule to print one-page summary of
    "aggregates and comparisons.
 IF tyears = 3 THEN OPEN aggc3$ FOR OUTPUT AS #7
 IF tyears = 5 THEN OPEN aggc5$ FOR OUTPUT AS #7
 IF tyears = 8 THEN OPEN aggc8$ FOR OUTPUT AS #7
 "First print totals for alternative remedies.
 PRINT #7, "Total Aggregates Remedies:"
 PRINT #7, "Remedy "; "CS "; ,,
 MSpi "; "TS "
 FOR path = 0 TO 14
    IF path = 0 THEN PRINT #7, "No-Remedy: ";
    IF path = 1 THEN GOSUB AGGSUB:
    IF path = 1 THEN path = 2
    IF path = 2 THEN PRINT #7, "APM, 2-firms: ,;
    IF path = 3 THEN PRINT #7, "APM, 3-firms: ";
    IF path >= 4 AND path <= 13 THEN
    PRINT #7, "RPM, z=";
    PRINT #7, USING "#.###"; 
zpath(path);
    PRINT #7, ": ";
 END IF
 IF path = 14 THEN PRINT #7, "Lawful Path: ";
 PRINT #7, USING 
"#####.#######"
; aggcs(path, 3); aggcomp(path, 3); aggms(path, 3); 
aggts(path, 3)
NEXT path
PRINT #7,
    "Second print comparisons.
 PRINT #7, "Comparing Remedies minus Lawful Path:"
 PRINT #7, "Remedy "; "CS "; 
"nonMSpi ,,; ,,
     MSpi "; "TS "
FOR c = 0 TO 13
    IF c = 0 THEN PRINT #7, "No-Remedy: ";
    IF c = 1 THEN GOSUB COMPSUB:
    IF c = 1 THEN c = 2
    IF c = 2 THEN PRINT #7, "APM, 2-firms: ";
    IF c = 3 THEN PRINT #7, "APM, 3-firms: ";
    IF c >= 4 AND c <= 13 THEN
    PRINT #7, "RPM, z=";
    PRINT #7, USING "#.###"; 
zpath(c);
    PRINT #7, ": ";
    END IF
    PRINT #7, USING 
"#####.#######"
; compcs(c, 3); compcomp(c, 3);
    Alternative
nonMSpi "; "



MTC-00030631--0195

compms(c, 3); compts(c, 3)
NEXT c
CLOSE #7
RETURN
"***** END OF PrintAggShort SUBMODULE *****
AGGSUB:
    "Submodule of PRINTAGGSHORT Submodule,
    " to print out variations on conduct remedy.
    temp0cs = aggcs(0, 3)
    temp0comp = aggcomp(0, 3)
    temp0ms = aggms(0, 3)
    temp0ts = aggts(0, 3)
    temp1cs= aggcs(l, 3)
    temp1comp = aggcomp (1, 3)
    temp1ms = aggms(l, 3)
    temp1ts = aggts(l, 3)
    temp2cs = aggcs(2, 3)
    temp2comp = aggcomp(2, 3)
    temp2ms = aggms(2, 3)
    temp2ts = aggts(2, 3)
 GOSUB PRINTSUB:
RETURN
"***** END OF AggSub SUBMODULE *****
COMPSUB:
"Submodule of PRINTAGGSHORT Submodule,
    " to print out variations on conduct remedy.
    temp0cs = compcs(0, 3)
    temp0comp = compcomp(0, 3)
    temp0ms = compms(0, 3)
    temp0ts = compts(0, 3)
    temp1cs = compcs(1, 3)
    temp1comp = compcomp(l, 3)
    temp1ms = compms(1, 3)
    temp1ts = compts(l, 3)
    temp2cs = compcs(2, 3)
    temp2comp = compcomp(2, 3)
    temp2ms = compms(2, 3)
    temp2ts = compts(2, 3)
 GOSUB PRINTSUB:
 RETURN



MTC-00030631--0196

"***** END OF CompSub SUBMODULE *****
PRINTSUB:
"Submodule of two submodules of the PRINTAGGSHORT
    " submodule, to print variations on conduct remedy.
"Compute and print 20% effective conduct remedy. PRINT #7, 
"20% Conduct:";
 PRINT #7, USING 
"#####.#######"
; temp0cs * .8 + temp1cs * .2;
 PRINT #7, USING 
"#####.#######"
; temp0comp * .8 + temp1comp * .2;
 PRINT #7, USING 
"#####.#######"
; temp0ms * .8 + temp1ms * .2;
    PRINT #7, USING 
"#####.#######"
; temp0ts * .8 + temp1ts * .2
"Compute and print 40% effective conduct remedy. PRINT #7, 
"40% Conduct:";
PRINT #7, USING 
"#####.#######"
; temp0cs * .6 + temp1cs * .4;
PRINT #7, USING 
"#####.#######"
; temp0comp * .6 + temp1comp * .4;
PRINT #7, USING 
"#####.#######"
; temp0ms * .6 + temp1ms * .4;
    PRINT #7, USING 
"#####.#######"
; temp0ts * .6 + temp1ts * .4
"Compute and print 60% effective conduct remedy. PRINT #7, 
"60% Conduct:";
 PRINT #7, USING 
"#####.#######"
; temp0cs * .4 + temp1cs * .6;
PRINT #7, USING 
"#####.#######"
; temp0comp * .4 + temp1comp * .6;
PRINT #7, USING 
"#####.#######"
; temp0ms * .4 + temp1ms * .6;
    PRINT #7, USING 
"#####.#######"
; temp0ts * .4 + temp1ts * .6
"Compute and print 80% effective conduct remedy. PRINT #7, 
"80% Conduct:";
PRINT #7, USING 
"#####.#######"
; temp0cs * .2 + temp1cs * .8;
PRINT #7, USING 
"#####.#######"
; temp0comp * .2 + temp1comp * .8;
PRINT #7, USING 
"#####.#######"
; temp0ms * .2 + temp1ms * .8;
    PRINT #7, USING 
"#####.#######"
; temp0ts * .2 + temp1ts * .8
"Compute and print 100% effective conduct remedy. PRINT 
#7, "100% Conduct:";
PRINT #7, USING 
"#####.#######"
; temp1cs;
PRINT #7, USING 
"#####.#######"
; temp1comp;
PRINT #7, USING 
"#####.#######"
; temp1ms;
PRINT #7, USING 
"#####.#######"
; temp1ts
"Compute and print the two-monopolies structural remedy. PRINT 
#7, "2-Monopolies:";
PRINT #7, USING 
"#####.#######"
; temp2cs / 3 + temp1cs * 2 / 3Q;



MTC-00030631--0197

PRINT #7, USING 
"#####.#######-
; temp2comp / 3 + temp1comp * 2 / 3;
PRINT #7, USING 
"#####.#######"
; temp2ms / 3 + temp1ms * 2 / 3;
PRINT #7, USING 
"#####.#######"
; temp2ts / 3 + temp1ts * 2 / 3
RETURN
"***** END OF PrintSub SUBMODULE ***** t
PRINTSTATS :
    "Submodule to print averages, weighted averages, minimums, 
maximums.
CLOSE #21
"First print out minimums.
MID$(aggr8$, 25, 3) = "MIN"
MID$(aggc8$, 25, 3) = "MIN"
FOR p = 0 TO 14
FOR t = 1 TO 3
    aggcs(p, t) = aggcsmin(p, t)
    aggcomp(p, t) = aggcompmin(p, t)
    aggms (p, t) = aggmsmin (p, t)
    aggts(p, t) = aggtsmin(p, t)
    compcs(p, t) = compcsmin(p, t)
    compcomp(p, t) = compcompmin(p, t)
    compms(p, t) = compmsmin(p, t)
    compts(p, t) = comptsmin(p, t)
NEXT t
NEXT p
GOSUB PRINTAGGCOMP :
GOSUB PRINTAGGSHORT :
"Second print out maximums.
MID$(aggr8$, 25, 3)--"MAX"
MID$(aggc8$, 25, 3) = "MAX"
FOR p = 0 TO 14
FOR t = 1 TO 3
    aggcs(p, t) = aggcsmax(p, t)
    aggcomp(p, t) = aggcompmax(p, t)
    aggms(p, t) = aggmsmax(p, t)
    aggts(p, t) = aggtsmax(p, t)
    compcs(p, t) = compcsmax(p, t)
    compcomp(p, t) = compcompmax(p, t)
    compms(p, t) = compmsmax(p, t)

[[Page 29201]]

    compts(p, t) = comptsmax(p, t)
NEXT t



MTC-00030631--0198

NEXT p
GOSUB PRINTAGGCOMP :
GOSUB PRINTAGGSHORT:
MID$(aggr8$, 25, 3) = "AVG"
MID$(aggc8$, 25, 3)--"AVG"
FOR p = 0 TO 14
FOR t = 1 TO 3
    aggcs(p, t) = aggcsavg(p, t) / avgtotal
    aggcomp(p, t) = aggcompavg(p, t) / avgtotal
    aggms(p, t) = aggmsavg(p, t) / avgtotal
    aggts(p, t) = aggtsavg(p, t) / avgtotal
    compcs(p, t) = compcsavg(p, t) / avgtotal
    compcomp(p, t) = compcompavg(p, t) / avgtotal
    compms(p, t) = compmsavg(p, t) / avgtotal
    compts(p, t) = comptsavg(p, t) / avgtotal
NEXT t
NEXT p
GOSUB PRINTAGGCOMP :
GOSUB PRINTAGGSHORT:
"Fourth print out weighted averages.
MID$(aggr8$, 25, 3) = "WTD"
MID$(aggc8$, 25, 3) = "WTD"
FOR p = 0 TO 14
FOR t = 1 TO 3
    aggcs(p, t) = aggcswtd(p, t) / pvtotal
    aggcomp(p, t) = aggcompwtd(p, t) / pvtotal
    aggms(p, t) = aggmswtd(p, t) / pvtotal
    aggts(p, t) = aggtswtd(p, t) / pvtotal
    compcs(p, t) = compcswtd(p, t) / pvtotal
    compcomp(p, t) = compcompwtd(p, t) / pvtotal
    compms(p, t) = compmswtd(p, t) / pvtotal
    compts(p, t) = comptswtd(p, t) / pvtotal
NEXT t
NEXT p
GOSUB PRINTAGGCOMP:
GOSUB PRINTAGGSHORT:
RETURN
 ,***** END OF PrintStats SUBMODULE *****
"**********END OF Program ..MS6Summ.bas".**********
.**********LAST OF SERIES OF SIX PROGRAMS**********



MTC-000361--0199

Attachment R.

    Contents of File "MS--Rev.csv".
    The "MS--Rev.csv" file is a needed input file 
for the "MS6Summ.bas" computer program.
    Microsoft Corporation,,,,
    "Real Annual Revenue, 2001 dollars (billions)." ....
    ,,,,"Platforms,"
    Calendar,Desktop,Platforms &,Platforms &,Applications
    Year,Platforms,Enterprise,Applications,& Enterprise
    1995, 3.0035316, 4.207892342, 6.855180159, 8.059540901
    1996, 3.727131393, 5.347349902, 8.460443423, 10.08066193
    1997, 5.035883238, 7.458570139, 11.21720468, 13.63989158
    1998, 6.454595209, 9.391381895, 14.2045433, 17.14132999
    1999, 7.693463232, 12.21087139, 17.14963014, 21.6670383
    2000, 8.186611784, 13.1922708, 17.72984147, 22.73550048
    2001, 7.2043035, 11.34811009, 16.7864329, 20.93023949
    2002, 9.14247463, 14.95519357, 19.79287211, 25.60559105
    2003, 10.58883605, 17.7114904, 22.8211218, 29.94377615
    2004, 12.00140966, 20.45382314, 25.77105291, 34.22346639
    2005, 13.36456237, 23.13621511, 28.61300897, 38.38466171
    2006, 14.67011841, 25.72877347, 31.33233776, 42.39099283
    2007, 15.91566918, 28.21539046, 33.92583204, 46.22555332
    2008, 17.10294472, 30.59079228, 36.39838725, 49.88623481
    2009, 18.23641933, 32.85759662, 38.760186, 53.38136329
    2010, 19.3222093, 35.02373565, 41.02449912, 56.72602548
    2011, 20.36725465, 37.10038404, 43.20607024, 59.93919963
    2012, 21.3787453, 39.10039929, 45.31999424, 63.04164823
    2013, 22.36374177, 41.03721389, 47.38098491, 66.05445702
    2014, 23.32894261, 42.92409405, 49.40293308, 68.99808453
    2015, 24.28055711, 44.77367791, 51.39867211, 71.89179291
    2016, 25.22425072, 46.59771715, 53.37988484, 74.75335127
    2017, 26.1651381, 48.40695999, 55.35710303, 77.59892492
    2018, 27.107806, 50.21112823, 57.33976344, 80.44308567
    2019, 28.05635302, 52.01895334, 59.33629582, 83.29889613
    2020, 29.01443792, 53.83824715, 61.35422596, 86.17803519
    2021, 29.98533062, 55.6759901, 63.40028299, 89.09094247
    2022, 30.97196248, 57.5384259, 65.48050406, 92.04696748
    2023, 31.97697372, 59.43115563, 67.60033258, 95.05451449
    2024, 33.002757, 61.35922702, 69.76470794, 98.12117797
    2025, 34.0514965, 63.32721672, 71.97814598, 101.2538662
    2026, 35.1252027, 65.3393044, 74.24481019, 104.4589119
    2027, 36.22574276, 67.39933867, 76.56857413, 107.74217
    2028, 37.35486715, 69.51089506, 78.95307569, 111.i091036
    2029, 38.51423258, 71.67732649, 81.40176416, 114.5648581
    2030, 39.70542191, 73.90180714, 83.91794075, 118.114326



MTC-00030631--0200

Attachment S.

    Contents of File "PointVal.csv".
    The "PointVal.csv" file is a needed input file for 
the "MS6Summ.bas" computer program.
    Cost-ratio,Speed,Portion,T-years,Point Values
1,1,0,3,1
1,1,0,5,1
1,1,0,8,1
1,1,1,3,2
1,1,1,5,2
1,1,1,8,2
1,1,2,3,2
1,1,2,5,2
1,1,2,8,2
1,1,3,3,2
1,1,3,5,2
1,1,3,8,2
1,1,4,3,1
1,1,4,5,1
1,1,4,8,1
1,2,0,3,1
1,2,0,5,1
1,2,0,8,1
1,2,1,3,2
1,2,1,5,2
1,2,1,8,2
1,2,2,3,2
1,2,2,5,2
1,2,2,8,2
1,2,3,3,2
1,2,3,5,2
1,2,3,8,2
1,2,4,3,1
1,2,4,5,1
1,2,4,8,1
1,3,0,3,1
1,3,0,5,1
1,3,0,8,1
1,3,1,3,2
1,3,1,5,2
1,3,1,8,2
1,3,2,3,2
1,3,2,5,2
1,3,2,8,2
1,3,3,3,2
1,3,3,5,2
1,3,3,8,2
1,3,4,3,1
1,3,4,5,1
1,3,4,8,1



MTC-00030631-0201

2,1,0,3,1
2,1,0,5,1
2,1,0,8,1
2,1,1,3,2
2,1,1,5,2
2,1,1,8,2
2,1,2,3,2
2,1,2,5,2
2,1,2,8,2
2,1,3,3,2
2,1,3,5,2
2,1,3,8,2
2,1,4,3,1
2,1,4,5,1
2,1,4,8,1
2,2,0,3,1
2,2,0,5,1
2,2,0,8,1
2,2,1,3,2
2,2,1,5,2
2,2,1,8,2
2,2,2,3,2
2,2,2,5,2
2,2,2,8,2
2,2,3,3,2
2,2,3,5,2
2,2,3,8,2
2,2,4,3,1
2,2,4,5,1
2,2,4,8,1
2,3,0,3,1
2,3,0,5,1
2,3,0,8,1
2,3,1,3,2
2,3,1,5,2
2,3,1,8,2

[[Page 29202]]

2,3,2,3,2
2,3,2,5,2
2,3,2,8,2
2,3,3,3,2
2,3,3,5,2
2,3,3,8,2
2,3,4,3,1
2,3,4,5,1
2,3,4,8,1



MTC-0003061-0202

3,1,0,3,2
3,1,0,5,2
3,1,0,8,2
3,1,1,3,4
3,1,1,5,4
3,1,1,8,4
3,1,2,3,4
3,1,2,5,4
3,1,2,8,4
3,1,3,3,4
3,1,3,5,4
3,1,3,8,4
3,1,4,3,2
3,1,4,5,2
3,1,4,8,2
3,2,0,3,2
3,2,0,5,2
3,2,0,8,2
3,2,1,3,4
3,2,1,5,4
3,2,1,8,4
3,2,2,3,4
3,2,2,5,4
3,2,2,8,4
3,2,3,3,4
3,2,3,5,4
3,2,3,8,4
3,2,4,3,2
3,2,4,5,2
3,2,4,8,2
3,3,0,3,2
3,3,0,5,2
3,3,0,8,2
3,3,1,3,4
3,3,1,5,4
3,3,1,8,4
3,3,2,3,4
3,3,2,5,4
3,3,2,8,4
3,3,3,3,4
3,3,3,5,4
3,3,3,8,4
3,3,4,3,2
3,3,4,5,2
3,3,4,8,2



MTC-00030631--0203

4,1,0,3,2
4,1,0,5,2
4,1,0,8,2
4,1,1,3,4
4,1,1,5,4
4,1,1,8,4
4,1,2,3,4
4,1,2,5,4
4,1,2,8,4
4,1,3,3,4
4,1,3,5,4
4,1,3,8,4
4,1,4,3,2
4,1,4,5,2
4,1,4,8,2
4,2,0,3,2
4,2,0,5,2
4,2,0,8,2
4,2,1,3,4
4,2,1,5,4
4,2,1,8,4
4,2,2,3,4
4,2,2,5,4
4,2,2,8,4
4,2,3,3,4
4,2,3,5,4
4,2,3,8,4
4,2,4,3,2
4,2,4,5,2
4,2,4,8,2
4,3,0,3,2
4,3,0,5,2
4,3,0,8,2
4,3,1,3,4
4,3,1,5,4
4,3,1,8,4
4,3,2,3,4
4,3,2,5,4
4,3,2,8,4
4,3,3,3,4
4,3,3,5,4
4,3,3,8,4
4,3,4,3,2
4,3,4,5,2
4,3,4,8,2



MTC-00030631-0204

5,1,0,3,2
5,1,0,5,2
5,1,0,8,2
5,1,1,3,4
5,1,1,5,4
5,1,1,8,4
5,1,2,3,4
5,1,2,5,4
5,1,2,8,4
5,1,3,3,4
5,1,3,5,4
5,1,3,8,4
5,1,4,3,2
5,1,4,5,2
5,1,4,8,2
5,2,0,3,2
5,2,0,5,2
5,2,0,8,2
5,2,1,3,4
5,2,1,5,4
5,2,1,8,4
5,2,2,3,4
5,2,2,5,4
5,2,2,8,4
5,2,3,3,4
5,2,3,5,4
5,2,3,8,4
5,2,4,3,2
5,2,4,5,2
5,2,4,8,2
5,3,0,3,2
5,3,0,5,2
5,3,0,8,2
5,3,1,3,4
5,3,1,5,4
5,3,1,8,4
5,3,2,3,4
5,3,2,5,4
5,3,2,8,4
5,3,3,3,4
5,3,3,5,4
5,3,3,8,4
5,3,4,3,2
5,3,4,5,2
5,3,4,8,2
    Review of Industrial Organization 11: 533-550, 1996.
    ??? 1996 Kluwer Academic Publishers. printed in the Netherlands.
    Using Relative Profit Incentives to Prevent Collusion
    CARL LUNDGREN*
    1212 W. Jefferson, Apt. A, Springfield, IL 62702, U.S.A. 
Abstract. This paper describes a new economic method for preventing 
oligopoly collusion. The method eliminates incentives for collusion 
by making managerial compensation depend on relative profits rather 
than absolute profits. This alteration of managerial incentives sets 
up a zero-sum game among the firms in an industry, yielding the 
result that firms no longer have incentive to collude, either 
actually or tacitly, with regard to prices or outputs. The method 
also ameliorates the imperfectly competitive outcomes which can 
result from even noncooperative oligopoly interactions.
    Key words: Oligopoly, collusion, relative profits, zero-sum 
game, managerial incentives. Introduction The purpose of this paper 
is to present an alternative method for preventing collusion,\1\ The 
method eliminates incentives for both actual and tacit collusion, 
and ameliorates the imperfectly competitive outcomes which can 
result from even noncooperative oligopoly interactions. The method 
prevents exploitation of oligopoly power, but is not a general cure 
for the market power problems of either strict monopoly or 
monopolistic competition.
---------------------------------------------------------------------------

    \1\ NOTICE OF PATENT PENDING: This paper describes a 
method of economic regulation for preventing collusion upon which 
the author and inventor has applied for a patent. A patent on this 
invention, if such should be granted, would only restrict actual use 
of the described invention; it would not restrict in any way the 
verbal or written discussion, description, or criticism of that 
invention.
---------------------------------------------------------------------------

    Section I introduces and verbally describes the basic method of 
providing relative profit maximizing incentives for owners and 
managers of business firms. Section I/reviews some related 
literature. Section HI illustrates the method using a particular 
mathematical example. Section IV discusses some practical concerns 
related to implementing the method. Section V focuses on how firm 
owners can be prevented from making management stress absolute 
profits over relative profits. Section VI concludes. Three 
mathematical appendices derive: (A) the optimal weighting of rival 
firms" profits under a relative profit incentive scheme; 03) 
short-run equilibrium; and ((2) Bertrand equilibrium for 
differentiated products.
    ldquo;The author would like to thank numerous individuals for 
their comments on previous versions of this paper.

I. Basic Method

    In an industry structure with only a few firms, collusion is a 
serious possibility, even when it is illegal. Tacit collusion, which 
does not require illegal communication among conspirators, can also 
occur.
    The basic concept which underlies this proposed method is the 
perception that causing managers of firms to participate in a zero-
sum game, or its equivalent or near-equivalent, will hinder or 
prevent cooperation or collusion among the managers

[[Page 29203]]

of different firms. In a zero-sum game it is possible for one firm's 
manager to gain only if another firm's manager loses, since there is 
only a fixed quantity of rewards to go around. In a nonzero-sum game 
it is frequently possible for everyone to gain through cooperation 
(collusion) as opposed to noncooperation, since cooperation may 
increase the total quantity of rewards available to go around.
    A zero-sum game for industry may be instituted by forcing firms 
as a whole to participate in a zero-sum game and/or by arranging 
zero-sum compensation arrangements for the managers of different 
firms. When the goal of firms is maximizing profits, instituting a 
zero-sum game in profits means that firms are motivated to maximize 
relative profits rather than absolute profits. That is, firms 
attempt to maximize the difference of their own firm's absolute 
profits relative to an average of other firms" absolute 
profits. Alternatively and equivalently, firms attempt to maximize 
the difference of their own firm's absolute profits relative to the 
average absolute profits era group of competing firms, of which 
group the firm is a member.
    A good way to institute a zero-sum game among firms in an 
industry is by motivating managers to seek relative profits rather 
than absolute profits. The usual way to motivate managers to pursue 
a particular goal is to pay managers in accordance with success in 
achieving that goal. If the goal is to maximize absolute profits, 
managers should expect to receive more compensation, the higher 
profits turn out to be. By altering the rules for managerial 
compensation in the appropriate way, we can make sure that managers 
are motivated to maximize relative profits rather than absolute 
profits.
    The key to understanding this method rests upon the seemingly 
trivial observation that successful collusion increases the absolute 
profits of firms, but does not increase the relative profits of 
firms. When firms collusively raise prices, the relative profits of 
each firm cannot increase on average. Only one of two things can 
happen: Either (1) absolute profits of each firm rise equally and 
relative profits of each firm stay the same, or (2) the absolute 
profits of each firm do not rise equally, in which case some firms 
gain relative profit and some firms lose relative profit. If the 
second case holds true, any firm which loses relative profit from 
the collusive agreement will want to cheat (assuming it seeks 
relative profit), since it gains relative profit in the short run by 
cheating and it gains relative profit in the long run by breaking up 
the collusive agreement. If the first case holds true, no firm gains 
relative profit by maintaining the collusive agreement in the 13ng 
run, and every farm gains relative profit by cheating in the short 
run. In a relative profit maximizing industry there is no incentive 
for all the firms to enter into or maintain any collusive agreement. 
Competitive behavior must result,
    Setting up a zero-sum game in profits does not in any way 
require placing any cap or limitation on the amount of absolute or 
relative profit which any individual firm may earn. Rather, there is 
simply a definitional change in the type of profit which a firm or 
firm manager is expected to maximize. The main difference between 
absolute profit maximizing (APM) firms and relative profit 
maximizing (RPM) firms is that RPM firms are not motivated to 
collude. In the absence of collusion, absolute profit and relative 
profit are very similar. RPM firms are just as strongly motivated as 
APM firms to seek other sources of profit, such as reducing costs of 
production or improving product quality. RPM firms are not 
deliberately inefficient nor do they try to slow down technical 
progress. They merely refuse to collude, even tacitly. .
    Government is assumed able to observe costs and revenues ex 
post, but is not assumed able to observe either demand curves or 
cost functions. The proposed regulation is not heavy-handed. Price 
controls, profit controls, central command and the like are no part 
of the proposal. Under the relative profit scheme of regulation, 
firms are perfectly free to try to make as much profit as they can, 
set whatever prices they wish, sell whatever Products they wish, and 
to enter or exit industries and product lines as they please. 
Application of the RPM regulatory scheme need not extend beyond 
those firms which are most likely to collude (i.e., the ?? firms 
within an oligopoly industry). Competitive industries, of course, do 
not ?? to be included (though no harm would come if they were).

II. Review of Some Related Literature

    Only in Donaldson and Neary (1984) does there first appear a 
suggestion that the principles of relative profit maximizing might 
be put to practical use by altering the incentives of firms or 
managers. Donaldson and Neary suggest that relative profit 
maximizing managers in a "socialist industry" composed 
wholly of govern?? owned firms can achieve efficient outcomes with a 
minimum of administrative supervision by a central planner. They 
also prove numerous game theory propositions in this connection. 
Although they indirectly allude to the anti-?? features of the 
incentive scheme, they never directly state this property outright. 
Consequently, they appear to have overlooked the possibility of 
extending the scheme to prevent collusion in Privately-owned or 
"capitalist" industries. Also, they appear to impose the 
unwarranted restriction that each manager must be paid dollar-for-
dollar for each dollar of relative profit which a firm earns (p. 
102).
    Two basic propositions in the Donaldson and Neary (1984) paper 
are worth special mention. The first is that RPM firms producing 
multiple or joint products will tend to produce at minimum cost and 
price efficiently (pp. 104-5, 109-10). This means that 
the incentive scheme is capable of being applied, not only to 
single-product firms and industries, but also to multi-product firms 
and industries.
    Secondly, RPM firms, unlike their APM counterparts, have little 
or no strategic incentive to increase their market shares in a cost-
inefficient manner by installing excess capital (pp. 105, 
107-9).
    The theoretical suggestion that firms with absolute profit 
incentives might under certain (presumably rare) circumstances try 
to behave as if they desired to maximize relative profits appears to 
have been made as early as 1960. Bishop (1960), describing the 
alleged "warfare" of oligopolists in the absence of 
collusion, Shubik and Levitan (1980), describing "beat-the-
average" games, and Jones (1980), describing the outcome era 
classroom game, each derive first-order conditions for a constant-
sum game in relative profits. Jones also derives second-order 
conditions. Two reasons are suggested for such behavior: (I) 
Businessmen might be naturally rivalrous, caring more about relative 
position than absolute position, or (2) bus/- nessmen may be 
carrying out threats in order to elicit more favorable collusive 
agreements from their rivals in the future. These three works do not 
suggest any practical application for the mathematical principles of 
relative profit maximizing.
    Although they do not anticipate the present subject matter, 
several other papers are worth mentioning. Holmstrom (1982) and Aron 
(1988) explore the use of relative performance evaluations for the 
quite distinct purpose of attempting more accurate evaluations of 
managerial performance. Gibbons mad Murphy (1990) ask whether, in 
fact, managers tend to be paid according to relative performance. 
Fouraker and Siegel (1963) and Vickers (I 985) consider relative 
profit goals and incentives of a different type, namely maximization 
of the difference between absolute profits of own firm and total 
absolute profits of rival firms, rather than average absolute 
profits of rival firms. Fershtman and Judd (1987) and Sklivas 0987) 
also consider alternative managerial incentives, but not relative 
profit incentives. Shleifer (1985) and Tam (1988) describe what may 
be the best currently known alternatives for regulating oligopoly 
markets, aside from antitrust enforcement or structural reform. Both 
of these alternatives require the regulation of prices, whereas the 
present method does not.
    In summary, none of the previous literature suggests that 
relative performance incentives can be used as a general method for 
preventing collusion.

III. An Illustrative Example

    Let G be some statistic which describes something about a firm. 
If the firm's managers arc rewarded for achieving higher levels of 
G, then maximizing G will be the firm's goal or objective.
    For purposes of this example, assume that there are N (N 
--> 2) identical firms. Each firm produces a single, 
homogenous product at a constant marginal cost of C. The market 
demand is linear, with P = A--bQ, where Q = ??Qi and Qi is firm 
output. Assume that each firm pursues an identical goal function, 
which has a coefficient of unity in own firm profits and a 
coefficient of W in rival firm profits. The goal function for firm i 
and rival firm(s) j looks as follows:
Gi=??i+W????j
 J??1
 =??i+W(N-1)??
= (PQi-CQi)+ W(N-1)(PQj-CQj)
    If W = 0, then the firm's goal is simply to maximize its own 
economic profit. This is the absolute profit maximizing (APM) goal. 
If W = 1, then the firm has a joint profit maximizing (JPM) goal. If 
all N firms have JPM goals, the industry will surely collude.

[[Page 29204]]

On the other hand, if W = -1/(N--1), then the firm has a 
relative profit maximizing (RPM) goal. The RPM goal is calculated by 
stetting with own firm profits and subtracting off a weighted 
average of the N--1 rival firm profits.
    If we assume noncooperative behavior and Cournot conjectures, 
firm i maximizes its goal function by choosing Qi such that:
?Gi/??Qi = (P-C)+(??P/??Qi)[Qi+ w(N- 1)Qj = 0
 = (A-bQi-b(N- 1)Qj-C)
 -b(Qi + W(N--1)Qj) = 0
(2)
    For a symmetric, noncooperative equilibrium, assume that Qn = Qi 
= Qj. Define WM = 1 + W(N--1). We can calculate the following 
quantities, price-cost margins, absolute profits, and goal 
fulfillments for each firm:
(A-C)/[b(N + WM)]
(A-C)W/(IV + Wm)]
(A-C)2W2M/[b(N + WM)2]
(l- C)'-W2m/[b(N + WM)2]
(3)
    Now, assume instead that each firm pursues a collusive 
("monopoly") equilibrium, in which each firm attempts to 
maximize its goal function under the assumption that all firms 
cooperate by setting the same level of output (QM) and receiving the 
same level of profit (??M). The goal function takes the form: .
GM--[1 + W(N- 1)]??M = WM??M
 = WM(PQM--CQM)
 (4)
    When W > -1/(N--1), WM > 0, so that joint goal 
fulfillment is equivalent to maximizing joint absolute profits. When 
W <--1 / (N--I ), WM < 0, j cint goal fulfillment 
requires the minimization of joint absolute profits, or the 
maximization of joint losses. When W = -1/(N--1), WM = O, we 
have a zero-stun game in relative profits. When WM--O, 
collusion can in no way improve the sum of relative profits for all 
N firms, since these must always add to zero. When WM = 0, there is 
no incentive for all N firms to collude either to raise prices or m 
lower prices from the prices that would exist in a noncooperative 
equilibrium.
    In what follows, assume that W >--. -1/(N--1), so 
that WM >-- 0 and joint maximization of absolute profits is 
a (weakly) plausible goal of collusion. (When WM = 0, firms are 
collectively no better off, but neither are they collectively worse 
off, from collusion.) Then the collusive equilibrium has the 
following solution:
??GM/??QM = WM(P--C).+ (??P/??QM)WMQM "- 0
 = WM(A--bNQM--C)- bNWMQM = 0
QM= (A--e)/[2bN]
PM-c = (A-c)/2
 ??M = (A--C)2/[4bN]
 GM =(A--C)2WM/[4bN]
(5)
    We now consider the one-period incentive for a firm to cheat on 
a collusive agreement. This can be calculated under the assumption 
that a single firm chooses its output to maximize its own goal 
function, taking as given that rival firms choose the agreed-upon 
collusive output level:
    This has solution:
(6)
= (P--C) + (??P/??Qi)(Qi + W(N--1)QM) = 0
= (A-bQi-b(N-1 )QM-C) b(Qi+W(N-1)QM)=O
 Qc = (A- c)(N + 2- WM)/[4bN]
Pc--c = (A c)(N + WM)/[4N]
- C)2(N + 2- WM)(N + WM)I[16bN2
- C) 2(N + WM)//[8bN2]
-C)2(N +WM)21[16bN2]
??c = (A
??j = (A
Gc = (A
(7)
.,.
??
k.
L
*
    The reward to a firm which colludes in a repeated game with its 
rivals is:
 CO
 R?? = GM + ?? GM/(1 + r)t = GM + GM/r (8)
 t=l
    The value of r depends not simply on the cost of capital and 
risk premia, but also includes the probability that collusion may 
break down, perhaps because of industry changes or government 
intervention. The length of the time period, t, depends on the time 
it takes for rivals to discover that cheating has occured, after 
which collusion breaks down. The shorter the time period needed to 
detect cheating, the lower the value of r. The reward to a firm 
which cheats in period t = 0 and sees the noncooperative equilibrium 
in subsequent periods is:
 Rc = Gc + ?? Gn/(l + r)t = Gc +Gn/r (9)
    RM > RC (so that collusion is sustainable) whenever the 
collusion/cheating ratio shown below exceeds r:
(GM--Gn)/(Gc--GM) = 4NWM/(N + WM)2 > r (I0)
    For a given N within the relevant range, this ratio reaches its 
maximum value of 1 when WM = N (JPM) and reaches its minimum value 
of 0 when WM = 0 (RPM). The ratio rises monotonically when WM 
increases from 0 to N. As aright be expected, when WM = 1 (APM), 
this ratio falls (i.e., collusion is harder to sustain) when the 
number of firms (N) increases.
    To summarize, when firms are given RPM incentives and placed in 
a zero-sum game, the incentive to collude is eliminated, but the 
incentive to cheat on collusion is maintained. No collusive 
agreement can benefit all firms in a zero-sum game, and any such 
agreement would in any case be subject to overwhelming incentives 
for most or all firms to cheat. This was shown verbally in Section I 
and is illustrated in this section using a particular mathematical 
model. The details of a mathematical model can be varied endlessly, 
but the qualitative conclusion will always be the same, given the 
verbal proof in Section I.

IV. Practical Implementation

    Economists traditionally present theory and presume (sometimes 
unrealistically) that the manner of its practice will be immediately 
apparent. With respect to many practical concerns which some 
economists and laymen have raised, some brief answers are indicated 
below.
    1. Would government regulators need extensive and expensive data 
to enforce the proposed scheme? No. The only data needed are data on 
costs, revenues, profits, and managerial compensation. Since this 
data must be collected in any case, either by government for tax 
purposes, or by accountants as a prudent way for managers and 
stockholders to keep tabs on a firm's activities and cash flows, it 
follows that the method can be implemented at little or no extra 
cost.
    This data is readily observable, so governmental omniscience is 
not required to implement the method. In particular, it is not 
assumed that government can observe either cost functions or demand 
curves, nor is it assumed that government can calculate optimal 
prices, profits, or output levels. Hence, the RPM method can be 
practiced, even if government is unable (because of information 
lira/tat ions) to set optimal prices or quantities directly.
    2. Would the use of accounting data to measure costs, revenues, 
and profit's cause economic distortions? Perhaps, but a more 
relevant question might be, would such distortions be any greater 
under RPM than under APM? The purpose of the method is to prevent 
collusion, not to calculate true economic costs or profits. Even 
under current arrangements, inability to measure true economic cost 
prevents stockholders from motivating managers with proper 
incentives to maximize absolute profits. Whatever may be (for 
motivational purposes) the most accurate way to measure absolute 
profits can also be used as a good way to measure relative profits. 
Regardless of whether profits are calculated using accounting data 
or other imperfect data, collusion will be prevented, and there is 
unlikely to be any significant incremental effect in causing 
additional misallocation of resources.
    3. How does one measure "relative profit"? Aside 
from accounting measures, one way to estimate absolute profit is to 
look at changes in the value of a firm's total outstanding stock 
over a period of t/me and make adjustments at an appropriate 
interest rate for dividends paid or new stock shares issued over the 
same period of time. Since changes in both short-term and long-term 
profit potential affect the firm's value, this method of 
ascertaining profit gives managers the least incentive to manipulate 
accounting procedures, or to manipulate events in response to 
mistaken accounting rules. To calculate relative profits by this 
method, one simply looks at the change in value for one firm and 
subtracts off a ' weighted average of the change in value for 
rival firm(s).
    alternative method for measuring relative profit makes use of a 
new forecasting method, described by Lundgren (1995). This method 
provides efficient incentives for unbiased human forecasts of any 
variable value, including the future absolute profits or relative 
profits of any firm or any subcomponent of a firm, and such 
forecasts can be made as free of accounting biases as stock values. 
An advantage of the forecasting method is that it can be used to 
separate out the industry-specific profits of a conglomerate 
operating in several industries.
    4. How does one apply the relative profit concept to industries 
which contain multi-industry conglomerates? Most multi-industry 
conglomerates adopt the multi-division form of organization, in 
which each industry

[[Page 29205]]

division is operated essentially as a separate profit center, with 
separate accounting for each industry of operation. If the 
conglomerate operates/I1 unrelated industries, there is unlikely to 
be any economy of scale or scope that would be wasted if the 
conglomerate were required to break itself into single-industry 
parts. If a break-up is deemed undesirable because of economies of 
scale or scope, and if it is infeasible to issue separate securities 
for each industry subsidiary of the firm, then one can either use 
accounting techniques or use the forecasting technique described in 
Lundgren (1995). If a firm simply produces multiple (but closely 
related) products, the firm is best understood as producing in a 
single industry--a circumstance which requires no special 
treatment, as shown in Donaldson and Neary (1984, pp. 104-5, 
lO9-110).
    5. How does one define the "market" or 
"'industry" for purposes of imposing the zero-sum 
game? Since it is not the purpose of the scheme to determine legal 
culpability for monopolization, but simply to eliminate incentives 
for collusion, it is not necessary to answer the tricky question of 
how broadly or narrowly the market should be defined. It is 
generally preferable to define the industry/market rather narrowly, 
so that only a very few, very similar firms are placed in each 
zerosum game. That is, if there is a broadly defined industry with 
several firms, it is generally preferable to impose more than one 
zero-sum game on the several firms, by grouping the firms into more 
narrowly defined sub-industries, and imposing a zero-sum game on 
each of the smaller groups. Unlike under current antitrust law, it 
is not necessary to inquire whether more distantly related firms are 
actually part of the same "market".
    6. How does one sustain incentives for innovation and 
technological progress ? Innovations may be either costless or 
costly, and may be either patentable or unpatentable. If innovations 
are costless, we may presume that relative profit maximizers will 
adopt them, since profit maximization implies cost minimization. If 
innovations are costly, but patentable, the patent law provides 
incentive for innovation. Since RPM incentives are designed to 
induce competition, they should not be applied to situations where 
monopoly, and hence absolute profit maximizing, is the preferred 
public policy. Fortunately, both absolute profit and relative profit 
are measured in compatible money units, so there is nothing to 
prevent the institution of APM incentives for patented activities 
and RPM incentives for unpatented activities, even with respect to 
the same manager in the same firm.\2\
---------------------------------------------------------------------------

    \2\ There are various ways this can be done. For example, 
if firm A has a patent and firm B is a rival, any royalty payment 
from firm B to firm A would not be counted against either firm p. or 
firm B in the calculation of relative profits. A complete exposition 
would require a separate paper.
---------------------------------------------------------------------------

    If innovations are costly, but unpatentable, RPM firms still 
have an incentive to reduce costs, if gains from innovation can be 
captured for a period o t" time until competitors follow suit. 
This incentive is proportional to firm output. The conventional 
Schumpeterian "wisdom" that a competitive industry is 
less innovative than an oligopolistic industry confounds the 
influence of firm size with the competitive/noncompetitive nature of 
firm interaction. It is mainly the size of firm output, not the size 
of a collusive price-cost margin, which deter-mines the size of the 
incentive to reduce unit costs.
    7. How does one prevent RPM industries from sustaining chronic 
losses? Chronic losses would occur only if marginal cost lies 
consistently below average cost for a particular industry. In such 
case, the industry can be made viable by offering an industry lump-
sum subsidy in the exact amount of the industry's economic losses. 
Lump-sum subsidies may be distributed equally to all firms in a 
zero-sum group without affecting relative profits, and hence without 
inducing behavior to manipulate the size of the subsidy. Financing 
the subsidy through general revenues yields marginal cost pricing. 
Financing through a special industry tax yields average cost 
pricing.
    8. How does one ensure that RPM firms do not sabotage rival 
firms "operations? Since relative profits rise when rival firm 
profits fall, there is arguably an increased incentive to sabotage 
rival firm operations. An increased incentive to cause sabotage need 
not imply a significant increase in actual sabotage. A situation of 
mutual sabotage can only arise if legal penalties are very weak, 
since rival firms have incentive to investigate, report, and 
prosecute sabotage activities which reduce their levels of profit.
    Nevertheless, even if we were to suppose that serious sabotage 
problems would arise from an unmodified RPM incentive scheme, it is 
possible to modify the incentive scheme slightly so as to eliminate 
the sabotaging incentives. This modification would require a 
deduction in managerial compensation which offsets (or further 
penalizes) any gain in managerial compensation resulting from any 
gain in relative profits due to sabotage occurring in rival firms, 
even if legal culpability for the sabotage cannot be established. In 
other words, one may convert the zero-sum game into a negative-sum 
game, if sabotage is observed. (One can apply the same reasoning to 
lawsuits.)
    9. How does one ensure that corporate managers will not evade 
the regulation of salary policies? The regulation of managerial 
compensation has nothing to do with the total amount of the salary 
and bonuses, but only the methods )f their calculation. Even if we 
suppose that the value of relative profits is lower, on average, 
than the value of absolute profits, the noncontingent salary 
component of a manager's compensation can always be raised to 
compensate. No reduction in the average levels of managerial 
compensation is required. For the same level of risk and expected 
compensation, managers do not care whether bonuses are contingent on 
relative profit or absolute profit.
    10. Does the scheme represent an unwarranted intrusion into 
managerial compensation policies which have heretofore been 
unregulated? The proposal does not actually require government to 
determine the managerial incentive schemes. It simply requires that 
the contingent part of any managerial incentive scheme must be based 
on relative firm performance, rather than absolute firm performance. 
In order to prevent the incentive for managerial collusion, it is 
not necessary that gov-ernment determine the overall level of 
managerial compensation, nor is it necessary that government 
determine and implement any, particular method for measuring 
relative firm performance. The minor intrusion, if it be such, is 
justified by the important public purpose at stake: Preventing 
collusion.
    11. How does one prevent collusion among managers to reduce 
managerial effort levels? Instituting a zero-sum game in managerial 
income does not mean instituting a zero-sum game in managerial 
effort levels, so collusion to reduce managerial efforts is at least 
conceivable. However, collusion to reduce effort levels is not a 
serious threat, since a) managers of firms typically work in 
separate locations, and b) the work of managers consists mainly of 
mental efforts. Therefore, since managerial effort is essentially 
unobservable, any agreement to reduce effort levels cannot be easily 
monitored or enforced by colluding managers.
    However, Simply for argument's sake, suppose that managerial 
effort is actually (at least partly) observable. For example, 
suppose effort can be measured based on hours spent "on the 
job". In that case, one can pay managers based both on 
absolute effort and on relative performance. If the compensation 
rate for effort is made high enough, managers will no longer have 
incentive to collude to reduce effort levels, even if such collusion 
could be made perfectly enforceable.
    12. How does one ensure that firm owners will not find ways of 
making man- agement stress absolute profits over relative profits? 
This is the subject of the next section.

V. Owners, Managers, and Incentives

    There are at least two ways of instituting relative profit 
incentives for firms First, top management (including the board of 
directors) can be given long-tern< compensation contracts based 
on relative performance. Secondly, one can impose the zero-sum game 
in profits on whole firms (owners), and not just managers. 
Government may adopt only the first set of measures, only the second 
set, or both sets simultaneously.
    The second method can be implemented by 100% taxing 
(subsidizing) the combined economic profits (losses) of an industry 
and allocating the tax (subsidy) equally to each firm. The tax 
(subsidy) would be on industry profits, not individual firm profits. 
As a result of the industry tax/subsidy scheme, after-tax profits to 
owner-shareholders are equivalent to pre-tax relative profits, which 
means owners will try to maximize relative profits rather than 
absolute profits. Although this method appears economically viable, 
it may not be politically palatable, given the potential for 
redistributions of income between stockholders and the government.
    In firms or industries where owners and managers are one and the 
same these two methods are essentially equivalent. No choice is 
possible. However, most important oligopoly industries are probably 
composed of large corporatiotions which maintain a separation 
between ownership and direct managerial control. This well-known 
aspect

[[Page 29206]]

of the internal structure of the modern corporation presents an 
interesting avenue by which government can enforce antitrust policy. 
Rather than impose relative profit incentives directly upon owners 
through taxes end subsidies, government can influence firm behavior 
simply by altering the incentives of management.
    However, if owners are not made the direct subjects of taxes and 
subsidies which impose relative profit incentives, this raises the 
issue of whether absolute wealth maximizing stockholders can somehow 
reimpose APM incentives on RPM managers. The current state of 
corporate affairs is that managers, not stockholders, basically 
control the large corporation. Managers effectively appoint the 
boards of directors, to whom they are ostensibly responsible. 
Indirectly, through their choice of board members, managers set 
their own salaries. Managers have no incertive to change this state 
of affairs.
    Stockholders are numerous and dispersed. Individually, most 
stockholders do not have enough votes to unseat management. 
Obtaining collective action to unseat management requires 
significant expense, which most stockholders find too costly to 
undertake. Controlling management is a "public good" for 
all stockholders, which most stockholders find rational to 
"free ride" upon by not attempting to provide it. The 
only stockholders who might have an incentive to undo management 
policies are the largest or principal stockholders. The remaining 
stockholders are of no consequence, except as voters who might side 
with the principal stockholder in any fight against management.
    Consider, therefore, an industry in which the top two, three, or 
four firm s have been placed into a zero-sum game in terms of 
managerial incentives. Each firm has a different principal owner. If 
the same person or entity is a principal owner in two or more of the 
top firms in an oligopoly industry, this should be regarded as an 
antitrust violation, just the same as interlocking directorates are 
so regarded. Hence, we assume different principal owners. Any 
conspiracy to undo the relative incentive scheme must involve the 
principal owners, since the managers themselves have no such 
incentive.
    To be effective, the conspiracy must convert all or most 
managers from relative profit goals to absolute goals. To convert 
only one manager to absolute profit goals would not generate the 
kind of collusion among business firms which could substantially 
raise prices and profits, and thereby make the conspiracy (with its 
attendant risks) worthwhile from a private perspective. The 
conspiracy must therefore involve the principal owners of different 
firms acting in combination. The principal owners, being already 
wealthy, will not rationally risk jail time simply to increase their 
wealth still further. Suppose, nevertheless, that the principal 
owners attempt a conspiracy. What means would they use to influence 
management?
    There are basically only two avenues by which the principal 
owners might try to influence management: compensation and 
employment. Either avenue may be pursued overtly or covertly.
    First consider overt operations. The principal owner persuades 
stockholder voters to alter the conditions of employment or 
compensation. For example, the principal owner might use the annual 
stockholder meetings to directly hire or fire the manager, according 
to whether the manager pursued or failed to pursue collusive 
policies alongside other firms. Alternatively, the annual meetings 
might be used to raise or lower the base salary for future 
employment in a manner designed to undo the relative profit 
incentives paid in previous years.
    Use of the annual stockholder meetings for either purpose would 
be an unusual or abnormal business practice. Use of the annual 
meetings for these purposes by an RPM firm would clearly be a 
suspect practice, prompting an antitrust investigation. More simply, 
use of a stockholder meeting to directly determine managerial 
employment or compensation might be made a per se antitrust 
violation, when performed by an RPM firm.
    Thus, the following is recommended for instituting RPM 
incentives on management: Both the managers and the boards of 
directors are given long-term contracts containing relative 
performance incentives, which are not altered from year to year in a 
manner that might allow owner to undo the RPM incentives. Any part 
of the compensation (including stock holdings or stock options) 
which is contingent on the firm's performance must be based on 
relative performance, not absolute performance. All compensation and 
compensation arrangements of managers and directors of RPM firms are 
disclosed to the antitrust authorities. Managerial employment is 
determined by the board of directors (all of whom are paid according 
to RPM incentives), not by either stockholders or principal owners, 
unless the principal owners have been converted to RPM incentives. 
The directors have overlapping terms, and are not all elected at 
once.
    In situations where a principal owner (or other stockholder) 
wishes to have an active role in management or on the board of 
directors of an RPM firm, such owner or stockholder must have his 
stockholdings convened into assets which provide RPM incentives. 
This can be accomplished either by shorting the stock of rival RPM 
firms, and/or by imposing a tax/subsidy on the stockholder which 
mirnicks the change in value of the stock in rival RPM firms. If the 
principal stockholder desires to be a passive investor, this change 
in incentive is not required.
    Consider now possible covert operations. Assume that the 
principal owner has not acknowledged any active interest in the 
corporation, and has not been converted to RPM incentives. How can a 
principal owner with APM incentives undo the RPM incentives of firm 
managers? There are only two possibilities: threats and bribes. 
Threats are particularly likely to be reported to the antitrust 
authorities, could result m extra jail time, and will presumable not 
be resorted to. This leaves bribery
    The rich stockholder may choose to bribe either the manager or 
the directors. The manager might be bribed to behave collusively. 
The directors might be bribed to hire and fire managers based on 
willingness to collude. Bribing the directors is likely to be 
cheaper, but also less effective and more likely to be reported. 
Even if successful, bribing the directors to fire a manager is 
particularly likely to be reported by the manager. This leaves only 
bribing the manager directly.
    A conspiracy by principal owner(s) will not stop at trying to 
institute ??M incentives on RPM managers. Rather, the rational goal 
would be to attempt to institute joint-profit maximizing (JPM) 
incentives on the managers. Bribing the managers of all the 
important firms in the industry to institute JIM incentives is the 
only procedure that would guarantee collusion. Re-instituting APM 
incentives merely provides the opportunity for collusion, but does 
not guarantee its occurrence.
    The possibility that principal owner(s) might bribe the 
manager(s) of APM firms to collude, or provide them with JPM 
incentives exists even today. Yet one rarely (or never?) hears of 
principal owner(s) attempting to bribe or covertly pay firm managers 
in this manner. If such behavior does not happen when firm managers 
are paid according to APM incentives, why should it happen if 
managers are paid according to RPM incentives?
    In short, an illegal conspiracy of stockholders to re-impose 
absolute profit incentives onto firm managers is unlikely. The small 
stockholder has little influence and insufficient incentive to 
launch such a conspiracy. The large stockholder is too wealthy to 
want to risk jail time. Any such conspiracy would have to be 
explicit (and therefore detectable), not merely tacit.

VI. Conclusion

    It has been shown that institution of a zero-sum game among a 
group of firms by means of relative profit maximizing incentives is 
capable of reducing or eliminating incentives for firms to collude, 
either actually or tacitly. This mild change in managerial 
incentives can be imposed at essentially zero public or private 
cost, yet it reaps potentially huge benefits.\3\

Appendix A. Optimal Weighting of Goal Functions

    This appendix derives the conditions for goal functions needed 
to achieve a zero-sum game with desirable long-run properties. 
Suppose there are N (N ?? 2) firms in an industry. Let ??1, ??2,..., 
??N be the profits earned by these firms; and let G1, G2, ..., GN be 
the goal functions for these firms. Let be the weight placed on firm 
j's profits infirm i's goal function, and let Ki be an arbitrary 
constant which adjusts firm i's goal satsifaction upwards or 
downwards (e.g., a fixed salary component in managerial pay). Goal 
functions which are linear in profits have the form:
N
j=l
for all i E [1, N], where all w's and K's are fixed constants.

[[Page 29207]]

    The zero-sum conditions require:
N
??, wi.i = 0, (A.2)
i=1
---------------------------------------------------------------------------

    \3\ One famous estimate of the deadweight cost of monopoly 
power (including oligopoly) is between 1/2% and 2% of G.N.P. 
(Scherer and Ross, 1990, p. 667).
---------------------------------------------------------------------------

    Suppose each firm sells a standardized product and that price 
depends solely on industry output: P = P(Q), where Q = ??Qi. Assume 
further (which is likely in the long run) that cost functions are 
identical for each firm: TCi = C(Q1). Hence,
??i = POi--C(Oi), so that we obtain:
N
Gi = ?? wij(PQj--c(Qj)) + Ki
j=1
(A.3)
    Define aji = ??Qj/??Qi as any arbitrary conjecture which firm i 
entertains about the reaction function of firm j (aii= 1). Thus:
N N
(??Gi/??O,) = ?? ajiwij[P- c'(Qj)] + p(O) ??wijQj = o
j=1 j=1
(A.4)
    Assuming that N firms in the industry is a given and that 
marginal cost is increasing, then the optimal industry outcome 
occurs only when firm outputs are identical (Qj = Q/N) and price 
equals marginal cost [P--C'(Qj) = 0] for each firm. These 
conditions are met only when the weights on profits meet the 
following conditions:
    N
?? to0" = 0 (A.5)
j=1
    These N conditions for long-run industry optimality are in 
addition to 1tie N conditions in (A.2) on weights needed to insure 
the zero-sum nature of the game. Short-run effects \4\ not 
analyzed here may perhaps place additional restrietions on the 
optimal values for weights in the goal functions of firms.
---------------------------------------------------------------------------

    \4\ These short-ran effects include possible incentives 
for pair-wise or subset collusion, or possible concerns about 
distribution of output among firms, if short,run costs differ 
significantly among firms and there are three or more firms in the 
same zero-sum game.
---------------------------------------------------------------------------

Appendix B. Short-run Cost Differences

    This appendix employs a 2-firm game to model the consequences of 
short-run cost differences between firms. Let G1(Q1) and C2(Q2) be 
the cost functions of firms 1 and 2, and let a12 -" ??Q1/??Q2 
and o121--??Q2/0QI be any arbitrary conjectures which each farm 
entertains about the reaction functions of the other firm. The 
problem itself may be stated thus:
G1 = ??l--7o2 = p(Q)Q1- C1(Q1)- p(Q )Q2 + C2(Q2),
(B.1)
G'2 = r2--??1 = p(,Q)Q2--C2(Q2)--p(Q)Q1+ C1(Q1). 
03.2)
    The first=t order conditions are:
??G1/??Q1- p'(Q)(1 + a21)(Ql-Q2) + p(Q)(I- a21)
-C1(Q1) + a21C12(Q2) = o
03.3)
??G2/??Q2 = p'(Q)(1 + a12)(Q2--Q1) + p(Q)(1--a12)
 -C(Q2) + al2c'1(Qt) = 0
03.4)
    It can be shown that the only solution which satisfies Equations 
03.3) at,d (B.4) has the form:
p(Q) = C1(Q??) + ?/Q,)
2
03.5)
(Q,--Q??) = ??Q??)--c(O2)
2f(Q) 03.6)
    Equation 03.5) tells us that price will be set equal to the 
average of the marginal costs of the two firms. Equation (B.6) tells 
us that the more efficient firm will produce morn output than the 
less efficient firm, since f(Q) < 0.

Appendix C. Differentiated Products

    This appendix models what happens when products are 
differentiated and firms compete in prices ('Bertrand conjectures). 
Let the demand structure for the two firms be defined in terms of 
quantities demanded as a function of two prices: Q I = Ql(Pl, P2) 
and Q2 = Q2(Pi, P2). It is reasonable to assume (??Qj/??Pj) < 0 
and (??Qi/??Pi) > 0 for all i and j, j ?? i, The problem is 
stated thus:
G1 = ??1--??2 = Q1(P1, P2)P1--C1(Q1(PI, P2))
-Q2(P1, P2)P2 + C2(Q2(P1,P2))
G2 = ??c2--??1 = Q2(P1,P2)P2--C2(Q2(P1,P2))
-Q1(P1,P2)P1 + C1(Q1(P1,P2))
    The first-order conditions are:
    (C.2)
I,
(??G1/??P1 ) = Q1 + P1(??Q1/??P1)--C1(Q1)(??Q1/P1)
 -P2(??Q2/??P1) + C2(Q2)(??Q2/??P1) = 0
(c.3)
(??G2/??P2) = Q2 + P2(??Q218P2)--C(Q2)(??Q2/??P2)
-P1(??Q1/??P2)+C1(Q1)(??Q1/??P2)=0 (c.4)
    We may rearrange these conditions as expressing the determinants 
of ??.eost margins:
-Q1 + [/>2--C2(Q2)](??Q2/??P1) C.5)
P1- C1(Q1) = (t)Q,l??P1)
-Q2 + [P1--Ci(Q1)](aQ1/aP2) (c.6)
P2--C2(Q2) = (??Q2/??P2)
    The corresponding conditions for APM firms with Bertrand 
conjectures are:
-Q1 (c.7)
P1--C1(Q1) = (??Q1/??P1)
-Q2 (c.8)
P2--C2(Q2) = COO21or,??)
    Suppose we have a situation where two monopolistically 
competitive finns satisfy equations (12.7) and ((2.8) because both 
firms are maximizing absolute profits. Assume that both firms have 
positive price-cost margins. Now suppose that one (or both) of the 
firms is converted into being a relative profit maximizer. If firm 
one is so converted, its price-cost margin is reduced, because the 
difference between the fight-hand-side terms in equations ((2.5) and 
(C.7) is negative:
[P2 -C2(Q2)](??Q2/??P1) < 0 (C.9)
(??Qt/??P1)
Similarly, if firm 2 is convened m relative profit maximizing 
(assuming firm 1 maintains a positive price-cost margin), it too 
will wish m reduce its price-cost margin by expanding output and 
lowering price: Bertrand competition is absolutely the most 
competitive behavior which it is reasonable to postulate about APM 
firms, yet RPM firms compete even harder.
    References
    Aron, Debra J. (1988) "Ability, Moral Hazard, Firm Size, 
and Diversification", Rand Journal of Economics, 19(1), 
72-87.
    Bishop, Robert L. (1960) "Duopoly: Collusion or 
Warfare?", American Economic Review, 50, 933-961.
    Donaldson, David and Hugh Neary (1984) "Decentralized 
Control era Socialist lndustry, Canadian
    Journal of Economics, 17(1), 99-110.
    Fershman, Chaim and Kenneth L. Judd (1987) "Equilibrium 
Incentives in Oligopoly", American Economic Review, 77(5), 
927--940.
    Fouraker, Lawrence E. and Sidney Siegel (1963)Bargaining 
Behavior. New York: McGraw-Hill.
    Gibbons, Robert and Kevin J. Murphy (1990) "Relative 
Performance Evaluation for Chief Executive
    Officers", Industrial and Labor Relations Review, 43, 
Special Issue, 308--51S.
    Holmstrom, Bengt 0982) "Moral Hazard in Teams", Bell 
Jouranl of Economics, 13(2), 32,1-340.
    Lundgren, Carl (1995) "Forecasting Incentives Based on 
Value Marginal Product", manusc??ipt, June.
    Jones, Michael (1980) "Note on oligopoly: Rival behavior 
and efficiency", Bell Journal of Economics, 11(2), 
709-714.
    Scherer, E M. and David Ross (1990) Industrial Market Structure 
and Economic Performance, Third Edition. Boston, MA: Houghton 
Mifflin Company.
    Shleifer, Andrei (1985) "A Theory of Yardstick 
Competition", Rand Journal of Economics, 16(3), 319-327.
    Shubik, M. and R. Levitan (1980) Market Structure and Behavior. 
Cambridge: Harvard University Press.
    Sklivas, Sloven D. (1987) "The Strategic Choice of 
Managerial Incentives", Rand Journal, d of Economic18(3), 
452-458.
    Tam. Mo-Yin S. 0988) "A Mechanism to Induce Ramsey Pricing 
for Natural Monopoy Firms",
    International Journal of Industrial Organization. 6(2), 
247-262.
    Vickers, John (1985) "Delegation and the Theory of the 
Firm", Economic Journal, 95, Conference Papers Supplement, 
138-147.
    EXHIBIT 2
    TO THE COMMENTS
    OF RELPROMAX ANTITRUST INC.
    i
    UNITED STATES DISTRICT COURT
    FOR THE DISTRICT OF COLUMBIA
    UNITED STATES OF AMERICA,
    Plaintiff,
    V.
    MICROSOFT CORPORATION,
    Defendant.
    CIVIL ACTION NO. 94-1564 (SS)
    FINAL JUDGMENT
    WHEREAS Plaintiff, United States of America, having filed its 
Complaint in this action on July 15, 1994, and Plaintiff and 
Defendant, by their respective attorneys, having consented to the 
entry of this Final Judgment without trial or adjudication of any 
issue of fact or law; and without this Final Judgment constituting 
any evidence or admission by any party with respect to any issue of 
fact or law;
    NOW, THEREFORE, before any testimony is taken, and without trial 
or adjudication of any issue of fact or law, and upon consent of the 
partial

[[Page 29208]]

    ORDERED, ADJUDGED AND DECREED a:

I. JURISDICTION

    This Court has jurisdiction of the subject matter of this action 
and of the person of the Defendant, Microsoft Corporation 
("Microsoft"). The Complaint states a claim upon which 
relief may be granted against the Defendant under Sections 1 and 2 
of the Sherman Act, 15 U.S.C. 1,2.

II. DEFINITIONS

    (A) "Covered Product(s)" means the binary code of 
(1) MS-DOS 6.22, (2) Microsoft Windows 3.11, (3) Windows for 
Workgroups 3.11, (4) predecessor versions of the aforementioned 
products, (5) the product currently code-named 
"Chicago," and (6) successor versions of or replacement 
products marketed as replacements for the aforementioned products, 
whether or not such successor versions or replacement products could 
also be characterized as successor versions or replacement products 
of other Microsoft Operating System Software products that are made 
available (a) as stand-alone products to OEMs pursuant to License 
Agreements, or (b) as unbundled products that perform Operating 
System Software functions now embodied in the products listed in 
subsections (1) through (5). The term "Covered Products" 
shall not include "Customized" versions of the 
aforementioned products developed by Microsoft; nor shall it apply 
to Windows NT Workstation and its successor versions, or Windows NT 
Advanced Server.
    (B) "Customized" means the substantial modification 
of a product by Microsoft to meet the particular and specialized 
requirements of a final customer of a computer system. It does not 
include the adaptation of such a product in order to optimize its 
performance in connection with a Personal Computer System 
manufactured by an OEM.
    (C) "Duration" means, with respect to a License 
Agreement, the period of time during which an OEM is authorized to 
license, sell or distribute any of the Covered Products.
    (D) A "License Agreement" means any license, 
contract, agreement or understanding, or any amendment thereto, 
written or oral, express or implied, pursuant to which Microsoft 
authorizes an OEM to license, sell or distribute any Covered Product 
with its Personal Computer System(s).
    (E) A "Minimum Commitment" means an obligation of an 
OEM to pay Microsoft a minimum amount under a License Agreement, 
regardless of actual sales.
    (F) "Lump Sum Pricing" means any royalty payment for 
a Covered Product that does not vary with the number of copies of 
the Covered Product that are licensed, sold or distributed by the 
OEM or of Personal Computer Systems distributed by the OEM.
    (G) "New System" means a system not included or 
designated in a Per System License.
    (H) "NDA" means any non-disclosure agreement for any 
pre-commercial release of a Covered Product that imposes any 
restriction on the disclosure or use of any such pre- commercial 
release of any Covered Product or any information relating thereto.
    (I) "OEM" means an original equipment manufacturer 
or assembler of Personal Computer Systems or Personal Computer 
System components (such as motherboards or sound cards) or 
peripherals (e.g., printers or mice) that is a party to a License 
Agreement.



MTC-00030631 0227

    (J) "Per Copy License" means any License Agreement 
pursuant to which the OEM's royalty payments are calculated by 
multiplying (1) the number of copies of each Covered Product 
licensed, sold or distributed during the term of the License 
Agreement, by (2) a per copy royalty rate agreed upon by the OEM and 
Microsoft, which rate may be determined as provided in Section IV 
(H).
    (K) "Per Processor License" means a License 
Agreement under which Microsoft requires the OEM to pay Microsoft a 
royalty for all Personal Computer Systems that contain the 
particular microprocessor type(s) specified in the License 
Agreement.
    (L) "Per System License" means a License Agreement 
under which Microsoft requires the OEM to pay Microsoft a royalty 
for all Personal Computer Systems which bear the particular model 
name(s) or number(s) which are included or designated in the License 
Agreement by the OEM to Microsoft, at the OEM's sole option and 
under the terms and conditions as set forth herein.
    (M) "Personal Computer System" means a computer 
designed to use a video display and keyboard (whether or not the 
video display and keyboard are actually included) which contains an 
Intel x86, or Intel x86-compatible microprocessor.
    (N) "Operating System Software" means any set of 
instructions, codes, and ancillary information that controls the 
operation of a Personal Computer System and manages the interaction 
between the computer's memory and attached devices such as 
keyboards, display screens, disk drives, and printers.

III. 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.

IV. PROHIBITED CONDUCT

    Microsoft is enjoined and restrained as follows:
    (A) Microsoft shall not enter into any License Agreement for any 
Covered Product that has a total Duration that exceeds one year 
(measured from the end of the calendar quarter in which the 
agreement is executed). Microsoft may include as a term in any such 
License Agreement that the OEM may, at its sole discretion, at any 
time between 90 and 120 days prior to the expiration of the original 
License Agreement, renew such License Agreement for up to one 
additional year on the same terms and conditions as those applicable 
in the original license period.
    The License Agreement shall not impose a penalty or charge of 
any kind on an OEM for its election not to renew all or any portion 
of a License Agreement. In the event that an OEM does not exercise 
the option to renew a License Agreement as provided above, and a new 
License Agreement is entered between Microsoft and the OEM, the 
arm's length negotiation of different terms and conditions, 
specifically including a higher royalty rate(s), will not by itself 
constitute a penalty or other charge within the meaning of the 
foregoing sentence.
    The Duration of any License Agreement with any OEM not domiciled 
in the United States or the European Economic Area that will not be 
effective prior to regulatory approval in the country of its 
domicile may be extended at the option of Microsoft or the OEM 
during the time required for any such regulatory approval.
    License Agreement provisions that do not bear on the licensing 
or distribution of the Covered Products may survive expiration or 
termination of the License Agreement.
    (B) Microsoft shall not enter into any License Agreement that by 
its terms prohibits or restricts the OEM's licensing, sale or 
distribution of any non-Microsoft Operating System Software product.
    (C) Microsoft shall not enter into any Per Processor License.
    (D) Except to the extent permitted by Section IV (G) below, 
Microsoft shall not enter into any License Agreement other than a 
Per Copy License.
    (E) Microsoft shall not enter into any License Agreement in 
which the terms of that agreement are expressly or impliedly 
conditioned upon:
    (1) the licensing of any other Covered Product, Operating System 
Software product or other product (provided, however, that this 
provision in and of itself shall not be construed to prohibit 
Microsoft from developing integrated products); or
    (2) the OEM not licensing, purchasing, using or distributing any 
non-Microsoft product.
    (F) Microsoft shall not enter into any License Agreement 
containing a Minimum Commitment. However, nothing contained herein 
shall prohibit Microsoft and any OEM from developing non-binding 
estimates of projected sales of Microsoft's Covered Products for use 
in calculating royalty payments.



MTC-00030631 0230

    (G) Microsoft's revenue from a License Agreement for any Covered 
Product shall not be derived from other than Per Copy or Per System 
Licenses, as defined herein. In any Per System License:
    (1) into any License Agreement, or for purposes of applying any 
volume discount, or otherwise, that any OEM include under its Per 
System License more than one of its Personal Computer Systems;
    (2) Microsoft shall not charge or collect royalties for any 
Covered Product on any Personal Computer System unless the Personal 
Computer System is designated by the OEM in the License Agreement or 
in a written amendment. Microsoft shall not require an OEM which 
creates a New System to notify Microsoft of the existence of such a 
New System, or to take any particular actions regarding marketing or 
advertising of that New System, other than creation of a unique 
model name or model number that

[[Page 29209]]

the OEM shall use for internal and external identification purposes. 
The requirement of external identification may be satisfied by 
placement of the unique model name or model number on the machine 
and its container (if any), without more. The OEM and Microsoft may 
agree to amend the License Agreement to include any new model of 
Personal Computer System in a Per System License. Nothing in this 
clause shall be deemed to preclude Microsoft from seeking 
compensation from an OEM that makes or distributes copies of a 
Covered Product in breach of its License Agreement or in violation 
of copyright law;
    (3) The License Agreement shall not impose a penalty or charge 
on account of an OEM's choosing at any time to create a New System. 
Addition of a New System to the OEM's License Agreement so that 
Covered Products are licensed for distribution with such New 
Microsoft shall not explicitly or implicitly require as a condition 
of entering System and royalties are payable with respect thereto 
shall not be deemed to constitute a penalty or other charge of any 
kind within the meaning of the foregoing sentence;
    (4) All OEMs with existing Per System Licenses, or Per Processor 
Licenses treated by Microsoft under Section IV (J) as Per System 
Licenses, will be sent within 30 days following entry of this Final 
Judgment in a separately mailed notice printed in bold, boxed type 
which shall begin with the sentence "You are operating under a 
Microsoft Per System License," and shall continue with the 
language contained in the first four quoted paragraphs below. All 
new or amended Per System Licenses executed after September 1, 1994 
shall contain a provision that appears on the top half of the 
signature page in bold, boxed type shall begin with the sentence 
"This is a Microsoft Per System License," and which 
shall continue with the language contained in the first four quoted 
paragraphs below. "
    As a Customer, you may create a Hew System" at any time 
that does not require the payment of a royalty to Microsoft unless 
the Customer and Microsoft agree to add it to the License 
Agreement."
    "Any New System created may be identical in every respect 
to a system as to which the Customer pays a Per System royalty to 
Microsoft provided that the New System has a unique model number or 
model name for internal and external identification purposes which 
distinguishes it from any system the Customer sells that is included 
in a Per System License. The requirement of external identification 
may be satisfied by placement of the unique model name or model 
number on the machine and its container (if any), without 
more."
    "If the customer does not intend to include a Microsoft 
operating system product with a New System, the Customer does not 
need to notify Microsoft at any time of the creation, use or sale of 
any such New System, nor does it need to take any particular steps 
to market or advertise the New System." "Under 
Microsoft's License Agreement, there is no charge or penalty if a 
Customer chooses at any time to create a New System incorporating a 
non- Microsoft operating system. If the Customer intends to include 
a Microsoft operating system product with the New System, the 
Customer must so notify Microsoft, after which the parties may enter 
into arm's length negotiation with respect to a license to apply to 
the New System."
    In the case of OEMs with Per Processor Licenses treated as Per 
System Licenses pursuant to Section IV (J), the notice shall include 
the following paragraph at the beginning of the notice:
    "All models covered by your Per Processor License are now 
treated as subject to a Per System License. You may exclude any such 
model from being treated as subject to a Per System License by 
notifying Microsoft in writing. Such notice to Microsoft must 
include the model designation to be excluded from the Per System 
License. Such exclusion shall take effect on the first day of the 
calendar quarter next following Microsoft's receipt of such 
notice."
    (H) Microsoft may not use any form of Lump Sum Pricing in any 
License Agreement for Covered Product(s) executed after the date of 
this Final Judgment. It is not a violation of this Final Judgment 
for Microsoft to use royalty rates, including rates embodying volume 
discounts, agreed upon in advance with respect to each individual 
OEM, each specific version or language of a Covered Product, and 
each designated Personal Computer System model subject to the 
License Agreement.
    (I) OEMs that currently have a License Agreement that is 
inconsistent with any provision of this Final Judgment may, without 
penalty, terminate the License Agreement or negotiate with Microsoft 
to amend the License Agreement to eliminate such inconsistent 
provisions. An OEM desiring to terminate or amend such a License 
Agreement shall give Microsoft ninety (90) days written notice at 
any time prior to January 1, 1995.
    (J) If an OEM has a License Agreement that is inconsistent with 
any provision of this Final Judgment, Microsoft may enforce that 
License Agreement subject to the following:
    (1) If the License Agreement is a Per Processor License, 
Microsoft shall treat it as a Per System License for all existing 
OEM models that contain the microprocessor type(s) specified in the 
License Agreement except those models that the OEM opts in writing 
to exclude and such exclusion shall take effect on the first day of 
the calendar quarter next following Microsoft's receipt of such 
notice; and
    (2) Microsoft may not enforce prospectively any Minimum 
Commitment.
    (K) Microsoft shall not enter into any NDA:
    (1) whose duration extends beyond (a) commercial release of the 
product covered by the NDA, (b) an earlier public disclosure 
authorized by Microsoft of information covered by the NDA, or (c) 
one year from the date of disclosure of information covered by the 
NDA to a person subject to the NDA, whichever comes first; or
    (2) that would restrict in any manner any person subject to the 
NDA from developing software products that will run on competing 
Operating System Software products, provided that such development 
efforts do not entail the disclosure or use of any Microsoft 
proprietary information during the term of the NDA; or
    (3) that would restrict any activities of any person subject to 
the NDA to whom no information covered by the NDA has been 
disclosed.
    (L) The form of standard NDAs will be approved by a Microsoft 
corporate officer and all non-standard language in NDAs that 
pertains to matters covered in Section (K) above will be approved by 
a Microsoft senior corporate attorney.
    (M) Within thirty (30) days of the entry of this Final Judgment, 
Microsoft will provide a copy of this Final Judgment to all OEMs 
with whom it has License Agreements at that time except for those 
with licenses solely under the Small Volume Easy Distribution (SVED) 
program or the Delivery Service Partner (DSP) program. V.
connection with its monitoring or securing of compliance with any 
Undertaking by or Decision against Microsoft that relates to 
Microsoft's licensing of any Covered Product. In addition, Defendant 
shall not object to disclosure to Plaintiff by DG-IV of any other 
information provided by defendant to DG-IV, or to cooperation 
between DG-IV and Plaintiff in the enforcement of this Judgment, 
provided that Microsoft shall receive in advance a detailed 
description of the information to be provided and the Plaintiff will 
accord any Microsoft information received from DG-IV the maximum 
confidentiality protection available under applicable law. 
Specifically, Plaintiff will treat Microsoft information that it 
receives from DG-IV as "confidential business 
information" within the meaning of the Freedom of Information 
Act, 5 U.S.C. 552, with Microsoft deemed a 
"submitter" of the information under the statute. 
Plaintiff shall take precautions to ensure the security and 
confidentiality of Microsoft information provided in electronic 
form.
    (E) If at the time information or documents are furnished by 
Defendant to Plaintiff, Defendant represents and identifies in 
writing the material in any such information or document to which a 
claim of protection may be asserted under Rule 26(c)(7) of the 
Federal Rules of Civil Procedure, and Defendant marks each pertinent 
page of such material "Subject to claim of protection under 
Rule 26(c)(7) of the Federal Rules of Civil Procedure," then 
ten days notice shall be given by Plaintiff to Defendant prior to 
divulging such material in any legal proceeding (other than a grand 
jury proceeding) to which Defendant is not a party.

VI. FURTHER ELEMENTS OF JUDGMENT

    (A) This Final Judgment shall expire on the seventy eighth month 
after its entry.
    (B) Jurisdiction is retained by this Court over this action and 
the parties thereto for the purpose of enabling any 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.

VII. PUBLIC INTEREST

    Entry of this Final Judgment is in the public interest.
    Entered:

[[Page 29210]]

    UNITED STATES DISTRICT JUDGE
    EXHIBIT 3
    TO THE COMMENTS
    OF RELPROMAX ANTITRUST INC.
    IN THE UNITED STATES DISTRICT COURT
    FOR THE DISTRICT OF THE DISTRICT OF COLUMBIA
    UNITED STATES OF AMERICA,
    Plaintiff,
    V.
    MICROSOFT CORPORATION,
    Defendant.
    COMPETITIVE IMPACT
    Pursuant to Section 2(b) of the Antitrust ??
    (h), the United States submits this Competitive Impact
    Civil Action No. 94-1564 (SS)
    Competitive Impact Statement
    Judgment submitted for entry with the consent of defen
    antitrust proceeding.
    NATURE AND PURPOSE OF T
    On July 15, 1994, the United States filed a civil antitrust 
Complaint to prevent and restrain Microsoft Corporation 
("Microsoft") from using exclusionary and 
anticompetitive contracts to market its personal computer operating 
system software, in violation of Sections 1 and 2 of the Sherman 
Act, 15 U.S.C.\1\,\2\. As alleged in the Complaint, Microsoft has 
used these contracts to restrain trade and to monopolize the market 
for operating systems for personal computers using the x86 class of 
microprocessors, which comprise most of the world's personal 
computers. As used herein, "PC" refers to personal 
computers that use this class of microprocessor.
---------------------------------------------------------------------------

    \1\ The proposed Final Judgment that was filed with the 
Complaint on July 15, 1994 contained several omissions and 
inconsistencies in the numbering of paragraphs and sub-paragraphs. 
With the Defendant's consent, a corrected version of the Final 
Judgment is being filed with this Competitive Impact Statement. See 
Attachment. Paragraph and sub-paragraph numbers in this Competitive 
Impact Statement refer to the numbers used in the corrected version 
of the Final Judgment.
    \2\ Judgment will terminate this civil action, except that 
the Court will retain jurisdiction for further proceedings that may 
be required to interpret, enforce, or modify the Judgment, or to 
punish violations of any of its provisions.
---------------------------------------------------------------------------

    The Complaint alleges that Microsoft has used its monopoly power 
to induce PC manufacturers to enter into anticompetitive, long-term 
licenses under which they must pay Microsoft not only when they sell 
PCs containing Microsoft's operating systems, but also when they 
sell PCs containing non-Microsoft operating systems. These 
anticompetitive, long-term licenses have helped Microsoft to 
maintain its monopoly. By inhibiting competing operating 
systems" access to PC manufacturers, Microsoft's exclusionary 
licenses slow innovation, raise prices, and deprive consumers of an 
effective choice among competing PC operating systems.
    The Complaint also alleges that in connection with pre-release 
testing of a new Microsoft operating system code-named 
"Chicago," Microsoft sought to impose unreasonably 
restrictive and anticompetitive non-disclosure agreements on a 
number of leading developers of applications software products. 
These non-disclosure agreements would have unreasonably restricted 
the ability of software developers to work with competing operating 
systems or to develop competitive products or technologies.
    The Complaint seeks to prevent Microsoft from continuing or 
renewing any of the anticompetitive practices alleged to violate the 
Sherman Act, and thus to provide fair opportunities for other firms 
to compete in the market for PC operating systems.
    The United States and Microsoft have agreed that the proposed 
Final Judgment may be entered after compliance with the Antitrust 
Procedures and Penalties Act.1 Entry of the Final DESCRIPTION OF THE 
PRACTICES INVOLVED IN THE ALLEGED VIOLATIONS
    If this case were to proceed to trial, the United States would 
prove the following: Microsoft develops, licenses, sells, and 
supports several types of software products for personal computers, 
including operating systems and applications. An operating system is 
software that controls the basic operations of the personal 
computer. Applications software, such as word processing programs 
and spread sheets, runs "on top of" an operating system 
to enable the computer to perform a broad range of useful functions. 
Operating systems are designed to work with specific 
microprocessors, the integrated circuits that function as the 
"brain" of the computer. Most of the personal computers 
in the world today use the x86 class of microprocessors, originally 
designed by Intel, and now including microprocessors manufactured by 
other companies that use a substantially similar architecture and 
instruction set. Original equipment manufacturers 
("OEMs") that sell PCs and customers who buy such 
machines cannot use operating systems written for other 
microprocessors.
    In 1981, Microsoft introduced a PC operating system called the 
Microsoft Disk Operating System ("MS-DOS"), the original 
version of which Microsoft licensed to IBM for use in IBM's PC. As 
IBM's PC experienced considerable commercial success, other OEMs 
also used MS- DOS in order better to emulate the IBM PC. In 1985, 
Microsoft introduced "Windows," a more sophisticated PC 
operating system product designed for use in conjunction with MS-
DOS. Windows allowed users to give instructions with a 
"mouse" or similar device and also to run more than one 
application at a time. Microsoft quickly gained a monopoly in the 
market for PC operating systems worldwide. For almost a decade, 
Microsoft's market share has consistently exceeded 70%.\2\
---------------------------------------------------------------------------

    \2\ In 1993, Microsoft's MS-DOS operating system 
constituted approximately 79 % of the operating systems sold to PC 
manufacturers. PC-DOS accounted for approximately 13 % of such 
sales, OS/2 constituted approximately 4 %, DR-DOS constituted 
approximately 3 %, and Unix operating systems constituted 
approximately 1%. A chart showing these market shares is attached as 
Exh. 1.
---------------------------------------------------------------------------

    Development, testing, and marketing of a new PC operating system 
involves considerable time and expense. A new operating system faces 
additional barriers to entry, including the absence of a variety of 
high quality applications to run on the system; the small number of 
people trained on and using the system, which discourages customers 
from buying it and software companies from writing applications to 
run on it; and, since the overwhelming majority of PCs are sold with 
a pre-installed operating system, the difficulty of convincing OEMs 
to offer and promote the system.
    Microsoft has used exclusionary and anticompetitive contract 
terms to maintain its monopoly. OEMs believe that a substantial 
portion of their customers will want a PC with MS- DOS and Windows, 
and therefore feel that they must be able to offer their customers 
MS-DOS and Windows. With thin profit margins, OEMs want to obtain 
these products at the lowest possible cost.
    Beginning in 1988, and continuing until July 15, 1994, Microsoft 
induced many OEMs to execute anticompetitive "per 
processor" licenses. Under a per processor license, an OEM 
pays Microsoft a royalty for each computer it sells containing a 
particular microprocessor, whether the OEM sells the computer with a 
Microsoft operating system or a non-Microsoft operating system. In 
effect, the royalty payment to Microsoft when no Microsoft product 
is being used acts as a penalty, or tax, on the OEM's use of a 
competing PC operating system. Since 1988, Microsoft's use of per 
processor licenses has increased. In fiscal year 1993, per processor 
licenses accounted for an estimated 60% of MS-DOS sales to OEMs and 
43% of Windows sales to OEMs.\3\ Collectively, the OEMs who have 
such per processor contracts are critical to the success of 
competing operating system vendors, but those OEMs effectively are 
foreclosed to Microsoft's competitors.
---------------------------------------------------------------------------

    \3\ 3 Per processor licenses accounted for an increasing 
proportion of Microsoft's operating system sales in the 
1988--1993 period. Twenty per cent of all units of MS-DOS that 
were sold to OEMs in FY 1989 were sold pursuant to per processor 
licenses. That percentage increased to 22 % in FY 1990; 27 % in FY 
1991; 50 % in FY 1992; and to 60 % in FY 1993. A chart showing this 
increasing use of per-processor licenses is attached as Exh. 2.
---------------------------------------------------------------------------

    Microsoft has further foreclosed the OEM channel through the use 
of long-term contracts with major OEMs, some expiring as long as 
five years from their original negotiation date. In some cases, 
these contracts have left OEMs with unused balances on their minimum 
commitments, which Microsoft can allow to be used if the contract is 
extended, but which would be forfeited if the OEM does not extend 
the contract. These practices have allowed Microsoft to extend the 
effective duration of its OEM contracts, further impeding the access 
of PC operating system competitors to the OEM channel.
    In addition to using anticompetitive OEM licenses, Microsoft has 
also employed anticompetitive restrictions in certain of its non-
disclosure agreements ("NDAs"). Microsoft

[[Page 29211]]



MTC-00030631 0242

    anticipates commercially releasing Chicago, the next version of 
Windows, in late 1994 or early 1995. In preparation for its release, 
Microsoft has allowed certain third parties, including independent 
software vendors ("ISVs") who write applications, to 
have access to pre-release versions of Chicago, a process known in 
the software industry as "beta testing." This permits 
Microsoft to receive feedback from the beta testers, and the ISVs to 
begin writing applications for Chicago prior to its release.
    In connection with beta testing Chicago, Microsoft employed, as 
it has in prior beta tests, NDAs prohibiting disclosure of 
confidential information. In this instance, however, Microsoft 
sought to impose on certain leading software companies far more 
restrictive NDAs than it had previously used. These NDAs would have 
precluded developers from working on competitive products and 
technologies for an unreasonably long period of time.
    Through these practices, Microsoft has excluded competitors by 
unreasonable and anticompetitive means, thereby lessening 
competition and maintaining a monopoly in the PC operating system 
market. Microsoft's licensing practices deter OEMs from entering 
into licensing agreements with operating system rivals and 
discourage OEMs who agree to sell non-Microsoft operating systems 
from promoting those systems. By depriving rivals of a significant 
number of sales that they might otherwise secure, Microsoft makes it 
more difficult for its rivals to convince ISVs to write applications 
for their systems, for OEMs to offer and promote their systems, and 
for users to believe that their systems will remain viable 
alternatives to MS-DOS and Windows.
    Microsoft's exclusionary contracts harm consumers. OEMs that 
sign Microsoft's exclusionary licenses but offer consumers a choice 
of operating systems may charge a higher price, in order to cover 
the double royalty, for PCs using a non-Microsoft operating system. 
Even consumers who do not receive a Microsoft operating system still 
pay Microsoft indirectly. Thus, Microsoft's licensing practices have 
raised the cost of personal computers to consumers.
    Microsoft's conduct also substantially lengthens the period of 
time required for competitors to recover their development costs and 
earn a profit, and thereby increases the risk that an entry attempt 
will fail. In combination, all these factors deter entry by 
competitors and thus harm competition. By deterring the development 
of competitive operating systems, Microsoft has deprived consumers 
of a choice of potentially superior products. Similarly, the slower 
growth of competing operating systems has retarded the development 
of applications for such systems.

EXPLANATION OF THE PROPOSED FINAL JUDGMENT

    The proposed Final Judgment will end Microsoft's unlawful 
practices that restrain trade and perpetuate its monopoly power in 
the market for PC operating systems. In addition, the proposed Final 
Judgment contains provisions that are remedial in nature and 
designed to assure that Microsoft will not engage in the future in 
exclusionary practices designed to produce the same or similar 
effects as those set forth in the Complaint.
    In particular, Sections IV (A), (C), and (F) prohibit 
Microsoft's use of the specific exclusionary practices alleged in 
the complaint--"per processor" contracts, lengthy 
terms, and minimum commitments--that foreclose competing PC 
operating system vendors from much of the OEM channel. Sections IV 
(K)-(L) prohibit the use of anticompetitive non-disclosure 
agreements in conjunction with Microsoft's distribution of pre-
commercial releases of operating system software products. Sections 
IV (B), (E), (G), and (H) impose prohibitions that go beyond the 
alleged exclusionary practices in order to ensure that Microsoft's 
future contracting practices--not challenged here because not 
yet used--do not unreasonably impede competition. Sections IV 
(J) and (M) are designed to bring existing contracts into immediate 
compliance with the proposed Final Judgment.

Scope of the Final Judgment

    The injunctions in Section IV generally apply to "covered 
products" which are defined, in Section II (A), as the binary 
code of MS-DOS 6.22; Microsoft Windows 3.11; Windows for 
Workgroups 3.11; predecessor versions of those products; the product 
currently code-named "Chicago" (the planned successor to 
Microsoft Windows 3.11); and other successor versions of or products 
marketed as replacements for the aforementioned products. This 
definition includes all Microsoft's PC operating system products in 
which the defendant currently possess a substantial degree of market 
power. The definition does not encompass, and specifically excludes, 
Windows NT Workstation and Windows NT Advanced Server, neither of 
which has a significant share of a relevant market at this time.
    The definition of "covered product" was drafted with 
the recognition that Microsoft will continue to modify its operating 
system products throughout the duration of the Final Judgment. The 
prohibitions in the decree will apply to the successor and 
replacement products of those existing operating system products 
that have substantial market power. The decree will govern the 
licensing of such products if they are made available as stand-alone 
products to OEMs pursuant to license agreements, or as unbundled 
products that perform operating system software functions now 
embodied in the specifically listed existing products. Moreover, the 
decree will govern the licensing of successor versions of or 
products marketed as replacements for MS-DOS 6.22, Microsoft Windows 
3.11, Windows for Workgroups 3.11, and "Chicago," even 
if such successor or replacement products could also be 
characterized as successors or replacements of operating system 
software products that are not covered, such as Windows NT 
Workstation or Windows NT Advanced Server.

Prohibition of the Licensing Violations

    The three anticompetitive features of Microsoft's license 
agreements that are challenged in the complaint--the excessive 
duration of those agreements, the requirement of royalty payments on 
a "per processor" basis, and large minimum 
commitments--are addressed principally in Sections IV (A), IV 
(C) and IV (F) of the Final Judgment.
    Duration: Section IV (A) limits the duration of Microsoft's 
license agreements with OEMs to one year, with OEMs having the 
option to renew a license for one additional one year term on the 
same terms and conditions as in the first year. This limitation on 
the duration of license agreements, along with the safeguards 
provided in Section IV (G), will ensure that vendors of competing 
operating systems will have regular and frequent opportunities to 
attempt to market their products to OEMs. Absent such opportunities, 
Microsoft's competitors might be unable to reach the level of market 
penetration needed for profitable operation in a reasonable period 
of time, even if they are offering products that are deemed superior 
by those customers who have an opportunity to buy them. Per 
Processor Licenses: Section IV (C) prohibits the use of per 
processor licenses.\4\ Section II (K) defines per processor licenses 
as licenses that require the OEM to pay a royalty for all personal 
computer systems that contain specified microprocessors. As noted 
above, the requirement to pay a royalty to Microsoft on the sale of 
a PC that has a non-Microsoft operating system is comparable, in its 
economic effect, to the imposition of a "tax" on the 
competing operating system. Per processor licenses are also very 
similar to exclusive dealing or requirements contracts; the OEM in 
effect is obtaining the right to use Microsoft's operating system, 
and is paying an operating system royalty, for all of its operating 
system "requirements" for use on PCs using the 
designated microprocessors.
---------------------------------------------------------------------------

    \4\ Section IV (J) (1) converts all per processor licenses 
to per system licenses, except those models which an OEM excludes, 
which will thereafter be subject to the limitations imposed on 
Microsoft by Section IV (G).
---------------------------------------------------------------------------

    Minimum Commitments: Section IV (F) will bar Microsoft from 
entering into any license agreement containing a minimum 
commitment.\5\ While minimum commitments are not in and of 
themselves illegal, they can be used to achieve a similar effect as 
that accomplished through per processor licenses or exclusive 
dealing contracts. If the minimum commitment is greater than the 
number of units of Microsoft software that the OEM expects or would 
otherwise desire to use at any time during the term of the contract, 
the minimum commitment creates a disincentive for an OEM to make 
incremental purchases of non-Microsoft operating systems. In that 
context, the minimum commitment also operates in effect to require a 
royalty payment to Microsoft, even for PCs that use a non-Microsoft 
operating system. This effect will be ended by Section IV (F).
    Restoring Competition To The Market Through Prophylactic 
Additional Relief The proposed Final Judgment not only bans 
Microsoft's unlawful practices, but also

[[Page 29212]]

contains additional provisions which are prophylactic in nature, and 
are intended to ensure that the anticompetitive effects of those 
practices are not replicated through use by Microsoft of other 
exclusionary practices.
---------------------------------------------------------------------------

    \5\ Section IV (J) (2) prohibits Microsoft from 
prospectively enforcing minimum commitments in existing license 
agreements.
---------------------------------------------------------------------------

    Microsoft Prohibited From Limiting OEM Sales of Competing 
Operating System Products: Section IV (B) bars Microsoft from 
entering into license agreements that prohibit or restrict an OEM 
from licensing, selling, or distributing competing operating system 
products. In addition, Section IV (E) prohibits Microsoft from 
expressly or impliedly conditioning its licenses of operating 
systems on the licensing, purchase, use or distribution not only of 
other covered products, but also any other Microsoft product, or 
non-Microsoft product. Without these provisions Microsoft could 
force OEMs to purchase covered products and thus accomplish 
anticompetitive effects similar to those achieved through its 
unlawful licensing practices, or attempt to extend or protect its 
monopoly in any covered product by conditioning its licenses on the 
licensing, purchase or use of other products.
    Microsoft Limited to Per Copy and Per System Licenses: Sections 
IV (D) and IV (G) require Microsoft to use either "per 
copy" or "per system" licenses. Per copy licenses, 
if used in conjunction with pro-competitive volume discounts, pose 
few competitive concerns. Per system licenses, if not carefully 
fenced in, could be used by Microsoft to accomplish anticompetitive 
ends similar to "per processor" licenses. However, if an 
OEM easily can designate models not subject to a per system license, 
it can use non-Microsoft operating systems on those models without 
incurring a royalty obligation to Microsoft. If an OEM need not pay 
a royalty to Microsoft for anything but the number of copies of the 
Microsoft operating system that it actually uses, that OEM will not 
be deterred from licensing, purchasing or using competing operating 
system products.
    Restrictions on Per System Licenses: The Final Judgment also 
places restrictions on the use of per system licenses to ensure that 
they are not used in an exclusionary manner. In particular, Section 
IV (G) specifies that per system licenses must allow the licensee to 
create "new systems" that can be sold without incurring 
a royalty obligation to Microsoft if they do not utilize a Microsoft 
product. Under Section IV (G), an OEM need only designate a new 
model name or number to create a "new system." Microsoft 
may not require the OEM even to notify Microsoft of the creation of 
a new system; nor may Microsoft impose requirements relating to the 
marketing or advertising of a new system, or penalize an OEM for 
creating a new system.
    Section IV (G) (4) requires Microsoft to notify within 30 days 
following entry of this Final Judgment all existing OEM licensees 
under per system licenses and all OEM licensees with per processor 
licenses who choose to let them be converted to per system licenses 
(a provision discussed below) of their rights to create new systems 
that will not be subject to any existing per system license. This 
notice provision ensures that existing licensees promptly know of 
their rights to avoid royalty payments under per system contracts if 
they choose to create new systems.
    Microsoft Prohibited From Using Lump Sum Pricing: Section IV (H) 
also serves a prophylactic function, prohibiting the use of lump sum 
pricing in license agreements for covered products. As defined in 
Section II (F), lump sum pricing is any royalty payment that does 
not vary with the number of copies of the covered product (under per 
copy licenses) or the number of personal computer systems (under per 
system licenses) that are licensed, sold, or distributed by the OEM. 
This restriction, like the prohibitions on minimum commitments and 
requirements contracts, restricts conduct that could be used by 
Microsoft to achieve effects comparable to the effects of the 
conduct challenged by the government, and for that reason is 
enjoined.\6\
    Neither Section IV (H) nor any other provision of the proposed 
Final Judgment prohibits the use of royalty rates, including rates 
embodying volume discounts, agreed upon in advance with respect to 
each individual OEM, each specific version or language of a covered 
products, and each designated personal computer system model. 
Nothing in the Final Judgment, however, in any way sanctions 
Microsoft structuring any volume discount whose purpose or effect is 
to impose de facto requirements contracts or exclusive arrangements 
on the OEM. As discussed below in connection with alternatives to 
the proposed Final Judgment, given Microsoft's monopoly power in 
operating systems, such practices can violate the antitrust laws.
---------------------------------------------------------------------------

    \6\ If a license agreement established a minimum 
commitment greater than the OEM's requirements for operating systems 
(an agreement that would be prohibited under this decree), the 
minimum commitment would constitute, in effect, a lump sum payment. 
Regardless of the number of copies distributed by the OEM, its 
royalty payment to Microsoft would not vary. A lump sum pricing 
arrangement imposed by a monopolist that allowed unlimited use of 
the licensed product for a single fee calibrated to the anticipated 
total operating system needs of a particular OEM would also produce 
a similar economic effect as a requirements contract or a per 
processor license: the OEM would owe the same royalty to Microsoft 
whether it chose to use a Microsoft operating system on all of the 
PCs it sold, or only on some of the PCs it sold, and would, in 
effect, "pay twice" if it chose to purchase a non-
Microsoft operating system for some of its PCs.
---------------------------------------------------------------------------

Transition Rules

    In the Stipulation consenting to the entry of the proposed Final 
Judgment, Microsoft agreed to abide by the provisions of the 
proposed Final Judgment immediately upon the filing of the 
Complaint, i.e., as of July 15, 1994. Among other things, the 
transition provisions described herein will require Microsoft to 
abide by the foregoing limitations and prohibitions when entering 
into any license agreements with OEMs after July 15, 1994. Certain 
additional provisions of the proposed Final Judgment also apply to 
existing license agreements that are inconsistent with the proposed 
Final Judgment's requirements for new license agreements.
    Under Section IV (I), existing OEM licensees may terminate or 
negotiate with Microsoft to amend their agreements to make them 
consistent with the requirements of the Final Judgment.
    Section IV (J) provides that if an OEM chooses not to exercise 
either of these options, Microsoft must abide by the following 
rules. First, under Section IV (J) (1), a per processor license must 
be treated as a "per system" license; OEM models that 
contain the microprocessor(s) specified in such a per processor 
license will be considered to be covered by the "per 
system" license unless the OEM opts in writing to exclude such 
model from coverage. As already noted, OEMs may freely sell PCs with 
non-Microsoft operating systems, and avoid any obligation to pay 
royalties to Microsoft under a per system license, simply by 
designating such PCs as a new system with a separate model number or 
name. Second, under Section IV (J) (2), Microsoft may not enforce 
any minimum commitment in an existing license agreement.
    These provisions further two consistent goals. Opportunities for 
competition in the PC operating system market are fostered by a 
rapid end to the unlawful practices embodied in existing licenses. 
At the same time, the transition rules avoid creating hardships for 
OEMs by not unnecessarily disrupting established commercial 
relationships with Microsoft. Indeed, OEMs are not required to 
terminate or amend their existing contracts with Microsoft; the 
choice to do so is theirs alone. Microsoft, however, may not enforce 
the per processor or minimum commitment features of any existing 
contract. Providing OEMs with this choice minimizes the costs of the 
transition from existing license agreements that are inconsistent 
with the decree to new license agreements, while ensuring that any 
unavoidable transition costs be borne largely by Microsoft.
    To ensure that existing licensees learn of their rights under 
the proposed Final Judgment, Section IV (M) requires Microsoft to 
provide a copy of the Final Judgment to all OEMs with which it has 
license agreements, except for those who have licenses only under 
Microsoft's Small Volume Easy Distribution program or the Delivery 
Service Partner program.

Non-Disclosure Agreements

    Finally, the proposed Final Judgment contains provisions that 
prevent Microsoft from imposing unlawfully restrictive NDAs on 
developers of applications software.
    Sections IV (K) (1) limits the duration of any NDA to the 
earliest of (a) the commercial release of the product covered by the 
NDA, (b) an earlier public disclosure of the information covered by 
the NDA, or (c) one year after the information is disclosed to the 
person subject to the NDA. Section IV (K) (2) provides that NDAs may 
not restrict subject parties from developing software products that 
will run on competing operating systems, if such development does 
not entail the use or disclosure of Microsoft proprietary 
information during the term of the NDA.
    In combination, these provisions recognize that whatever 
Microsoft's legitimate interest in protecting the confidentiality of 
proprietary information covered by the NDAs, the need for any such 
protection must be balanced against the competitive

[[Page 29213]]

consequences of any restriction imposed on others concerning 
disclosure and use of the information. The proposed Final Judgment 
ensures that any NDA imposed by Microsoft will not extend beyond the 
point that the requirements of the Antitrust Procedures and 
Penalties Act have been satisfied. The Court then must determine 
whether the proposed decree is in the public interest, pursuant to 
Section 5 (e) of the Clayton Act, 15 U.S.C. 16 (e).\7\
---------------------------------------------------------------------------

    \7\ In making this public interest determination, 
"[t]he balancing of competing social and political interests 
affected by a proposed antitrust consent decree must be left, in the 
first instance, to the discretion of the Attorney General. The 
court's role in protecting the public interest is one of insuring 
that the government has not breached its duty to the public in 
consenting to the decree. The court is required to determine not 
whether a particular decree is the one that will best serve society, 
but whether the settlement is "within the reaches of the 
public interest.'" United States v. Bechtel Corp., 648 F.2d 
660,666 (9th Cir.), cert. denied, 454 U.S. 1083 (1981) (citations 
and internal omitted), Accord United States v. Western Electric Co., 
993 F.2d 1572, 1576 (D.C. Cir. 1993); United States v. American Tel. 
and Tel. Co., 552 F. Supp. 131,151 (D.D.C. 1982), aff'd suc nom. 
Maryland v. United States, 460 U.S. 1001 (1983).
---------------------------------------------------------------------------

ALTERNATIVES TO THE PROPOSED FINAL JUDGMENT

    In addition to the remedies provided in the proposed Final 
Judgment, the Department also considered whether to require 
limitations on the manner in which Microsoft could structure volume 
discount pricing arrangements for covered products. While the 
Department recognizes that volume discount pricing can be and 
normally is pro-competitive, volume discounts also can be structured 
by a seller with monopoly power (such as Microsoft) in such a way 
that buyers, who must purchase some substantial quantity from the 
monopolist, effectively are coerced by the structure of the discount 
schedule (as opposed to the level of the price) to buy all or 
substantially all of the supplies they need from the monopolist. 
Where such a result occurs, the Department believes that the volume 
discount structure would unlawfully foreclose competing suppliers 
from the marketplace--in this case, competing operating 
systems--and thus may be challenged.
    The Department ultimately concluded that it would not require 
provisions in the Final Judgment to attempt to proscribe in advance 
the various means by which Microsoft could attempt to structure 
volume discounts as a means to thwart competition rather than as a 
means of promoting competition. The Department reached this 
conclusion because it does not have evidence that Microsoft has, to 
date, in fact structured its volume discounts to achieve 
anticompetitive ends. The Department did, however, communicate to 
Microsoft its concern and stated its intent to initiate an 
investigation and antitrust enforcement proceeding, if warranted, 
should Microsoft adopt anticompetitive volume discount structures in 
its future license agreements. Given the procompetitive impact of 
the provisions of the proposed Final Judgment, the normally 
procompetitive nature of volume discount pricing, and the absence of 
any evidence that Microsoft has used volume discounting in an 
anticompetitive manner to date, the Department believes that this 
resolution is appropriate on the record at this time.
    Another alternative to the proposed Final Judgment would be a 
full trial of this case. The Department of Justice believes that 
such a trial would involve substantial cost to the United States and 
is not warranted since the proposed Final Judgment provides all of 
the relief that the United States seeks in its Complaint and 
includes substantial additional prophylactic measures as well.

Determinative Materials and Documents

    No materials or documents of the type described in Section 2(b) 
of the Antitrust Procedures and Penalties Act, 15 U.S.C. 16(b), were 
considered in formulating the proposed Final Judgment.
    Dated: July 27, 1994
    Respectfully submitted,
    Anne K. Bingaman
    Assistant Attorney General
    Antitrust Division
    Donald J. Russell
    U.S. Department of Justice Antitrust Division
    Communications & Finance Section
    Judiciary Center Building
    555 Fourth Street, NW
    Washington, DC 20001
    (202) 514-5814
    EXHIBIT 4
    TO THE COMMENTS
    OF RELPROMAX ANTITRUST INC.



MTC-00030631--0256

    GARY L. REBACK (Bar No. 218594)
    SUSAN A. CREIGHTON
    DAVID A. KILLAM
    NEIL M. NATHANSON
    IRWIN R. GROSS
    WILSON, SONSINI, GOODRICH & ROSATI
    Professional Corporation
    650 Page Mill Road
    Palo Alto, California 94304-1050
    Telephone: (415) 493-9300

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED 
STATES

    Plain vs. ?? No. 94-1564 (SS) MICROSOFT COR?? FILED Defend 
FEB 14 1995 Clerk U.S. District Court District of Columbia.
    MEMORA?? The economic arguments in ?? were prepared m extensive 
consultation with the following economists. However, because of the 
shortness of time, counsel retained complete responsibility for the 
contents of this document.
    Garth Saloner
    W. Brian Arthur
    Magowan Professor of Economics Citibank Professor and Strategic 
Management Santa Fe Institute and and Associate Dean for Morrison 
Professor of Academic Affairs Population Studies and Graduate School 
of Business Economics Stanford University Stanford University

                            TABLE OF CONTENTS
 
                                                            Page
 
I INTRODUCTION AND SUMMARY.................................            3
II THE PERMISSIBLE SCOPE OF THIS COURT'S REVIEW............           14
III THE ECONOMIC CHARACTERISTICS OF THE SOFTWARE INDUSTRY..           20
  A. Market And Technology Background......................           21
    1. The Business Desktop................................           24
    2. The Intrabusiness Server............................           28
    3. The Home-to-Business Server.........................           31
    4. Home Computer Market................................           32
    5. OLE.................................................           33
    6. Windows.............................................           34
      a. Desktop...........................................           35
      b. Server............................................           35
  B. Free Market Forces in Increasing Return Industries....           36
IV MICROSOFT'S TACTICS AND PROSPECTS FOR SUCCESS...........           43
  A. Microsoft's Strategy..................................           44
      1. The Business Desktop..............................           50
      a. Effect of the Monopoly on Operating Systems.......           51
      b. Effect of the Monopoly on Applications............           52
      c. Unfair Early Access...............................           55
      d. Predatory Bundling................................           59

[[Page 29214]]

 
      e. Predatory Unbundling..............................           62
      f. Other Uses of Leverage............................           62
    2. The Intrabusiness Server............................           64
    3. The Home-to-Business Market (Server and Client).....           65
      a. Predatory Bundling................................           66
      b. Unfair Use of Information.........................           68
      c. Unfair Head Start.................................           69
V MICROSOFT'S NETWORK-WIDE MONOPOLY........................           73
  A. Leverage of the Installed Base by Competitors.........           74
  B. Alliances.............................................           75
  C. "Tiered" Monopoly.........................           77
  D. Efficiencies of Integration...........................           80
VI ANTITRUST ENFORCEMENT...................................           83
  A. Deficiencies of the Proposed Judgment.................           84
  B. Comparable Consent Decrees............................           87
    1. Parke, Davis Decree (Pharmaceuticals)...............           87
    2. International Business Machines Corp. (Computers)...           88
    3. American Telephone and Telegraph                               89
     (Telecommunications)..................................
  C. Case Law..............................................           90
VII PROPOSED PROCEDURES UNDER SECTION 16(f)................           91
                TABLE OF AUTHORITIES CASES
Alaska Airlines, Inc. v. United Airlines, Inc., 948 F.2d              90
 536 (9th Cir. 1991), cert. denied, 112 S. Ct. 1603 (1992).
Digidyne Corp. v. Data General Corp., 734 F.2cl 1336 (9th             91
 Cir. 1984), cert. denied, 473 U.S. 908 (1985).............
Eastman Kodak Co. v. Image Technical Services, Inc., 112 S.           90
 Ct. 2072 (1992)...........................................
Grappone, Inc. v. Subaru of New England, Inc., 858 F.2d 792    -91
 (1st Cir. 1988)...........................................
Lee v. Life Ins. Co., 829 F. Supp. 529 (D.R.I. 1993),                 91
 aff'd, 23 F.3d 14 (1st Cir.), cert. denied, 1994 U.S.
 LEXIS 7596 (1994).........................................
Ortho Diagnostic Systems, Inc, v.. Abbott Laboratories,               91
 Inc., 822 F. Supp. 145 (S.D.N.Y. 1993)....................
United States v. American Tel. & Tel., 552 F.Supp. 131
 (D.DC 1982), aff'd sub nom. Maryland v....................
United States, 460 U.S. 1001 (1983)........................  14, 16, 17,
                                                             18, 67, 89,
                                                                      95
United States v. BNS Inc., 858 F.2d 456 (9th Cir. 1988)....       15, 16
United States v. Gillette Co., 406 F.Supp. 713 (D. Mass.     14, 16, 18,
 1975).....................................................           19
United States v. International Business Machines Corp.,               88
 1956 Trade Cas. (CCH) 68,245 (S.D.N.Y. 1956)..............
United States v. Parke, Davis and Co. and Eli Lilly and               87
 Co., 1951 Trade Cas. (CCH) 62,914 (E.D. Mich. 1951).......
United States v. Parke, Davis and Co. and Eli Lilly and               88
 Co., 1987-2 Trade Cas. (CCH) 67,834 (E.D. Mich.
 1987).....................................................
United States v. Western Electric Co., 900 F.2d 283 (DC               17
 Cir. 1990), cert denied, 498 U.S. 911 (1990)..............
United States v. Western Electric Co., Inc., 993 F.2d 1572        17, 18
 (DC Cir. 1993)............................................
United States v. Yoder, 1989-2 Trade Cas. (CCH)                 92
 68,723 (N.D. Ohio 1986)...................................
Viacom International, Inc. v. Time Inc.,, 785 F. Supp. 371            91
 (S.D.N.Y 1992)............................................
                          STATUTES
47 Fed. Reg. 23,320, 23,335 (May 27, 1982).................           89
59 Fed. Reg. 59,426 (Nov. 17, 1994)........................           15
59 Fed. Reg. 59,427 (Nov. 17, 1994)........................        3, 20
59 Fed. Reg. 59,429 (Nov. 17, 1994)........................       15, 17
59 Fed. Reg. 42,847 (Aug. 19, 1994)........................  26, 43, 49,
                                                                      79
59 Fed. Reg. 42,850 (Aug. 19, 1994)........................           50
15 U.S.C.  16(b)-(h) (1994)......           14
15 U.S.C.  16(e) 14, 17, 94....................
15 U.S.C.  16(f)...............................           91
                    Additional Materials
All Things Considered (NPR broadcast, Nov. 17, 1994).......           24
The Antitrust Procedures and Penalties Act: Hearings on S.            14
 782 and S. 1088 before the Subcommittee on Antitrust and
 Monopoly of the Committee on the Judiciary, 93rd Cong.,
 1st Sess. (1973)..........................................
Byte, May 1992, at 159 62 The Computer Industry Survey:      21, 30, 48,
 Reboot System and Start Again, The Economist, Feb. 27-Mar.       81, 83
 5, 1993...................................................
Computerworld, Dec. 6, 1993 (International Data Corp.                 26
 Table)....................................................
A Fierce Battle Brews Over the Simplest Software Yet,             19, 57
 Business Week, November 21, 1983, at 114..................
Microsoft Corp. Employee Performance Review, dated Nov. 2,             4
 1987......................................................
Microsoft Corp. Employee Performance Review, dated May 4,           4, 5
 1987......................................................
Microsoft's Domination, San Jose Mercury News, December 21,        9, 63
 1994......................................................
Personal Computing Software Worldwide, Dataquest, June 27,             9
 1994......................................................
OS Overview, Computer Reseller News, Aug. 22, 1994.........        6, 51
PC Week, Feb. 21, 1994 (Paine Webber, Inc. Table)..........           26
Quote of the Week, InformationWeek, Aug. 1, 1994...........           93
Tr. of Status Call, Sept. 29, 1994.........................    3, 9, 19,
                                                                  34, 92
Will Sun Melt the Software Barrier, Business Week, April               6
 18, 1988, at 72 ..........................................
Paul Andrews, Windows Is No JFK, But Its Visual Appeal Is
 Outstanding, Seattle Times, May 22, 1990..................

[[Page 29215]]

 
61.........................................................
Paul Andrews, Can Microsoft Just Do It?, Seattle Times,
 March 18, 1991............................................
19.........................................................
W. Brian Arthur, Positive Feedback in the Economy,
 Scientific American, Feb. 1990............................
36, 37, 38, 41.............................................
W. Brian Arthur, Increasing Returns and Path Dependence in
 the Economy (1994)........................................
38, 40, 76.................................................
Doug Barney, Microsoft, Stac Resolve Dispute;..............
Microsoft Finally Pays Up, InfoWorld, June 27, 1994, at 14.
61.........................................................
Doug Barney, Microsoft to Announce New On-Line Service at
 Comdex, InfoWorld, Oct. 24, 1994, at 1, 140...............
69, 72.....................................................
Doug Barney and Ilan Greenberg, ISVs Dampen Microsoft Furor
 for OLE, InfoWorld, July 18, 1994, at 1...................
34.........................................................
Amy Bernstein, Microsoft Goes Online, U.S. News & World
 Report, Nov. 21, 1994, at 84..............................
67.........................................................
Jesse Berst, Behind The Smoke: Microsoft Wins Again, PC
 Week, July 25, 1994, at 106...............................
85.........................................................
Jesse Berst, Microsoft's On-Line Rivals Could End Up In
 "Cyberia", PC Week, Dec. 12, 1994, at 120.....
68.........................................................
Jeff Bertolucci, Microsoft Settles: Business As Usual, PC
 World, October 1994, at 72................................
85.........................................................
Stanley M. Besen and Joseph Farrell, Choosing How to
 Compete, J. of Econ.t Perspectives, Spring 1994...........
40, 42.....................................................
Stanley Besen and Leland Johnson, Compatibility Standards,            39
 Competition, and Innovation in the Broadcasting Industry
 (1986)....................................................
Stanley Besen and Garth Saloner, The Economics of                     39
 Telecommunications Standards, in Changing the Rules:
 Technological Change, International Competition, and
 Regulation in Communications 177 (1989)...................
William Brandel, Developing for Next Generation of Windows            65
 May Mean Running on NT, Computerworld, November 18, 1994,
 at 4......................................................
Richard Brandt, Microsoft Is Like an Elephant Rolling                 57
 Around, Squashing Ants, Business Week, Oct. 30, 1989, at
 148.......................................................
Larry Campbell, Novell to Introduce SuperNOS Strategy,                 8
 South China Morning Post, Sept. 20, 1994, at 1............
Jim Carlton & G. Pascal Zachary, Microsoft Sells A 20%            71
 Interest In Planned Unit, Wall St. J., Dec. 22, 1994......
William Casey, Let's Stop Beating On Microsoft, Washington            86
 Post, July 25, 1994, at F15...............................
Don Clark, Microsoft to Buy Intuit In Stock Pact, Wall St.            70
 J., Oct. 14, 1994, at A3..................................
Don Clark and Laurie Hays, Microsoft's New Marketing          26, 75, 86
 Tactics Draw Complaints, Wall St. J., Dec. 12, 1994, at B6
Elizabeth Corcoran, Microsoft Deal Came Down to a Phone                7
 Call, Washington Post, July 18, 1994, at A1...............
Elizabeth Corcoran, Microsoft Heads Home: Software Giant     24, 49, 67,
 Targets Huge Consumer Market With a Host of High-Tech            71, 76
 Innovations, Washington Post, Nov. 13, 1994, at H1, H6....
O. Casey Corr, IBM vs. Microsoft--Software                       55
 Superbowl--IBM to Kick Off New Version of OS/2, but
 will Microsoft Make Winning Goat, Seattle Times, March 29,
 1992, at C1...............................................
O. Casey Corr, A Look Behind Stac Deal, Seattle Times, June       61, 62
 26, 1994, at F1...........................................
Amy Cortese, Next Stop, Chicago, Business Week, Aug. 1,            6, 50
 1994, at 24...............................................
Amy Cortese, No Slack for Microsoft Rivals, Business Week,     6, 7, 52,
 Dec. 19, 1994, at 35......................................           67
Michael Csenger & Adam Griffin, Microsoft Free At                 60
 Last?, Ruling Still Lets Firm Incorporate Apps Into Its
 OS'es, Network World, July 25, 1994, at 4.................
Cara A. Cunningham, IBM and Microsoft Wage Open Doc vs. OLE           56
 Find, InfoWorld, Aug. 15, 1994, at 25.....................
Barbara Darrow, Developers Brace for Shakeout, Computer               55
 Reseller News, Feb. 1, 1993, at 28........................
Paul A. David, Clio and the Economics of QWERTY, Amer.            37, 82
 Econ. Rev., May 1985, at 332..............................
Department of Justice Press Conference (July 16, 1994).....        7, 84
Laura DiDio, NetWare, NT Server to Divide Lion's Share,               29
 Dec. 26, 1994, at 77......................................
John Eckhouse, Giant Microsoft Buys Intuit for $1.5                   32
 Billion, San Francisco Chronicle, Oct. 14, 1994, at A1....
David Einstein, Microsoft Unscathed by Settlement, S.F.           86, 93
 Chronicle, July 18, 1994, at A1...........................
Karen Epper, Software Deal Shakes Up Home Banking, Amer.              70
 Banker, Oct. 17, 1994, at 1,25............................
Joseph Farrell, Hunter K. Monroe and Garth Saloner, The               83
 Vertical Organization of Industry and Systems Competition
 Versus Component Competition, October 1994 (working paper)
Joseph Farrell and Garth Saloner, Standardization,                40, 42
 Compatibility, and Innovation, Rand J. of Econ., Spring
 1985......................................................
Joseph Farrell & Garth Saloner, Installed Base and       37, 38, 39,
 Compatibility: Innovation, Product Pre-Announcements, and        42, 82
 Predation, Amer. Econ. Rev., Dec. 1986....................
Joseph Farrell and Carl Shapiro, Dynamic Competition with             41
 Switching Costs, Rand J. of Econ., Spring 1988, at
 123-137.............................................
Michelle Flores, Probe of Microsoft is Extended--            32, 70
 Justice Dept. Asks For More Information, Seattle Times,
 Nov. 22, 1994, at B11.....................................
Laurie Flynn & Rachel Parker, Extending its Reach,            55, 57
 InfoWorld, August 7, 1989, at 43..........................
Mary Jo Foley, Microsoft Lays Foundation For On-Line                  69
 Network, PC Week, Nov. 14, 1994, at 1.....................
Adam Gaffin & Peggy Watt, Microsoft, Lotus Battle                 66
 Shifting to On-Line Services, Network World, Nov. 21,
 1994, at 1................................................
Lee Gomes, Microsoft to Acquire Intuit, San Jose Mercury              69
 News, Oct. 14, 1994, at 1D................................
John M. Goodman, The DOS Heavyweights Go Another Round,               75
 InfoWorld, Aug. 29, 1994, at 87...........................
David A. Harvey, Ergonomic Issues Have Taken a Backseat to        37, 38
 Performance, Resulting in a Growing Tide of Computer-
 Related Injuries. Change is Needed--Now!, Byte, Oct.
 1, 1991, at 119...........................................
Stuart J. Johnston, Dangerous Liasons, InfoWorld, April 8,            56
 1991, at 44...............................................

[[Page 29216]]

 
Stuart J. Johnston, "No Chinese Wall" at                  59
 Microsoft, Infoworld, Dec. 30, 1991, at 107...............
Stuart J. Johnston, Microsoft Settles for Piece of Stac,              61
 Computerworld, June 27, 1994, at 30.......................
Stuart J. Johnston, Decree: Deal or Dodge?, Computerworld,            85
 July 25, 1994.............................................
Stuart J. Johnston and Ed Scannell, Server Suite Could        30, 45, 65
 Squeeze Market, Computerworld, Oct. 10, 1994, at 4........
Joseph Katten, Market Power in the Presence of an Installed           37
 Base, 62 Antitrust L.J. 1 (1993)..........................
Michael Katz and Carl Shapiro, Systems Competition and        39, 40, 78
 Network Effects, J. of Econ. Perspectives, Spring 1994....
Michael Katz and Carl Shapiro, Network Externalities,                 35
 Competition, and Compatibility, Amer. Econ. Rev., June
 1985 39, 40 Miles B. Keyhoe, The Winds of Change, HP
 Professional, Aug. 1994, at 40............................
Bob Lewis, Ten Troublesome Trends in Computing That Are                8
 Sure to Spook You, InfoWorld, Oct. 31, 1994, at 82........
Yael Li-Ron, PC DOS 6.3: DOS and DOS: Separated At Birth,             75
 PC-Computing, July 1994, at 94............................
Brian Livingston, Undocumented Windows Calls, InfoWorld,      34, 56, 59
 Nov. 16, 1992, at 98......................................
Brian Livingston, Will "Windows" Compatible               65
 Really Mean What It Says?, InfoWorld, November 14, 1994,
 at 40.....................................................
Claudia Maclachlan, Software Makers Mull Over Microsoft       85, 87, 93
 Legal Challenge, National Law Journal, Aug. 1, 1994, at B1
Lawrence J. Magid, Microsoft: Not So Marvelous, Bay Area              67
 Computer Currents, Dec. 1, 1994, at 98, 101...............
John Markoff, Microsoft's Future Barely Limited, N.Y.         60, 86, 93
 Times, July 18, 1994, at D1...............................
Charles McCoy, Microsoft to Pay Stac Judgment of $120                 61
 Million, Wall St. J., Feb. 24, 1994, at A4................
Start Miastkowski, Digital Research Creates a Better DOS,             51
 Byte, Nov. 1991, at 68....................................
Michael J. Miller, The World According to Microsoft, PC       70, 72, 82
 Magazine, Jan. 24, 1995, at 80............................
Charles R. Morris and Charles H. Ferguson, How Architecture  21, 47, 49,
 Wins Technology Wars, Harv. Bus. Rev., Mar. 1993..........   52, 54, 56
Michael Morris, Microsoft Deal: Too Little, Too............
Late, S.F. Examiner, July 24, 1994, at C-5.................           82
Jane Morrissey, DOJ Accord Fosters "Too Little, Too         85, 93
 Late" Perception, PC Week, July 25, 1994, at 1......
Jane Morrissey, Microsoft's Application Unit Seeks Market             53
 Dominance, PC Week, Nov. 18, 1991, at 1...................
Viveca Novak, Antitrust's Bingaman Talks Tough in Microsoft           90
 Case, Wall St. J., July 19, 1994, at B5...................
Rory J. O'Connor, Microsoft, Intel Set to Define                  74, 76
 Technology, San Jose Mercury News, Nov. 13, 1994, at 1-A..
Christopher O'Malley, The New Operating Systems, Personal          6, 84
 Computing, October 1986, at 181...........................
Janusz A. Ordover and Garth Saloner, Predation,                   37, 42
 Monopolization, and Antitrust, in Handbook of Industrial
 Organization 537 (R. C. Schmalensee and R. Willis eds.,
 1989).....................................................
Carroll Patton, Bundles Are Bad News, Computerworld, Nov.             67
 14, 1994, at 57...........................................
Alan Padding, IBM PC Orphans Hang On To A Good Thing,                  6
 Computerworld, March 7, 1988, at 81.......................
Kathy Rebello, et al., Is Microsoft Too Powerful, Business            55
 Week, March 1, 1993, at 88................................
Earle Robinson, DOS-version Madness? Integration Coping               75
 with DOS, Windows Sources, Oct. 1994, at 163..............
Jeffrey Rohlfs, A Theory of Interdependent Demand for a               39
 Communications Service, Bell J. of Econ., Spring 1974.....
Garth Saloner, Economic Issues in Computer Interface         37, 39, 41,
 Standardization, Econ. Innov. New Techn., 1990............           43
Brent Schlender, Bill Gates: What Doesn't He Want, Fortune,            6
 Jan. 16, 1995 passim Jerry Schneider, Dump DOS? No Way,
 Not Yet, Computer Decisions, March 1988, at 50............
Jack Schofield, Computing 94: Processor Wars and Rumors of             8
 Delays, Guardian, Dec. 29, 1994, at T14...................
Michael Schrage, Microsoft Can Make Lots of Money; Can It             70
 Shape the Management 0f It?, Washington Post, Oct. 21,
 1994, at B3...............................................
Andrew Schulman, Microsoft's Grip On Software Tightened By    73, 85, 93
 Antitrust Deal, Dr. Dobb's Journal of Software Tools, Oct.
 1994, at 143..............................................
J. William Semich, The Long View From Microsoft: Component        passim
 DBMSs, Datamation, Aug. 1, 1994, at 40....................
Sean Silverthorne, AMD Files $2 Billion Antitrust Suit                20
 Against Intel, Investor's Daily, August 30, 1991, at 1....
Gina Smith, Merger Misgivings: Will Intuit Go "Soft?,           70
 S.F. Chronicle, Dec. 4, 1994, at B5.......................
Michael Stroud, FTC Widens Probe of Microsoft Dominence,              20
 Investor's Daily, Apr. 15, 1991, at I.....................
Eamonn Sullivan & Matt Kramer, Microsoft Marvel Beta              69
 Leverages WIN 95 Desktop, PC Week, Nov. 7, 1994, at 169...
Jean Tirole, The Theory of Industrial Organization (1988)..       38, 40
L. D. Tyson, Who's Bashing Whom? Trade Conflict in High-              48
 Technology Industries (1992)..............................
Doug VanKirk, Integrated Office Suites, InfoWorld, Feb. 7,   ...........
 1994, at 51...............................................
James Wallace & Jim Erickson, Hard Drive: Bill Gates          passim
 and the Making of the Microsoft Empire (1992).............
Ray Weiss, Windows Stars at SD 91, Electronic Engineering             57
 Times, Feb. 18, 1991 .....................................
Ron White, Microsoft Gives the New Word, PC Week, Oct. 20,            10
 1987, at 95...............................................
Ethan Winer, BASIC, Yes; Feeble, No., PC Magazine, Oct. 30,           60
 1989, at 187..............................................
G. Pasquel Zachary, Showstopper: Breakneck Race To Create             55
 Windows NT and the Next Generation at Microsoft, 27 (1994)
 49, 64 Victor F. Zonana, $14-Million Deal Microsoft Buys
 Software Competitor, L.A. Times, July 31, 1987, at 4......
 

    The Department of Justice has determined that from 1988 through 
July 1994, a period during which the number of personal computers in 
the United States virtually exploded. Microsoft Corporation 
successfully used a variety of unlawful and 
"anticompetitive" practices to maintain its monopoly 
position in the market for "operating systems" for use 
with personal computers. As a result of these unlawful practices, 
Microsoft has been able to preclude any meaningful competition in 
the market while increasing the installed base of Microsoft 
operating systems from well under 20 million in 1988 to 
approximately 120 million in 1994.
    This memorandum \1\ will show that under established 
economic theory, this now- massive installed base will enable 
Microsoft, if unchecked, both to maintain its monopoly in the 
operating systems market, and to leverage its installed base to 
dominate and monopolize the markets for applications and other 
software products. This brief also will show that the Department's 
proposed decree completely fails to address the consequences of the 
huge increase in installed base that Microsoft has procured through 
illegal practices. Instead, the Department simply proposes to shut 
the barn door now that the horse has already gone.
---------------------------------------------------------------------------

    \1\ This memorandum amici curiae is submitted by Wilson, 
Sonsini, Goodrich & sati on behalf of certain clients that 
prefer to retain their confidentiality. Hence, they are not 
identified in this submission.
---------------------------------------------------------------------------

    Under established economic theory, it is clear that the proposed 
decree will neither

[[Page 29217]]

result in an increase in competition in the operating systems 
market, nor prevent Microsoft from monopolizing the remainder of the 
software industry. These amici accordingly urge the Court to require 
further submissions from the Department, both by way of expert 
affidavits and the production of documents, to explain how 
permitting Microsoft to profit from its illegal conduct not just by 
continuing, but by expanding, its monopolization of the software 
industry can be argued to be in the "public interest."

Introduction and Summary

    This Court has been asked to endorse the proposed Consent Decree 
between the Department of Justice and Microsoft without being 
provided with any of the information upon which a meaningful 
determination under the Tunney Act could be based. Thus, for 
example, the Department's investigation ostensibly inquired 
regarding "alleged false product preannouncements" by 
Microsoft. 59 Fed. Reg. 59,426, 59,427 (Nov. 17, 1994). At the 
September 29, 1994 hearing on this matter, the Court referred to 
this issue, noting that in the book Hard Drive,:\2\ Microsoft was 
said "time after time" to predatorially preannounce 
products "th the intent [to] freeze other people from coming 
out with their product." Tr. of Status Call, Sept. 29, 1994, 
at 16:21-22. The following colloquy then took place between 
Microsoft's counsel and the Court:
---------------------------------------------------------------------------

    \2\ James Wallace & Jim Erickson, Hard Drive: Bill 
Gates and the Making of the Microsoft Empire (1992).
---------------------------------------------------------------------------

    The Court: [H]ow do you answer those charges?
    Mr. Urowsky: Those charges we believe are entirely false.
    The Court: In other words, the vaporware charge is false?
    Mr. Urowsky: That's correct.
    Id. at 15:7-12, 16:18-17:1.
    Microsoft's representations, however, are belied by Microsoft's 
own documents, produced to the Government during the course of its 
investigation. (Examples of such documents are attached hereto at 
Appendix Exs. 21 and 22.) \3\ Thus, for example, a Microsoft 
manager was involved in spearheading two product preannouncements 
during one six-month period. In one instance, the manager wrote that 
in response to "Borland's announce[ment of] TurboBASIC at the 
November Comdex," he simultaneously worked "to develop a 
[Microsoft] spec[ification] that could beat TurboB," while 
also formulating a promotional campaign "that could hold our 
position until [QB3, the Microsoft product] hit the 
market." \4\ He stated that he "reviewed [this] 
promotion plan with Bill G. before implementation." Id. The 
Microsoft documents state that Steve Ballmer, one of Microsoft's top 
executives, favorably commented on this strategy, saying that the 
"best way to stick it" to Borland was such a "QB3 
preannounce to hold off Turbo buyers." \5\
---------------------------------------------------------------------------

    \3\ Exhibit numbers refer to selected supporting documents 
which have been included in the Appendix to this Memorandum of 
Amici, filed herewith. For the Court's convenience, documents in the 
Appendix have been organized alphabetically by publication title.
    \4\ Microsoft Corp. Employee Performance Review, dated May 
4, 1987, at 3 (Ex. 21). (Although this review has become a public 
document, these amici have redacted the review to safeguard the 
employee's privacy interests.)
    \5\ Microsoft Corp. Employee Performance Review, dated 
Nov. 2, 1987, at 8 (Ex. 21). (Although this review has become a 
public document, these amici have redacted the review to safeguard 
the employee's privacy interests,)
---------------------------------------------------------------------------

    In the same document, the Microsoft manager wrote that Microsoft 
was "not as far along on the response to [Borland's] Turbo 
C," a second product, because Microsoft was "further 
from product announcement." According to the Microsoft 
document, the Microsoft manager: developed a rollout plan for 
[Microsoft's products] QuickC and CS that focused on minimizing 
Borland's first mover advantage by preannouncing with an aggressive 
communication campaign.\6\
---------------------------------------------------------------------------

    \6\ Id. at 6.
---------------------------------------------------------------------------

    The manager was given the highest possible rating on his 
performance review (a "5-") for his "public 
relations" handling of this "C 
preannouncement."\7\
---------------------------------------------------------------------------

    \7\ Microsoft Corp. Employee Performance Review, dated May 
4, 1987, supra, at 3 (Ex. 21).
---------------------------------------------------------------------------

    Perhaps even more striking than the incongruence between 
Microsoft's representations and its own documents is the silence by 
the Department, both in its written submissions and in its oral 
presentation to the Court, regarding its findings on this and other 
matters. The Department has not taken the position (nor, presumably, 
could it, without some explanation of the documents that have been 
submitted to it) that Microsoft has not engaged in practices such as 
predatory, preannouncements, or the seeding of what are referred to 
as "undocumented calls" (secret elements in an operating 
system that make a competitor's applications program operate less 
well than a rival Microsoft program),\8\ Instead, the Department 
simply has asserted that it had determined that "no further 
action was warranted" on these matters--presumably a 
conclusion that it asks this Court to take completely on faith, 
since it has provided the Court with literally no explanation for 
its decision.
---------------------------------------------------------------------------

    \8\ Examples of such "undocumented calls" will 
be described in Section IV, infra.
---------------------------------------------------------------------------

    Most remarkable of all, however, is the absence of any 
information in any of the Department's submissions regarding the 
adequacy of its proposed remedy for Microsoft's illegal monopolistic 
conduct. Based on the Department's own allegations, from 1988 to 
1994 Microsoft used a variety of illegal tactics to maintain its 
monopolistic share in the rapidly growing operating systems 
market--and thus increased the size of its installed base 
through the use of illegal tactics from no more than 18 
million \9\ to approximately 120 million users.\10\ Having 
acknowledged that Microsoft thus illegally acquired its massive 
installed base, the Department nonetheless has failed to proffer any 
basis for concluding that simply prohibiting these practices in the 
future will remedy the unassailable position that Microsoft has 
gained as a result of its unfair and illegal practices.
---------------------------------------------------------------------------

    \9\ According to industry consultant Jerry Schneider, 
Microsoft's installed base in March 1988 was only nine to twelve 
million. Dump DOS? No Way, Not Yet, Computer Decisions, March 1988 
at 50 ("between nine and twelve million DOS machines"). 
Indeed, according to Business Week, no more than twelve million PCs 
had been sold by April 1988. Will Sun Melt the Software Barrier, 
Business Week, April 18, 1988, at 72 ("Sun aims to coax a 
portion of the 12 million owners of PCs and clones into the UNIX 
camp.") The more expansive measure taken by industry analysts 
at International Data Corp. indicated there were 
"approximately 18 million IBM PCs and compatibles 
worldwide," in March 1988. Alan Radding, IBM PC Orphans Hang 
On To A Good Thing, Computerworld, March 7, 1988, at 81. Therefore, 
even under the assumption that Microsoft's operating system software 
had been installed in every IBM PC or compatible sold by 1988, 
Microsoft's installed base at that time was no larger than eighteen 
million. Cf. Christopher O'Malley, The New Operating Systems, 
Personal Computing, October 1986, at 181 ("better than 95 
percent [of then-existing] PC's and compatibles use] Microsoft's 
disk operating system.").
    \10\ Amy Cortese, Next Stop, Chicago, Business Week, Aug. 
1, 1994, at 24 C120 million MS-DOS customers (including 55 million 
Windows users)"). See also OS Overview, Computer Reseller 
News, Aug. 22, 1994, at 223 (International Data Corporation table) 
(DOS and Windows installed base of 110.1 million).
---------------------------------------------------------------------------

    Certainly no one in the industry believes that the Department's 
proposed remedies will have the slightest effect in unseating 
Microsoft from the position that it now illegally occupies. As one 
competitor observed after the consent decree was announced, 
"[t]he consent decree seems to have set [Microsoft] free .... 
Now, they are running rampant over everything."\11\ Microsoft 
entirely agrees. As Bill Gates observed in his response to the 
proposed decree:
---------------------------------------------------------------------------

    \11\ Amy Cortese, No Slack for Microsoft Rivals, Business 
Week, Dec. 19, 1994, at 35 (Ex. 5).
---------------------------------------------------------------------------

    None of the people who run [Microsoft's seven] divisions are 
going to change what they do or think or forecast. Nothing. There's 
one guy in charge of [hardware company] licenses. He'll read the 
agreement.--Elizabeth Corcoran, Microsoft Deal Came Down to a 
Phone Call, Washington Post, July 18. 1994, at Al (Ex. 42).
    Nor have events since the decree was proposed provided the 
slightest basis for believing that the Department's proposed remedy 
will have any effect. In a nationally televised press conference on 
July 16, 1994, Attorney General Janet Reno predicted that the 
Department's settlement with Microsoft would have two results: it 
"will save consumers money [and] enable them to have a choice 
when selecting operating systems."\12\ In fact, however, in 
the six months since the proposed settlement was announced, press 
reports indicate that Microsoft has literally doubled the price of 
its operating system to computer manufacturers.\13\
---------------------------------------------------------------------------

    \12\ Attorney General Janet Reno, Department of Justice 
Press Conference Transcript Microsoft Settlement (July 16, 1994) at 
2 (Ex. 12).
    \13\ Amy Cortese, Business Week, Dec. 19, 1994, supra, at 
35 (Ex. 5) ("Computer makers have been startled to learn that 
they will be asked to swallow a huge price hike for their use of 
Windows 95--to as much as $70 per PC, vs. roughly $35 
today.").
---------------------------------------------------------------------------

    Moreover, far from the decree leading to an increase in 
competition in the operating

[[Page 29218]]

systems market, a key competitor in that market, the maker of DR 
DOS, has subsequently withdrawn from the market. The competitor 
observed in withdrawing from the market that "the battle for 
the desktop is over and MS DOS and Windows have 
won." \14\ The withdrawal of DR DOS from the market is 
of particular note since it was DR DOS that the authors of Hard 
Drive pointed to as providing the most likely source of meaningful 
competition to Microsoft in the operating systems market. See Hard 
Drive, supra, at 398.\15\
    Having failed to explain how its proposal will remedy 
Microsoft's illegal acquisition of its massive installed base in the 
operating systems market, the Department's submission does not even 
touch on Microsoft's use of that illegally acquired installed base 
to leverage into--and acquire market power in--other 
software markets. In analyzing the strength of the Department's case 
against Microsoft, Hard Drive identified Microsoft's weakness in 
application programs as the principal reason (apart from the 
competition provided by products such as DR DOS) why Microsoft's 
dominant position arguably would not hurt consumers. With respect to 
application programs, the authors in 1992 argued that Microsoft does 
not come close to dominating the Big Three of 
applications--word processing, databases and spreadsheets. 
WordPerfect is far ahead of Microsoft Word, Lotus 1-2-3 
is still ahead of Excel, and Microsoft has nothing to compete 
against Ashton-Tate's dBASE.
    Larry Campbell, Novell to Introduce SuperNOS Strategy, South 
China Morning Post, Sept. 20, 1994, at 1 (Ex. 37) (quoting Robert 
Frankenburg speech to Networld + InterOp "94 conference). See 
also Bob Lewis, Ten Troublesome Trends in Computing That Are Sure to 
Spook You, InfoWorld, Oct. 31, 1994, at 82 ("Let's all admit 
that NextStep and QNX should have all of the market if there was any 
justice," but Microsoft's "Windows and DOS have more 
than 80 percent market share, so the wax is over! "). Nor has 
the irony of this withdrawal been lost on the computer industry. As 
one observer noted: "July [of 1994] saw Microsoft in full 
agreement with the Justice Department. Microsoft agreed to withdraw 
the "per processor" option that most PC suppliers found 
the cheapest way to buy DOS [in order to] encourage firms to offer 
alternatives to Microsoft's operating systems. Shortly afterward, 
Novell announced that it was stopping development of DR-DOS." 
Jack Schofield, Computing 94: Processor Wars and Rumors of Delays, 
Guardian, Dec. 29, 1994, at T14.
    What a difference three years can make--at least when, like 
Microsoft, a company can leverage its installed base in operating 
systems, and finance early losses in applications with monopoly 
profits from operating systems. Under the headline 
"MICROSOFT'S DOMINATION," Dataquest Inc. has reported 
the 1994 market revenue and share figures for the applications 
market:
    "Lotus 1-2-3, WordPerfect, dBASE, Paradox and 
Harvard Graphics once dominated their respective categories," 
said Dataquest analyst Karl Wong. "Today, Microsoft products 
have replaced each of these one-time product category 
leaders." Microsoft's Domination, San Jose Mercury News, 
December 21, 1994, at 1F (Ex. 35).
    Microsoft did not achieve its dominant position in operating 
systems and applications through free and open competition on a 
level playing field. Rather, it used the illegal tactics challenged 
in the Government's complaint to create a huge installed base in 
operating systems. Then, it took unfair advantage of its installed 
base to give its own applications group a head start and its 
programs a performance advantage over applications 
competitors--precisely the concern voiced in Hard 
Drive \17\ and echoed by this Court.\18\
---------------------------------------------------------------------------

    \17\ Hard Drive, supra, at 398-99.
    \18\ Tr. of Status Call, Sept. 29, 1994, at 25-28.
---------------------------------------------------------------------------

    Indeed, in 1990 Microsoft began to bundle its application 
products together into so-called "suites." These mites 
are the fastest growing segment of the applications market, and 
Microsoft commands more than 85% of the suite market. See Personal 
Computing Software Worldwide, Dataquest, June 27, 1994, at 20 
(selected pages at Ex. 11) (unit shipments of suites grew more than 
350% in 1993); id. at 27 (Microsoft's 1993 market share for suites 
is 85.4%); Doug VanKirk, Integrated Office Suites, InfoWorld, Feb. 
7, 1994, at 51 ("Microsoft owns a 90 percent share of the 
suite market .... ").
    "Microsoft has never had a hit among its MS-DOS 
applications programs." \19\ Yet, in the past few years, 
Microsoft has come from nowhere to provide the lion's share of 
business application programs.\20\
---------------------------------------------------------------------------

    \19\ Ron White, Microsoft Gives the New Word, PC Week, 
Oct. 20, 1987, at 95.
    \20\ See. Eg., Brent Schlender, Bill. Gates: What Doesn't 
He Want, Fortune, Jan. 16, 1995, at 36.
---------------------------------------------------------------------------

    As explained in this brief, Microsoft achieved that result by 
the illegal tactics charged by the Government, and by illegal tying 
techniques, monopoly leveraging, and otherwise predatorially 
exploiting its monopoly position in one market to achieve market 
power in other markets. Because of the type of economic forces that 
prevail in these markets, rigorous economic analysis predicts that, 
unless restrained by Government action, Microsoft will succeed in 
using its dominance in operating systems to monopolize all other 
aspects of transaction software, from desktop applications to online 
systems. Microsoft's goal is to identify and control every 
"strategic component," "choke point" or 
"leverage point" in the information economy.\21\ And 
Microsoft is already close to achieving a complete lock-in in 
desktop applications.
---------------------------------------------------------------------------

    \21\ Id. at 47.
---------------------------------------------------------------------------

    This Memorandum of Amici argues that the Proposed Final Judgment 
is not in the public interest and should not be entered by this 
Court. Indee??conomically impossible to achieve the stated goals of 
greater choices and lower prices for operating systems without (1) 
addressing the increase in installed base that Microsoft has 
procured through illegal practices and (2) restraining Microsoft's 
use of that installed base to dominate the markets for applications 
and other software products.
    This Memorandum of Amici is divided into seven sections. This 
first section provides a summary and overview of the brief. The 
second section addresses the scope of investigation and power of 
this Court under the Tunney Act. In particular, the second section 
argues that, under 15 U.S.C. 16(e), the Court not only can but 
should consider the effect of the proposed decree beyond the 
operating systems market. The section further argues that the 
Department's submission falls far short of providing the Court with 
an adequate record upon which to act, and provides no factual 
predicate for concluding that the decree's remedy is even arguably 
within the "public interest" under Section 16(e). The 
remainder of the brief explains that the Government cannot 
effectively restore and maintain competition--even in the 
operating systems market--without addressing both the 
consequences of the "installed base" that Microsoft 
increased through illegal means, and the use of Microsoft's 
resulting market power more broadly. Section III describes the 
markets and technologies in which Microsoft operates and lays a 
foundation for an understanding of Microsoft's conduct and strategic 
direction. The section begins by describing the interrelationships 
among complicated software technologies and demonstrates that the 
various markets in which Microsoft competes are parts of a large 
network that can be entered by a competitor's product through a few 
key gateways, the principal gateway being the desktop operating 
system. Using economic analysis, the section then argues that the 
economic characteristics of the technologies and markets at issue 
differ markedly from other, more conventional industries, in that 
these products (software products) and markets (networks) exhibit 
"increasing returns," also sometimes called 
"network effects." The section discusses the underlying 
characteristics of the technology that gave rise to these conditions 
and the likely consequences that these circumstances will produce.
    Section IV of the brief explains Microsoft's strategy and 
evaluates Microsoft's prospects for complete domination of all of 
the interconnected software markets. The section begins by 
explaining that Microsoft increased its "installed base" 
in operating systems through the illegal practices charged in the 
Government's complaint. The section then explains and documents the 
fact that Microsoft pursues a strategy of leverage from 
"gateway" markets, like the desktop operating system in 
which it is dominant, to strategic markets in which its competitive 
position is weak (as was the case in applications). Microsoft 
targets such strategic markets, establishes marketing and 
technological links to those markets from established monopolies in 
gateway markets, and leverages its power to monopolize the target 
markets. In other words, it transfers the installed base of a 
gateway market it dominates to create an installed base in the 
strategic target market. The section focuses primarily on the 
desktop market, describing in some detail the method by which 
Microsoft (according to the Government's Tunney Act filing) used 
illegal activities to increase its installed base in operating 
systems and then leveraged its monopoly

[[Page 29219]]

over the operating system to dominate applications. In particular, 
the section describes Microsoft's tactics of bundling and unbundling 
functions into and out of its operating system to disadvantage its 
competitors in the applications market.
    Section V of the Memorandum of Amici applies "increasing 
returns" economics to suggest that Microsoft likely will 
achieve a monopoly position for its products throughout the entire 
personal computer network unless restrained by Government action. 
The section rejects various arguments that could be put forward to 
justify such monopolization, including the arguments (1) that 
alternative networks created by alliances of competitors will 
provide competition, and (2) that the benefits derived from 
integration of a single product line are worth the cost in loss of 
free competition throughout the network. The section concludes by 
suggesting that absent meaningful governmental intervention, the 
American software industry will be monopolized by Microsoft, with 
the only competition coming from protected markets and competition 
abroad.
    Section VI evaluates the possibilities and prospects for 
governmental intervention from the legal "perspective. The 
section begins with an evaluation of the proposed Final Judgment, 
observing that the Government's Tunney Act filing concedes that 
Microsoft. through the use of illegal practices, has acquired an 
enormous installed base that constitutes an overwhelming barrier to 
entry. The only sanction proposed by the Government, requiring 
Microsoft to cease the behavior that permitted it to acquire this 
entrenched installed base, will have no effect in diminishing the 
installed base, easing barriers to entry, or otherwise precluding 
Microsoft from using the illegally acquired installed base to 
monopolize the operating system market or other markets. The section 
considers specific strategies for relief adopted by previous 
Administrations in comparable situations and analyzes legal 
precedents supporting such strategies. Finally, Section VII of the 
brief proposes procedures this Court may wish to adopt in order to 
exercise its appropriate role in Tunney Act proceedings. The section 
urges the Court to order the production of key Microsoft documents 
and to require the Government to produce detailed and predictive 
economic models of the type previously employed to support consent 
decrees adopted through Tunney Act procedures.

The Permissible Scope of This Court's Review

    In 1974 Congress enacted the Antitrust Procedures and Penalties 
Act ("APPA"), also known as the "Tunney 
Act." 15 U.S.C.  16(b)-(h) (1994), out of 
concern with "prior practice, which gave the [Justice] 
Department almost total control of the consent decree process, with 
only minimal judicial oversight." United States v. American 
Tel. & Tel., 552 F.Supp. 131. 148 (D.DC 1982) 
("AT&T"), aff'd sub nom. Maryland v. United States, 
460 U.S. I001 (1983). To remedy this practice, Congress sought to 
eliminate "judicial rubber stamping" of such consent 
decrees,\22\ providing that "[b]efore entering any consent 
judgment ... the court shall determine that the entry of such 
judgment is in the public interest." 15 U.S.C. 16(e). Circuit 
Judge Aldrich, sitting by designation in United States v. Gillette 
Co., 406 F.Supp. 713 (D. Mass. 1975) (cited by both the Department 
and Microsoft), observed upon reviewing the legislative history of 
the Act:
---------------------------------------------------------------------------

    \22\ As the sponsor of the Act, Senator Tunney, declared: 
"Specifically, our legislation will . . make our courts an 
independent force rather than a rubber stamp in reviewing consent 
decrees, and it will assure that the courtroom rather than the 
backroom becomes the final arbiter in antitrust enforcement." 
The Antitrust Procedures and Penalties Act: Hearings on S. 782 and 
S. 1088 before the Subcommittee on Antitrust and Monopoly of the 
Committee on the Judiciary, 93rd Cong., 1st Sess. (1973).
---------------------------------------------------------------------------

    The legislative history shows clearly that Congress did not 
intend the court's action to be merely pro forma, or to be limited 
to what appears on the surface. Nor can one overlook the 
circumstances under which the act was passed, indicating 
Congress" desire to impose a check not only on the 
government's expertise--or at the least, its exercise of 
it--but even on its good faith.----Id. at 715.\23\
---------------------------------------------------------------------------

    \23\ Accord AT&T, 552 F. Supp. at 148 (Congress had 
"found that consent decrees often failed to provide 
appropriate relief, either because of miscalculations by the Justice 
Department or because of the "great influence and economic 
power" wielded by antitrust violators").
---------------------------------------------------------------------------

    Despite this clear statutory intent, the oral and written 
submissions in the present case have suggested that the Court's 
review should be circumscribed in ways not supported either by the 
statute or by existing case law. First, the submissions may be taken 
as suggesting that the Court should look only to the impact of the 
proposed decree on the operating system market in determining 
whether the decree is in the public interest. See, e.g., 59 Fed. 
Reg., at 59,429. The law, however, plainly is otherwise. For 
example, in United States v. BNS Inc., 858 F.2d 456 (9th Cir. 
1988),--a case relied upon by the Department--the Court 
observed that "the statute suggests that a court may, and 
perhaps should, look beyond the strict relationship between 
complaint and remedy in evaluating the public interest." 858 
F.2d at 462 (quoting United States v. Bechtel Corp., 648 F.2d 660, 
666 (9th Cir.), cert. denied, 454 U.S. 1083 (1981)). While the 
court's public interest determination may not be based on a 
different market from the one identified in the complaint, the Ninth 
Circuit emphasized that this did not mean that only effects on that 
market can or should be considered:
    [T]he statute clearly indicates that the court may consider the 
impact of the consent judgment on the public interest, even though 
that effect may be on an unrelated sphere of economic activity. For 
example, the government's complaint might allege a substantial 
lessening of competition in the marketing of grain in a specified 
area. It would be permissible for the court to consider the 
resulting increase in the price of bread in related areas.--Id. 
at 463 (emphasis added).
    Under the Department's own authority, therefore, the Court's 
inquiry is not limited to the effect of the proposed judgment on the 
operating system market. To the contrary, the Court can (and, it is 
submitted, should) determine the effect of the proposed judgment on 
other areas impacted by Microsoft's monopolistic conduct. As will be 
discussed in more detail in Section IV, infra, for example, 
Microsoft has used its illegally acquired market position to 
leverage into and acquire a monopoly in other related markets. The 
failure of the decree to "break up or render impotent [this] 
monopoly power found to be in violation of the Act." AT&T, 
552 F. Supp. at 150--indeed, its tacit decision to leave 
Microsoft free to profit from its unlawful market power by 
leveraging into other software markets--is something that the 
Court should consider in evaluating the public interest served (or 
disserved) by the proposed decree.



MTC-00030631--0283

    A second limitation implied in the submissions to the Court also 
is without authority in the case law. namely, that the Court is 
limited to considering those matters that the Department has 
identified in its complaint. That is not the law. See, e.g., BNS, 
858 F.2d at 462 ("a court may consider matters not discussed 
in the complaint"); Gillette, 406 F.Supp. at 715 
("Congress did not intend the court's action to be... limited 
to what appears on the surface"). Indeed, simply accepting at 
face value the Department's analysis--and even its good 
faith--amounts to precisely the kind of "rubber 
stamping" that the APPA expressly rejects. The Court is 
required, in evaluating the Department's proposed decree, to 
determine whether it "meets the requirements for an antitrust 
remedy--that is, if it effectively opens the relevant markets 
to competition and prevents the recurrence of anticompetitive 
activity." AT&T, 552 F. Supp. at 153. If the Department 
has determined not to address a practice--for example, 
Microsoft's "bundling" of operating and applications 
programs, discussed in more detail in Section IV, infra--which 
forecloses any meaningful chance of competition in the operating 
systems market, that fact must be considered by the Court in 
assessing the adequacy of the decree as a remedy for the charged 
violations. That is so regardless of whether the Department has 
chosen to turn a blind eye to the consequences of such bundling on 
the effectiveness of its proposed decree.
    Finally, prior submissions to the Court have emphasized that in 
assessing whether the decree is in the "public interest" 
under Section 16(e), the Court should not "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." 
United States v. Western Electric Co., 900 F.2d 283, 309 (DC Cir. 
1990), cert. denied, 498 U.S. 911 (1990) (citations and quotations 
omitted; emphasis in original). This standard clearly is correct. 
but the parties" further assertion--that the submissions 
already made by the Department are sufficient to satisfy this 
standard--equally clearly is not.
    A comparison of the information provided in those cases relied 
upon by the Department,

[[Page 29220]]

with that provided here, highlights just how far short the 
Department has fallen in providing this Court with an adequate 
record upon which to act. For example, the Department relies heavily 
upon the Court of Appeals" decision affirming a modification 
of the consent decree in United States v. Western Electric Co., 
Inc., 993 F.2d at 1572. See 59 Fed. Reg. at 59,429.\24\ However, in 
finding that there was a sufficient "factual foundation for 
the judgment call made by the Department of Justice and to make its 
conclusion reasonable," 993 F. 2d at 1582, the Court of 
Appeals in that case expressly pointed to the "array of 
prominent economists (including two Nobel laureates, Stigler and 
Arrow)," who had submitted affidavits in the record that 
supported the Department's position. These affidavits provided 
detailed support for the factual predicates underlying the 
Department's proposal, including the view that the Bell operating 
companies would not be able to discriminate or engage in cross-
subsidization: that government oversight would be effective in 
regulating their behavior; and that the proposal would enhance 
competition in the relevant markets. See id. at 1578-82.
---------------------------------------------------------------------------

    \24\ An initial difference between that case and the 
present one, of course, is that the initial decree in that case was 
entered after the District Court had already heard approximately 11 
months of trial testimony from roughly 350 witnesses. See AT&T, 
552 F. Supp. at 140.
---------------------------------------------------------------------------

    This Court, by contrast, has not been provided with the 
affidavit of any economist, or for that matter of anyone else, that 
would provide a factual predicate for any of the matters that it 
must decide in reviewing the adequacy of the proposed decree. The 
Department has provided no factual basis (other than its say-so) for 
believing that the remedies proposed in the decree would be 
sufficient to "pry open to competition" the operating 
systems market, AT&T, 552 F. Supp. at 150; that Microsoft's 
other anticompetitive practices (undocumented calls, predatory 
preannouncements, anticompetitive bundling and unbundling, early 
disclosure to Microsoft applications programmers) will not undermine 
the effectiveness of the decree; and so forth. Although this case 
involves an industry of unquestioned significance to the future of 
the American economy--one of comparable importance to AT&T 
itself--the Department has in fact given this Court 
nothing to go on other than the purest ipse dixit. Indeed, it is 
hard to imagine how the Department could claim that its request for 
approval of the decree amounts to anything but a request for a 
"rubber stamp" when it has so notably failed to say 
anything other than "trust us."
    Nor does the Department's submission compare favorably with the 
information available to other courts in cases cited by the 
Department. In Gillette, for example, which first formulated the 
"reaches of the public interest" standard, see 406 F. 
Supp. at 716, Judge Aldrich concluded that he was able to make an 
independent determination regarding the adequacy of the proposed 
decree because "the record [in the case] is both open and 
extensive." Id. at 715. Here, the record is neither. Indeed, 
the transcripts of the hearings on September 29, 1994 and November 
2, 1994 are replete with inquiries by the Court regarding matters 
inextricably tied to the adequacy of the proposed 
remedy--inquiries that repeatedly failed to yield any 
information at all, or (even worse) information that is at odds with 
the record.
    The example of preannouncements already has been discussed 
above: despite Microsoft's unequivocal denial, and the Department's 
silence, the documentary record shows that such predatory 
preannouncements in fact are used by Microsoft. Nor is this the only 
example highlighted by the transcript. Equally striking is the 
Court's effort to ascertain whether the Department had concluded 
that a "Chinese Wall" exists between Microsoft's 
operating system and applications divisions. Noting the discussion 
of this point in Hard Drive, the Court may have been left with the 
impression during the hearing that such a "Chinese Wall" 
in fact exists. See Tr. of Status Call, Sept. 29, 1994, at 
27:11-28:1. Certainly that is the impression that Microsoft 
previously has sought to convey, dating all the way back to 
1983.\25\ Indeed, throughout the spring and summer of 1991, after 
the FTC announced its investigation of Microsoft in March 1991, 
Microsoft persisted in its claim that the company's applications and 
systems development groups were separated.\26\
---------------------------------------------------------------------------

    \25\ See, e.g., A Fierce Battle Brews Over the Simplest 
Software Yet, Business Week, November 21, 1983, at 114 (Ex. 2) 
(quoting Microsoft executive Steve Ballmer) ("There is a very 
clean separation between our operating system business and our 
applications business... It's like the separation of church and 
state").
    \26\ See, e.g., Paul Andrews, Can Microsoft Just Do It?, 
Seattle Times, March 18, 1991, at B1 (Microsoft 
"repeatedly" asserted "that a "Chinese 
Wall" exists between its applications and systems 
divisions"); Microsoft and IBM Under Investigation by FTC, 
Technical Computing, Apr. 1, 1991 ("Microsoft maintains that 
it does not take unfair advantage of advance knowledge of operating 
systems in designing its consumer products. It says there is a 
"Chinese Wall" between systems and applications"); 
Michael Stroud, ITC Widens Probe of Microsoft Dominence, Investor's 
Daily, Apr. 15, 1991, at 1 ("Microsoft maintains that it keeps 
a "Chinese Wall" between its operating system and 
applications divisions to prevent such an unfair advantage from 
occurring"); Sean Silverthorne, AMD Files $2 Billion Antitrust 
Suit Against Intel, Investor's Daily, August 30, 1991, at I 
(Microsoft responds to charges that its application developers 
receive "inside knowledge" about the company's operating 
systems by claiming that Microsoft "has erected a 
"Chinese Wall" between the two operations. ").
---------------------------------------------------------------------------

    Now, however, at the end of a long footnote in its written 
submission, Microsoft disavows that any such "Chinese 
Wall" exists--and, indeed, derides the idea as 
"irrational." See Microsoft Mem. at 7 n. 12. The 
Department, again, has been silent. Was its determination that 
"no further action [is] warranted" on this issue, 59 
Fed. Reg. at 59,427, based on Microsoft's earlier representation 
that a "Chinese Wall" in fact exists? Was it based on 
the conclusion that there is no "Chinese.Wall," but it 
does not matter? If not, why not'.)
    The answers to these and other questions may remain unanswered 
because no satisfactory answer is available. As shown in Sections 
III through VI, infra, the Government cannot effectively restore 
competition in the operating systems market without addressing the 
consequences of Microsoft's illegally-acquired "installed 
base," and its broader use of its acquired market power. The 
Government's proposed consent decree, however, fails to do either.

The Economic Characteristics of the Software Industry

    Section III is divided into two parts. Subsection A provides 
background by describing the structure of the software industry and 
how it has changed over time in response to Microsoft's prior 
conduct in the market. Subsection B describes the economic 
characteristics of the technologies and markets at issue here.

A. Market And Technology Background

    The relevance of much of the material in this section, 
particularly the schematic diagrams, is fleshed out and explained to 
a great extent in the subsequent sections. If the Court is 
unfamiliar with these markets, the Court may find it useful at this 
point to read The Economist \27\ article, and the Harvard 
Business Review \28\ article, both found in the Appendix.
---------------------------------------------------------------------------

    \27\ The Computer Industry Survey: Reboot System and Start 
Again, The Economist, Feb. 27-Mar. 5, 1993, at 3 (Ex. 14). 28 
Charles R. Morris and Charles H. Ferguson, How Architecture Wins 
Technology Wars.
    \28\ Harv. Bus. Rev., Mar. 1993, at 86 (Ex. 16).
---------------------------------------------------------------------------

    At the outset, two characteristics of these markets and 
technologies should be emphasized. First, the products at issue are 
software products, composed almost entirely of intellectual property 
content. Because of the nature of software, there can be greater 
flexibility in the formation of vertical relationships than often is 
present with respect to more conventional products. Unlike a 
pipeline, for example, many competitors can vertically link their 
software, through software compatibility, to products in the markets 
above and below them. So, for example, a number of different 
companies can make word processing application programs that work 
equally well with Microsoft's operating system so long as they all 
have the same technical information on a timely basis. It is not 
necessary for Microsoft to bundle--or literally tie 
together--its operating system and word processing program in 
order to ensure that the two programs work well together. With 
software, the efficiency benefits of vertical integration can be 
achieved without foreclosing access to competitors.
    Second, the Stipulated Complaint and Final Judgment in this case 
focus on the Personal computer operating system and the applications 
that run on top of it. Together, the personal computer operating 
system and the applications that run on it are sometimes known as 
the "business desktop." But the desktop is really only 
an interrelated component of a network that contains desktops (or 
"clients") and "servers." These software 
networks bear many of the characteristics that economists have 
associated with networks in other industries, including 
"increasing returns" or "network

[[Page 29221]]

effects," as described in Subsection B. Indeed, software 
networks manifest increasing returns, or demand-side economies of 
scale, more strongly than networks in more conventional industries.
    The network at issue here has four components, two on the 
"business" side and two on the "home" side. 
On both the home and business sides, there is a desktop, or 
"client," component, and a "server" 
component that links the desktop into a broader network. The network 
as a whole can be diagramed as follows:
    BOX 1
    HOME CLIENT
    Applications
    Multiple Layers
    Connected to Server
    by Windows 95
    Home-to-Business
    ("On Line Services")
    Home-to-Business
    Server
    8 Layers
    Connected to Home
    Client and
    Intrabusiness Server
    by Windows NT
    HOME-TO-BUSINESS
    BOX 2
    BOX 4
    INTRABUSINESS CLIENT
    Applications
    5 Layers
    Connected to Server by
    Windows 95"
    Intrabusiness
    (Enterprise Server)
    Intrabusiness Server
    8 Layers
    Connected to
    Intrabusiness Client
    and Home-to-
    Business Server by
    Windows NT
    ENTERPRISE SERVER
    BOX 3
    Figure I
    The following description attempts to provide some explanation 
for each of these boxes: the intrabusiness client, which runs on the 
"desktop"; the enterprise "server, " meaning 
the hardware and software applications that run on a more 
centralized computer and that link the clients together; the home 
"client;" and the home-to-business server, that 
similarly links home personal computers ("PCs") into a. 
larger network. This brief then discusses two particular 
technologies that play a critical role in understanding Microsoft's 
strategy: OLE and Windows.
    1. The Business Desktop
    The personal computer or "PC" was initially devised 
as a stand-alone device, but today it is usually used as part of a 
network. This is certainly the case in business, and will 
increasingly be the case in the home.\29\ The PC, both stand-alone 
and as part of a network, is often referred to as "the 
desktop." The FTC Investigation and the DOJ investigation of 
Microsoft have focussed on the desktop.
---------------------------------------------------------------------------

    \29\ See, e.g., All Things Considered (NPR broadcast, Nov. 
17, 1994) ("if there's a sub-theme to this whole [Comdex] 
conference, it's networking, and Microsoft is the company that wants 
to connect all those different boxes that are going to be in your 
house. "); Elizabeth Corcoran, --Microsoft Heads Home: 
Software Giant Targets Huge Consumer Market With a Host of High-Tech 
Innovations, Washington Post, Nov. 13, 1994, at H1 (Ex. 44).
---------------------------------------------------------------------------

    Prior to Microsoft Windows, the intrabusiness "client 
side" or desktop could have been thought of as having four 
layers.

------------------------------------------------------------------------
        Level                   Name                    Examples
------------------------------------------------------------------------
4...................  Applications............  Lotus 1-2-3,
                                                 dBASE, WordPerfect.
                                                 Harvard Graphics
3...................  Development Tools.......  Basic, Pascal, C
2...................  OS......................  Apple, CPM, MS DOS, DR
                                                 DOS
1...................  Hardware................  IBM, Apple, Kaypro
------------------------------------------------------------------------

    Today, the market looks more like Figure 3 below. It reflects 
two principal changes, each of which will be explained in Section 
IV, infra. First, Microsoft succeeded in forcing the market to 
migrate to a new operating system or "OS" (Windows), 
thereby inserting a new layer, the "graphical user 
interface" (GUI) layer (layer 3), between the operating system 
and the applications. Second, using its leverage in layers 2 and 3, 
it has become dominant as well in development tools (layer 4) and 
business applications (layer 5).\30\
---------------------------------------------------------------------------

    \30\ 30 Layer 5 has been broken out into two parts to 
reflect the development of what are known in the industry as 
"client-server" applications: applications that run 
partially on the desktop, and partially on server hardware connected 
to the desktop by a computer network.

------------------------------------------------------------------------
       Level                   Name                     Examples
------------------------------------------------------------------------
5.................  Applications.............  (a) Desktop applications
                                                (e.g., Lotus
                                                1-2-3,
                                                dBASE, MS Word, MS
                                                Excel, WordPerfect) The
                                                Microsoft Office is a
                                                bundle of these
                                                applications made
                                                exclusively by
                                                Microsoft.
                                               (b) Client applications
                                                as part of a network
                                                (e.g., Oracle
                                                Financials, SAP,
                                                Peoplesoft, D&B
                                                Software. etc.)
4.................  Development..............  Basic, Pascal, C, Borland
                                                C + +, Tools Powersoft
3.................  GUI and/or...............  MS Windows OS Services
2.................  Operating System.........  DOS, Apple, OS2/WARP,
                                                UNIX
1.................  Hardware.................  IBM, Apple, Compaq, Dell
------------------------------------------------------------------------

Figure 3

    The Justice Department investigation of Microsoft has focussed 
primarily on operating systems (Levels 2 and 3 in Figure 
3),--but the Government's Tunney Act submission also considers 
the applications layers (Levels 4 and 5) insofar as they impact 
competition in operating systems. In order to evaluate the proposed 
Final Judgment, a slightly more detailed understanding of the 
operating system layer is necessary.
    The Government's complaint defines the market as operating 
systems that run on the Intel chip set (known as "X86" 
chips). 59 Fed. Reg. at 42.847 (Complaint "[ 13). There were 
formerly three principal operating system vendors for this 
market--Microsoft (MS DOS and Windows), Novell (DR DOS) and IBM 
(PC-DOS and OS/2). Novell, as indicated above, has withdrawn from 
this market, and Microsoft is unquestionably a monopolist, currently 
enjoying a greater than 90% market share.\31\ Software written for 
the current version of Windows (v. 3.1) and prior versions will also 
run on the IBM OS/2 operating system. However, software written 
expressly for Microsoft's next release of Windows (Windows 95), due 
out in August of 1995, will not run on the IBM OS/2 operating 
system. Don Clark and Laurie Hays, Microsoft's New Marketing Tactics 
Draw Complaints, Wall St. J., Dec. 12, 1994, at B6 (Ex. 41).
---------------------------------------------------------------------------

    \31\ PC Week, Feb. 21, 1994, at 39 (Paine Webber, Inc. 
Table) (excluding sales of Macintosh--which does not use X86 
chips--Microsoft's 1994 market share was 92.4%).
---------------------------------------------------------------------------

    There are a few other competing desktop operating systems that 
run on different chip sets. For example, Apple's Macintosh operating 
system runs on a Motorola chip set. And the UNIX operating system 
generally runs on a specially designed chip, such as the 
"RISC" (reduced instruction set) chip designed by Sun 
Microsystems. See also

[[Page 29222]]

Computerworld, Dec. 6, 1993, at 99 (International Data Corp. Table) 
(Microsoft 1992 market share is 92.5%).
    Even including these other operating systems in the same market 
as those that run on the Intel chip, Microsoft has an overwhelming 
market share, with well over 85 %. As the Government's Complaint 
correctly points out, applications software written for an Intel 
chip operating system will not run on the Apple Macintosh or Sun 
RISC workstation without significant modification--known as 
"porting." Frequently, porting application software to a 
new chip set and operating system entails a significant re-
engineering of the software. Hence. the Government does not include 
operating systems for the different chip sets within the same 
antitrust market.
    However, the Government fails to point out that the only 
companies in the market for developing business application software 
for the operating systems sold by Apple and Sun, for example, are 
also the business application vendors on the Windows 
platform--e.g., Novell/WordPerfect, Lotus, Borland, etc., and 
Microsoft, itself, of course. The significance of this fact is 
discussed in greater detail infra. The point here, however, is that 
if Microsoft were able to monopolize the market for business 
applications software, it would severely inhibit competition from 
vendors of operating systems that run on other chips but 
nevertheless compete with the Microsoft operating system (e.g., 
Apple and Sun).\32\ Figure 4 shows what the intrabusiness client 
side probably will look like once Microsoft's strategy of vertical 
integration of markets within the client is completely executed.
---------------------------------------------------------------------------

    \32\ The situation with respect w UNIX is slightly more 
complex, but in the final analysis, the situation is the same. UNIX 
has a strong following among technical engineering (as opposed to 
business) users of computers. There are companies that have written 
technical engineering application programs (such as "computer 
aided design" programs) to run on UNIX. But, as with Apple, 
the business applications vendors for the UNIX platform are the same 
companies that write applications for Windows. Hence, by controlling 
business desktop application programs, Microsoft can keep UNIX from 
penetrating the business desktop market.
---------------------------------------------------------------------------

    It shows the completion of Microsoft's leverage from layers 2 
and 3 to further its domination of all aspects of layers 4 and 5.

------------------------------------------------------------------------
       Level                   Name                     Examples
------------------------------------------------------------------------
5.................  Applications.............  Desk-top Applications,
                                                e.g., Microsoft Word,
                                                Microsoft Excel,
                                                Microsoft Access, and
                                                Client Server
                                                Applications
4.................  Development Tools........  MS Basic, MS C, MS C + +,
                                                Microsoft Visual Basic,
                                                Microsoft Visual C + +,
                                                OLE
3.................  Graphical User Interface.  MS Windows
2.................  Operating System.........  MS DOS
1.................  Hardware.................  X86 PC Hardware and Other
                                                Hardware in Figure 3
------------------------------------------------------------------------

Figure 4

    2. The Intrabusiness Server
    The "server" is the direct lineal descendant of the 
mainframe computer. Prior to the advent of the personal computer, 
companies operated using a mainframe, to which "dumb" 
terminals were connected. Personal computer technologies now allow 
many computing functions to be performed on the desktop by an 
individual worker, but workers within a business still need to share 
information with each other and access a body of data 
simultaneously. The "server," a dedicated hardware 
platform with its own server operating system, allows this to 
happen. Indeed, increasingly, workers within a business will want 
simultaneous access to several bodies of data and several different 
application programs, so that, for example, textual documents 
containing spreadsheets can be prepared by a number of employees 
working at the same time.
    There are two basic components of the server markets. The 
intrabusiness server is the backbone of business. Microsoft has 
projected that there will be 300 million servers in the business 
community, running everything from phone systems, to copying 
systems, to cash registers. J. William Semich, The Long View From 
Microsoft: Component DBMSs. Datamation, Aug. 1. 1994, at 40 (Ex. 
10). If a Single company controls all business server markets and 
applications, that company has far greater market power in various 
sections of the economy than, say, mere control of the desktop would 
bestow. The second server component. home-to-business, will be 
described in a subsequent section.
    Today, the "server" side of the intrabusiness 
environment has approximately eight layers. It would unnecessarily 
complicate this brief of amici to describe the intrabusiness server 
markets in great detail. There are, however, three important points 
about the intrabusiness server markets that are relevant for this 
Court's consideration. First, the most important layer in the server 
market is the operating system level. The two leading competitors in 
this market at present are Novell's "Netware" product 
and Microsoft's NT product." The operating system is important 
because the other products in the server market run on top of the 
server operating system in much the same way as desktop applications 
run on top of Windows. The operating system level is also important 
because it is the level through which the server is connected to the 
business desktop and (through on-line services) to the home client.
    Second, as was the case on the desktop four years ago, 
competition is vigorous at all levels of the server market. At each 
of the eight levels, there are a number of competitors, each 
striving to make better products at cheaper prices. This condition 
represents a significant (and welcome) departure from the state of 
the computer industry prior to the advent of personal computer and 
server technology. In an earlier period, there were only a few 
vertically integrated companies in the computer industry, such as 
IBM, DEC and Wang. These companies attempted to supply all aspects 
of computer technology--from the underlying chips and operating 
systems, to applications, to distribution, and even including 
service and support of previously sold computers. Generally 
speaking, consumers have benefitted enormously by the fragmentation 
of the industry into horizontal layers characterized by vigorous 
competition. Consumers have been able to choose the technologically 
superior and most cost effective product at each level and combine 
those products into a system that addresses the consumers" 
needs. The pro-competitive benefits of the industries" current 
horizontal alignment is discussed in some detail in the Economist 
article (Ex. 14).\33\
---------------------------------------------------------------------------

    \33\ 33 Laura DiDio, NetWare, NT Server to Divide Lion's 
Share, Dec. 26, 1994, at 77 ("The network operating system 
arena looks like a two-horse race in 1995, with Novell, Inc.'s 
NetWare 4.1 and Microsoft Corp. "s Windows NT Server 3.5 
locked in a battle for first place. ").
---------------------------------------------------------------------------

    Finally, Microsoft is pursuing a vertical integration strategy 
on the intrabusiness server side similar to that pursued on the 
business desktop side. This strategy is only briefly discussed 
elsewhere in this paper. The Court can get further information 
concerning Microsoft's strategy, goals and prospects for success 
from the following articles found in the Appendix: Stuart J. 
Johnston and Ed Scannell, Server Suite Could Squeeze Market, 
Computerworld, Oct. 10, 1994, at 4 (Ex. 7); How Microsoft's Server 
Strategy Will Change The Industry--Parts I & II, Report by 
Summit Strategies Inc.; J. William Semich, Datamation, Aug. 1, 1994, 
supra, at 40 (Ex. 10). Obviously, after complete execution of this 
strategy, Microsoft products would be dominant or exclusive on each 
of the server layers.
    3. The Home-to-Business Server
    The second aspect of server technology is the home-to-business 
server market, sometimes known as "online services." 
Today, most online services run off mainframe computers the way 
LEXIS and NEXIS do. Businesses will increasingly need to sell 
directly into the home through online services in order to remain 
competitive. Control by a single company of the home-to-business 
server market would have significant economic ramifications.

[[Page 29223]]

    Although there is a vigorous online services market in place, 
the home-to-business server does not yet exist, except in 
Microsoft's plans. It can be readily assumed that the home-to-
business server would look much like the intrabusiness server, with 
only Microsoft products being vertically integrated.

------------------------------------------------------------------------
       Level                   Name                     Examples
------------------------------------------------------------------------
8.................  Vertical Applications....  Home banking, home
                                                shopping, news, product
                                                support, portfolio
                                                management, plus other
                                                "Marvel"
7.................  Horizontal Applications..  (the Microsoft online
                                                service) applications
6.................  Development Tools........  Same as Intrabusiness
                                                Server, plus Blackbird
                                                (OLE-based development
                                                tools; see InfoWorld 10/
                                                24/94)
5.................  Server Applications......  Microsoft EMS E-mail;
                                                Microsoft Tiger Video
                                                Distribution
4.................  Database Services........  Microsoft SQL Server
                                                (bundled with Marvel)
3.................  OS Services..............  Windows NT (bundling MS
                                                Services)
2.................  OS Networking............  Windows NT (with Marvel
                                                Server Code)
1.................  Hardware.................  Intel or Alpha (DEC) chip
------------------------------------------------------------------------

Figure 5

    4. Home Computer Market
    The home computer market is in its incipiency. The most 
important applications programs on the home client are "home 
banking" (also sometimes known as "personal 
finance") and tax preparation.\34\ The most successful company 
in this market, Intuit, Inc., makes the largest selling home banking 
("Quicken") and tax preparation ("TurboTax") 
programs. The only substantial competition to Intuit's products 
comes from Microsoft. Yet, despite a very. substantial commitment in 
marketing staff and resources, Microsoft has gained only a 10% 
share. Microsoft has therefore elected to take over the home finance 
market by purchasing the leading software developer, Intuit, rather 
than by making better products to compete against it. The Microsoft 
acquisition of Intuit was announced on October 13, 1994 and is still 
under review by the Department of Justice. It is the largest 
acquisition in the history of the industry with Microsoft paying 
twice as much for Intuit as that company was worth in the stock 
market.\35\
---------------------------------------------------------------------------

    \34\ See, e.g., Michelle Flores, Probe of Microsoft is 
Extended--Justice Dept. Asks For More Information, Seattle 
Times, Nov. 22, 1994, at B11 (electronic banking is the 
"killer app. of the "90s").
    \35\ Prior to rumors of the acquisition, Intuit's stock 
traded at 40 3/4. John Eckhouse, Giant Microsoft Buys Intuit for 
$1.5 Billion, San Francisco Chronicle, Oct. 14, 1994, at A1, A19. 
Each Intuit share is to receive 1.336 Microsoft shares at the 
closing. Id. Based on Microsoft's January 3, 1995 closing price of 
60 3/16, each Intuit share receives over $80.
---------------------------------------------------------------------------

    The Microsoft acquisition of Intuit is highly strategic. It is a 
key element in Microsoft's plans to dominate all of information 
processing and will be discussed in a subsequent section. If the 
Microsoft-Intuit deal is consummated, it is not difficult to project 
what the home client will look like given Microsoft's recent 
announcement concerning "Marvel" (described in a 
subsequent section).




MTC-00030631 0300

------------------------------------------------------------------------
       Level                   Name                     Examples
------------------------------------------------------------------------
5.................  Applications.............  Microsoft Works, Quicken
                                                (Intuit), TurboTax,
                                                Encarta. etc.
4.................  Development Tools........  For example, language
                                                features of Microsoft
                                                Excel
2-3.........  GUI/OS/Networking........  Windows 95 with Marvel
                                                Client Code
1.................  Hardware.................  PC Hardware
------------------------------------------------------------------------

Figure 6

    In summary, in each of the four components of the software 
industry, Microsoft's overall business approach and strategy is 
based on the creation of technological linkages between layers 
within the same market (e.g., DOS to Windows on the desktop) and 
between layers in one market and corresponding layers in another 
market (e.g., Windows NT to the Microsoft Network to Windows 95 on 
the home client). To fully understand Microsoft's strategy and its 
economic implications, however, it is necessary to understand two 
additional strategic Microsoft technologies: OLE and Windows. This 
Memorandum of Amici will address each in turn.

5. OLE

    OLE (object linking and embedding) is a strategic technology for 
Microsoft on both the client and server side. It is the Microsoft-
imposed standard for sharing information both among applications, 
and between applications and the operating system. During the 
Justice Department investigation, desktop application companies 
complained that Microsoft seeded OLE to its own application 
developers before giving it to ISV's (independent software vendors), 
thereby giving its own applications a lengthy head start over the 
competition.\36\ As set forth in a subsequent section, these charges 
are supported by ample evidence and constitute the clearest examples 
of Microsoft's use of operating system information and 
specifications to achieve an unfair head start in the application 
markets. This is precisely the issue raised by this Court.\37\
---------------------------------------------------------------------------

    \36\ See Brian Livingston, Undocumented Windows Calls, 
InfoWorld, Nov. 16, 1992, at 98 (Ex. 19); Doug Barney and 
Ilan Greenberg, ISVs Dampen Microsoft Furor for OLE, InfoWorld, July 
18, 1994, at 1.
    \37\ 37 Tr. of Status Call, Sept. 29, 1994, at 
25-28.
---------------------------------------------------------------------------

    Even more striking is the fact that Microsoft continues to 
exercise the very same strategy on the server side. See, e.g., J. 
William Semich, Datamation, Aug. 1. 1994, supra, at 40, 41-44 
(Ex. 10) ("If you think OLE is everywhere in the future, the 
answer is yes"). Microsoft has made it clear that OLE will be 
strategic technology for the home-to-business server market, but 
Microsoft has not provided sufficient specifications to independent 
database server providers to enable them to release equally well-
behaved products on the same time schedule as Microsoft's own 
products.\38\
---------------------------------------------------------------------------

    \38\ Microsoft has made numerous presentations around the 
country that specifically make this point and written documentation 
from these presentations has been provided to the Justice 
Department.
---------------------------------------------------------------------------

6. Windows

    The business desktop connects to the server through the Windows 
operating system ("OS") and the home-to-business server 
("online services") also connect to the home computer 
through the Windows operating system. Microsoft has several 
different Windows products that provide OS, GUI and networking 
capabilities. A brief (and superficial) description of these 
products is included at this point to avoid confusion.\39\
---------------------------------------------------------------------------

    \39\ For a more thorough discussion, see Miles B. Keyhoe, 
The Winds of Change, HP Professional, Aug. 1994, at 40 (Ex. 17). See 
also Microsoft Corporation, Microsoft Windows NT and Client-Server 
Computing, May 1993.
---------------------------------------------------------------------------

    a. Desktop
    Microsoft's first Windows products were targeted for the desktop 
and were built on top of Microsoft's dominant desktop operating 
system MS-DOS. Because of their DOS legacy, these products are 
unable to take full advantage of the capabilities of the 32-bit 
microprocessors they run on. Microsoft's

[[Page 29224]]

current product in this area is Windows 3.1, which. due in part to 
the illegal per-processor licensing challenged by the Government, is 
pre-installed on most desktop systems presently sold.
    Microsoft plans to proliferate Windows 95 (also known in the 
press as "Chicago" or "Windows 4.0") widely 
next year as the successor to Windows 3.1. Windows 95 is a true 32-
bit operating system, but it is being targeted to the mainstream 
personal computer market. It also includes advanced networking 
features.
    Windows NT was Microsoft's first true operating system for 32-
bit microprocessors. NT's principal use is in the server market 
(discussed below) but Microsoft has also targeted its NT marketing 
to power users running high-end personal computers or workstations.
    b. Server
    Windows NT can also be used as an operating system for a network 
server. Microsoft markets a version of NT with advanced server 
capabilities, called Windows NT Advanced Server, as an enterprise-
wide computing solution. Microsoft offers a suite of applications 
for Advanced Server called "BackOffice" that includes 
database services, electronic mail, systems management, and 
connectivity to mainframe and minicomputers. Microsoft's vision for 
enterprise computing is being marketed through its plans for a 
replacement for Windows NT currently code-named "Cairo." 
Cairo brings object-oriented technology into the file server and 
operating system. Microsoft already controls object standards 
through it OLE specification, discussed in the next subsection. See 
J. William Semich, Datamation, Aug. 1, 1994, supra., at 41-44 
(Ex. 10).
    B. Free Market Forces in lncreasing Return Industries
    In some industries, companies generally compete on a 
"level playing field." In such industries, diminishing 
returns to scale ensure that the forces of the free market will 
naturally gravitate toward an equilibrium point which maximizes the 
production of goods and services and results in the most efficient 
allocation of resources. Under such conditions, antitrust enforcers 
as well as business executives can count on the fact that superior 
products will necessarily prevail in free and open competition.\40\
---------------------------------------------------------------------------

    \40\ W. Brian Arthur, Positive Feedback in the Economy, 
Scientific American, Feb. 1990, at 92, 93 (Ex. 36).
---------------------------------------------------------------------------

    Free market forces in other industries--including those at 
issue here--do not exhibit such qualities. Rather, they exhibit 
"increasing returns." In such industries, there is more 
than one equilibrium point and there is no reason to expect the free 
market to reach equilibrium at a point that most efficiently 
allocates resources.\41\ The markets in such industries can easily 
be manipulated by a company with a large "installed 
base,"\42\ with the result that superior products of 
competitors are not likely to prevail in the free market.\43\ 
Indeed, in "increasing returns" industries, there is 
every reason to believe that consumers will get "locked 
into" the first product that appears on a new platform, even 
if the product is technologically inferior.\44\ Similarly, a company 
with a large installed base in one market can give its inferior 
product in a second market an insurmountable advantage over 
competitors in the second market by integrating the products from 
the two markets together technologically.\45\
---------------------------------------------------------------------------

    \41\ Id. at 92 (Ex. 36).
    \42\ "Installed base" in the economic 
literature "means the number of owners of a good who may be 
dependent on the manufacturer of the good for the provision of 
complementary goods." Joseph Katten, Market Power in the 
Presence of an Installed Base, 62 Antitrust L.J. 1, 4 (1993).
    \43\ Joseph Farrell and Garth Saloner, Installed Base and 
Compatibility: Innovation, Product Pre-Announcements, and Predation, 
Amer. Econ. Rev., Dec. 1986, at 940; Janusz A. Ordover and Garth 
Saloner, Predation, Monopolization, and Antitrust, in Handbook of 
Industrial Organization 537, 565 (R. C. Schmalensee and R. Willis 
eds., 1989).
    \44\ W. Brian Arthur, Scientific American, Feb. 1990, 
supra, at 92-93 (Ex. 36).
    \45\ See, e.g., Garth Saloner, Economic Issues in Computer 
Interface Standardization, Econ. Innov. New Tech., 1990, at 
140-142.
---------------------------------------------------------------------------

    Some of the early economic research in the area focused on 
perceived anomalies -- particular standards that became locked 
in, notwithstanding their obvious inferiority. Stanford economist 
Paul David identified several such examples, the most famous of 
which is the layout of the common typewriter keyboard, known as the 
"QWERTY" configuration because of the order of the keys 
in the second row of the keyboard.\46\ Primitive typewriters were 
unreliable mechanical devices and the QWERTY keyboard, at least 
according to the folklore, was therefore deliberately designed to be 
dysfunctional so that typists would not strike the keys so rapidly 
that the device would jam. Obviously. modem software and computers 
can process keystrokes far more quickly, yet consumers are locked 
into the QWERTY standard. There are even allegations "that the 
combination of constant repetitive motion and inefficient finger 
movements that QWERTY requires is the ticket to the most well-known 
[repetitive stress injury.] RSI. carpel tunnel syndrome." yet 
we go right on teaching it in elementary schools.\47\ Superior 
keyboard layouts were developed years ago but were unsuccessful in 
dislodging the clearly inferior design that established itself as an 
early standard.\48\
---------------------------------------------------------------------------

    \46\ See, e.g., Paul A. David, Clio and the Economics of 
QWERTY, Amer. Econ. Rev., May 1985, at 332; David A. Harvey, 
Ergonomic Issues Have Taken a Backseat to Performance, Resulting in 
a Growing Tide of Computer-Related Injuries. Change is 
Needed--Now!, Byte, Oct. 1, 1991, at 119.
    \47\ See David A. Harvey, Byte, Oct. 1, 1991, supra, at 
120.
    \48\ Joseph Farrell & Garth Saloner, Amer. Econ. Rev., 
Dec. 1986, supra, at 942; Jean Tirole, The Theory of Industrial 
Organization at 405, n.40 (1988).
---------------------------------------------------------------------------

    By the late 1980's, economic analysis was finally able to 
explain such situations more clearly. Economists at Stanford and the 
University of California at Berkeley published " leading 
articles demonstrating that market characteristics long viewed as 
anomalous were, in fact, widespread in high technology 
industries.\49\ By the mid-1990's, increasing returns economics has 
become widely accepted as mainstream economic analysis.\50\ There is 
now extensive theoretical literature with direct empirical 
application to many leading industries, including 
telecommunications, broadcasting, computers, and ATMs.\51\
---------------------------------------------------------------------------

    \49\ W. Brian Arthur, Scientific American, Feb. 1990, 
supra, at 93.
    \50\ See W. Brian Arthur, Increasing Returns & Path 
Dependence in the Economy, 1994, at ix (forward Kenneth J. Arrow).
    \51\ For the theoretical literature see, for example, the 
recent Symposium on Network Externalities in the Journal of Economic 
Perspectives, Spring 1994, the Symposium on Compatibility, edited by 
Richard Gilbert in the Journal of Industrial Economics, March 1992, 
and the survey by Paul David and Shane Greenstein in the Economics 
of Innovation and New Technology, 1990. For an application to 
telecommunications, see Stanley Besen and Garth Saloner, The 
Economics of Telecommunications Standards, in Changing the Rules: 
Technological Change, International Competition, and Regulation in-
Communications 177 (1989); for applications to broadcasting, see 
Stanley Besen and Leland Johnson, Compatibility Standards, 
Competition, and Innovation in the Broadcasting Industry (1986); for 
applications to ATMs, see Garth Saloner and Andrea Shepard, 
forthcoming in the Rand Journal of Economics, and Steven Salop, 
Deregulating Self-Regulated Shared ATM Networks, Econ. of Innov. and 
New Tech., 1990; and for computers, see Garth Saloner, Econ. Innov. 
New Tech., 1990, supra.
---------------------------------------------------------------------------

    Increasing returns are present in industries throughout the 
economy, but two high technology market situations, in particular, 
give rise to increasing returns. First, users of high technology 
products are frequently electronically connected in a network. 
Networks exhibit and produce certain important economic results. 
Because the purpose of a network is to enable communication with 
others, the value of the network increases with the total number of 
users who join the network.\52\ Consequently, once a network such as 
a telephone network is in place. a competing network would have to 
enter the market with at least as large a number of nodes in order 
to displace (or even compete meaningfully with) the first 
network.\53\
---------------------------------------------------------------------------

    \52\ This "network effect" has been described 
by numerous authors. In a recent Symposium in the Journal of 
Economic Perspectives, Michael Katz and Carl Shapiro write, 
"Consequently, as has long been recognized, the demand for a 
network good is a function of both its price, and the expected size 
of the network." See also Jeffrey Rohlfs, A Theory of 
Interdependent Demand for a Communications Service, Bell J. of 
Econ., Spring 1974, for an early reference, as well as Michael Katz 
and Carl Shapiro, Network Externalities, Competition, and 
Compatibility, Amer. Econ. Rev., June 1985; Joseph Farrell and Garth 
Saloner, Amer. Econ. Rev., Dec. 1986, supra: and other papers cited 
in Michael If, am and Carl Shapiro, Systems Competition and Network 
Effects, J. of Econ. Perspectives, Spring 1994.
    \53\ See Julio J. Rotemberg and Garth Saloner, lnterfirm 
Competition and Collaboration, Strategic Options, 1991, for an 
example of the power of network size.
---------------------------------------------------------------------------

    A second factor that gives rise to increasing returns is 
referred to as "compatibility" in the economic 
literature. Unlike more conventional industries, the value of the 
technology to end users in increasing returns industries increases 
with the number of users who use compatible technology. While the 
"network" feature draws its force from physical 
interconnection, the "compatibility"

[[Page 29225]]

factor arises from a dependency of mutual use by consumers without 
regard to actual physical interconnection.\54\ For example, although 
manual typewriters were not connected in a physical network, new 
users adopted the QWERTY keyboard because it was in wide use by 
others.\55\
---------------------------------------------------------------------------

    \54\ See Stanley M. Besen and Joseph Farrell, Choosing How 
to Compete, J. of Econ. Perspectives, Spring 1994, at 118; see also 
Michael Katz and Carl Shapiro, J. of Econ. Perspectives, Spring 
1994, supra, at 106. Once a market is "tipped" in favor 
of a particular competitor, it would take truly massive forces to 
return the market to a state of equilibrium (i.e., competition). 
See, e.g., W. Brian Arthur, Increasing Returns and Path Dependence 
in the Economy, supra, at 2, I0-11.
    \55\ For early examples in the economics literature, see 
Joseph Farrell and Garth Saloner, Standardization, Compatibility, 
and Innovation, Rand J. of Economics, Spring 1985 and Michael Katz 
and Carl Shapiro, Amer. Econ. Rev., supra; Jean Tirole, supra, at 
405. 55 Jean Tirole, supra, at 404-406.
---------------------------------------------------------------------------

    Economic analysis demonstrates that superior products do not 
necessarily prevail in markets and technologies that exhibit 
increasing returns. Rather, these markets are easily susceptible to 
"tipping"--once moved off of equilibrium by an 
event, the market tends quickly toward a single standard that 
dominates the market:
    [N]etwork markets are "tippy': the coexistence of 
incompatible products may be unstable, with a single winning 
standard dominating the market. The dominance of the VHS 
videocassette recorder technology and the virtual elimination of its 
Betamax rival is a classic case.
    Creating a large installed base is the key to dominating such an 
increasing returns market.
    Because of the compatibility and network benefits, all else 
equal, a new user prefers a vendor with a larger total installed 
base of users. Thus installed bases have a tendency to be self-
perpetuating: they provide the incentive for the provision of 
products (software and hardware) that is compatible with the 
installed base which in turn attracts new users to the installed 
base further swelling its ranks ....
    Garth Saloner, Econ. Innov. New Tech., 1990, supra, at 140. 
Indeed, "de novo entry into a market occupied by vendors with 
large installed bases is exceedingly difficult." Id. at 140.
    The self-perpetuating nature of an installed base in an 
increasing returns industry causes particular products to become 
"locked-in." W. Brian Arthur, Scientific American, Feb. 
1990, supra, at 99 (Ex. 36). The costs to a consumer of using or 
switching to a different system are so high that the vendor with the 
installed base has a substantial advantage over competitors and can, 
once the base is established, charge consumers supracompetitive 
prices.\56\
---------------------------------------------------------------------------

    \56\ Garth Saloner, Econ. Innov. New Tech., 1990, supra, 
at 137-138; Joseph Farrell and Carl Shapiro, Dynamic 
Competition with Switching Costs, Rand J. of Econ., Spring 1988, at
---------------------------------------------------------------------------

    Because increasing returns markets are particularly susceptible 
to "tipping," a company with a monopoly in one market 
that faces competition in a second market can use the locked-in 
installed base of the first market to wipe out competition in the 
second market by "tipping" the second market. The 
monopolist might achieve this result by releasing a "predatory 
preannouncement" with regard to a product in the second 
market. In markets that feature increasing returns, users will want 
to be on the same standard as other users, so expectations (what 
users believe will happen) dominate user choice in the second 
market--as opposed, for example, to the inherent technological 
quality of competing product offerings,\57\
---------------------------------------------------------------------------

    \57\ Joseph Farrell and Garth Saloner, Amer. Econ. Rev., 
Dec. 1986, supra, at 942.
---------------------------------------------------------------------------

    [A] preannouncement can sometimes secure the success of a new 
technology that is socially not worth adopting, and that would not 
have been adopted absent the preannouncement.
    Similarly, a monopolist that is cash rich from monopoly profits 
in the first market might also "buy off" early adopters 
to create a "band wagon effect" in favor of its product 
in the second competitive market.\58\ This technique of predation is 
known in the economic literature as "penetration 
pricing."
---------------------------------------------------------------------------

    \58\ See Stanley M. Besen and Joseph Farrell, J. of Econ. 
Perspectives, Spring 1994, supra, at 122; see also Janusz A. Ordover 
and Garth Saloner, Predation, Monopolization, and Antitrust, supra.
    Stanley M. Besen and Joseph Farrell, J. of Econ. Perspectives, 
Spring 1994, supra, at 118; Joseph Farrell and Garth Saloner, Amer. 
Econ. Rev., Dec. 1986, su0ra, at 946.
    Joseph Farrell and Garth Saloner, Rand J. of Econ., Spring 1985, 
supra; Joseph Farrell and Garth Saloner, Amer. Econ. Rev., Dec. 
1986, supra.
---------------------------------------------------------------------------

    An installed base advantage might also be achieved by 
"penetration pricing," the technique of offering low 
prices to early customers so as to build up an installed base and 
influence the choice of later adopters. Penetration pricing seems a 
natural strategy in network industries, and appears prominently in 
the theory.
    Finally, a monopolist with a large installed base in one market 
might "tip" a second competitive market in favor of his 
product in that market by technologically linking the two products, 
or by outright bundling of the functionality of the second product 
into the first product, thereby eliminating the need for the 
competitor's product in the second market. For example, by subtly 
altering the tying product so that rival products in the tied market 
become incompatible with the monopolist's "standard," 
the monopolist can quickly dominate the second market.\59\
---------------------------------------------------------------------------

    \59\ See Garth Saloner, Econ. Innov. New Tech., 1990, 
supra, at 141-142.
---------------------------------------------------------------------------

    The Justice Department's complaint in this case recognizes the 
critical importance of an "installed base." The 
complaint alleges that the "lack of a sizable installed base 
of users" constitutes a "substantial barrier to 
entry" for Microsoft's operating system competitors. 59 Fed 
Reg. at 42,847 (Complaint 15). The complaint also alleges that 
Microsoft used "anticompetitive contracting practices" 
including "per processor licenses" starting as early as 
1988 to "significantly increase the already high barriers to 
entry." Id. at 42,847, 42,848 (Complaint 18, 20, 26). The 
complaint appears to assume that Microsoft's monopoly was lawfully 
acquired. Id. at 42,847 (Complaint 19). But since Microsoft's 
installed base of operating system users has increased six-fold 
since 1988, it must follow that the "anticompetitive licensing 
practices" with which Microsoft is charged had the result of 
increasing its own installed base at the same time it impeded the 
development of competitors" installed bases. As set forth in 
the next section, Microsoft has used its installed base both to 
preclude competitive entry into the operating system market, and to 
stifle competition in related markets.

Microsoft's Tactics and Prospects for Success

    This section of the Memorandum of Amici will examine Microsoft's 
overall strategy, the tactics that Microsoft has used in pursuing 
that strategy, and the likelihood that Microsoft will accomplish its 
aims. Microsoft, by the admission of its own Chief Executive 
Officer, intends to dominate all of data and information processing. 
There's no level of performance or specific application of corporate 
information systems that we don't intend to go after... [and] there 
won't be anything we won't say to people to try and convince them 
that our way is the way to go. That's because this new, electronic 
world of the information highway will generate a higher volume of 
transactions than anything to date, and we're proposing that Windows 
be at the center, servicing those transactions. Brent Schlender, 
Fortune, Jan. 16, 1995, supra, at 40 (emphasis in original).
    To accomplish these aims, Microsoft has pursued licensing 
practices that the Government has denominated as 
"anticompetitive," and has engaged in classic predatory 
behavior by using its monopoly in one market to achieve monopolies 
in other markets. This section applies increasing returns economic 
analyses to Microsoft's behavior and concludes that, unless 
restrained by Governmental intervention, it is highly likely that 
Microsoft will achieve its goal of dominating the entire national 
information infrastructure.
    A. Microsoft's Strategy
    Even if Microsoft's initial monopoly was lawfully obtained, its 
enormous market power (and particularly the power to leverage into 
related markets) comes from its installed base in operating systems. 
That installed base, according to the Complaint, was procured as a 
result of anticompetitive practices. Indeed, Microsoft's installed 
base of operating system users has increased more than six-fold 
(from 18 to 120 million) since 1988, when the company began its 
anticompetitive practices. Microsoft has used its monopoly and its 
installed base in a classically predatory manner. It has used its 
monopoly revenues in one market to drive competitors out of other 
markets. It has also used its operating system installed base in a 
predatory manner to "tip" adjacent competitive markets 
in the direction of its own product in those markets, to the 
detriment of competitors.
    Microsoft's strategy at any particular point on the network (for 
example, at the home client or at the business desktop) can only be 
understood and evaluated in the context of Microsoft's overall 
strategy. Microsoft pursues a strategy of leverage from product

[[Page 29226]]

markets in which it is dominant, to markets in which its competitive 
position is weak. It targets particular markets, establishes 
marketing and, in particular, technological links to those markets 
from established monopolies, and then leverages its power to 
monopolize the target markets.
    As used in this brief, "leverage" means that 
Microsoft uses the installed base in a market it dominates (for 
example, the operating system) to create an installed base in a new 
market (for example, desktop applications). It uses predatory 
subsidization, and both marketing and technological linkages, to 
accomplish leverage, as explained in greater detail in the 
succeeding pages. For the sake of easy example, Microsoft's 
horizontal tie-ins within, a single layer represent the most trivial 
example of its marketing strategy. Thus, Microsoft has trundled for 
sale a number of desktop applications (under the name, the 
"Microsoft Office"), putting companies like Lotus, 
WordPerfect and Borland at a competitive disadvantage. Carole 
Patton, Bundles Are Bad News, Computerworld, Nov. 14, 1994, at 57 
(Ex. 8). Microsoft is executing the same tactic on the server side 
by bundling its "BackOffice" products to foreclose 
meaningful competition at the "server applications" 
layer. See Stuart J. Johnston and Ed Scannell, Computerworld, Oct. 
10, 1994, supra, at 4 (Ex. 7). Microsoft also pursues other tactics. 
In particular, Microsoft derives leverage from its control of 
Windows products and logo; from its use of a consistent graphical 
user interface; and from its tight technical integration between 
interconnected machines through the control of standards such as 
OLE. After establishing market power on one level, Microsoft will 
target an adjacent layer, subsidize the creation and sale of 
products at that layer from the monopoly it derived on the first 
level, establish proprietary technological linkages to the target 
layer, and then leverage its market power to establish market power 
in the next layer. Two examples of this within the desk-top side are 
DOS to Windows, and Windows to desktop applications. In addition, 
Microsoft uses its market power from one side of the network (server 
or client) to leverage to the other side, again by establishing 
linkages. Microsoft is already attempting to leverage its control of 
the desktop into a control of servers. It will also use its market 
power in the PC-based financial and text software market, through 
the acquisition of Intuit, to leverage into the server.\60\
---------------------------------------------------------------------------

    \60\ For a detailed review of Microsoft's server strategy, 
see How Microsoft's Server Strategy Will Change The Industry, supra, 
(Ex. 38).
---------------------------------------------------------------------------

    Obviously, control of certain layers in the various markets of 
the network create greater potential for leverage than control of 
other layers. In particular, there are a few "gateway" 
layers into the network. Control of these layers represents the most 
effective platform for leverage (i.e., moving the installed base). 
Generally speaking, the operating system layers in each box 
represent the most powerful platforms for both horizontal and 
vertical leverage.\61\ For example, Microsoft has already leveraged 
control of operating systems to desktop applications. It can also 
leverage control of the desktop operating system (Windows 95) to the 
server operating system (Windows NT).
---------------------------------------------------------------------------

    \61\ There was clearly the potential for at least some 
leverage from the chip or hardware level, when the OS level was more 
fragmented. This possibility is not treated in this brief for a 
number of reasons, including the widely publicized alliance between 
Microsoft and Intel that makes separate treatment of the hardware 
layer irrelevant.
---------------------------------------------------------------------------

    Control of the "gateway" layers provides greater 
possibilities for leverage because control of the architecture at 
those levels effectively controls all higher vertical levels, and 
also provides significant power at the horizontal interface between 
the client operating system and the server operating system. This 
brief uses the term "architecture" in the same way as 
that term is used in the Morris and Ferguson Harvard Business Review 
article--namely, the complex of standards and rules that define 
how programs and commands will work and how data will move around 
the system. Charles R. Morris and Charles H. Ferguson, Harv. Bus. 
Rev., Mar. 1993. supra, at 88 (Ex. 16).
    By owning the installed base at a gateway, Microsoft can control 
not only the architecture at that level but also at all higher 
vertical levels. For example, by controlling the desktop operating 
system architecture, Microsoft can easily obsolete or render 
inoperable Lotus 1-2-3, merely by making a minor change 
to the architecture. Microsoft can pretextually or otherwise claim 
the change to be an "upgrade" or a "bug 
fix," but it is the effect of the power to control 
architecture that is more important than Microsoft's subjective 
intent.
    If Microsoft controls the architecture at a 
"gateway," it can loudly proclaim its system to be 
"open" while in truth its architecture remains closed. 
Thus, for example, Microsoft can claim that its desktop operating 
system will continue to work with Lotus 1-2-3 or that 
its server operating system will continue to work with the database 
products offered by Microsoft competitors (and, to that extent, its 
system is "open"). Because Microsoft can easily obtain 
competitive advantage over (or outright displacement of) vertically 
related competitors by upgrades to the architecture, however, its 
nominally "open" system does not provide for effective 
competition on higher vertically related levels.\62\
---------------------------------------------------------------------------

    \62\ The operating system gateways are the most effective 
layers for leverage. But the system can also be leveraged from other 
access points as to which strong network externalities attach. For 
example, on the home client, Intuit has leverageable power from the 
strong network externalities that have attached to that product at 
the computer-human interface. (This is described in greater detail 
elsewhere in this brief.)
---------------------------------------------------------------------------

    All companies try to use leverage to some extent,\63\ but 
Microsoft has a powerful advantage over its competitors. It has used 
"anticompetitive" licensing practices to acquire a huge 
installed base and it uses the power of this installed base against 
competitors in adjacent markets. Microsoft employs multiple linkages 
and leverage from the different markets (and, in particular, from 
the gateways) it controls into a single target market, so as to 
completely outflank and overrun existing competitors in that market.
---------------------------------------------------------------------------

    \63\ In many respects Microsoft's strategy of targeting, 
linking and leverage is little different from that employed by MITI 
and Japanese keiretsus to target and capture American markets. 
Microsoft's leverage comes from technical ties in markets it 
dominates, while Japanese companies" leverage comes from the 
installed base of buyers it creates in Japan. In both cases, the 
leverage can be applied by forward-pricing into the target market to 
damage competition in that market. Cf., L. D. Tyson, Who's Bashing 
Whom.? Trade Conflict in High-Technology Industries, at 55-57, 
99-101 (1992).
---------------------------------------------------------------------------

    In the beginning (for our purposes), IBM had a monopoly in 
computers and the market for computer products was, generally 
speaking, vertically integrated. (This necessary background is 
explained in The Economist, supra, at 3-18 (Ex. 14).) How IBM 
got this monopoly was the subject of much conjecture and years of 
litigation, but is irrelevant for our purposes. What is relevant is 
the fact that IBM, in its rush to get out a personal computer, did 
not leverage its own power from mainframes. Rather, it procured 
chips from Intel and an operating system from Microsoft 
("DOS"), thereby transferring its market power to them 
as the market for personal computers expanded to displace mainframes 
and IBM's imprimatur established a standard. In short, IBM empowered 
Microsoft and Intel to control the architecture for the next 
generation of computers, and has been playing catch-up ever since. 
See Charles R. Morris and Charles H. Ferguson, Harv. Bus. Rev., Mar. 
1993, supra, at 86, 92 (Ex. 16). See. also Elizabeth Corcoran. 
Washington Post, Nov. 13, 1994, supra, at H6 (Ex. 44).
    Bill Gates, the founder of Microsoft, secured control of the 
personal computer market by riding IBM's coattails. The success of 
the IBM PC opened a lucrative market for compatible computers, or 
"clones." At the time, Microsoft was the sole source for 
a compatible operating system. Accordingly, Microsoft was able to 
license the operating system ("DOS") to compatible 
makers at significantly higher rates than those charged to IBM. 
Hence, as the Government's Complaint (paragraph 19) explains, 
"Microsoft quickly dominated and gained a monopoly in the 
market for PC operating systems." 59 Fed. Peg. at 42,847. More 
precisely,
    DOS would have been worth relatively little had Gates not 
retained the right to license its use to IBM's rivals. This 
arrangement--the source of Gates" wealth and 
power--became clearer as IBM set the standard for the 
burgeoning PC market. By the mid 1980's every rival except Apple 
computer felt that the only way to compete against IBM was to sell a 
clone of IBM's PC. Making a clone required, among other things, 
licensing DOS from Microsoft. Over time DOS became a kind of annuity 
for Microsoft: buying DOS was the price of admission for entering 
the PC business.
    See G. Pasquel Zachary, Showstopper: Breakneck Race To Create 
Windows NT and the Next Generation at Microsoft, 27 (1994).
    As new technologies overcame the old mainframe market, the 
market for computer products formed into a number of horizontal 
markets that are vertically related to each

[[Page 29227]]

other. Charles R. Morris and Charles H. Ferguson, Harv. Bus. Rev., 
Mar. 1993, supra, at 8 (Ex. 16). There are many competitors at each 
level that aggressively compete with each other to develop more 
powerful products at lower prices. Generally speaking, consumers 
have benefitted from the formation of horizontal markets. Consumers 
can put a system together using the best and most cost effective 
products at each level, even if the products are made by different 
manufacturers. But by using its installed base in operating systems 
to "tip" each of these markets in favor of its own 
products, Microsoft undermines the competitive process. From the 
initial monopoly bestowed on it by IBM and the huge installed base 
secured by anticompetitive practices, Microsoft has leveraged and 
linked a series of powerful monopolies with the intent of forming a 
new verticality on the market. After establishing several monopolies 
with enormous leverage potential, the positive feedback from the 
verticality imposed by Microsoft will in short order eliminate 
competition on all horizontal layers within the server and online 
markets, just as it is eliminating competition in the horizontal 
layers on the desktop.

1. The Business Desktop

    The Justice Department's Tunney Act filing alleges that 
Microsoft has monopolized "the market for PC operating systems 
worldwide" for "almost a decade." 59 Fed. Reg. at 
42,850. As noted previously, in 1988 Microsoft had an installed base 
of approximately 18 million operating system users? In 1988, Novell 
(formerly Digital Research, Inc.) entered the X86 operating system 
market with a competitive product, DR DOS, and it was in response 
that Microsoft began the "anticompetitive licensing 
practices" identified by the Government. Microsoft continued 
these practices through mid-1994, and, as noted previously, it was 
during this period that Microsoft was able to increase its installed 
base by more than 100 million
    See supra note 9.
    users.\65\65 the preceding section explains, it is the size of 
Microsoft's installed base, rather than merely its market share, 
that determines the company's true market power. Accordingly. 
through practices that the Government has identified as 
"anticompetitive," Microsoft has increased its market 
power many fold.
---------------------------------------------------------------------------

    \65\ Amy Cortese, Next Stop, Chicago, Business Week, Aug. 
1, 1994, at 24 C 120 million MS-DOS customers (including 55 million 
Windows users)"). See also OS Overview, Computer Reseller 
News, at 223 (DOS installed base of 110.1 million).
---------------------------------------------------------------------------

    Having gained this market power, Microsoft has used it both to 
maintain its monopoly in operating systems (described in subsection 
(a) immediately below) and to obtain a monopoly in desktop 
applications (subsection (b)). The remainder of this section 
(subsections (c) through (f)) describe how Microsoft has used its 
market power to engage in other predatory, conduct in the desktop 
markets.
    a. Effect of the Monopoly on Operating Systems
    Microsoft's strategy, which was based at the outset on an 
installed base created in part through anticompetitive licensing 
practices, succeeded in monopolizing the desktop OS and threatening 
desktop applications. Once Microsoft had control of the operating 
system, which is the key architectural technology for desktop 
computing, it was able to maintain its share, even with an inferior 
product. The introduction of DR DOS from Novell showed that 
Microsoft had failed to keep MS DOS abreast of leading 
technology.\66\ Yet Novell's compatible offering in the DOS market 
(DR DOS) stopped selling when Microsoft made it clear that Microsoft 
would create versions of Windows that were incompatible with DR DOS. 
It is common for "better" products to fail if a 
competitor controls the architecture in which the product operates. 
See Charles R. Morris and Charles H. Ferguson, Harv. Bus. Rev., Mar. 
1993, supra, at 89-91 (Ex. 16).
---------------------------------------------------------------------------

    \66\ See Start Miastkowski, Digital Research Creates a 
Better DOS, Byte, Nov. 1991, supra, at 68.
---------------------------------------------------------------------------

    Microsoft was also able to raise prices for its operating 
system, as its monopoly position continued to solidify and its 
installed base increased. In the early 1980's, Microsoft licensed MS 
DOS for $2--$5 per copy. By 1988, the price was up to $25 to 
$28. Once Microsoft drove DR DOS out of the operating system market, 
it was able to double the price it charged, with recent press 
reports indicating that it is demanding as much as $70 per copy of 
the forthcoming version of its operating system.\67\
---------------------------------------------------------------------------

    \67\ See Amy Cortese, Business Week, Dec. 19, 1994, supra, 
at 35 (Ex. ----) ("Computer makers.., have been 
startled to learn that they will be asked to swallow a huge price 
hike for their use of Windows 95--to as much as $70 per PC vs. 
roughly $35 today.").
---------------------------------------------------------------------------

    Overall, Microsoft's strategy has been enormously successful in 
maintaining its monopoly in operating systems while expanding its 
installed base. Microsoft's share of all desktop operating systems 
is a staggering 85 %. See supra note 32. Microsoft's share of the 
operating system market that runs on X86 chips is even 
larger--more than 90%. See id.
    b. Effect of the Monopoly on Applications
    Having entrenched its operating systems monopoly, Microsoft has 
aggressively leveraged this monopoly to gain a monopoly in business 
applications. In 1991, Microsoft's senior vice-president Mike Maples 
expressly stated the company's intention to monopolize the software 
applications market:
    If someone thinks we're not after Lotus, and after WordPerfect 
and after Borland, they're confused... My job is to get a fair share 
of the software applications market, and to me that's 100 percent.
    See Jane Morrissey, Microsoft's Application Unit Seeks Market 
Dominance, PC Week, Nov. 18, 1991, at 1.
    Microsoft used the monopoly revenues from licensing the 
operating system to fund the development of applications to run on 
DOS, in competition with software vendors which had no operating 
system control (for example, Lotus, Borland. and WordPerfect). But 
because of the relatively open nature of DOS, competitors like 
Novell could make "compatible" operating 
systems--operating systems that would run applications written 
for Microsoft's MS DOS without modification.
    Therefore, Microsoft could not exercise sufficient control to 
give its own applications a strong competitive advantage over the 
application programs of competitors. The competitors" products 
were the first developed on DOS and had therefore acquired 
significant installed bases, as to which powerful network 
externalities had attached. In order to displace these competitors, 
Microsoft needed to create a new operating system platform so that 
its own applications would reach the market on the new platform 
before its competitors" products.
    Microsoft "solved" this problem by (1) developing a 
new operating environment (Windows) that it totally controlled, (2) 
targeting a function performed in the application layer that it 
could either embed in the operating system (for example, the 
"graphical user interface" or "GUI" feature) 
or link with the operating system, and (3) using its power over DOS 
to migrate users to Windows. Microsoft thereby got more control over 
the OS, added value to the OS it controlled, and forced independent 
application publishers to rewrite all of their applications twice 
(once for Windows and a second time for OLE, as described below). 
The forced migration that Microsoft effected with the GUI and 
Windows may be depicted as follows:
    DOS
    BEFORE (See Figure 2)
    GUI/Applications
    GUI/Applications I
    GUI/Applications
    AFTER (See Figure 3)
    DOS/Windows GUI
    Applications

Figure 7

    Microsoft, in effect, added a new layer to the architecture of 
the desktop, moving the industry, from Figure 2 to Figure 3 above. 
Controlling architectures is the key to dominating competition. See 
Charles R. Morris and Charles H. Ferguson, Harv. Bus. Rev., Mar. 
1993, supra (Ex. 16).
    Microsoft leveraged its control over the operating system to 
control desktop applications, following a carefully crafted plan 
that utilized the market power of its installed base. First, 
Microsoft emulated the application program of the market leader in 
that application (e. g., Lotus, WordPerfect or Borland), breaking 
the network externality of the installed base by providing file and 
keystroke compatibility. Microsoft funded the development, 
marketing, and below-market pricing of its applications from the 
profits it reaped on the six-fold increase in the installed base of 
its operating system. Microsoft's stronghold in operating system 
software . . . financed Microsoft's push into applications software.
    Victor F. Zonana, $.l. 4-Million Deal Microsoft Buys Software 
Competitor, L.A. Times, July 31, 1987, at 4? For years, Microsoft 
funded "many versions" of applications programs before 
they "were good enough to grab substantial market share. 
,,\68\But [b]ecause Windows gives Microsoft a

[[Page 29228]]

"pervasive presence on any desktop that matters, Microsoft can 
subsidize its loss leaders [in applications] and leverage its 
desktop heritage".
---------------------------------------------------------------------------

    \68\ See also O. Casey Corr, IBM vs. 
Microsoft--Software Superbowl--IBM to Kick Off New Version 
of OS/2, but will Microsoft Make Winning Goal, Seattle Times, March 
29, 1992, at C1 (system sales are "the cash cow that has 
fueled Microsoft's aggressive entry into nearly every field of 
personal computing"); id. ("DOS, which comes installed 
on computers at the factory, has provided profits to finance 
Microsoft's development of applications such as the Excel 
spreadsheet and Word, a writing program."); Laurie Flynn & 
Rachel Parker. Extending its Reach, InfoWorld, August 7, 1989, at 43 
("the Microsoft strategy has been to fund expensive 
applications development and marketing with its profits from the 
recurring DOS royalties it receives. ").
---------------------------------------------------------------------------

    Barbara Darrow, Developers Brace for Shakeout, Computer Reseller 
News, Feb. I, 1993 at 28 (quoting Don DePalma, senior industry 
analyst for Forrester Research). ACCESS, Microsoft's database 
program, is a case in point. It cost a staggering $60 million to 
develop .... By contrast, the [entire 1992 development] budget at 
Borland was $50 million. At Lotus, it was $35 million. That's not 
all. Microsoft also had the money to offer an introductory price of 
$99 for ACCESS--less than one-third the retail price for 
similar packages. Result: Microsoft sold 700,000 copies in just 
three months. The entire market in 1992 was only 1.2 million units.
    Kathy Rebello, et al., Business Week, March 1, I993, supra, at 
88.\69\
---------------------------------------------------------------------------

    \69\ Kathy Rebello, et al., Is Microsoft Too Powerful, 
Business Week, March 1, 1993 at 88 (Ex. 4).
---------------------------------------------------------------------------

    c. Unfair Early Access
    Moreover, because of Microsoft's installed base in operating 
systems, it was able to provide an unfair advantage to its 
applications in a variety of other ways, as well. For example, 
Microsoft based its own application programs on components m the 
operating system that it had unique or early access to. Microsoft 
claimed it was "open," but actually used hidden features 
and functions to gain a competitive advantage. Brian Livingston. 
InfoWorld, Nov. 16. 1992, supra, at 98 (Ex. 19). That is, Microsoft 
provided a proprietary architecture with a supposedly 
"open" system. See Charles R. Morris and Charles H. 
Ferguson, Harv. Bus. Rev.. Mar. 1993. supra. The most well-known 
such example involves Microsoft's "OLE" (object linking 
and embedding) standard.
    Microsoft created interoperability among its own applications, 
and between its applications and its operating system, by creating a 
new standard, OLE, which copied functionality from Hewlett-Packard's 
product New Wave. Stuart J. Johnston, Dangerous Liasons, InfoWorld, 
April 8, 1991, at 44. With market power on both sides of the 
interface (i.e., in both the applications and the operating system), 
Microsoft easily displaced the existing standard in favor of OLE. It 
embedded OLE functionality into both its operating system and 
applications, and it heavily marketed this new functionality using 
profits from its market position in operating systems.\70\
---------------------------------------------------------------------------

    \70\ See Cara A. Cunningham, IBM and Microsoft Wage Open 
Doc vs. OLE Find, InfoWorld, Aug. 15, 1994, at 25 (Microsoft has an 
"army of evangelists.., that goes out and sells the [OLE] 
technology and swarms over developers").
---------------------------------------------------------------------------

    During the very same time period that the Government contends 
Microsoft was using "anticompetitive licensing tactics" 
to harm OS competitors, applications competitors repeatedly 
complained that Microsoft was using its knowledge of new operating 
system features to give its own applications programs a head start 
and performance advantage over applications competitors. As stated 
in Section II of this memorandum, throughout the 1980's and early 
1990's Microsoft responded to this criticism by asserting that it 
had erected a "Chinese Wall" between its operating 
system developers and applications developers. According to Steve 
Ballmer, the senior vice-president for Microsoft's system divisions:
    [T]here is a very clean separation between our operating system 
business and our applications business .... It's like the separation 
of church and state.
    Business Week, Nov. 21, 1983, supra, at 114 (Ex. 2).
    In the face of mounting criticism, Microsoft executives adhered 
to the party line. For example, in 1989, Steve Ballmer again 
disputed "the charge that his people gave their counterparts 
in applications previews of their upcoming systems 
products."\71\ Microsoft executives repeatedly told the press 
that a "Chinese Wall" was in place. See, e.g., Laurie 
Flynn and Rachel Parker, Infoworld, Aug. 7, 1989, supra, at 43. 
Indeed,
---------------------------------------------------------------------------

    \71\ Richard Brandt, Microsoft Is Like an Elephant Rolling 
Around, Squashing Ants, Business Week, Oct. 30, 1989, at 148 (Ex. 
3).
---------------------------------------------------------------------------

    Gates insisted that Microsoft kept the playing field level by 
erecting an imaginary barrier between the company's operating 
systems group and its applications division.
    Hard Drive, supra, at 308. Even into early 1991, Microsoft 
executives were claiming that the company had an "ISV-
independent program" that treated Microsoft applications 
"the same as any other ISV [independent software 
vendor]."\72\ Although the FTC began investigating Microsoft 
in 1990, Microsoft continued to maintain that it had a 
"Chinese Wall" well into 1991.\73\
---------------------------------------------------------------------------

    \72\ Ray Weiss, Windows Stars at SD 91, Electronic 
Engineering Times, Feb. 18, 1991 (Ex. 15).
    \73\ 73 See supra note 27.
---------------------------------------------------------------------------

    But Microsoft's head start in using OLE in 1991 to the detriment 
of applications competitors put the lie to such claims. Microsoft 
incorporated OLE into its Windows operating system and shipped its 
first completed application incorporating OLE, Excel 3.0, in 
February. of 1991. at the very same time it was releasing a 
"beta version" of OLE--not suitable for commercial 
distribution--to ISV's. Indeed, the February 1, 1991, issue of 
Byte Magazine reports the two events in the same issue.\74\ 
Microsoft's applications competitors suffered delays of many months 
as they were forced to rewrite their own applications to make them 
perform under Windows as well as Microsoft's Excel, which had a head 
start in using OLE. It was not until many months later that the 
first third-party implementation of OLE appeared on the market.\75\
---------------------------------------------------------------------------

    \74\ Compare Andrew Reinhardt, First Impressions: New 
Extras for Excel, Byte, Feb. 1, 1991, at 136 with Microbytes, Byte, 
Feb. 1, 1991, at 20.
    \75\ See, e.g., Start Levine, Lotus Embraces 
"Competition As It Aims for Identity, LAN Times, June 17, 
1991.
---------------------------------------------------------------------------

    Microsoft's unfair advantage obtained from prior knowledge of 
operating system functionality created a significant head start for 
its own applications on the new Windows platform. As the prior 
economic analysis demonstrates, the advantage of being first to 
market in an "increasing returns industry" is 
enormous--it permits a competitor to begin to generate an 
installed base, reap the benefits of "positive 
feedback," and otherwise drive its own products to "lock 
in" before competitors even reach the market. Microsoft used 
its operating systems information to secure these unfair benefits 
for its applications.
    Confronted with their obvious untruths, Microsoft executives did 
an abrupt corporate-wide about-face at the end of 1991. Microsoft 
senior executive Mike Maples stated in December of 1991:
    There is no Chinese Wall. We don't want there to be a Chinese 
Wall, and I don't think we've ever claimed that there is a Chinese 
Wall. Microsoft is a single company .... We don't try to pretend 
that there is a Chinese Wall ....
    Stuart J. Johnston, "No Chinese Wall" at Microsoft, 
Infoworld, Dec. 30, 1991, at 107 (Ex. 18). And since early 1992, 
Microsoft has freely and openly given its applications developers an 
advantage over ISVs. In November of 1992:
    at least half a dozen cases in which Microsoft allegedly 
withheld information on its DOS or Windows functions from outside 
developers, for periods ranging from six months to several years. 
During these periods, Microsoft's own developers appear to have used 
these functions in applications or utilities that competed with 
those eventually developed by independent software vendors, 
according to programmers who have examined the code.
    [I]n each case, the lack of documentation of the functions may 
have given Microsoft applications a time-to-market lead of six 
months or more before similar features could be incorporated into 
competing developers" applications ....
    Brian Livingston, InfoWorld, Nov. 16, 1992, supra, at 98 (Ex. 
19).
    d. Predatory Bundling
    Since dropping all pretense of a "level playing 
field," Microsoft has increasingly used the power of its 
operating system installed base to gain advantages over applications 
competitors. It has attempted to monopolize the market for the 
development tools (also known as programming languages) used to 
create applications by predatorially preannouncing its products (as 
documented in the introduction to this brief) and by bundling 
versions of its own programming language products into its operating 
systems so that users will have a powerful disincentive to purchase 
a competitor's programming language separately.\76\
---------------------------------------------------------------------------

    \76\ Ethan Winer, BASIC, Yes; Feeble, No, PC Magazine, 
Oct. 30, 1989, at 187 (Because "the BASIC [programming 
language] interpreter [is] bundled with DOS... at no extra cost, 
[it] is known and used by more people than any other programming 
language for personal computers.").

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

[[Page 29229]]

    Microsoft has also conducted a lengthy "campaign" to 
bundle business software applications into the operating system so 
that it can "mop up competitors that sell stand-alone 
applications, resulting in more limited user choice down the 
road." \77\ Microsoft has steadily increased the price of its 
operating system to cover its own loss of revenue from the 
diminished sales of free-standing applications that it bundles into 
the operating system. Although free-standing applications generally 
cost more than Microsoft's increases in operating system licensing 
fees, the unit sales of each application are far fewer than the 
number of users that upgrade to each new release of the 
OS--because of the huge installed base that Microsoft has 
procured by "anticompetitive practices." Hence, even a 
modest increase in operating system fees more than offsets 
Microsoft's loss of revenue from diminished applications sales.
---------------------------------------------------------------------------

    \77\ Michael Csenger & Adam Griffin, Microsoft Free At 
Last?, Ruling Still Lets Firm Incorporate Apps Into Its OS'es, 
Network World, July 25, 1994, at 4 (Ex. 23); see also John Markoff, 
Microsoft", Future Barely Limited, N.Y. Times, July 18, 1994, 
at D1 (Ex. 24) (describing Microsoft's 14 year "campaign[] to 
expand the definition of what computing functions belong inside the 
computer operating system.").
---------------------------------------------------------------------------

    Applications competitors, of course, do not fare as 
well--when Microsoft bundles the functionality of their 
products into the operating system, they lose their only source of 
revenue. After the competitors go out of business, Microsoft is free 
to unbundle the applications from the operating system and charge, 
in the absence of competition, whatever price the market will bear. 
Microsoft initiated this strategy with the introduction of Windows, 
by bundling word processing, calculations, communications and 
"paint" business applications software directly into the 
operating system.\78\
---------------------------------------------------------------------------

    \78\ Paul Andrews, Windows Is No JFK, But Its Visual 
Appeal Is Outstanding, Seattle Times, May 22, 1990, at C2 
("Windows 3.0 comes with a suite of mini-applications 
including Write, Paintbrush, Clock, Recorder (a macro utility), and 
Terminal (telecommunications). ").
---------------------------------------------------------------------------

    Microsoft has even bundled technology into its operating system 
that it misappropriated from its competitors. When Microsoft wanted 
to add data compression capabilities to DOS, for example, it 
approached Stac Electronics, developer of the industry's leading 
data compression software. Microsoft demanded a worldwide license to 
use Stac's software as part of DOS, but "steadfastly refused . 
. . to pay Stac any royalty for [its] patented data-compression 
technology." \79\ When Stac refused Microsoft's demand, 
Microsoft simply incorporated Stac's intellectual property directly 
into DOS. Id. Stac brought suit and a federal jury found Microsoft 
guilty of infringing Stac's data compression patents and awarded 
Stac $120 million in damages.\80\ Microsoft thereafter settled the 
case by acquiring a 15 % interest in Stac, and obtained a license to 
Stac's vital data compression technology for a fraction of the 
jury's verdict.\81\ Because Microsoft's conduct in the Stac case 
"underscore[s] the sort of allegations that have kept the 
[Government's antitrust investigation] alive for years," some 
observers have suggested that the timing of Microsoft's settlement 
with Stac m late June 1994 was calculated to "remove [Stac 
president Gary] Clow as a hostile witness in the Justice 
investigation."\82\
---------------------------------------------------------------------------

    \79\ O. Casey Corr, A Look Behind Stac Deal, Seattle 
Times, June 26, I994, at FI (quoting Stac's complaint).
    \80\ Id.; Charles McCoy, Microsoft to Pay Stac Judgment of 
$120 Million, Wall St. J., Feb. 24, 1994, at A4.
    \81\ Stuart J. Johnston, Microsoft Settles for Piece of 
Stac, Computerworld, June 27, 1994, at 30 (Microsoft paid $39.9 
million for 155'o of Stac, and an additional $43 million over 43 
months for a license to Stac's data compression technology); Doug 
Barney, Micros. oft, Stac Resolve Dispute; Microsoft Finally pays 
Up, InfoWorld, June 27, 1994, at 14.
    \82\ O. Casey Corr, A Look Behind Stac Deal, supra, at Fl.
---------------------------------------------------------------------------

    e. Predatory Unbundling
    Microsoft has also unbundled technology from its operating 
system in order to render other companies" products 
uncompetitive. For example, the DOS operating system contained, in 
version after version, a portion of code known as the "debug 
kernel." Both Microsoft and competitors like Borland created 
development tools that used the functionality of the debug kernel in 
order to run.
    With the introduction of Windows 3.1 in April, 1992, Microsoft 
removed the debug kernel from the operating system and bundled it 
with its own language application program. If a user wanted to run 
the competitive Borland program, it had to buy the debug kernel 
separately from Microsoft, at a price Microsoft set to make the 
Borland product less competitive. Microsoft even conspicuously 
advertised the fact that its own product was cheaper than the 
Borland product because the user had to buy the debug kernel 
separately from Microsoft. Byte, May 1992, at 159 (Ex. 6). Whatever 
pro-competitive benefits Microsoft might advance to justify its 
bundling of new functionality into the operating system, it is 
difficult to imagine any justification for unbundling operating 
system technology, other than harming competition.
    f. Other Uses of Leverage
    Microsoft further exploited its leverage, both vertically and 
horizontally. Horizontally, within the desktop applications layer, 
Microsoft introduced additional applications, touting and exploiting 
the benefits and advantages of its vertical linkage (to the 
operating system): for example, word processing 
("Word"), database ("Fox Pro" and 
"Access"), and presentations ("Power 
Point"). Microsoft also employed horizontal leverage in the 
applications layer through its marketing practice of bundling a 
group of applications into a "suite," which is sold at 
low price points. And, all the while, Microsoft used its profits 
from its monopoly position in OS for (1) massive marketing to 
promote the linkage features of the OS. and (2) sustaining a 
protracted battle with independent applications vendors in a new 
market that. without the profits from the leveraged market, could 
not be sustained.\83\
---------------------------------------------------------------------------

    \83\ As explained in Section V.C., infra, the 
superficially irrational behavior of undermining the application 
vendors that produce programs that run on Microsoft's operating 
system is logical specifically because Microsoft has an independent 
economic incentive to monopolize the market for business application 
programs.
---------------------------------------------------------------------------

    As noted in the introduction to this brief, Microsoft has been 
spectacularly successful in leveraging its installed base in the 
operating system market to dominate the business applications 
market. In four years, Microsoft "went from an also ran in the 
business applications market to the industry leader." Inside 
Telecom, Sept. 26, 1994. Although Microsoft has not yet fulfilled 
Mike Maples" goal of "I00 percent" market share, 
it is by far the leading supplier in each individual applications 
product category. Microsoft Domination, San Jose Mercury News, Dec. 
21, 1994, supra, at 1F (Ex. 35). Moreover, suites are the fastest 
growing category of business applications software and Microsoft 
accounts for an astounding 85% of all suites sold. See supra note 
16. Microsoft's success in monopolizing business applications is, 
absent effective Government intervention, only a taste of things to 
come. Having succeeded in dominating the desktop operating system 
and applications markets, Microsoft has begun to leverage its 
installed base to monopolize both the intrabusiness server and on-
line systems, as set forth m subsequent sections.
    2. The Intrabusiness Server
    Microsoft intends to displace all of the competition on the 
enterprise server, just as it did on the desktop, by employing 
multiple linkages and leverage. Its leverage will come from the 
large installed base of the PC operating system monopoly. Using this 
base, Microsoft will employ three strategies: (a) vertical linkages 
similar to those that worked in the desktop markets, (b) horizontal 
linkages from desktop to intrabusiness server, and (c) horizontal 
linkages from home-to-business server to intrabusiness server.
    Microsoft began the implementation of its strategy by creating a 
new server OS ("Windows NT") that horizontally leverages 
from the monopoly position of DOS/Windows in the client market. 
Microsoft has increasingly placed server functionality into Windows 
and Windows applications (for example, with the Microsoft products, 
Access, Fox Pro, and Excel). With NT, Gates seeks to extend his 
software dominion from desktop software, which he monopolizes, to 
the network. In the 1980's, Microsoft's DOS and Windows systems 
software defined the way most people worked with computers. In the 
1990's, the company aims to define the software that electronically 
ties together workers and businesses, customers and homes. Zachary, 
Showstopper, supra, at 3.
    In addition, Microsoft is nakedly leveraging its market power in 
the desktop operating system market to the enterprise server by 
requiring software developers who want to use the logo for 
"Windows 95," the forthcoming version of Microsoft's 
desktop operating system, to make their desktop application products 
also run on "Windows NT" (Microsoft's server operating 
system).

[[Page 29230]]

See William Brandel, Developing for Next Generation of Windows May 
Mean Running on NT, Computerworld, November 18, 1994, at 4. There is 
no technical reason to require an application to run on both 
Microsoft's desktop and server: indeed, a user would not even expect 
(nor perhaps even want) a "Windows 95" application 
program to run on the server. Microsoft's requirement is simply 
another way of leveraging:
    The NT requirement seems like nothing more than an attempt to 
leverage Microsoft's control over the upcoming Windows 95 market to 
assist its lackluster Windows NT product.
    Brian Livingston, Will "Windows" Compatible Really 
Mean What It Says?, InfoWorld, November 14, 1994, at 40 (Ex. 20) 
(quoting Andrew Schulman, Unauthorized Windows 95). Microsoft is 
using its operating system power to force independent application 
vendors to establish the linkage between the desktop and the server 
that Microsoft has been trying to establish through its own 
products. In affect, Microsoft is using independent software vendors 
to establish Microsoft's power in servers.
    Microsoft also enhances its power in the server applications 
layer by horizontally bundling these products into a suite (the 
"BackOffice") in the same way Microsoft bundled desktop 
applications into a suite. Just as with the desktop applications, 
there is also vertical leverage to enforce the horizontal bundle by 
making all server applications OLE-enabled. See Stuart J. Johnston 
and Ed Scannell, Computerworld, supra, Oct. 10, 1994, at 4 (Ex. 7); 
J. William Semich, Datamation, Aug. 1, 1994, supra, at 4144 (Ex. 
10).
    3. The Home-to-Business Market (Server and Client) Increasingly, 
business will need to communicate with personal computers in homes 
in order to sell products or services and in order to provide 
information, for work or other purposes. Obviously, businesses that 
exploit this channel will have a strong advantage over competitors 
that do not, with the result that all businesses will seek entry. 
This market is currently known as "online services." 
There are three principal competitors in this market-- America 
Online, CompuServe and Prodigy.
    Control of the home-to-business market by a single company would 
produce an enormous windfall. First, of course, the monopoly would 
be able to extract a toll for a large percentage of consumer 
financial and product transactions. More strategically, a company 
that controlled the home-to-business market could leverage that 
control back to the intrabusiness, or enterprise, server market. 
Control of both sides of the server market, intrabusiness 
(enterprise) and home-to-business, would place enormous power 
(financial services, information, education, etc.) in the hands of a 
single company. Microsoft has this power within its grasp. Microsoft 
is pursuing its policy of targeting, linking and leverage from the 
operating system installed base to seize control of the architecture 
of the home-to-business market, just as Microsoft gained domination 
of the desktop.
    On November 14, 1994, Microsoft announced its own online service 
known as "Marvel" or the "Microsoft 
Network." Microsoft will use Windows NT as the home-to-
business server for the Network. Adam Gaffin & Peggy Watt, 
Microsoft, Lotus Baffle Shifting to On- Line Services, Network 
World, Nov. 21, 1994, at 1. More importantly, Microsoft will use the 
market power from its" installed base in operating systems in 
a number of ways to displace existing on-line competitors and 
dominate the home-to-business market.
    a. Predatory Bundling
    First, Microsoft intends to leverage its installed base in 
operating systems to give its own on-line service an unfair 
advantage over existing competitors. Microsoft has already announced 
that the next upgrade of its PC operating system, Windows 95 (due 
out later this year), will have a connection to the Microsoft 
Network already bundled in. According to Bill Gates, "We'll 
give you access to [the Microsoft Network] with Windows 95... If 
(the software notices you have a modem, it will ask you if you want 
to register."\84\
    This tactic will instantly displace existing on-line 
competition. Windows 95 will be pre-installed on virtually every PC 
sold in the United States in the coming year85 and approximately 20 
million copies will be in use within a year of its release. Amy 
Bernstein. Microsoft Goes Online, U.S. News & World Report, Nov. 
21, 1994, at 84. This "potent plan for spreading Marvel" 
will dwarf the competition. Id. America On-Line, by comparison, has 
an installed base of 1.25 million subscribers. Elizabeth Corcoran, 
Washington Post, Nov. 12, 1994, supra, at H6.
    Industry analysts and commentators have repeatedly raised 
concerns that Microsoft's bundling of its own on-line service 
"tilts the playing field in its direction," likening 
Microsoft's bundling practice to the utility company selling 
appliances or the local phone company automatically connecting the 
user up with AT&T's long distances\86\
---------------------------------------------------------------------------

    \86\ See Lawrence J. Magid, Microsoft: Not So Marvelous, 
Bay Area Computer Currents, Dec. 1, 1994, at 98, 101 (Ex. 1); Carole 
Patton, Computerworld, Nov. 14, 1994, supra, at 57 (Ex. 8).
---------------------------------------------------------------------------

    In essence, OEMs will be forced to distribute MSN [The Microsoft 
Network] if they want to access Windows 95--even if that 
distribution is to the OEM's detriment.
    s, Elizabeth Corcoran, Washington Post, Nov. 12, 1994, supra, at 
H6. Amy Cortese, Business Week, Dec. 19, 1994, supra, at 35 (HP, 
Compaq and other big U.S. PC makers plan to bundle Windows 95 into 
their machines).
    Jesse Bent, Microsoft's On-Line Rivals Could End Up In 
'Cyberia', PC Week, Dec. 12, 1994, at 120 (Ex. 30). 
Microsoft's conduct is a textbook example of an attempt to use 
market power in one market (operating systems) to "tip" 
a competitive adjacent market (online systems).
    b. Unfair Use of Information
    Microsoft is also using its power over the operating system 
installed base to dominate the content of the home market--CD 
ROMs--the same way it used leverage from the operating system 
installed base to dominate business applications. For example, as a 
condition to obtaining information about how to run on the 
multimedia portions of Microsoft's operating system, independent CD 
ROM developers were required to fill out a form, designated 
"Microsoft Confidential." In other words, in order to 
obtain necessary operating system information, the form required 
Microsoft's CD ROM competitors to disclose to Microsoft confidential 
business information necessary to make successful CD ROM products. 
This form is a remarkably glaring example of the open exercise of 
market power. It required, inter alia, the following disclosures:
    Please describe your company's important business relationships 
(distribution, venture capitalists, etc.) Provide proposed product 
areas.
    Current key software products (in order of market share and 
importance to your company).
    Who is the target audience for your products?
    What is the price of your products?
    What is your supply date for retail distribution?
    What competition do you perceive for this product?
    How will you differentiate this product from its competition?
    How is this project funded? (The "Microsoft 
Confidential" form is found in the Appendix as Ex. 22.) Armed 
with all of this confidential information about its competitors 
plans and products, Microsoft has successfully entered the CD ROM 
business itself, and is "churning out about one new CD ROM 
title per week." Washington Post, Nov. 13, 1994, supra, at H6 
(Ex. 44).
    c. Unfair Head Start
    Microsoft will also ensure domination of the content of on-line 
services by using OLE-based tools as the standard for business 
developers and users to create object-oriented documents that can be 
transmitted over the Microsoft Network. Mary Jo Foley, Microsoft 
Lays Foundation For On-Line Network, PC week, Nov. 14, 1994, at 1; 
Doug Barney, Microsoft to Announce New On-Line Service at Comdex, 
InfoWorld, Oct. 24, 1994, at I, 140. According to a PC Week article, 
the Microsoft network employs OLE technology and uses the 
"standard Microsoft Exchange E-mail client included with 
Windows 95....\87\ "In short, "Microsoft Network's on-
line services are well-integrated into the Windows 95 user 
interface." Eamonn Sullivan & Matt Kramer, Microsoft 
Marvel Beta Leverages WIN 95 Desktop, PC Week, Nov. 7, 1994, at 169 
(Ex. 28).
---------------------------------------------------------------------------

    \87\ Lee Gomes, Microsoft to Acquire Intuit, San Jose 
Mercury News, Oct. 14, 1994, at 1D.
---------------------------------------------------------------------------

    And, as if Microsoft's use of leverage to dominate the home and 
on-line markets is not sufficient, Microsoft announced on October 
13, 199487 its intention to buy Intuit. Inc., paying a 100% premium 
to market. See supra note 36. Intuit publishes the personal finance 
and tax planning software programs that dominate their respective 
markets. Intuit's product controls 80-85% of the personal 
finance markets.\88\
---------------------------------------------------------------------------

    \88\ Don Clark, Microsoft to Buy Intuit In Stock Pact, 
Wall St. J., Oct. 14, 1994, at A3 (86% of retail store sales); Karen 
Epper, Software Deal Shakes Up Home Banking, Amer. Banker, Oct. 17, 
1994, at 1, 25 (80-85%).

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

[[Page 29231]]

    Personal financial software is generally regarded as the 
"killer app[lication] of the 90's" for the home 
computing market,\89\ Personal financial software has broad consumer 
appeal in that everyone has a bank account. It requires the 
integration of several sources of data including bank accounts, 
brokerage accounts, and credit information. Because of Intuit's 
commercial success, there is a strong network externality 
("lock in") attached to a user's viewing his personal 
financial information through the Intuit user interface. 
Accordingly, Intuit provides tremendous leverage into the home 
banking market.
---------------------------------------------------------------------------

    \89\ Michelle Flores, Probe of Microsoft is 
Extended--Justice Dept. Asks For More Information, Seattle 
Times, Nov. 22, 1994, at B11; Michael Schrage, Microsoft Can Make 
Lots of Money; Can It Shape the Management of It?, Washington Post, 
Oct. 21, 1994, at B3; Brent Schlender, Fortune, Jan. 16, 1995, 
supra, at 36.
---------------------------------------------------------------------------

    The Intuit acquisition is currently under Justice Department 
scrutiny. If the deal is consummated, Microsoft can be expected to 
leverage Intuit's installed base to further lock in its own 
products. For example, Microsoft will bundle Intuit's products with 
its next release of the operating system to increase the number of 
users who will upgrade to Windows 95.\90\ Microsoft can also provide 
an enormous market edge to its own on-line service by making Intuit 
available exclusively (as among on-line services) on the Microsoft 
Network, See Michael J. Miller, The World According to Microsoft, PC 
Magazine, Jan. 24, 1995, at 80 (Ex. 25).
---------------------------------------------------------------------------

    \90\ Gina Smith, Merger Misgivings: Will Intuit Go 
"Soft?, S.F. Chronicle, Dec. 4, 1994, at B5, B14.
---------------------------------------------------------------------------

    Domination of home banking and personal finance provides the 
optimum platform from which to dominate other on-line services, 
including, for example, shop-at-home. Businesses that want to 
provide financial information to Intuit users, or who want to 
provide other on-line services, will want to choose server software 
for interacting with the Microsoft Network. Microsoft will be able 
to use all of its vertical integration skills developed in the 
desktop and enterprise server marketplace to ensure that businesses 
choose Microsoft home-to- business server software.
    Based on the leverage potential from its operating system 
installed base, Microsoft has been able to consummate deals that 
will ensure that Microsoft Network dominates the market. For 
example, on November 8, 1994, Microsoft and VISA (the credit card 
company) announced the provision of a standard and secure method 
"for executing electronic bankcard transactions across global 
public and private networks." Visa News Release, Nov. 8, 1994 
(Ex. 39). In the question and answer session following the press 
release, the VISA spokesperson said that the driving force in VISA's 
decision to do the deal with Microsoft was the fact that Microsoft 
had an installed base of 60 million copies of Windows. The 
significance of Visa's agreement with Microsoft is not lost on 
industry observers. See, e.g., Elizabeth Corcoran, Washington Post, 
Nov. 12, 1994, supra, at H6. Nor is it likely to be the last such 
agreement: the Post reported, for example, that "four 
telecommunications companies are expected to announce on Monday 
[November 14, 1994] that they are working with Microsoft to make 
dialing into Marvel a local call for many subscribers." Id. 
And, on December 21, 1994, Microsoft announced that Tele-
Communications, Inc. purchased a 20% stake in the Microsoft Network 
for $125 million. The deal implies a value of $625 million for an 
on-line service that doesn't exist yet .... "Jim Carlton & 
G. Pascal Zachary, Microsoft Sells A 20% Interest In Planned Unit, 
Wall St. J., Dec. 22, 1994. Once again, Microsoft is controlling the 
architecture and using a nominally open standard.
    If Microsoft is successful in establishing the standard for the 
home-to-business market, it will be able to leverage into the 
enterprise server market both from the desktop, which it already 
controls, and the home market. Once a business decides that it 
should use the Microsoft server to communicate with customers, there 
is no point in having a different. probably incompatible, server for 
intrabusiness needs. After all, the operating system for the server 
side of Microsoft's home-to-business server is Windows NT. Why have 
a different business server operating system? This connection 
between the home server and the business server is clearly in 
Microsoft's contemplation because Microsoft has already announced 
that Marvel (the Microsoft network) will connect directly to a 
company's server. Doug Barney, Microsoft to Announce New On-Line 
Service at Comdex, InfoWorld, Oct. 24, 1994, supra, at I.
    The inevitable result of Microsoft's monopoly leverage will be 
to transform Microsoft into a "middleman" or rent 
collector for every transaction processed in an all- encompassing 
information economy. Whether writing a letter, placing an order, or 
paying a bill, every consumer and business connected to the 
information highway will pay Microsoft's toll. As noted in Fortune, 
"[t]his isn't just a gleam in Bill Gates" eye--[by 
purchasing Intuit, entering a joint venture with Visa, and bundling 
the Microsoft Network]--its already starting to come together, 
and in Microsoft's typically orchestrated fashion.\91\
---------------------------------------------------------------------------

    \91\ Brent Schendler, Fortune, Jan. 16, 1995, supra, at 
4748; see also, Michael I. Miller, PC Magazine, Jan. 24, 1995, 
supra, at 80 (Ex. 25) ("Microsoft could require just a small 
service charge on each transaction. Or it could make money on the 
float--the interest in the few seconds it takes to move money 
from one place to another. Or both.").
---------------------------------------------------------------------------

    MICROSOFT'S NETWORK-WIDE MONOPOLY
    It is readily apparent that Microsoft's strategy of targeting, 
linking and leveraging from the desktop operating system has been 
successful in seizing control of the business desktop. It is also 
apparent that Microsoft is leveraging from the business desktop to 
the business server and is vertically integrating within the 
business server so as to seize control of the critical server 
operating system gateway. The Intuit acquisition is intended to 
control the gateway on the home computer and leverage toward the 
home-to-business market.
    Application of "increasing returns" economic 
analysis would reasonably predict that, given the present situation, 
Microsoft will succeed in monopolizing the entire information 
infrastructure (just as it has monopolized the desktop) and that the 
monopoly will remain in place for a very long period of time.\92\ 
Indeed, the monopoly on the enterprise and home-to-business server 
markets is likely to be so vast that Microsoft will be able to 
extract monopoly rents on not only financial transactions, but also 
the transmission of information and data.
---------------------------------------------------------------------------

    \92\ For example, leading industry analyst Rick Sherlund 
of Goldman Sachs predicted that with the settlement, Microsoft 
"should dominate the market for desktop software for the next 
10 years." And another leading analyst, Richard Shaffer 
concluded that "It]he operating system wars are 
over--Microsoft is the winner .... Microsoft is the Standard 
Oil of its day." Andrew Schulman, Microsoft's Grip On Software 
Tightened By Antitrust Deal, Dr. Dobb's Journal of Software Tools, 
Oct. 1994, at 143 (Ex. 13).
---------------------------------------------------------------------------

    Some fear that as the digital future of the information 
superhighway emerges, an unchallenged Microsoft and Intel will wind 
up in total, undisputed control of the technology upon which the 
country's citizens and economy will depend . . . 
"Increasingly, I'm believing it's all over, and we're going to 
be locked into Microsoft and Intel forever," said Dataquest 
analyst Kimball Brown.
    Rory J. O'Connor, Microsoft, Intel Set to Define Technology, San 
Jose Mercury News, Nov. 13, 1994, at 1-A. (Ex. 34).
    Notwithstanding the Government's conclusion that Microsoft has 
increased its installed base in operating systems six-fold using 
"anticompetitive practices," and ample evidence that 
Microsoft has leveraged that installed base to attempt to monopolize 
business applications (as well as other markets), the Government's 
Tunney Act filing does not require divestiture of any part of its 
operating system installed base, nor does it prevent Microsoft from 
using that installed base to monopolize other markets, including 
business applications. The Government has articulated no economic 
rationale to justify its failure to act in the face of such clear 
evidence of anti-competitive intent and effect. These Amici can 
identify four possible economic justifications for the Government's 
inaction, but none of the four is persuasive.

A. Leverage of the Installed Base by Competitors

    Although the Government has not articulated an economic 
rationale for its position, the Justice Department may have 
concluded that a monopoly of the X86 operating system market by 
Microsoft is inevitable--either because MS DOS is already 
locked-in or because an "increasing returns" market will 
cohere around a standard in any case. Following this approach, the 
Government may have concluded that the best hope for competition in 
the operating system market is through an operating system program 
compatible with MS DOS, but made by a Microsoft competitor. 
Arguably, a vendor of such a program could tap into Microsoft's huge

[[Page 29232]]

installed base and attempt to displace Microsoft by 
"migrating" users to subsequent versions of the 
competitor's operating system. If such was ever in the Government's 
contemplation, events since the announcement of the settlement 
between the Justice Department and Microsoft have shown that such a 
scenario is unrealistic. Novell has withdrawn its MS DOS compatible 
operating system from the market entirely. See, supra note 14. And 
Microsoft's market is so strong that IBM selected Microsoft's MS DOS 
program for pre-installation on a new line of IBM personal 
computers, instead of IBM's own PC-DOS (compatible) 
program--notwithstanding the fact that IBM's product is 
technologically superior to MS DOS and is less expensive.\93\
---------------------------------------------------------------------------

    \93\  ???
---------------------------------------------------------------------------

    IBM's \93\technologically advanced OS/2 is faring no better. OS/
2 is capable of executing both DOS and Windows 3.1 applications, and 
according to Microsoft executive Steve Ballmer, IBM is 
"offering computer makers OS/2 for free and may be even paying 
some to take it."\94\ However, Microsoft's market power has 
resulted in IBM getting few if any takers, even on these terms. As 
one potential customer, a computer manufacturer, stated:
---------------------------------------------------------------------------

    \93\ See John M. Goodman, The DOS Heavyweights Go Another 
Round, InfoWorld, Aug. 29, 1994, at 87 (rating PC-DOS version 6.3 
above MS-DOS version 6.22) and Earle Robinson, DOS-version Madness? 
Integration Coping with DOS, Windows Sources, Oct. 1994, at 163 
("my choice would be the IBM . . . it's cheaper") and 
Yael Li-Ron, PC DOS 6.3: DOS and DOS: Separated At Birth, PC-
Computing, July 1994, at 94 (IBM's Ambra computers ship with MS-
DOS).
    \94\ Don Clark & Laurie Hays, Microsoft's New 
Marketing Tactics Draw Complaints, Wall St. J., Dec. 12, 1994, at B6 
(Ex. 41).
---------------------------------------------------------------------------

    Microsoft can kill us ..... I worry more about my dealings with
    Microsoft than I do about my competitors.\95\
---------------------------------------------------------------------------

    \95\ Id.
---------------------------------------------------------------------------

B. Alliances

    Alternatively, the Government may have concluded that other 
operating system competitors might combine with application 
developers in alliance-type combinations to prevent Microsoft from 
extracting monopoly rents from the business desktop. But alliances 
among companies rarely work in the best of circumstances--i.e., 
in more conventional markets. Here, the alliances would have to 
produce or blend complex software technologies in order to make a 
competitive offering equally useful and reliable to that marketed by 
a single vertically integrated competitor, which is better able to 
guarantee seamless integration.\96\ Similarly, from the economic 
perspective, the possibilities of real competition from an alliance-
based product line are highly remote, at best. Microsoft's installed 
base and share of the applications market is so large that its 
products are "locked-in" and true competition can be 
restored only through truly massive forces or structural relief. 
See, e.g., W. Brian Arthur, Increasing Returns and Path Dependence 
in the Economy 2, 10-11 (1994).
---------------------------------------------------------------------------

    \96\ All of these problems are discussed in Rory O'Connor, 
San Jose Mercury News, Nov. 13, 1994, supra, at 1A, 28A (Ex. 34).
---------------------------------------------------------------------------

    Most importantly, although there are companies that make 
operating systems that run on different chips, no Microsoft 
competitor or group of competitors controls the operating system 
gateway to the network in the way that Microsoft does. Control of 
the "human interface" gateway on the home computer 
through the acquisition of Intuit will only heighten Microsoft's 
control throughout the market. In short, the prospects of an 
alliance to compete effectively with Microsoft, in the current 
market where the gateways are controlled by Microsoft, are extremely 
remote. Competitors would have to produce a competing information 
infrastructure through a different paradigm (e.g., cable 
television), something that is years, if not decades, away. 
Microsoft is, moreover, already committing substantial 
resources--reportedly 500 employees by next June--in 
anticipation of this paradigm shift. See Elizabeth Corcoran, 
Washington Post, Nov. 13, 1994, supra, at H6 (Ex. 44). It therefore 
is clearly preparing now to be in a position to control this new 
paradigm as well.

C. "Tiered" Monopoly

    Third, the Justice Department might have concluded that, 
although Microsoft has achieved a monopoly in the operating system 
market, there is no need for governmental intervention because 
Microsoft would prefer competition in business and home applications 
software. In other words, the Government might argue that Microsoft 
has no economic incentive to monopolize the applications market 
intentionally and has acquired its dominant position in the market 
only because of superior products. According to this approach, 
although Microsoft has a monopoly on X86 operating systems, it would 
actually prefer that the applications (and development tools) market 
be fully competitive in order to maximize monopoly profits from the 
operating system market. A schematic representative of the 
"desktop," Figure 3, is reproduced below for reference:

------------------------------------------------------------------------
              Level                      Name              Examples
------------------------------------------------------------------------
5...............................  Applications......  (a) Desktop
                                                       applications
                                                       (e.g., Lotus
                                                       1-2-3
                                                       , dBASE, MS Word,
                                                       MS Excel,
                                                       WordPerfect) The
                                                       Microsoft Office
                                                       is a bundle of
                                                       these
                                                       applications. (b)
                                                       Client
                                                       applications as
                                                       part of a network
                                                       (e.g., Oracle
                                                       Financials, SAP,
                                                       Peoplesoft,
                                                       D&B Software,
                                                       etc.)
4...............................  Development Tools.  Basic, Pascal, C,
                                                       Borland C + +,
                                                       Powersoft
3...............................  Gill and/or.......  MS Windows
                                  OS Services.......   
2...............................  OS................  Apple, DOS
1...............................  Hardware..........  IBM, Apple,
                                                       Compaq, Dell
------------------------------------------------------------------------

    Figure 8
    This type of economic thinking would suggest that if Microsoft 
truly had a monopoly at the second level (operating systems), it 
would prefer competition at all higher levels so as to maximize its 
ability to extract monopoly profits through the operating system 
level. And, according to this economic argument, there would be no 
point in Microsoft expending the resources to monopolize 
applications (level 5), since it would derive the same benefit by 
monopolizing the operating system (level 2).
    Indeed, according to this approach, because of the presence of 
demand side economies of scale, there would be a need for Microsoft 
to control the X86 operating system (level 2). There is a network 
externality that must be solved by a single firm with control of 
both level 2 and all of the levels above it (3-5). All other 
factors being equal, according to this argument, consumers would be 
better off with the greatest possible variety of level 5 competition 
and the greatest possible adoption of one operating system 
standard.\97\ Hence, if Microsoft controls the operating system, it 
would have an incentive to price it low because it could extract the 
profits through the applications (level 5). (Or, alternatively, 
Microsoft might price the applications low and take the profits out 
through the operating system.) Indeed, Microsoft might be willing to 
price below cost.
---------------------------------------------------------------------------

    \97\ See Michael Katz and Carl Shapiro, Systems 
Competition, supra.
---------------------------------------------------------------------------

    On the other hand, according to this economic approach, if a 
Microsoft competitor gained control of applications, Microsoft and 
the competitor would fight over the division of profits. This would 
be wasteful, would lead to higher total costs for the system because 
of "double marginalization" and would not lead to as 
great adoption of the overall system. Given that Microsoft controls 
the X86 operating system, so the argument would go, its profits 
would be maximized if the market for applications were made as large 
as possible. Hence, it would follow that Microsoft would want to 
control applications to make this market as large as possible and 
would do this by pricing applications at a low level, and by making 
the inter-connection between its applications and operating system 
as efficient as possible.
    This economic approach is unpersuasive for three reasons. First, 
although Microsoft monopolizes the market for operating systems that 
run on the X86 chip, there are competitive operating systems that 
run on other chips--Apple and UNIX, for example. These 
competitive operating systems, like the Microsoft operating system, 
run business applications. Hence, so long as these competitive 
operating systems exist, Microsoft can extract "monopoly 
rents" by monopolizing a layer above operating 
systems--business applications.
    Second, as the Government's complaint in this case points out, 
there must be "a variety

[[Page 29233]]

of high quality applications" that run on an operating system 
if that operating system is to be successful. 59 Fed. Peg. at 42,847 
(Complaint 16-18). Accordingly, control of applications 
enables Microsoft to maintain and increase barriers to entry in the 
operating system market, thereby solidifying and maintaining 
Microsoft's operating system monopoly.
    Finally, control of the application layer enables Microsoft to 
price discriminate more effectively, thereby maximizing its monopoly 
returns. For example, because Microsoft also monopolizes business 
applications, it has the ability to selectively bundle some word 
processing functionality into operating systems, while at the same 
time offering a higher priced, more fully functional word processing 
program to users who need greater functionality. This enables 
Microsoft to extract greater revenues than would be possible merely 
by uniform operating system prices--i.e., if Microsoft only 
monopolized operating systems, but not applications.
    In short, Microsoft has ample economic incentive to monopolize 
business applications. To the extent Microsoft is concerned at all 
about actual or potential competition for operating systems, gaining 
control of applications will ensure overall control of the desktop. 
regardless of what might transpire in the future with respect to 
operating systems.
    A complete comparison of consumer welfare in a world with 
uniform dominant- firm pricing in operating systems and competition 
in applications on the one hand, with monopoly price discrimination 
on the desktop (operating system and application together), on the 
other hand, is beyond the scope, of this Memorandum. However, 
economic theory would strongly suggest that with respect to pricing, 
competition in applications, coupled with imperfect competition in 
operating systems--or at least the presence of potential 
competition in operating systems--is preferable to monopoly of 
the entire desktop. Moreover, in terms of technology, it is 
considerably more likely that the best technology will emerge in 
applications if there is open competition for the technology, rather 
than if it is dominated by the firm that monopolizes operating 
systems. That is especially true if the reason that Microsoft is 
able to monopolize applications is because it can leverage its 
operating systems monopoly and not because of any superiority of its 
technology.

D. Efficiencies of Integration

    Finally, the Government might justify its failure to act on the 
belief that the benefits Microsoft is providing by vertical and 
horizontal integration outweigh any anti- competitive effects. 
Microsoft will point out that it seamlessly integrates new 
technologies into new markets, and it will argue that unless it is 
permitted to link and leverage, these markets will not be opened in 
a way meaningful for consumers. It will further argue that if 
markets are opened by less efficient alliances, the services are 
bound to cost more because Microsoft competitors will not enjoy the 
efficiency benefits of integration. Indeed, according to this 
argument, allowing Microsoft to leverage Windows from one market to 
the other amortizes the research and development costs over a 
broader base of potential customers, with the result that Microsoft 
can charge less for the product in the first instance.
    Furthermore, Microsoft presumably will argue that because these 
markets and technologies exhibit increasing returns, they will 
gravitate toward a standard (i.e., a monopoly) anyway. According to 
this argument, it would be economically wasteful to require two 
networks that do the same thing. And, if there is only going to be 
one standard, that standard should be chosen by the market, as 
opposed to by Government intervention.
    There are two important responses to this argument. First, 
software is not similar to many conventional products in an 
important way. With software it is possible to achieve virtually all 
of the benefits of integration without excluding competitors. There 
is no reason why an application developed by an ISV cannot work just 
as well with the operating system as a Microsoft application, 
provided Microsoft provides necessary information to application 
competitors on a timely and complete basis.
    Second, while there are benefits to vertical and horizontal 
integration that Microsoft will point out, there are also very 
substantial costs. The enterprise server market, for example, is 
currently organized into a number of horizontal layers, each of 
which is characterized by strong competition. Generally speaking, 
consumers prefer this horizontal competition. See, e.g., The 
Economist, Feb. 27-Mar, 5, 1993, supra, at 11 (Ex. 14). Microsoft is 
attempting to impose a verticality on the enterprise market so that 
it can extract monopoly rents. e"
    Benefits of vertical integration, as opposed to horizontal 
competition at each layer. both on the desktop and the server, 
should be evaluated on the basis of product quality and incentive to 
innovate, as well as product cost. It is clear that vertical 
integration will allow Microsoft to displace even superior 
technologies. As PC Magazine recently observed:
    Since Microsoft is in a position where its operating system is 
dominant . . . [i]n order to be successful, Microsoft Network 
doesn't even have to be the best on-line service; it just needs to 
be good enough and the most convenient.
    Michael J. Miller, PC Magazine, Jan. 24, 1995, supra, at 
79-80 (Ex. 25). Similarly, if Microsoft controls the operating 
system gateway layer, its vertical integration will permit the 
displacement of superior products at the applications (and 
development tools) layer merely because of the vertical integration. 
The displacement of superior products is clearly a cost that should 
be evaluated, offsetting Microsoft's claim that its products would 
be lower-priced to the consumer.\98\
---------------------------------------------------------------------------

    \98\ Joseph Farrell and Garth Saloner, Installed Base, 
supra; Paul David, Amer. Econ. Rev., May 1985, supra.
---------------------------------------------------------------------------

    Moreover, once Microsoft achieves dominance in a market, it has 
little incentive to innovate\99\ So the negative effects of vertical 
integration include both the displacement of superior products, as 
well as the diminution of the incentive to advance technology that 
has become a standard. The latter cost should be evaluated as well. 
Nor is it altogether clear that vertical integration will 
necessarily produce efficiencies (that translate into lower prices) 
over, say, horizontal competition at each layer.
---------------------------------------------------------------------------

    \99\ Indeed, Microsoft's operating system "lock-
in" has permitted it to bring demonstrably inferior products 
to market (products that did not enjoy any appreciable consumer 
acceptance) without negative consequences to the company. See 
Michael Morris, Microsoft Deal: Too Little, Too Late, S.F. Examiner, 
July 24, 1994, at C-5. (Ex. 33)
---------------------------------------------------------------------------

    There is not yet empirical research on point, but there is 
certainly theoretical research suggesting that there are benefits to 
horizontal competition in the vertical layers.\100\ Hence, while 
there is theoretical literature that documents the efficiency of the 
horizontal competition model, the real challenge is maintaining the 
horizontal model in the world. Increasing return economics indicates 
that there is no reason to believe that the market, as currently 
structured, will choose the "best" product at a 
particular level. Rather. there is every reason to believe that 
Microsoft. through leverage from control of the operating system, 
will be able to impose verticality, with its associated 
costs--notwithstanding the fact that users appear to desire the 
benefits of horizontal competition. See, e.g., The Economist, Feb. 
27-Mar. 5, 1993, supra (Ex. 14). In short, Government intervention 
is necessary merely to provide a sufficiently level playing field 
for the horizontal model to have a reasonable chance of succeeding.
---------------------------------------------------------------------------

    \100\ Joseph Farrell, Hunter K. Monroe and Garth Saloner, 
The Vertical Organization Of Industry and Systems Competition Versus 
Component Competition, October 1994 (working paper).
---------------------------------------------------------------------------

VI ANTITRUST ENFORCEMENT

    This section of the brief identifies the deficiencies of the 
proposed Final Judgment and compares the relief sought by the 
Government in this case to the relief sought by the Government in 
comparable situations involving pharmaceutical, computer and 
telecommunications monopolies. Finally, the section analyzes the 
relevant case law that would support similar relief in this case, 
particularly a preclusion on the use of leverage from an installed 
base that was procured by "anticompetitive practices."

A. Deficiencies of the Proposed Judgment

    Manifestly, the proposed judgment has failed to achieve its 
stated purposes. Instead of saving consumers money and providing 
them with greater operating system choices as the Attorney General 
promised, the settlement has permitted Microsoft to run yet another 
competitor out of the operating systems market (Novell) and raise 
its own prices to resellers. From an economic perspective, this was 
to be expected. The relief proposed by the Government will neither 
maintain nor restore competition in the operating systems market. 
More ominously. the settlement clears the way for Microsoft to use 
its unfairly acquired

[[Page 29234]]

installed base to run competitors out of other software and 
networking markets, as well.
    According to the Government's complaint, Microsoft used 
anticompetitive licensing practices from at least 1988 to 1994. As 
noted earlier, during that period, Microsoft maintained its greater 
than 90 % share of the X86 operating system market.\101\ thereby 
increasing its installed base six-fold.\102\ Contrary to the 
assertions of the Assistant Attorney General, the relief proposed by 
the Government, a cessation of further anticompetitive practices, 
will not restore competition to the X86 operating system market 
because of the "network effects" present in the market.
---------------------------------------------------------------------------

    \101\ See, e.g., supra, note 32. (Microsoft presently 
holds greater than 90% of the X86 operating system market share); 
Christopher O'Malley, Personal Computing, October 1986, supra, at 
181, 183 ("Microsoft's operating system" has 
"better than 95 percent" share of the X86 systems.)
    \102\ Department of Justice Press Conference (July 16, 
1994), at 3-11 (by Asst. Attorney General Anne Bingaman).
---------------------------------------------------------------------------

    Because Microsoft now has a huge installed base and an 
overwhelming market share of X86 chip operating systems, thousands 
of applications have been written for the Microsoft operating 
system. Microsoft products, in economic jargon, are "locked 
in." New purchasers of computers with X86 chips have every 
incentive to demand Microsoft operating systems--and no 
incentive to demand the operating systems of its competitors. Given 
the huge installed base, OEM's will therefore preinstall the 
Microsoft operating system in order to meet consumer 
demand--whether Microsoft continues to pursue "per 
processor" licenses or not.
    This conclusion is demonstrable from the economic literature 
cited in earlier sections. It is also obvious to the journalists, 
analysts and commentators who follow the computer industry. For 
example, following announcement of the settlement, PC Week wrote:
    According to computer manufacturers, industry analysts and end 
users, the outlook is grim for Novell's DOS and IBM's PC-DOS and OS/
2. They say there is not much motivation for PC manufacturers to 
pre-install a competing product, since Windows has millions of users 
and thousands of software applications.
    See Jeff Bertolucci, Microsoft Settles: Business As Usual, PC 
World, Oct. 1994, at 72 (Ex. 31).\103\ Furthermore, Microsoft has 
adopted new marketing incentives that violate the spirit if not the 
letter of the consent decree by rewarding OEMs for activities 
designed to prevent them from doing business with competing 
operating system vendors. Don Clark & Laurie Hays, Wall St. J., 
Dec. 12, 1994, supra, at B6. In short, Microsoft's new practices 
achieve substantially the same effect as those banned by the 
Judgment.
---------------------------------------------------------------------------

    \103\ See also Stuart J. Johnston, Decree: Deal or Dodge?, 
Computerworld, July 25, 1994 ("Interviews with PC hardware 
vendors last week indicated few are likely to switch to a competing 
system any time soon. "Customers have already voted with their 
dollars in a very strong way for DOS and Windows. I don't see that 
changing," said Howard Elias, a vice president at AST 
Research, [a leading OEM].") Jane Morrissey, DOJ Accord 
Fosters "Too Little, Too Late" Perception, PC Week, July 
25, 1994, at 1 ("[O]bservers doubt the consent decree agreed 
on will have much effect on the company or its competitors," 
because it is "too little, too late. "); Jesse Berst, 
Behind The Smoke: Microsoft Wins Again, PC Week, July 25, 1994, at 
106 ("Does the agreement really change anything? No .... If 
the decree had come five years ago, when there were viable MS-DOS 
clones, it might have had some immediate impact. Now, in a world 
where MS-DOS is on the way out and Windows has no real clones, it 
will have no short-term impact") (Ex. 27); Andrew Schulman, 
Dr. Dobb's Journal of Software Tools, Oct. 1994, supra, at 143 
("the change from per-processor to per-copy licensing probably 
comes about four years too late"); Claudia Maclachlan, 
Software Makers Mull Over Microsoft Legal Challenge, National Law 
Journal, Aug. 1, 1994, at B1 ("They can't do [original
---------------------------------------------------------------------------

    More importantly, Microsoft remains free to leverage its 
installed base-- apparently with the Government's 
blessing--to put competition out of business in scores of new 
markets: business applications, entertainment software, personal 
finance software, on-line systems, server technologies, etc. This 
key issue is simply not mentioned in the Government's Tunney Act 
filings, but, as with "lock-in," the significance of the 
issue is not lost on the industry:
    The settlement did not specifically address what many competing 
companies consider the antitrust issue. Microsoft, they say, has 
used its control of DOS and Windows to extend its hold on the 
software sector.
    See David Einstein, Microsoft Unscathed by Settlement, S.F. 
Chronicle, July 18, 1994, at A1 (Ex. 32).\104\ As explained in 
Section V.C., supra, Microsoft's use of leverage against equipment 
manufacturer] pricing, but they don't need it anymore.")
---------------------------------------------------------------------------

    \104\ See also John Markoff, N.Y. Times, July 18, 1994, 
supra, at D1 (Ex. 24) ("The agreement leaves untouched what 
many computer industry executives say is Microsoft's principal 
advantage--that it develops both the basic operating system 
software that makes personal computers run.., and applications 
software.., that performs specific tasks."); id. ("The 
other important issue not specifically addressed in the consent 
decree is whether Microsoft has been able to leverage its virtual 
monopoly in operating systems into domination of applications 
software--a far bigger and more lucrative market"); 
Claudia Maclachlan, National Law Journal, Aug. 1, 1994, supra, at B1 
("As long as [Microsoft has] a dominant position in operating 
systems ... it allows them to leverage that into applications. This 
agreement does nothing to the sums quo.") (internal quotation 
omitted).
---------------------------------------------------------------------------

    Indeed, even Microsoft's supporters concede that, "[a] 
year from now, [the proposed decree] will be" no more than 
"a blip on the radar screen of computing history." 
William Casey, Let's Stop Beating On Microsoft, Washington Post, 
July 25, 1994, at F15. "Issued five years ago, the ruling 
would have had an effect.., users were open to alternative 
environments, even if it meant migrating from [Microsoft's 
products]." Id. ldquo;Those choices, and the years in which 
they could have been made freely, are ancient history .... It's a 
fact that [today] the operating environment of choice on Intel-based 
processors is DOS and Windows." Id. application competitors 
damages competition in the operating systems market, the very market 
the Government purports to address.
    The pernicious use of leverage is well known to the Justice 
Department. Decrees sought by the Antitrust Division in comparable 
circumstances over the past forty years have prohibited leveraging 
of monopoly power to dominate related markets.

B. Comparable Consent Decrees

    It is hardly aberrational for the Department of Justice to 
settle monopolization cases in high technology industries by 
securing consent judgments that prohibit the use of leverage from a 
monopolized market to a market in which competition is present. Some 
of the largest monopolization cases in history were settled on such 
a basis.

1. Parke, Davis Decree (Pharmaceuticals)

    The decree entered in United States v. Parke, Davis and Co. and 
Eli Lilly and Co., 1951 Trade Cas. (CCH) <20> 62,914 (E.D. 
Mich. 1951), prevented Parke, Davis and Eli Lilly from using their 
market power in the primary market for pharmaceuticals to exert 
leverage into the secondary market for gelatin capsules (used to 
contain individual doses of particular drugs). The decree did not 
foreclose the defendants from competing in the capsule market, but 
it imposed severe restrictions designed to ensure competition:
    No Acquisitions of Stock in Companies in the Secondary-- 
Market:
    Defendants were prohibited for ten years from acquiring any 
interest in any business engaging in the manufacture or sale of 
capsules, capsule manufacturing equipment, or capsule filling 
equipment unless they applied to the court and made an affirmative 
showing that such acquisition would not substantially reduce 
competition. (An equivalent Microsoft decree would prohibit 
Microsoft from acquiring any interest in any company making or 
selling application programs (e.g., Intuit).) Mandatory Licensing of 
Patents Pertaining to Secondary Market: Defendants were required to 
grant to "any applicant" (except the other defendant) 
royalty-free, unrestricted licenses under all Defendants" 
existing capsule-related patents. Defendants also were required to 
grant licenses to all of their future capsule-related patents in 
return for a "reasonable and non-discriminatory 
royalty." (An equivalent Microsoft decree would require, at 
minimum, that Microsoft grant royalty-free licenses on all its 
existing application and server software patents.)
    Publication of Documentation to Enable Competition in Secondary 
Market: Defendants were required for five years to provide to all 
applicants "a written manual.., describing the methods, 
processes, materials and equipment used by [Defendants]" in 
the commercial manufacture of capsules. (A provision that would have 
the same effect in the Microsoft decree would require, at minimum, 
that Microsoft immediately provide all competitors or potential 
competitors all operating systems documentation and specifications 
necessary to create a well-behaved application program. Going 
forward, Microsoft would have to provide the information necessary 
to place each of its competitors in the applications program market 
on an equal footing with Microsoft itself.) This decree remained in

[[Page 29235]]

effect until 1987. See United States v. Parke, Davis and Co. and Eli 
Lilly and Co., 1987-2 Trade Cas. (CCH) thnsp;67,834 
(E.D. Mich. 1987).

2. International Business Machines Corp. (Computers)

    In 1956, the Justice Department settled its monopolization case 
against IBM with the entry of a comprehensive decree, United States 
v. International Business Machines Corp., 1956 Trade Cas. (CCH) 
thnsp;68,245 (S.D.N.Y. 1956). That decree still remains in 
effect.
    The IBM decree prevents IBM from utilizing its power in a 
primary market (the market for "tabulating systems" and 
"electronic data processing systems") to create a 
monopoly in secondary markets (the markets for service on IBM 
machines). Unlike the Microsoft settlement, however, the IBM decree 
makes a comprehensive effort to prevent leveraging of the primary 
market monopoly. Rather than prohibiting a small number of specific 
practices (e.g., per-processor licensing), the IBM decree 
fundamentally restructured IBM's method of operation in the primary 
market to eliminate leverage opportunities.
    A similar decree against Microsoft would have included (at 
minimum) provisions requiring that Microsoft: (1) train its 
customers and competitors in the use and structure of Windows, (2) 
disclose to all developers, customers and competitors the same 
details about Windows that it discloses to its own employees and at 
the same time, (3) make public Microsoft technical documentation and 
tools used in Windows development, and (4) create a separate 
corporation for developing application programs, with a true 
"Chinese Wall" between the applications and operating 
system development personnel.

3. American Telephone and Telegraph (Telecommunications)

    In January of 1982, the Department of Justice filed a Final 
Judgment breaking up the AT&T monopoly. In its response to 
comments on the proposed final judgment, the Government explained 
that it sought broad relief to prevent the type of leverage that 
Microsoft is currently employing:
    The theory of both the Western Electric and AT&T cases was 
that, as a rate base/rate of return regulated monopolist, AT&T 
has had both the incentive and the ability, through cross-
subsidization and discriminatory actions, to leverage the power it 
enjoys in its regulated monopoly markets to foreclose or impede 
competition in related, potentially competitive markets.
47 Fed. Reg. 23,320, 23,335 (1982). Microsoft is not a regulated 
monopolist, but its monopoly in operating systems is no less 
thorough and its use of leverage to dominate related markets no less 
pervasive. Yet according to newspaper interviews given by the 
Assistant Attorney General following announcement of the settlement 
with Microsoft, the Justice Department "never 
considered" breaking up Microsoft. Viveca Novak, Antitrust's 
Bingaman Talks Tough in Microsoft Case, Wall St. J., July 19, 1994, 
at B5.

C. Case Law

    Had the Justice Department sought to prevent Microsoft from 
leveraging its installed base of "locked-in" operating 
system users, its position would have found support in the case law. 
Cases in which leveraging claims have been denied involve factual 
situations in which the plaintiff conceded that monopolization of 
the target market was impossible, even with the leveraging. See, 
e.g., Alaska Airlines, Inc. v. United Airlines, Inc., 94.8 F.2d 536, 
54.6 (9th Cir. 1991), cert. denied, 112 S. Ct. 1603 (1992).
    This is not such a case. Here, both Microsoft and the Government 
concede that Microsoft has a monopoly in the operating system market 
and that Microsoft used "anticompetitive practices" to 
increase its installed base in operating systems six-fold. Microsoft 
then clearly expressed its intention to monopolize the business 
application market and thereafter succeeded by leveraging. Now, 
Microsoft's executives have clearly expressed their intention to 
monopolize every "specific application of corporate 
information systems." Brent Schendler, Fortune, Jan. 16, 1995, 
supra, at 40. Microsoft's tactics, coupled with the economics of the 
markets at issue, would lead inexorably to the conclusion that 
Microsoft will succeed.
    A number of courts, including the Supreme Court, have evaluated 
conduct in one market based upon conditions in an adjacent, related 
market. Relevant decisions have reflected increasing returns-type 
analyses. For example, in Eastman Kodak Co. v. Image Technical 
Services, Inc., 112 S. Ct. 2072 (1992), the Supreme Court held that 
factual issues regarding consumer "lock-in" in the 
after-market for replacement parts constituted a proper basis on 
which to deny motions for summary judgment in a tie-in case. 
Similarly, a plaintiff's use of leverage in lock-in situations has 
frequently been cited in the lower courts as a principal basis for 
the denial of summary judgment motions in both tie-in and 
monopolization situations.\105\
---------------------------------------------------------------------------

    \105\ See, e.g., Digidyne Corp. v. Data General Corp., 734 
F.2d 1336, 1340-43 (9th Cir. 1984), cert. denied, 473 U.S. 908 
(1985); (software); Ortho Diagnostic Systems, Inc. v. Abbott 
Laboratories, Inc., 822 F. Supp. 145, 155-56 (S.D.N.Y. 1993) 
(blood screening technology); Viacom International, Inc. v. Time 
Inc.,, 785 F. Supp. 371,377 (S.D.N.Y 1992). See also Lee v. Life 
Ins. Co., 829 F. Supp. 529, 537-39 (D.R.I. 1993), aff'd, 23 
F.3d 14 (1st Cir.), cert. denied, 1994 U.S. LEXIS 7596 (1994).
---------------------------------------------------------------------------

    One good example of such thinking is Grappone, Inc. v. Subaru of 
New England. Inc.. 858 F.2d 792 (1st Cir. 1988). There the First 
Circuit (Breyer, C. J.) provided what it referred to as a more 
"refined analysis" for tie-in situations. This analysis 
begins to consider the anti-competitive consequences of actions that 
require competitors to enter the market on two levels (rather than a 
single level) of business. Id. at 795-96.

VII PROPOSED PROCEDURES UNDER SECTION 16(f)

    Reflecting its emphasis on the importance of court review of 
decrees agreed to by the Justice Department, Congress in 15 U.S.C. 
 16(f) has expressly authorized a wide variety of 
procedures that the Court may use in making its determination 
regarding the public interest. These procedures include, inter alia, 
taking the testimony of Government officials or experts, or other 
expert witnesses ( 16(f)(1)); appointing a special 
master or court expert ( 16(f)(2)); examining 
documentary materials ( 16(f)(3)); or "taking such 
other action in the public interest as the court may deem 
appropriate" ( 16(f)(5)).
    In this action, some information is relatively well-documented 
in the public record, and hence is less pressing significance to the 
Court's ability to engage in a meaningful public interest analysis. 
By way of comparison, in United States v. Yoder, 1989-2 Trade 
Cas. (CCH)  68.723, at 61,797 (N.D. Ohio 1986), the 
Department provided the court with an affidavit identifying the 
number of competitors, distributors and customers in the industry, 
whom it had contacted about a proposed modification to a consent 
decree, and described the responses and concerns of those contacted. 
See id. at 61,797 n. 10. Here, the Department has simply asserted 
orally that "by and large I think we got positive 
feedback" from competitors and customers, then adding (in 
response to a comment by the Court) "there were clearly some 
people who wished that we had done more." Tr. of Status Call, 
Sept. 29, 1994., at 13:16-22. These observations certainly do 
not give the Court the full flavor of industry concerns, but 
critical reports in the media amply document the true reaction in 
the industry to the proposed decree.\106\ It is, therefore 
unnecessary to further burden the Court with affidavits or the 
testimony from those in the industry, regarding these concerns.
---------------------------------------------------------------------------

    \106\ See, e.g., David Einstein, S.F. Chronicle, July 18, 
1994, supra, at A1 (Ex. 32) (Ernie Simpson, president of a software 
company which develops programs for use with Windows, called the 
decree "a waste of time"); Quote of the Week, 
InformationWeek, Aug. 1, 1994, at 10 (Reacting to the proposed 
decree, Gordon Eubanks, CEO of software firm Symantec Corp., said 
simply, "That's it?"); John Markoff, N.Y. Times, July 
18, 1994, supra, at D1 (Ex. 24) (quoting Martin Goetz, cofounder of 
Applied Data Research, the nation's first software company, as 
saying of the decree, "The Justice Department hasn't listened 
to the cries of the software companies"); Jane Morrissey, PC 
Week, July 25, 1994, supra, at 1 (Ex. 26) (quoting Mitchell 
Kertzman, chairman of Powersoft Corp., as saying the proposed decree 
will have "close to zero impact," and that "to the 
extent that Microsoft's behavior prevented other operating systems 
from succeeding, the war is over ... DOS is it and Windows is 
it"); Andrew Schulman, Dr. Dobb's Journal of Software Tools, 
Oct. 1994, supra, at 143 (Ex. 13) (quoting spokesman for Compaq as 
saying "Windows is the standard--not much will 
change"). See also David Einstein, S.F. Chronicle, July 18, 
1994, supra, at A1 (Ex, 32) (quoting a leading industry analyst as 
concluding that "[t]he operating system wars are 
over--Microsoft is the winner ... Microsoft is the Standard Oil 
of its day"); Claudia Maclachlan, National Law Journal, Aug. 
1, 1994, supra, at B1 ("As long as [Microsoft has] a dominant 
position in operating systems ... it allows them to leverage that 
into applications. This agreement does nothing to the status 
quo") (internal quotations omitted).
---------------------------------------------------------------------------

    Similarly, the nature of the allegations regarding Microsoft's 
conduct are well- established. Media reports, publications such

[[Page 29236]]

as Hard Drive, this brief, and the Government's own submissions all 
document what the alleged illegal conduct is claimed to be: 
undocumented calls; early disclosure of operating systems 
information to Microsoft's own applications engineers; predatory 
preannouncements; predatory bundling and unbundling of operations 
and applications functionality; restrictive licensing practices; and 
the use of subsidized pricing to leverage into the applications 
market using monopoly profits from operating systems. See supra text 
at notes 69-70. It would therefore appear unnecessary to hold 
hearings in which various independent software vendors, OEM 
manufacturers, and other industry participants recount particular 
instances of such alleged conduct.
    Instead, these amici submit that what is missing from the record 
before the Court are two categories of information, neither of which 
should require unduly protracted hearings. but which together should 
provide the Court with a sufficient record to make a determination 
under Section 16(e). First, in the course of its investigation, the 
Government has reviewed large quantities of documents from 
Microsoft, and these amici believe that a very. small group of these 
documents have been identified by the Government as 
"key" documents. These documents largely should answer 
questions regarding Microsoft's intent and use of various illegal 
practices. They should be turned over to the Court for its review.
    Second, the Government should be required to submit affidavits 
from its economic experts that set forth in detail what those 
experts anticipate the operating systems and applications software 
markets will look like in five years, assuming that the present 
proposed decree were implemented. Such a submission should indicate 
whether, under the present decree, the Government's experts 
anticipate that competition will have been restored in the operating 
systems market by that time. If the Government's experts believe 
that competition is not likely to have returned to the market by 
that time, they should be required to indicate what effect different 
alternative proposals might have on restoring competition to the 
market. And, if they believe under "increasing returns" 
theory that it is simply too late to restore competition--that 
the operating systems market "runs to scale," and having 
been permitted to establish dominance through its illegal practices, 
that Microsoft cannot now practically be unseated--the 
Government should be required to indicate what alternatives it has 
considered to minimize adverse consumer consequences resulting from 
this monopoly.
    These amici submit that the affidavits from the Government's 
economists also should address the extent to which they anticipate 
that Microsoft will have been able to leverage
    its operating systems monopoly into secondary software markets. 
Because Microsoft's installed base monopoly (and the resulting 
monopoly profits) were illegally acquired, the Government's 
economists should explain why it is unnecessary from an economic 
point of view to implement provisions such as those present in the 
IBM and Eli Lilly consent decrees. This analysis would include, for 
example, the effect of alternatives such as prohibiting Microsoft 
from acquiring stock in companies that make or sell application 
programs (Eli Lilly): spinning off its applications division into a 
separate subsidiary, and enjoining it from giving any benefit to the 
subsidiary, that is not also provided to third-party applications 
providers (IBM); and making public Windows technical documentation 
and tools used in Windows development (IBM). In the event that such 
alternatives were not viewed as sufficient to ensure a "level 
playing field" in the applications markets, given Microsoft's 
now-dominant installed base, the economists should address whether 
divestiture (such as in AT&T) is the appropriate remedy.
    Based upon the information made available to the Court as a 
result of this analysis, these amici believe that the Court would be 
in a position to accept or reject the Government's current proposed 
decree, or to identify those modifications that would be necessary 
to bring the decree within the public interest standard. Cf. 
AT&T, 552 F. Supp. at 153 & n.95, 212-13. At a 
minimum, such submissions would provide a factual record which the 
Court's own economist expert could review in considering the 
economic issues raised by the proposed decree, or to which 
economists could respond on behalf of other interested parties.
    Given the extreme importance of these proceedings to the future 
of the American software industry, and hence to the economy as a 
whole, the Government should be permitted to do no less. As 
documented in previous Sections, economic theory predicts that, even 
without resort to its ongoing (and unchecked) illegal practices, 
Microsoft would very likely be able to
    leverage its unlawfully acquired installed base in operating 
systems to monopolize the entire business and home software network 
in the United States. The Government's decision to do nothing to 
restrain Microsoft's ability to engage in such monopoly leveraging, 
or even to curtail Microsoft's use of blatantly predatory and 
unlawful practices in furtherance of that end, requires explanation. 
Absent such explanation, these amici submit that the Court has no 
choice but to reject the proposed consent decree as plainly outside 
the bounds of the public interest.
    Dated: January 10, 1995
    Respectfully submitted,
    WILSON, SONSINI, GOODRICH & ROSATI 
By---------------- -
-------------------
------------
    Gary L. Reback
    PROOF OF SERVICE BY OVERNIGHT COURIER
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State of California. I am over the age of 18 years and not a party 
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    On January 9, 1995, I served the attached NOTICE OF MOTION, 
MOTION, AND MEMORANDUM IN SUPPORT OF MOTION TO FILE MEMORANDUM OF 
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FINAL JUDGMENT on the parties listed below by placing the documents 
described above in an envelope addressed as indicated below, which I 
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ordinary business practices at Wilson, Sonsini, Goodrich & 
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to be personally served on the following:
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    United States Courthouse
    Third Street & Constitution Ave., NW
    Washington, DC 20001
    Anne K. Bingaman
    U.S. Department of Justice
    Civil Division
    Tenth Street & Constitution Ave., NW
    Room 3101
    Washington, DC 20530
    Donald J. Russell
    U.S. Department of Justice
    Antitrust Division
555 Fourth Street, NW
Room 8249
Washington, DC 20001
GARY L. REBACK (Bar No. 218594)
SUSAN A. CREIGHTON
DAVID A. KILLAM
NEIL M. NATHANSON
IRWIN R. GROSS
WILSON, SONSINI, GOODRICH & ROSATI
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304--1050
Telephone: (415) 493-9300
IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA,
Plaintiff, vs. Civil Action No. 94-1564 (SS)
MICROSOFF CORPORATION, FILED
Defendant. FFB 14 1995
FILED
FEB 14 1995
Clerk, U.S. District Court
District of Columbia
APPENDIX TO MEMORANDUM OF AMICI CURIAE IN OPPOSITION TO PROPOSED 
FINAL JUDGMENT
INDEX
TAB SOURCE
    1. Lawrence J. Magid, Microsoft: Not So Marvelous, Bay Area 
Computer Currents, Dec, 1, 1994, at 98.
    2. A Fierce Battle Brews Over the Simplest Software Yet, 
Business Week, Nov. 21, 1983, at 114.
    3. Richard Brandt, Microsoft Like An Elephant Rolling Around, 
Squashing Ants, Business Week, Oct. 30, 1989, at 148.
    4. Kathy Rebello, et al., Is Microsoft Too Powerful, Business 
Week, Mar. 1, 1993, at 82.
    5. Amy Cortese, et al., No Slack For Microsoft Rivals, Business 
Week, Dec. 19, 1994, at 35.
    6. Byte, May 1992, at 157, 159.

[[Page 29237]]

    7. Stuart J. Johnston and Ed Scannell, Server Suite Could 
Squeeze Market, Computerworld, Oct. 10, 1994, at 4.
    8. Carole Patton, Bundles Are Bad News, Computerworld, Nov. 14, 
1994, at 57.
    9. William Brandel and Ed Scannell, Developing for Next 
Generation of Windows May Mean Running on NT, Computerworld, Nov. 
28, 1994, at 4.
    10. The Long View From Microsoft: Component DBMSs, Datamation, 
Aug. 1, 1994, at 40.
    11. Personal Computing Software, Dataquest Report (1994) 
(selected pages).
    12. Department of Justice Press Conference (July 16, 1994).
    13. Andrew Schulman, Microsoft's Grip on Software Tightened by 
Antitrust Deal, Dr. Dobb's Journal of Software Tools, Oct. 1994, at 
143.
    14. Computer Industry Survey: Reboot System and Start Again, The 
Economist, Feb. 27- Mar. 5, 1993).
    15. Ray Weiss, Windows Stars at SD 91, Electronic Engineering 
Times, Feb. 18, 1991.
    16. Charles R. Morris and Charles H. Ferguson, How Architecture 
Wins Technology ..Wars, Harv. Bus. Rev., Mar.-Apr. 1993, at 86.
    17. Miles B. Keyhoe, Microsoft readying Three 32-Bit Operating 
Systems, HP Professional, Aug. 1994, at 40.
    18. Stuart J. Johnston, "No Chinese Wall" at 
Microsoft, Infoworld, Dec. 30, 1991, at 107.
    19. Brian Livingston, Undocumented Windows Calls, InfoWorld, 
Nov. 16, 1992, at 98.
    20. Brian Livingston, Will "Windows Compatible" 
Really Mean What it Says?, InfoWorld, Nov. 14, 1994, at 40.
    21. Microsoft Corp. Employee Performance Reviews, dated Nov. 2, 
1987, and May 4, 1987.
    22. Confidential Multimedia Systems Development Partner Program, 
Microsoft Corp., Aug. 1990.
    23. Michael Csenger & Adam Griffin, Microsoft Free At Last?, 
Ruling Still Lets Firm Incorporate Apps Into Its OS'es, Network 
World, July 25, 1994, at 4.
    24. John Markoff, Microsoft's Barely Limited Future, N.Y. Times, 
July 18, 1994, at D1.
    25. Michael J. Miller, The World According to Microsoft, PC 
Magazine, Jan. 24, 1995, at 80.
    26. Jane Morrissey, DOJ Accord Fosters "Too Little, Too 
Late" Perception, PC Week, July 25, 1994, at 1.
    27. Jesse Berst, Behind The Smoke: Microsoft Wins Again, PC 
Week, July 25, 1994, at 106.
    28. Eamonn Sullivan and Matt Kramer, Microsoft Marvel Beta 
Leverages WIN 95 Desktop, PC Week, Nov. 7, 1994, at 169.
    29. Mary Jo Foley and Lisa DiCarlo, PC Vendors Allege Undue 
Pressure From Microsoft, PC Week, Nov. 21, 1994, at 1.
    30. Jesse Berst, Microsoft's On-Line Rivals Could End Up In 
"Cyberia", PC Week, Dec. 12, 1994, at 120.
    31. Jeff Bertolucci, Microsoft Settles: Business As Usual, PC 
World, Oct. 1994, at 72.
    32. David Einstein, Microsoft Unscathed by Settlement, S.F. 
Chronicle, July 18, 1994, at A1.
    33. Michael Morris, Microsoft Deal: Too Little, Too Late, S.F. 
Examiner, July 24, 1994, at C-5.
    34. Rory J. O'Connor, Microsoft, Intel Set to Define Technology, 
San Jose Mercury News, Nov. 13, 1994, at 1A.
    35. Microsoft Domination, San Jose Mercury News, Dec. 21, 1994, 
at IF.
    36. W. Brian Arthur, Positive Feedback in the Economy, 
Scientific American, Feb. 1990, at 92.
    37. Larry Campbell, Novell to Introduce SuperNOS Strategy, South 
China Morning Post, Sept. 20, 1994, at 1.
    38. How Microsoft's Server Strategy Will Change The 
Industry--Parts I & II, Report by Summit Strategies, Inc.
    39. Microsoft and Visa To Provide Secure Transaction Technology 
For Electronic Commerce, Visa News Release, Nov. 8, 1994.
    40. Viveca Novak and Don Clark, Trade Group's Board Cancels 
Hearing On Microsoft's Plan to Acquire Intuit, Wall St. J., Dec. 5, 
1994, at B6.
    41. Don Clark and Laurie Hays, Microsoft's New Marketing Tactics 
Draw Complaints, Wall St. J., Dec. 12, 1994, at B6.
    42. Elizabeth Corcoran, Microsoft De81 Came Down To a Phone 
Call, Washington Post, July 18, 1994, at A1.
    43. Elizabeth Corcoran, Microsoft's Plan To Buy Intuit Raises 
Concern; Trade Group Calls 2 Hearings To Get Industry Opinion On 
Deal, Washington Post, Nov. 8, 1994, at C1.
    44. Elizabeth Corcoran, Microsoft Heads Home, Washington Post, 
Nov. 13, 1994, at H6.
    TAB1
    TO
    APPENDIX TO MEMORANDUM OF AMICI CURIAE IN OPPOSITION TO PROPOSED 
FINAL JUDGMENT IN CIVIL ACTION NO. 94-1564 (SS) SIGNED BY GARY 
REBACK
    PAGE 98 BAY AREA COMPUTER CURRENT5 DECEMBER 1-- DECEMBER 
12, 1994 USER OUTLOOK
    Microsoft:
    Not So Marvelous
    BY LAWRENCE J. MAGID
    Microsoft Chairman Bill Gates didn't get to be the richest 
person in America by being modest or by playing patsy with his 
competitors. So it came as no surprise to hear Gates belittle his 
competition and exaggerate the value of his offerings at the recent 
Comdex trade show.
    Gates was introducing the Microsoft Network. Preliminary reports 
on this online service, code-named "Marvel," have been 
circulating for months.
    Like everything Gates announces, The Microsoft Network is 
purported to be the greatest thing since individually wrapped cheese 
slices. In introducing the service, Gates made some not-so- subtle 
digs at current online providers. "There is an opportunity to 
bring innovation into this market," said Gates, adding that 
existing services "take print material and move it 
over." GOOD, NOT REVOLUTIONARY
    Due that's not entirely true, While the three big online 
services (CompuServe, Prodigy, and America Online) each offer online 
magazines, newspapers, and other print material, they also offer 
interactive forums, live chat rooms, shareware libraries, online 
technical support, and other information and interactive services 
that you can't get from your local newspaper. All three services are 
also experimenting with sound and graphics, and all plan to 
introduce animation and full motion video when communications 
technology (i.e., ISDN) lets them get around the limits of today's 
phone system. Bill Gates and his team of developers may be smart, 
but they have an exaggerated opinion of themselves when compared to 
the rest of the world.
    Besides, what did Gates show when he demonstrated the service! 
An icon pointing to an online edition of USA Today. This is 
creative? To be fair, Gates also demonstrated some interesting new 
technology, including an online prototype of Microsoft Bookshelf, 
the company's multimedia reference guide. Most commercial online 
services offer online encyclopedias and other reference works, but 
none currently include graphics as a routine part of the deal.
    Gates also showed how the Microsoft Network will be integrated 
with Windows 95, Users will be able to drag icons directly from the 
service to their Windows desktop. In theory at least, information 
that's online will be as easy to locate as information on your 
computer's hard disk. Of course, your modem will have to dial into 
the network to ??rieve the information, at least until we're all 
hard wired into cyberspace.
    I was also impressed by the way the Microsoft Network will 
display complex graphics like color photos. When you enter an area 
that uses images, graphics will quickly reveal themselves in low-
resolution form, then become sharper and more vivid as data streams 
over the modem. This gradual display of graphics is necessa because 
the Microsoft Network will initially suffer the same phone-line and 
modem limitations that other online services do.
    As interesting as Microsoft's service may be, it's hardly 
revolutionary. Prodigy, CompuServe, America Online, and Interchange 
(Ziff-Davi??'s forthcoming service) are all capable of offering 
similar features. The Microsoft Network won't be available to the 
public for at least eight months; its See USER OUTLOOK, page 101 
94-1564 ??
    FILED
    FEB 14 1995
    Clerk, U.S. District Court
    District of Columbia

USER OUTLOOK

    USER OUTLOOK, from page 98 competitors will have plenty of time 
to catch up, if not move beyond Microsoft's plans.
    Three basic issues affect the popularity of online 
services-- interface, price, and content. Prodigy, CompuServe, 
and America Online can compete quite successfully on all three 
fronts. All three have plenty of time to tweak their interfaces, all 
can adjust their prices, and they all have a head start when it 
comes to content. Prodigy will announce a major interface overhaul 
in early 1995, and has had several years to build up its online 
content. CompuServe is reportedly working on easier-to-use software 
and, after nearly 15 years, is a leader in online databases, 
shareware, and more. America Online,

[[Page 29238]]

though lacking the content of its two major competitors, leads the 
way with online editorial offerings and is generally regarded as 
being easy and pleasant to use.
    Ziff-Davis's Interchange is every bit as up-to-date as 
Microsoft's Network. The only advantage Microsoft has is its ability 
to build its online software into Windows 95. And therein lies my 
biggest concern.

A RIGGED PLAYING FIELD

    By making its network part of the operating system, Microsoft 
tilts the playing field in its direction. Microsoft clearly has the 
right to enter the online business, but ?? question whether it's 
fair to the other players if the Microsoft Network--and only 
the Microsoft Network--is part of Windows 95.
    Imagine that utility companies said appliances. You've just 
moved into an empty house and after turning on the power, the power 
person says she has a great refrigerator in the truck that she'd be 
happy to install for you. "It's as cheap as any you'll get in 
town and you don't have to make any payments until after you've used 
it for a while. Besides, our refrigerator is optimized to work best 
with our electricity." That utility company would sell a lot 
of refrigerators--and every other appliance vendor would 
rightly cry foul. This would never happen in real life, because 
utilities are regulated monopolies. Microsoft, despite the Justice 
Department's recently rulings, is a virtual monopoly, controlling 
nearly 80 percent of the personal computer operating system 
business.
    Gates claims that his bundling the Network with Windows 95 is no 
different than IBM's bundling Prodigy software with some of its 
machines. And IBM does own half of Prodigy. But IBM also offers 
America Online on some of its machines. More germane, IBM controls 
only a fraction of the personal computing market. Nobody, except 
Microsoft, has a grip on more than about 10 percent of the market.
    Microsoft's bundling scheme has caused America Online president 
Steve Case to cry foul, accusing Microsoft of creating an 
"unlevel playing field." Others in the online industry 
agree. Robert D. Mainor, vice president of Product Marketing for 
CompuServe, didn't go as far as Case in criticizing the Microsoft 
announcement, but he did say that "Microsoft enjoys a 
distribution model that no one else has access to." He added 
that his service, in business for about 15 years, is in a good 
position to compete with Microsoft. If CompuServe's claim of 2.4 
million members is accurate, it is currently the largest online 
service.
    Prodigy's president, Ross Glatzer, said that Microsoft's entry 
will help expand the total online market.
    However, he agrees that Microsoft has its thumb on the scale. 
Glatzer would welcome the opportunity to include Prodigy and other 
online service software with Windows 95 so that users would have 
free choice of services.
    I think Microsoft is a great company. It produces some excellent 
programs and it improves America's trade imbalance. But it doesn't 
have the right to run roughshod over the entire computer industry. 
Microsoft's practices affect its competitors and, ultimately, its 
customers. The computer industry needs competition and a balance of 
power. Right now, that power is tilting toward Redmond, WA. It's 
time for the folks in the other Washington--the one between 
Maryland and Virginia--to wake up and start taking a hard look 
at Microsoft's anti-competitive behavior. * ?? 1994 Lawrence J. 
Magid. All rights reserve.
    Larry Magid is the author of Cruising Online: Larry Magid's 
Guide to the New Digital Highways (Random Housc. 1994) and The 
Little PC Book: A Gentle Introduction to Personal Computers 
(Peachpit Press. 199J). He is also an internationally syndicated 
columnist for the L.A. Times. You can reach Larry on the Internet at 
magid@la??imes.com, via CompuServe at 75.100,2105. via 
Prodigy at KPVN58A, via America Online as LarryMagid, or care of 
Computer Currents.
    TAB 2
    TO
    APPENDIX TO MEMORANDUM OF AMICI CURIAE
    IN OPPOSITION TO PROPOSED FINAL JUDGMENT
    IN CIVIL ACTION NO. 94-1564 (SS)
    SIGNED BY GARY REBACK
    1ST STORY of Level I printed in FULL format.
    Copyright 1983 McGraw-Hill, Inc.
    Business Week
    November 21, 1983
    94--1564
    FILED
    FEB 14 1995
    Clerk, U.S. District Court
    District of Columbia
    SECTION: INFORMATION PROCESSING; Software; Pg. 114
    LENGTH: 1565 words

HRADLING: A FIERCE BATTLE BREWS OVER THE SIMPLEST SOFTWARE YET BODY:

    The all-out fight for supremacy among the hardware 
makers--Apple, Digital Equipment, IBM, and 150 others--has 
been getting the headlines recently in the mushrooming personal 
computer market. But while it may never attract as much attention, 
an equally important battle is about to explode among the leading 
companies that write software for the small machines. Prompting this 
latest free-for-all is the emergence of an entirely new class of 
product called "environment" software Environment 
software has no specific application such as word processing or 
financial analysis. It is designed to make such jobs easier for 
users who are not technically trained--a group that is rapidly 
becoming the majority of personal computer users. The new generation 
of software, which was pioneered with such machines as Xerox Corp.'s 
Star and Apple Computer Inc.'s Lisa, splits the computer screen into 
sections, or "windows." Users can run different 
applications software simultaneously in each window. Normally, a 
computer displays only one program at a time.
    The new software more or less replicates tne desktop on the 
computer screen. In effect, a business executive or professional can 
put the equivalent of a letter, financial spreadsheet, or Rolodex 
file in the different windows on the computer display, or electronic 
desk.
    The software battle pits three leading 
developers--Microsoft, Digital Research, and 
VisiCorp--against one another. Each wants its product to become 
the industry standard. The competition is especially fierce, because 
windowing programs are expected to be standard on every personal 
computer--a market potential of as many as 5 million units in 
1984 alone. "Environments used to feature, but now they have 
become a fundamental part of the [personal comter] system," 
says Esther Dyson, president of Rosen Research Inc.
    In the fight to get their new software running on the largest 
variety of computer brands, the competitors are wooing the hardware 
makers for endorsements. The outcome will shape not only the future 
of the current $1.5 billion annual market for personal computer 
programs but also sales of the equipment itself, since the machines 
tnat run the most popular software will be among the best sellers. 
As a result, leading hardware makers--most notably Apple and 
International Business Machines Corp.--are being drawn into the 
fray.
    The battle lines are forming rapidly. On Nov. 10, Microsoft 
Corp. was expected to announce that 23 computer 
makers--including Apple, Digital Equipment Honeywell, Tandy, 
and Texas Instruments--have signed up to muse its LEXIS??-
NEXIS??LEXIS??-NEXIS??LEXIS-NEXIS??
    Services of Mead Data Central, Inc.
    1983 McGraw-Hill, Inc., Business Week, November 21, 1983 version 
of the new software, which it says will be ready by April. 
Meanwhile, VisiCorp, the first software company to offer this next-
generation product to the industry, is racing to get its VisiOn 
program out the door (page 115). Not to be left out, Digital 
Research Inc., which has not yet demonstrated its product, is 
leaking word that it will begin delivering its version of 
environment software to as many as 10 computer makers before the end 
of the year. "It's a real battle of the software 
developers," says Steven A. Ballmer, a vice-president at 
Microsoft.
    Competition will be fierce because there is not enough room in 
the personal computer marketplace to support several versions of 
environment software. Applications programs for specific tasks such 
as word processing and financial analysis will have to be rewritten 
to work with each environment package.
    "The battle is to establish whose [environment software] 
is going to win, because software developers don't want to write 
programs for 18 different systems," says Rosen Research's 
Dyson. Adds Moize Adney, manager of internal software development at 
Texas Instruments Inc.: "The pressure to standardize will be 
there."
    INDUSTRY STANDARD. Companies racing to market environment 
software are placed in something of a catch-22 situation. They must 
convince computer makers that many writers of applications software 
will develop useful programs to operate with their environment 
packages. But they must convince the software writers at the same 
time that their environment programs will be used on the largest 
number of machines.
    Microsoft hopes to parlay the popularity of its MS/DOS operating 
system-- the

[[Page 29239]]

housekeeping software that controls the basic functions of a 
computer-- into a marketing edge. Its new environment program, 
Microsoft-Windows, is actually just an extension of its operating 
system. An impressive 40% of personal computers sold--including 
the best-selling IBM PC--are controlled by the Bellevue (Wash.) 
company's operating system software. This penetration, Microsoft 
maintains, provides a ready market for Windows. If every computer 
that runs Microsoft's operating system adds Windows, Microsoft is 
well on its way toward becoming an industry standard, says the 
company's Ballmer.
    "CHURCH AND STATE." On the other hand VisiCorp is 
stressing its success in appli cations programs. The San Jose 
(Califcompany, which was made famous by the VisiCalc financial 
modeling and spreadsheet program, has developed a set of 
applications for its VisiOn environment package. "What will 
make a windowing system successful is the quality of the 
applications under it," says Danie Fylstra, VisiCorp chairman.
    While archrival Digital Research has not formally announced its 
environment package, the company is working hard to line up 
applications software companies to write programs for use with its 
new windowing software. Digital Re search says its environment 
package is the safest choice, because the company does not write 
applications software. "We're not in the applications business 
like VisiCorp or Microsoft," says Digital Research President 
John R. Rowley. "We do not present a threat."
    Rowley contends that competitors can use their own environment 
software to bring out applications packages before anyone else can. 
Microsoft, for one, denies that offering an environment program 
gives its own applications programs an advantage. "We have 
shown in the past that there i8 a very clean separation LEXIS??-
NEXIS??LEXIS??-NEXIS??LEXIS-NEXIS??
    Services of Mead Data Central, Inc.
between our operating system business and our applications 
software," says Ballmer. "It's like the separation 
between church and state. Axed if you don't play it straight, you 
can't expect to get the business." Microsoft is expected to 
hit sales of $70 million this year, double its figure for 1982.
    Some applications software writers are concerned, however, that 
Rowley may be right. "VisiCorp is a competitor," says 
Fred M. Gibbons, president of Software Publishing Corp., which sells 
personal computer applications software. "Why should I trust 
them?" To cover their bets, some powerful independents could 
decide to go with more than one environment package. "There 
are many valid reasons to support more than one environment and let 
the marketplace decide," says Mitchell D. Kapor, president of 
Lotus Development Corp., which for now has gone with Microsoft for 
1-2-3, its popular integrated spreadsheet and graphics 
package.
    One variation on the environment theme is Quarterdeck Office 
Systems, a small Santa Monica (Calif.) startup. By the end of the 
year, Quarterdeck will begin shipping a $399 environment package 
called DESQ. But instead of persuading software writers to modify 
their programs, the company has designed DESQ for use with several 
existing applications programs. "With DESQ you just buy it and 
run it totally without having anything modified," says Therese 
E. Myers, president and founder.
    PREEMINENT POSITION. As the battle begins to heat up, no company 
has produced the supporter that could carry the day: IBM. "IBM 
has established such a preeminent position in the marketplace that 
the supplier that has its environment on IBM will have the greatest 
success," says John R. Keifer, senior analyst at InfoCorp. 
Since the IBM PC was introduced in 1981, the computer giant has won 
more than 26% of the market. As many as 75% of personal computers, 
industry observers agree, are expected to follow the IBM PC design 
by 1985 (BW-- Oct. 3).
    Few are willing to predict IBM's strategies in this key software 
market. "I don't expect IBM to endorse one environment in the 
near term," says Rosen Research's Dyson. "It will 
probably make them all available." But some observers say IBM 
will bring out its own environment software, and it is not clear 
where such a move would leave the independent software companies. 
IBM already has shown some of its own windowing software on an 
enhanced version of the PC, and there are reports of another IBM 
environment program, called Glass, that is being considered as a 
product. "With IBM's announcement of its own windowing 
capability, it looks to us that the big guy is starting his own 
standard," says Dennis V. Vohs, executive vice-president of 
Management Science America Inc., which owns Peachtree Software Inc., 
a personal computer software company.
    The victors in the battle over environment software may not be 
obvious for a year or more. Despite an impressive array of 
endorsements, Microsoft will not begin shipping Windows until April. 
At that time, VisiCorp and Digital Research will have had their 
products on the market for only a few months. "There will be a 
lot of bandstanding and claiming victory," says Digital 
research's Row- ley. "But you won't really know what will 
happen for at least 6 to 12 months."
    GRAPHIC: Picture, MICROSOFT'S BALLMER AND A DISPLAY DIVIDED INTO
    "WINDOWS"
    LANGUAGE: ENGLISH
    LEXIS?? LEXIS?? LEXIS?? NEXIS?? LEXIS?? NEXIS??
    services of Mead Data Central, Inc.
    TAB 3
    TO
    APPENDIX TO MEMORANDUM OF AMICI CURIAE
    IN OPPOSITION TO PROPOSED FINAL JUDGMENT
    IN CIVIL ACTION NO. 94-1564 (SS)
    SIGNED BY GARY REBACK
    Information Processing
    SOFTWARE
    "MICROSOFT IS LIKE AN ELEPHANT ROLLING AROUND, SQUASHING 
ANTS"
    As the company's dominance grows, so have the complaints of 
other suppliers of software. There's no doubt about it. Microsoft 
Corp. wants to dominate the world--the personal computer 
software world, that is. And it isn't very far from doing so: It 
already supplies the core software for just about all of the world's 
25 million-plus IBM PCs and their clones. It has done well, too, in 
many sectors of the huge market for PC applications 
programs--spreadsheets, word processors, and the like. All in 
all, it's the leader in total PC software sales--Wall Street 
expects revenues of $1.1 billion for the year ending next June, up 
40% from the year before.
    Now, Microsoft is beginning to suffer the slings and arrows that 
often come with such fortune. Other suppliers of PC software are 
downright angry over its dominance. The company, they say, is just 
too powerful and its products too pervasive. Its virtual monopoly-in 
PC operating systems--the software life-support systems that 
all other programs call upon for access to the PCs memory, disk 
drives, and display screen--means that Microsoft's even" 
technical change, strategy shift, or mistake can adversely affect, 
producers of applications soft ware. They argue, moreover, that 
Micro soft is abusing its systems software edge to put them at a 
disadvantage-- and win greater control of the market. INTIMATE 
TIES. This, critics say, will make it harder for Microsoft's small 
competitors to prosper. And that hints at less innovation in 
software, the one part of the world computer market in which U.S. 
companies still hold an unassailable edge. Says Fred M. Gibbons, 
president of $100 millionplus Software Publishing Corp.: 
"Microsoft is like an elephant roll ing around, squashing 
ants."
    William H. Gates III, Microsoft's CEO, argues that such fears 
are misplaced. He contends that his company is so in fluential 
simply because it knows more than any other about how the pieces of 
a PC fit together, from chips to other com ?? to software. 
Microsoft's inti ??s with leading companies such as IBM, Compaq, and 
Intel bode well for the U.S. computer industry, he argues. By virtue 
of those relationships, Micro soft can establish coherent technical 
standards--in graphics, communications, or computer languages, 
for instance-- that if followed by everyone would speed up the 
process of writing new pro grams. Those would help sell machines, 
fulfilling Gates's vision of a PC on every desk and in every home.
    What worries other software makers is where they fit into this 
vision. While tightening its grip on the $1.4 billion sys tems 
software market, where its MS-DOS and OS/2 operating systems are 
king, Microsoft has pushed harder than ever into the $4.4 billion 
market for applica tions packages. Its Microsoft Word text 
processing program, Excel spreadsheet, and other such products now 
account for 47% of total revenues--almost equal to its systems 
business. And competitors say they're getting squeezed.
    Recently, for example, Microsoft stopped providing them with 
lists of cus tomers that use Windows, its graphical extension to MS-
DOS. Instead, it offered to place ads for their Windows-compatible 
software in a booklet shipped with each copy of Windrows. 
Competitors suspected that Microsoft's own applications group was 
still getting the lists. So they complained--and got the lists 
back.

[[Page 29240]]

VOCAL CRITIC. More unsettling are suspi cions that Microsoft doesn't 
keep its systerns and applications groups as sepa rate as it 
promises--that church and state tend to ming??. Competitors 
figure that if Microsoft's applications people" get peeks at 
unanmounced systems software, they should, too. Otherwise, they're 
at a disadvantage. Microsoft" fuels suspicions by sometimes-
shifting workers between its groups. And it Agenda 90, a recent 
trade conference 148 BUSINESS WEEK/OCTOBER 30, 1989 INFORMATION 
PROCESSING
    outsiders were angered to see an Excel specialist demonstrating 
new operating system features that they hadn't been briefed on. 
Apple Computer Inc. solved such conflicts in 1987 by spinning off 
its applications group into an independent company, called Claris 
Corp. Gates says that's not necessary at Microsoft.
    Micrografx, a tiny graphics software company, might disagree. 
Recently, it approached Microsoft with a program it thought the 
larger company might want to use. But it showed it only to 
Microsoft's applications developers--not to its systems people, 
who it ??eared would copy its proprietary ideas. Micro ?? President 
J. Paul
    Grayson says that one person who saw his program was soon 
transferred to Microsoft's systems division. Eventually, Gates 
placated Grayson with a crossli ??ensing deal, which Microsoft 
concedes was unusually generous. Still, Grayson says he was 
"manipulated by Micro soft," which insists it did 
nothing wrong. ??NFUL P.S. Whatever the case, Microsoft's tactics 
have strained relations even with partners. This fall, John War 
??ock, chief executive of Adobe Systems Inc., had an emotional, 
public falling out with Gates. Adobe's top product called 
Postscript, is a key program for desktop publishing. Earlier this 
year, Apple, Ado he's best customer, said it would replace 
Postscript in Apple computers. Microsoft continued to do business 
with Adobe.
    Then, in September, Apple and Microsoft surprised Warnock by an 
nouncing at an industry conference that they would collaborate in 
competing with Adobe. Says Warnock: "We used to be a strong 
ally of Micro soft." Now, "it's easier to help their 
competitors."
    The biggest gripes have been with Micro soft's moves in 
operating systems. Like Microsoft, its competitors use those basic 
programs as "platforms" upon which to construct 
applications software. But if the platform is shaky, late to market, 
or just not selling well, writing software for it can be 
risky--as the tale of Win dows shows.
    Starting in early 1983, Microsoft tried to supplement MS-DOS 
with Windows, a program that makes PCs act much like Apple's 
Macintosh. But outside develop- era were wary of writing programs 
for Windows, which was 16 months late to market, because of its many 
early technical problems. They say Microsoft also gave them mixed 
signals: It positioned Windows as a program mainly for low- end PCS, 
while it worked on a more ad vanced--but 
incompatible--operating system called OS/2 for more powerful 
computers. And IBM threw its weight be hind OS/2.
    Much to the industry's surprise, how ever, OS/2 has caught on 
slowly. And Windows has taken off. Microsoft has shipped 2 million 
copies of it, compared with only 150,000 of OS/2. And next year, it 
will bring out a major revision of Windows that will be easier to 
program and more functional than the original-- enough so, in 
fact, to do many of the same jobs that OS/2 was supposed to handle. 
Windows, says David G. Bayer, an analyst at Montgomery Securities, 
"has become the platform of choice." DUPLICITOUS? Guess 
which company is poised to exploit that platform? While most 
competitors concentrated on writ ing for OS/2, Microsoft has been 
ready ing a slew of applications for Windows as well. They include a 
fancy new word processor, a project management program, and a long-
rumored dam-base program called Omega. That's leading companies such 
as Lotus Development and Software Publishing to call Microsoft 
duplicitous. They charge that Microsoft enhanced Windows just to 
help its own applications group. And, they claim, the more powerful 
Windows will further hurt OS/2 "It's irresponsible of Micro 
soft to do that," says Software Publish ing's Gibbons.
    Even discounting the effect of a revived Windows, Microsoft has 
disappointed those counting on OS/2. Introduced in 1987, that 
program still can't do all it promised, such as use all the power of 
Intel Corp.'s popular 80386 chip Worse, perhaps, is that Microsoft 
still offers no aids for modifying Windows programs to work with OS/
2. A recent poll shows that software executives don't expect OS/2 to 
really catch on until 1993--two years later than what they 
predicted last year. Gates's answer: Microsoft is devoting the 
maximum feasible engineering talent to OS/2 and Windows, favoring 
neither.
    "SLIDEWAR" On top of all this are wilder 
accusations--for instance, that Microsoft peddles nonexistent 
products to scare off competition. Michael J. Maples, the company's 
vice-president of applications software, shows slides at trade shows 
that list the software markets Microsoft intends to 
enter--programs for desktop presentations, for instance. One 
competitor calls that "slideware. They have slides saying 
they're going to be involved in every conceivable area of innovation 
five years from now," he says. "It slows the pace of 
innovation" by intimidating smaller competitors.
    Gates laughs off the idea of software companies quaking in their 
boots. "So what are they doing instead, starting fast-food 
restaurants?" he quips. "I've never heard anyone say, 
"we're chicken, we can't compete with you." WordPerfect 
Corp., for example, is beating Microsoft in word processing, with a 
40% share of the market, up from 16% three years ago. And companies 
such as Micrografx and Atlanta-based Samna Corp. have drawn 
technical praise for their applications programs for Windows.
    In fact, many of Microsoft's critics helped create their own 
problems when they ignored its pleas to develop applications for 
Windows. "Even when Gates makes a mistake, people turn it into 
a Machiavellian plot," says Gordon E. Eubanks Jr., president 
of software house Symantec Corp. And Steven A. Ballmer, senior vice-
president for Microsoft's systems division, disputes the charge that 
his people give their counterparts in applications previews of their 
upcoming systems products.
    Since Microsoft earns more from systems than from applications 
programs, Ballmer says, he would be foolish to jeopardize his market 
just to boost applications sales. Indeed, he recounts an occasion 
when Microsoft's developers of Excel accosted him in the company 
cafeteria for revealing their work to Lotus, which confers often 
with Microsoft on FORMATION PROCESSING BUSINESS WEEK/OCTOBER 30, 
1989 149
    Information Processing changes in its operating systems. 
"Telling me is as good as telling Lotus," he says, as if 
to prove his independence.
    So, qthe tension mounts. But what can Microsoft's rivals do? 
Their dependence on its PC operating systems puts them at a 
disadvantage. But no company--not even ISM--has been able 
to avoid that. They might try to subvert Microsoft's efforts to win 
control over every critical software standard in the PC market. 
"If people are feeling mishandled, they're going to look for 
other [partners]," warns Lotus CEO Jim P. Manzi. A likely one 
would be the group of suppliers backing American Telephone & 
Tele graph Co.'s Unix operating system, which rivals OS/2 in scope 
and function.
    But Unix" base of existing customers is minuscule compared 
with MS-DOS's. And Microsoft already has the best-sell ing version 
of Unix for personal comput ers, called Xenix. Perhaps, for competi 
tots, there's just one choice: Learn to dance with the elephant.
    By Richard Brandt in San Francisco WHAT NOT DOING WINDOWS COSTS 
LOTUS
    It's enough to drive Lotus Development Corp. to whining. Lotus 
spent three frustrating years and millions of dollars to bring out 
two versions of its 1-2-3 spreadsheet program that Can 
work with Microsoft Corp.'s OS/2 Presentation Manager, the basic 
software, or operating system, that was supposed to turn every PC 
into a Macintosh. But OS/2 isn't selling well. And Microsoft, 
unexpectedly, is selling loads of an alternative called Windows, an 
earlier program that has lots of Presentation Manager's easy-to-use 
graphics.
    Microsoft wins no matter which program takes off. Its own 
spreadsheet, called Excel, works with both. But Lotus isn't so 
lucky. Its advanced new 1-2-3, called Release 3.0, won't 
work with Windows. As Excel makes inroads, "Lotus has found 
that there's this large installed base of Windows users that it 
decided to ignore," says analyst David Readerman at Shearson 
Lehman Hutton Inc. LATEST WOE. That has led to some public griping. 
For software companies, "choosing an operating system" 
to write programs for "should not be equivalent to betting on 
a horse race," Lotus CEO Jim P. Manzi told some of his peers 
in a recent speech. "Windows is like a horse that was about to 
be put to pasture but was then revitalized."
    Indeed, corporate buyers such as Eastman Kodak Co. and 
BankAmerica Corp., which want to upgrade pro ?? like 
1-2-3 and use Windows us we??used. Less powerful ver 
sions of 1-2-3 work with Windows, but they

[[Page 29241]]

can't take advantage of many of its graphical features. Lotus 
probably will solve that problem: "We're not naive," 
says Frank A. Ingari, vice-president of its PC spreadsheet division. 
But analysts say the revised program could take a year to produce.
    The Windows flap is just the latest woe for seven-year-old 
Lotus. True, customers are buying more of 1-2-3 than 
competing products, giving Lotus 65% of the $600 million world 
market for PC spreadsheets. But so far, Re lease 3.0 may not be 
doing as well as its other new version, called Release 2.2, which 
runs on less powerful PCs. Some customers even are sticking with 
Release 2.01, now more than three years old. At Soft sel Inc., a 
software distributor, Release 2.2 is outselling 3.0 by 3 to 2. 
Corporate Software Inc. says its ratio is more than 2 to 1. Lotus 
disputes such numbers, claiming that 2.2 and 3.0 are selling about 
the same.
    The split means a lot to Lotus, which gets two-thirds of its 
profits from spreadsheets. Next year, it will lift 3.0's list price 
to $595, some $100 higher than other versions. That might add $20 
million or more to Lotus" overall revenues in 1990. But it 
might not: "The question is, does Lotus see a fall-off after 
this initial upgrade bubble?" says Richard G. Sherlund, an 
analyst at Goldman Sachs & Co.
    Profits dipped while Lotus struggled to get 3.0 out the door. 
But it now expects to finish this year with strong earnings. Its 
spreadsheet sales have returned to historical levels of about 
110,000 units a month. And sales of 2.2 and 3.0 will boost revenues 
by $30 million this year. Now, all Lotus needs is one more 
product--so it can bet on two Microsoft horses at once.
    By Keith H. Hammonds in Boston COMPUTERS A HEAVYWEIGHT 
LIGHTWEIGHT
    Compaq's new laptop may win big Rod Canion keeps his 
word--eventually. For years, the president Compaq Computer 
Corp. promised that his company would build a laptop computer as 
soon as it could do so without compromises such as eliminating 
floppy disks. Lately, with Zenith Data Systems Corp. and Japanese 
rivals selling laptops with all the customary PC features, Canion's 
pledge began sounding hollow. Even Compaq's first battery-powered 
PC, although a runaway success, had drawbacks: At a time when the 
Japanese were pushing down the size weight, and price of laptops, 
the Compaq machine came in at a hulking 14 pounds--and with a 
$5,400 base price.
    Now, Canion has kept his promise with a pair of laptops that 
weigh only 6 pounds, fit in a briefcase, and don't cost a lot more 
than competing PCs. These are the first "notebook" 
models (8 1/2 by 11 by 1 7/8 inches) to incorporate a full size 
floppy disk. An optional hard disk, storing 20 million or 40 million 
characters of data, boosts the weight to only 6.7 pounds. Starting 
at $2,400, the basic LTE is aimed at NEC Corp.'s Ultralite and 
Zenith's Minisport, the leading notebook PCs. The competing models 
don't have a standard floppy disk drive and can't accommodate a 
built-in hard disk. A second Compaq LTE model, based on the faster 
Intel 80286 microprocessor, starts at $3,899. "These are 
breakthrough systems," says Peter J. Tiege, an analyst at 
market researcher InfoCorp. ??. Some breakthroughs came from Japan s 
Citizen Watch Co., which will build LTEs for the European market. 
Citizen also worked on manufacturing problems. "We benefited 
from their miniaturization experience," says Canion.
    On Wall Street, the laptops were an instant hit. Rumors of their 
debut sent Compaq's stock to a record 107 on Oct. 10. The Oct. 16 
announcement pushed the stock back to 103 3/4 on Oct. 17, up from 98 
after the market dove on Friday the 13th. Predicting that Compaq can 
sell 190,000 LTES by the end of next year, Prudential-Bache 
Securities Inc. analyst Kimball H. Brown has boosted 1990 earnings 
estimates by 20??, to $9.80 per share. That should make Compaq's 
lightweight laptops worth the wait.
    By Geoff Lewis in New York 152 BUSINESS WEEK/OCTOBER 30, 1989 
INFORMATION PROCESSING
    TAB4
    TO
    APPENDIX TO MEMORANDUM OF AMICI CURIAE
    IN OPPOSITION TO PROPOSED FINAL JUDGMENT
    IN CIVIL ACTION NO. 94-1564 (SS)
    SIGNED BY GARY REBACK
    Special Report
    IS MICROSOFT ??
    It's a chilly November night in Las Vegas, but 10,000 technoids 
are in full fever pitch. They're in town for 1992's Fall Comdex, the 
computer world's biggest convention cure celebration. Tonight is the 
annual Chili Cook Off, a charity event for the National Center for 
Missing & Exploited Children. Each year, the crowd pours in for 
kegs of beer, vats of chili, and live music. For one night, 
archrivals in the industry are expected to put aside their bitter 
feuds and just goof off.
    But not this year. The Grayson brothers, Paul and George, 
founders of software house Micrografx Inc. and organizers of the 
event, are thanking companies that ponied up money. Each gets a 
round of applause. That is, until one of the hosts offers "a 
special thanks to Bill Gates and Microsoft," donors of 
$30,000. The crowd's reaction: scattered cheers, drowned out by a 
round of boos. BIG GREEN. The fear and loathing on display in Las 
Vegas--as well as envy and a grudging respect--are the 
natural responses to Microsoft Corp. these days. Long a power in 
personal computer software, Microsoft has now emerged as clearly the 
most important single force in the entire computer industry. Where 
Microsoft leads, computer makers and customers follow. Where it 
stakes a claim, rivals steer clear. And as it springboards from its 
dominance in operating systems into a commanding position in 
applications programs, Microsoft leaves less and less territory for 
its software rivals. Many venture capitalists these days troy they 
won't consider funding a software startup that looks like it might 
wind up competing on Microsoft's expanding turf.
    Such a concentration of clout and power has not been seen in the 
computer industry, since the glory days of IBM. Even Intel Corp., 
whose microprocessors are as pervasive as Microsoft's software. does 
not have the leverage of Microsoft, in part because Intel now must 
respond to chip clones (page 86). Some software executives refer to 
Microsoft, headquartered amid the evergreen trees of Redmond, Wash., 
as "Big Green." Says Ala?? K. McAdams, the chief 
economist in the Justice Dept.'s fruitless antitrust suit against 
IBM in the 1970s: It sure sounds familiar. Microsoft: is using its 
power in ways that are just like IBM's."
    But does that mean Micros?? powerful: Does its dominance ?? WHY 
ALL THE FUSS? THE POINTS OF CONTENTI?? EARLY PRODUCT ANNOUNCEMENTS 
CHARGE To preempt competing products, rivals say, Microsoft 
sometimes announces products years before they actually exist. Even 
if a rival's product already has the features" that Microsoft 
promises, many customers are reluctant to buy it, preferring instead 
to wait for the "safe choice"--Microsoft RESPONSE 
Microsoft says it is important to let outside software developers 
know Microsoft's directions in system software so they can develop 
application programs. In fact, software developers demand it. And. 
Microsoft says. it is important to let customers know where it's 
headed so they can plan accordingly

INSIDE KNOWLEDGE ??RGE Makers of applications programs allege that 
Microsoft's applications programmers have advance details of its 
operating system software, and the company is slow to share vital 
information. They say Microsoft uses this edge to bring out better 
applications sooner. This, rivals complain, is a big reason Microsoft 
has more than 60% of the market for programs that work with Windows 
RESPONSE Microsoft says it freely shares its knowledge with the 
industry and enjoys no substantial advantage in developing applications 
that work with its operating systems. The company says its software 
sells well because it's good

THE DOS TAX

    CHANGE Rivals say that the way?? crosoft licenses MS-DOS and W?? 
dows to major PC manufacture?? makes it nearly impossible for ?? to 
compete. Under some Micros?? censing contracts, PC makers pa?? fee 
to Microsoft for every PC th?? ship, even if they don't install th?? 
crosoft software on each mach?? Because of this. PC makers are ?? 
likely to substitute a competing ?? ating system RESPONSE Microsoft 
says PC ?? can. and do. choose several diff?? ways to license MS-
DOS. The co?? versial "per processor" licensing 
rangement offers a lower price ?? higher volume
    82 BUSINESS WEEK/MARCH 1, 1993 SPECIAL PER??




MTC-00030631--0382

    POWERFUL? HOW THE INDUSTRY'S LEADER IS WIELDING ITS CLOUT
    hibit competition in the software market, and does it hamper 
advancement of the computer industry, itself?. And, perhaps most 
worrisome, will it ultimately lead to fewer competitors and less 
innovation in an industry founded on the latest, the greatest, and 
never-before-thought-of? Those questions are critical because 
computer software has be come one of the driving forces in the 
economy. Not only is the software industry, a key area for job 
creation, but it also pro

[[Page 29242]]

duces the tools other industries need to boost productivity. Is such 
a vital industry best served by having a single dominant company?
    FTC PRO??E. Microsoft's competitors answer no. Software rivals 
insist that Microsoft's hyperaggressiveness--its use of every 
trick at its disposal to gain an edge, enter a new segment, or eke 
out one more iota of market share--has started to edge out 
innovation itself as the force that determines the shape of the 
industry. Microsoft Chairman William H. Gates III says such charges 
are ridiculous. "Our success is based on only one thing: good 
products. It's not very BETWEEN MICROSOFT AND COMPETITORS PRICING
    CHARGE Microsoft can offer low-ball prices in two ways: by 
including extra programs with its operating systems and by using 
profits from operating system sales to support low pricing of 
applications programs. For instance, because it has not made much 
headway so far. against Novel?? in sales of networking software, 
Microsoft is now building networking into Win dows and MS-DOS
    RESPONSE Microsoft says it is an in dustrywide trend that. as 
operating system software is improved, more features, such as 
networking, communications and graphics, are included to make 
computing more seamless for customers

THE F.U.D. FACTOR

    CHARGE As the dominant force in PC software, Microsoft uses its 
unique position to spread "fear. uncertainty, and doubt" 
about its rivals to stop customers from buying rival products. 
Microsoft, competitors say, warns buyers that if they buy IBM's OS/2 
or Novell's DR-DOS-- both of which claim advantages over 
Microsoft's operating systems---they will be throwing away 
their money be cause those products may wind up in compatible with 
Windows or may not be around in a few years
    RESPONSE Microsoft says customers ask for advice on many 
products, and, when it comments it is just respond ing to questions

BRAIN-PICKING

    CHARGE Several companies charge that Microsoft has, in effect, 
stolen their ideas in the course of exploring collaborative 
agreements. Go Corp., for example, says that Microsoft expressed 
interest in writing applications for Go's operating system for pen-
based computers. After Microsoft programmers examined Go's 
technology, however, Microsoft said it was no longer interested, Go 
says. Then, Microsoft announced plans for a competing system, 
developed, in part. by those who visited Go RESPONSE Microsoft says 
it is upsetting that companies accuse it or imply it stole from 
them. Microsoft says it always honors nondisclosure pacts ?? 
BUSINESS WEEK/MARCH 1, 1993 83
    Complicated." he says. "We're not pow erful enough 
to cause products that are not excellent to sell well." Still. 
com plaints from other software makers helped spur a 2 and 1/2-year 
investigation by the Federal Trade Commission into Microsoft's 
tactics. FTC sources say the nonpublic probe was completed at the 
close of 1992 and focused on allegedly unfair tactics used to 
squelch competi tion (table). According to a confidential outline 
obtained by BUSINESS WEEK, the FTC investigated practices ranging 
from the way Microsoft prices software to the way it allegedly uses 
tying arrange ments to force customers who want one Microsoft 
product to also buy others. Sources close to the investigation say 
that FTC staffers recommended a number of actions, including a 
preliminary. court injunction, ordering Microsoft to cease the 
offending practices immediate ly, pending the outcome of the case.
    NECESSARY EVIL? That they would even contemplate such an 
injunction--rather than wait for the outcome of a commis sion 
proceeding--is an indication of how serious the situation 
appears to the FTC staff, says Terry Calvani, a former FTC 
commissioner. "The reason the staff went into this uncharted 
area was the concern that there are companies in business today that 
may no longer be" by the time the FTC could finish trying a 
case against Microsoft, he says. But an injunction was only one 
staff recommen dation among many and, so far. the FTC commissioners 
have not acted. On Feb. 5, they considered the recommendations and 
split 2-2 on what action, if any, to take. They are expected 
to meet again in a few weeks, but Calvani says the tie does not bode 
well for competitors who were hoping to see dramatic action.
    Even if the FTC does nothing, the dom inance of Microsoft will 
remain a maelstrom of controversy. Interviews with more than 60 
industry executives and customers and a review of still secret FTC 
documents point" to one overriding concern: Microsoft's 
methods and its growing control over the computer in dustry could 
choke the life out of any company that stands in its way. Steven P. 
Jobs, chairman of NeXT Computer Inc. and an outspoken critic of 
Microsoft. has publicly called for the breakup of Microsoft into two 
companies: one for operating systems and one for applications pro 
grams. That move--considered, then rejected by the FTC 
staff--would keep
    Microsoft from using its operating-sys tems business to give its 
applications business an extra edge, as now alleged.
    For the most part, customers can't see what all the fuss is 
about: Most seem happy with what they're getting and with what 
they're paying for it. And even if computer makers grouse about how 
much influence Microsoft now exerts over their business plans, they 
concede that the standards Microsoft sets are helping to keep their 
industry vi brant. Says an executive with a top-tier PC maker: 
"Microsoft is not just a neces sary evil at this point. It's 
necessary for the industry to proceed."
    For many customers. Big Green has already taken on the role that 
had been Big Blue's. The saying among computer managers used to be: 
"Nobody ever got fired for buying IBM." Now. says the 
information-technology manager of a major French manufacturer. 
"If you put all your marbles in the Microsoft hat, you're 
safe--like the old IBM."
    Even Gates, who pooh-poohs comparisons with the mighty IBM of 
the 1970s, agrees that his company has partially taken on the 
leadership role Big Blue has lost. "Who's there to fill that 
vacuum? Microsoft, more than anyone else," he says. Adds Roger 
McName??, a partner in technology investors Integral Capital 
Partners: "Microsoft has been anointed the industry tsar. When 
that happens, people make it very, very rich." WINDOWS AND 
ORPHANS. Rich indeed. Microsoft's MS-DOS operating system is used by 
81% of the 22 million IBM-compatible PCs built every year, according 
to Sanford C. Bernstein & Co. Microsoft Windows, which gives MS-
DOS a graphical "look and feel," is selling an the rate 
of 1 million copies a month. Anal because it has been first to 
market with top-notch applications packages for Windows, Microsoft 
is now the king of that white-hot growth segment. Lot??s Development 
Corp., the king of spreadsheets in the MS-DOS world, has just 20% of 
the $756 million Windows spreadsheet market, while Microsoft's Excel 
now claims 73%, says market researcher Dataquest Inc. In word 
processing, the MS-DOS leader, Wordperfect, has 31% of the Win

BIG BLUE MEETS

BIG GREEN

    As IBM ruled the 1970s with its mainframe hardware, Microsoft 
dominates today with its operating system software Microsoft used 
IBM's own tactic against it: By "preannouncing" Windows 
NT, it stalled sales of Big Blue's OS/2, Version 2 84 BUSINESS WEEK/
MARCH 1, 1993 S??CIAL REPORT
    Special Report ly, he adds: "I hope they don't kill 
us." Novell can afford to joke. For now, it still holds 70% of 
its market. But the rest of the industry, isn't laughing. Rival 
software companies give Microsoft credit for building good products 
and marketing them cleverly. But many software executives also are 
fuming about what they say are Microsoft's unnecessarily tough, 
sometimes downright mean-spirited tactics. Says the CEO of a rival 
software company: "If you were in my shoes, you would probably 
want to go and shoot them. It's not a level playing field. IBM was 
the most opportunistic and ruthless in the 1970s. And that's exactly 
what Microsoft is today." VAPOR TIGERS. Indeed, industry 
veterans say there's a striking parallel between how Big Blue 
behaved back then and how Microsoft acts now. Computer executives 
say that just like the IBM of yore, Big Green bullies partners, 
withholds vital information, disparages competitors, and stalls the 
market by announcing products long before they're ready. Microsoft 
denies such charges. While such tactics are in the playbooks of many 
competitors, in the hands of the richest and most powerful player, 
they can be lethal.
    Take IBM's classic move of announcing a product long before it 
was ready to ship--a tactic known as 
"preannouncing." In software, such products are called 
"vaporware" and no one pays much attention--unless 
the company promoting vapor holds a dominant position. In that case, 
tire market freezes. Facing upstart Control Data Corp. in the 1960s, 
IBM paralyzed the market for scientific mainframes by announcing it 
was working on machines that would be far faster than CDC's.

[[Page 29243]]

These paper tigers, as they came to be known in a subsequent 
antitrust trial, prevented CDC from winning a single order in 18 
months.
    Microsoft preannouncements now have a similar effect. Take the 
case of Adobe Systems Inc.. maker of software that controls how 
computer printers produce typefaces. In September, 1989, Microsoft 
and Apple Computer Inc. said they would jointly develop a rival 
product. Adobe's stock fell 20% in one day, and for the next nine 
months the company spent 90% of its time answering customer's 
questions and "fighting vaporware," says Chairman John 
E. Warnock. As it turned out. Apple backed off and Microsoft did not 
ship its competing product, TrueImage, for two years.
    Microsoft has turned this Big Blue weapon on IBM itself. Just as 
IBM was getting OS/2 Version 2.0 off the ground in mid-1991. 
Microsoft announced plans for Windows NT. Like the IBM product, NT 
would be a 32-bit operating system, meaning that it would tap all 
the powers of Intel's fastest chips. Customers could buy the 32-bit 
system from IBM then or wait at least 18 months for NT. POWER PITCH. 
Guess what? Most of the market is waiting for the leader. An 
executive at a top PC company tells of one customer that felt the 
squeeze after committing to buy 36,000 copies of OS/2. The way the 
exec tells it, Microsoft came and pitched NT, and the buyer put the 
OS/2 order on hold. "It used to be IBM could put orders on 
hold," says the executive. "Now it happens with 
Microsoft."
    And NT? It's the toast of the tech world even though it's still 
not ready.
    After a six-month delay, it's now scheduled for shipment by 
June--two years after it was announced. It could be a big FOR 
INTEL, ONE GOOD FRIEND ISN'T ENOUGH Microsoft isn't the only 
standard-bearer in the computer business. Software alone does not a 
computer make, and when it comes to standard PC hardware, the world 
looks to Intel Corp. Its microprocessors are at the heart of most 
IBM-Compatible personal computers.
    But Intel's power isn't rock-solid. For starters, unlike 
Microsoft, it has lost share in its core business. Clonemakers 
Advanced Micro Devices Inc. and Cyrix Corp. have already snagged 62% 
of the market for Intel's aging 386 chips and are getting ready to 
sell clones of the 486 as well. Their presence has forced Intel to 
adjust its marketing plans in the past two years, accelerating the 
shift from 386 to 486 chips. "SIMPLICITY." Intel could 
be in for more adjustments as Microsoft, its partner since the dawn 
of the ISM PC in 1981, spreads out. Windows NT, scheduled to appear 
this June, will be the first Micro-soft operating system to run on 
chips other than those that are Intel-compati-Microsoft's Gates and 
Intel's Grove: Intel needs Microsoft, but the reverse is becoming 
less and less true ble. For starters, NT will also run on the Alpha 
AXP chip from Digital Equipment Corp. and the R4000 line from MIPS 
Computer Systems Inc., now owned by Silicon Graphics Inc. These are 
RISC (for reduced instruction-set computing) chips, the type of 
speedy design that since 1985 has been challenging Intel's 
dominance.
    Microsoft says the RISC deals are to satisfy, customer requests 
and don't indicate a change in the relationship with Intel. 
"Our cooperation with Intel is far more advanced than it is 
elsewhere," 86 BUSINESS WEEK/MARCH 1 1993 SPECIAL PEPORT 



MTC-00030631--0385 

dows market, compared with 539 for Microsoft Word.
    In short. Microsoft is cleaning up big time--at the expense 
of its smaller rivals. While other software makers were announcing 
shrinking market share, losses, or lay-offs in 1992. Microsoft 
tacked on $975 million in calendar-year revenues--more than 90% 
of all the revenue growth in the PC software industry, according to 
preliminary Data-quest figures. Microsoft's share of the world 
desktop PC software industry reached 44% last year. Dataquest 
figures. And if. as analysts project, Microsoft sales rise 36%, to 
$3.75 billion, in the fiscal year ending June 30, Micro-soft will 
have more revenues than its seven closest publicly held rivals 
combined. And at nearly $1 billion, it will have more than twice 
their net income (chart).
    All that money, rivals fear, will soon translate into even 
greater power for Microsoft. Without healthy profits, other software 
makers may find it impossible to fund new development or finance up-
grades of complex programs such as data bases, which comprise 
millions of lines of code. Borland International Inc. Chairman 
Philippe Kahn blamed pressure from Microsoft's foray into Borland's 
data-base turf when he laid off 150 of his 2,200 workers in 
December. Borland then reported a $61.3 million loss for the quarter 
and put on the back burner a word processing project that had been 
two years in development. Gates says Borland suffered mainly because 
its products were late to market. Lotus, once No. 1 in PC 
applications programs, had its first-ever layoffs in 1992. Now, it's 
concentrating its resources where Microsoft isn't--yet: 
Programs such as Notes, which helps groups of workers collaborate. 
"TOTAL UNDERDOG." Such a sharp contrast between one have 
and many have-nots worries industry executives. They fear there will 
be few major players, more consolidation, and less money for 
everybody except Microsoft. They also warn of a chill on software 
startups. John M. Grillos, who manages technology investing for 
Robertson Stephens" venture-capital arm, says that there are 
still new Opportunities for startups and scores are on the drawing 
boards--in promising new areas such as multimedia. But he has a 
long list of phone numbers at Microsoft and checks the behemoth's 
plans before going ahead with an investment. Does he call very 
often? "You bet," he says. "I'm not crazy." 
'Microsoft is extremely aggressive in using everything they 
can to their advantage"
    PIERLUIGI
    ZAPPACOSTA
    Logitech
    Gates, the billionaire mastermind of the Microsoft empire, says 
such worries are nonsense. Is Microsoft too powerful? "The 
answer is simply no," he says. He points out that Microsoft 
still lags in some important markets. "Take networking. 
We're the total underdog." And. he asserts, in markets 
such as spreadsheets and word processing, Microsoft's presence has 
prodded the competition to im prove their wares.
    Gates also points out that his commanding position does not 
guarantee him success in the next generation of software: operating 
systems that will let networks of personal computers take on the big 
computing jobs now done by mainframes, minicomputers, and 
workstations. Microsoft's entry, Windows NT, will square off with 
Novell's UnixWare, Sun Microsystems" Solaris, IBM's OS/2, and 
NeXT's NextStep.
    Still. none of those competitors has the momentum that Microsoft 
gets from Windows. That should help Gates reach his stated goal of 
selling 1 million copies of NT the first year. But he insists that 
doesn't mean NT is already the winner. "This is a 
hypercompetitive market," Gates says. "Scale is not all 
positive in this business. Cleverness is the positive in this 
business."
    To be sure, competitors such as Lotus and Borland have 
contributed to the myth of Microsoft's invincibility through their 
own less than clever moves. Equally true, there are examples of 
software companies that have kept well ahead of Microsoft. Many, 
such as Intuit Inc., a maker of personal finance software, are 
masters of lucrative niches (page 88).
    The biggest player to successfully fend off Microsoft so far has 
been Novell Inc., the $933 million Provo (Utah) maker of networking 
software. But Microsoft is aiming for this key software market by 
building some features similar to Novell's NetWare into Windows NT. 
Says Kanwal S. Rekhi, a Novell executive vice-president: 
"Microsoft will keep us on our toes." Then, half-joking-
hit. Even Borland is developing software for it. Says CEO Kahn: 
"There's no choice. The issue is not whether NT is good or 
bad. The issue is NT is being pushed by Microsoft."
    And Microsoft is already talking about an operating system 
beyond NT. It's called Cairo. and it's due by 1995. The company says 
that package will match features of Novell's most advanced 
networking programs and the object-oriented programming features of 
NextStep and Pink, the operating system due by 1995 from Taligent. 
the joint venture between IBM and Apple. F.U.D. MISSILES. Gates says 
Microsoft preannounces systems software because customers and 
outside developers need details to plan ahead. And once Microsoft 
tells developers, word spreads fast. "We tell 100 
developers," Gates says. "And believe me. that is out in 
the press the next day."
    Whatever the legitimate purpose, preannouncing is part of a 
larger strategy computer makers say IBM used effectively for years. 
It's called F. U. D.--for fear" uncertainty, and 
doubt--and it really works only for the big guy. It's 
essentially a whispering campaign suggesting it would be terribly 
unsafe to bet on a competitor. Gates snorts at the notion Microsoft 
uses F.U.D. as a weapon. "We have a whole department in charge 
of F. U. D.," he jokes. Seriously, he adds that Microsoft 
simply gives its opinions and expects customers to judge for 
themselves. "We're giving our honest view of how wise it is to 
buy these products." he says.
    Where any discussion of Microsoft's power gets dead serious is 
when rivals-and the

[[Page 29244]]

FTC--consider the power stemming from Microsoft's dominance in 
operating software. Like IBM, whose aggressive tactics for 
preserving its dominance in mainframes led to the Justice Dept.'s 
1969 antitrust suit, Microsoft seems most bareknuckled when 
perpetuating its position in operating sytems.
    Microsoft's most controversial tactic IS a "per-
processor" discount plan for MSDOS, which it offers to the 
highest-volume PC makers. On average, PC makers pay $13 to $14 per 
copy. For the steepest discounts, the PC maker must agree to pay for 
a copy of MS-DOS for each PC it ships, whether or not the software 
is actually installed. That makes it "undesirable for a 
manufacturer to ship anything but MS. DOS," says a PC 
executive. Microsoft hays that PC makers are offered a number of 
ways to buy MS-DOS. But with other plans the discounts are smaller, 
and PC makers locked in a bloody price war can ill afford to pass up 
the steepest discounts. DOS & DON'TS. When, pricing isn't 
inducement enough, Microsoft allegedly uses other means. One PC 
maker says it told Microsoft that it planned to ship DR.DOS, 
Novell's clone of MS-DOS, on about 10% of its machines. By shipping 
MS-DOS on 90% of its PCs, the company figured it would still get the 
best discount. Microsoft's response: It doubled that customer's 
price on MS-DOS, which quickly forced the PC maker to drop the idea 
of offering a choice to customers. Says a company executive: 
"In my opinion, any monopoly situation is not good for the 
customer." A senior Microsoft executive says he wasn't aware 
of this charge but says it would not be common practice.
    Such alleged tactics may seem a tad over the top, but 
maintaining dominance in PC operating systems is critical. Like 
IBM's dominance in mainframes, it gives Microsoft an extremely 
reliable, enormously profitable revenue stream. "Microsoft's 
mainframe is its operating system," says one software 
executive.
    Analysts estimate that between 1989 and 1992, MS-DOS and Windows 
generated revenues of $2.3 billion, with $998 million of that in 
1992 alone. Net profits on those sales last year were $278 million, 
according to Sanford C. Bernstein & Co. Such profits have helped 
fund forays into almost every major software market. Microsoft's new 
data-base program, Access, cost. a staggering $60 million to 
develop--and it was just one of a dozen products Microsoft 
brought to market last year. By contrast, last year's entire R&D 
budget at Borland was $50 million. At Lotus, it was $85 million.
    That's not all. Microsoft also had the money to offer an 
introductory price of $99 for Access--less than one-third the 
retail price for similar packages. Result: Microsoft sold 700,000 
copies in just three months. The entire market in 1992 was only 1.2 
million units.
    Gates shrugs off the notion that operating systems are his cash 
cow. "That's the biggest joke I ever heard." he snaps 
and points out that products such as ??vs Carl Stork, the Microsoft 
manager ??works with hardware makers. For ??anee, Microsoft still 
designs its operting system fastest on Intel chips.
    For his part, Chief Executive Officer ??ndrew S. Grove points 
out that Intel is ?? completely dependent on Microsoft ??oftware, 
either. OS/2 and Unix are al??eady available on Intel chips and NeXT 
?? Inc.'s NextStep and Sun's So?? soon will be. And, says Ronald J. 
??hittier, vice-president and general manager of Intel's software 
technology group, most customers aren't likely to switch to RISC 
hardware for NT because that would require buying all-new 
applications programs instead of keeping existing programs as owners 
of Intel-based NT systems will be able to do. "The thing 
Corporate America wants is simplicity," he says.
    ??. Where Intel could be vulnerable, however, is in the market 
for network servers, a key objective for Windows Nr. These machines, 
which feed centralized information to personal computers over a 
network, are replacing minicomputers and mainframes in corporations. 
And that means they're replacing large computer software, not 
desktop software. In that market, Intel has no advantage, and buyers 
can look for the best performance. That means RISC chips, which 
generally run about 50% faster than Pentium, Intel's most powerful 
chip yet, due out this March. "Would we look at other 
platforms in the future? Sure," says Edward F. Driscoll, an 
assistant vice-president at CIGNA Systems, which buys computers for 
the insurer. "The key is what happens at the server 
end."
    If the RISC chips start to invade Intel's turf on servers 
running Windows NT, they could soon move toward desktops. And that 
could shake Intel's hold on the computer market. Microsoft, on the 
other hand, would still be selling software for all those machines.
    By Richard Brandt in San Francisco
    Word and Excel are his most profitable. Yet in the next 
sentence, as he elaborates on the returns from operating systems. he 
says: "If you just took the cash cow business and did not 
factor in [the development costs of] NT and Cairo, yes, you'd get a 
huge profitability."
    Gates is accurate when he points out that his applications 
business now generates more profits--about 50% of net 
income--than operating software. But it took years to reach 
that point--years during which Microsoft funded many versions 
of Word before it was good enough to grab substantial market share. 
Only when the Windows 3.0 version appeared, in 1990, did it take 
off.
    The operating system business does more than spin" 
profits. Competitors charge that because Microsoft writes operating 
systems, it also has an unfair edge in writing the applications 
programs that work with them. They say Microsoft's applications 
developers get a pe??k at the inner workings of new operating 
systems early so they can write programs to take advantage of new 
features first. In the FTC document, investigators referred to this 
as Microsoft's "fake Chinese Wall" and listed a dozen 
"MICROSOFT IS GOOD, BUT IT'S NOT GOD" Scott Cook was 
stunned by a phone call in late 1990. It was a senior Microsoft 
Corp. executive telling Cook, the co-founder and chief executive of 
tiny Intuit Inc., that the software goliath was about to enter 
Intuit's market--programs for check writing and household 
budgeting. Because the two companies had once talked about 
collaborating on a finance program for Windows, the executive said 
he felt obliged to let Cook know.
    Small consolation. After their talks had broken off, Cook 
shelved plans for a Windows package, and he thought that Microsoft 
had abandoned its efforts. Now, Cook had little choice: He had to 
have a Windows version of Quicken in a hurry. In just 10 months, the 
Menlo Park (Calif.) company was done, just three weeks after 
Microsoft launched Money. "The advantage we were counting on 
was lost," says Bruce Jacobsen, general manager of the 
Microsoft unit that sells Money.
    Then, the real battle began. Both products got good reviews, and 
both carried a list price of $70. Cook cut wholesale prices so 
dealers could undercut Microsoft's $45 retail price. He also began 
advertising on TV. All told, Intuit managed to hold on to its 60% 
market share. Jacobsen concedes that Microsoft was caught off guard.
    The episode illustrates that Microsoft is not invincible. And 
although Microsoft loses only rarely, its performance with Money is 
not an isolated case. Says Robertson, Stephens & Co. analyst 
Peter J. Rogers: "Microsoft is good, but it's not God."
    Some software makers have even taken back markets that Microsoft 
dominated. Until a year ago, Microsoft's Works program had close to 
90% of the $50 million market for integrated software for Macintosh 
computers. Such packages combine basic word processing, spreadsheet, 
communications, and data-base functions. But Claris Corp., Apple's 
software subsidiary, figured it could build a better product. Its 
ClarisWorks arrived in late 1991 and within a year had 77% of the 
market, leaving Microsoft with 20%.
    Sometimes, Microsoft's aggressiveness backfires. When it comes 
to creating multimedia CD-ROM disks, for instance, Microsoft often 
insists on buying rights to the content of the disks. That can scare 
off book publishers who worry about losing control in the new 
medium. Comptons NewMedia, a San Diego-based unit of Encyclopaedia 
Britannica Inc., on the other hand, helps publishers create and 
distribute new works for CD-ROM without buying content rights. 
Result: Comptons now distributes more than 40% of all retail CD-ROM 
titles in the U.S., while Microsoft only has five titles on the 
market. Says Link Resources Inc. Cook pulled out the stops to market 
a Windows version of Quicken in time to spoil Microsoft's picnic 
analyst Steve Reynolds: "The Comptons approach will be more 
prevalent." FOLLOWED HOME. If Microsoft has a consistent 
weakness, it may be in consumer products. Microsoft dominates the 
corporate market for PC software, which requires building 
relationships with computer managers and giving volume discounts. 
The home market, on the other hand, is based on catchy in-store 
promotions, direct marketing, and meticulous attention to making 
software easy to use.
    That's where Intuit has excelled. A former Procter & Gamble 
Co. manager, Cook has built his company from about $6 million in 
1988 to $84 million in 1992 by studying how ordinary people manage 
their finances. He

[[Page 29245]]

has even had product developers follow customers from the store to 
their homes to see what difficulties they encounter when loading and 
using Quicken.
    Of course, Microsoft isn't throwing in the towel. To finally win 
some mar ket share from Intuit, Microsoft now has dealers selling 
Money for $15, com pared to Quicken's typical retail price of $35. 
"Microsoft is relentless," says Cook. "It never 
gives up."
    By Evan L Schwartz in New York other ways Microsoft allegedly 
abuses its position. Microsoft denies any unfair crossover or inside 
knowledge.
    Software developers also complain that Microsoft is slow or even 
reluctant to deliver needed information about operating systems. 
Perhaps the most ironic such charge comes from Claris Corp., Apple's 
software subsidiary, Executives there say they tried for a year to 
get information for writing Windows applications from Microsoft, to 
no avail. Claris says Microsoft was worried there were cracks in the 
Chinese Wall between Claris and Apple's operating system 
team--just what rivals say occurs at Microsoft. But after 
executive meetings and assurances of no cracks, the situation was 
resolved. Microsoft's head of developer relations says he wasn't 
aware of the Claris problem but does "Microsoft is the IBM of 
the "90s and uses exactly the same marketing toctics IBM used 
to" PHILIPPE KAHN Borland International concede a general 
"concern about giving information to our operating system 
competitors." Microsoft says it's doing its best to get 
information out to thousands of companies and that it doesn't 
withhold information to favor itself. Says Pat Bellamah, a manager 
in Microsoft's developer group: "It's ironic to us that people 
feel they're having a hard time getting information when that's all 
we're putting out there." Gates estimates Microsoft spends $80 
million a year dissemihating information to developers.
    One reason Microsoft draws so much criticism is simply that 
wherever it com petes, it seems to play a particularly hard-core 
game of hardball. Take its dealings with Logitech Inc. Until last 
June, Logitech had a license to buy Microsoft Windows 3.0 at a 
discount, then sell it together with Logitech's mice. But Microsoft 
abruptly canceled the deal, saying that it was losing money on such 
"bundles" involving inexpensive hardware. according to 
Logitech President Pierluig?? Zappacosta. Only Microsoft still 
continued to sell Windows bundled with its own mice--for about 
$10 more than Logitech had been charging.
    After Zappacosta publicized his situation in September, 
Microsoft relented. But there was a catch: The new license fee would 
be 30% higher. Zappacosta says that priced him out of the market, 
depriving his company of about $20 million annually. Microsoft 
continues to sell its Windows-and-mouse bundle. Says Zappacosta: 
"Microsoft is extremely aggressive in using everything it can 
to its advantage." Microsoft denies that it forced Logitech 
out of the market but declines to discuss its pricing. STAC ATTACK. 
Occasionally, Microsoft's hardball tactics have resulted in civil 
suits. The latest was filed in January by Stsc Electronics, a maker 
of data-compression software. In its suit, Stsc claims that 
Microsoft violated its patent by including Stac's technology in test 
versions of MS-DOS 6.0 without permission. Stsc says it was 
negotiating with Microsoft to license the technology, but talks 
broke down when Microsoft did not offer a sufficient royalty. The 
suit claims that Microsoft executives then showed Stsc a 
spreadsheet, detailing the "adverse impact on sales of 
Stacker" if Microsoft opted for another company's technology. 
Microsoft denies the claim. saying it bargained in good faith and 
offered "real money" for a license.
    As the stories multiply, it also becomes clear that Microsoft 
long ago became everybody's favorite whipping boy.
    There's certainly resentment on the part of bright young 
software entrepreneurs who may never see millions, much less Gates's 
billions. And for all the companies that grouse about their dealings 
with the industry giant, there are dozens that are ardent admirers. 
Says Morton H. Rosenthal, CEO of software distributor Corporate 
Software: "We all live in a Microsoft-centric world. Working 
with Microsoft is like skiing behind the Queen Mary. It's a good 
ride. But getting up is a little rocky."
    Indeed, with Big Blue's waning influence, there's a genuine need 
for a leader. Customers want good software and good prices. They 
also want a relationship with a software maker that's going to be 
around for the long run. They want a new IBM. "If I were a 
software company, I'd be complaining about Microsoft, too," 
says Greg Chetel, director of systems planning and research at 
Gillette Co. "But I don't care who wins. I just want quality 
products."
    In the end, that may be the key to assessing whether Microsoft 
does indeed have too much power. Software makers are right to cry 
foul when they think Microsoft's practices have been 
anticompetitive. They have done so. and the FTC has listened. But as 
long as Microsoft's dominance stems from keeping customers like 
Gillette satisfied, it is hard to argue that its power, per se, is 
harmful.
    The danger is that Microsoft will start to use the power of its 
position, rather than the appeal of its products and services, to 
stay on top. "If Microsoft runs out of bandwidth," says 
McNamee of Integral Partners, "then there will be a 
problem." That's when there will be reason to fear that 
competition will be stifled mad innovation squelched.
    If the history of Big Blue is a guide, Microsoft's dominance 
will be in danger of waning long before it can distort the market 
with nefarious practices. When the Justice Dept. began its antitrust 
suit in I969, IBM's hold on the mainframe market made it seem 
invincible. By the time federal prosecutors withdrew their suit in 
1982, however, the market had taken care of the problem: New 
technologies such as minicomputers and PCs had made IBM'S near-
monopoly in mainframes largely irrelevant.
    History could repeat itself: Says Joe Guglielmi, a former IBM 
executive, now CEO of Taligent: "Today, everyone is in fear of 
Microsoft." "But in the end, everyone will compete. 
There are thousands of Bill Gateses out there who will find pieces 
of this market and win them." Just the way Microsoft won its 
place in the sun.
    By Kathy Rebello in Redmond, Wash., with Evan I. Schwartz and 
John W. Verity in New York, Mark Lewyn in Washington, Jonathan 
Levine in Paris, and bureau?? reports
    TAB 5
    SPECIAL REPORT TO APPENDIX TO MEMORANDUM OF AMICI CURIAE IN 
OPPOSITION TO PROPOSED FINAL JUDGMENT IN CIVIL ACTION NO. 
94-1564 (SS) SIGNED BY GARY REBACK
    SOFTWARE NO SLACK FOR MICROSOFTS RIVALS
    They complain it hasn't been reined in at all by Justice When 
Microsoft Corp. signed a consent decree in July with U.S. Justice 
Dept. trustbusters, it emerged virtually unscathed from the 
feds" five-year probe. Still, the investigation was a 
protracted--and expensive--headache for Chairman William 
H. Gates III. And the settlement banned some of Microsoft's most 
aggressive licensing practices. The experience, rival executives 
figured, surely would leave Microsoft chastened. No such luck. 
"The consent decree seems to have set [Microsoft] free," 
gripes Robert J. Frankents it hasn't strayed from the bounds of 
normal licensing practices There is little doubt that Microsoft is 
competing aggressively: Even while the software giant presses its 
market-share advantages in operating systems and applications 
programs, it is bolting into new consumer markets with its own on-
line service and a plan to buy Intuit Inc., the top maker of 
personal-finance software. The $1.5 billion deal requires approval 
of Justice, and rivals once again are regaling Justice staffers with 
tales of Microsoft's alleged anticompetitive behavior. WINDOWS PAIN. 
What really stirs fresh fear and loathing in the computer business, 
however, is Windows 95. Microsoft plans to begin shipping the up-
grade of Windows by mid-1995, and the industry already is 
complaining about the software giant's pricing and marketing plans 
for the software. Computer makers, for example, have been startled 
to learn that they will be asked to swallow a huge price hike for 
their use of Windows 95--to as much as $70 per PC, vs. roughly 
$35 today. At the same time, Microsoft has established more rigorous 
technical requirements for hardware and software makers who want to 
claim their products are compatible with Windows. "Prices are 
going up and terms are becoming more restrictive," says John 
B. Landry, senior vice-president at Lotus Development Corp.
    There are ways PC makers can lower their costs--if they 
agree to shipment goals and marketing tactics designed to give 
Windows 95 an early boost. Indeed. a new "Market Development 
Agreement" that Microsoft has distributed to PC makers spells 
out a dozen ways to cut the Windows 95 license fee. For example, a 
company can save $3 per system by preloading Windows 95 on at least 
50% of its personal computers in the first month Windows 95 is 
awailable. In a business with evershrinking margins, that's a deal 
many PC makers can't afford to pass up, ensuring Microsoft lots of 
promotional help.
    In Europe, where Windows" grip on the market isn't as firm 
as it ms in the U.S., Microsoft's pricing has prompted a 
minirebellion. Vobis Microcomputer, the No. 1 PC maker in Germany, 
announced in late

[[Page 29246]]

November that it plans to bundle IBM's 0S/2 operating system, rather 
than Windows, with its machines starting Jan. 1. Says Theo Lieven, 
Vobis" CEO: "Every penny counts."
    CONTINENTAL DRIFT. Lieven contends his rebellion already is 
working. He says sales have jumped since mid-November, when Vobis 
began effering 0S/2 in addition to Windows, and "we think OS/2 
helped" contribute to the increase. Other European computer 
makers, including Peacock computer. have also quietly begun shipping 
0S/2 on their machines.
    U.S. PC makers aren't likely to follow the Vobis 
lead--partly because the American market is less receptive to 
OS/2. But that doesn't mean they're all happy about the Windows 95 
pricing. Hewlett-Packard Co. executives, for example, say they are 
comcerned that the higher cost of Windows 95 may cause a pricing 
differential between Windows PCs and those equipped with 0S/2. 
Still, says a spokesman, HP expects to bundile Windows 95--and 
not OS/2--into its machines. And other big U.S. PC makers also 
remain loyal. "We plan to move to Windows 95 as quickly as we 
can." says Lorie L. Strong, a vice-president at Compaq 
Computer Corp.
    Still, with Microsoft on thin offensive again, some rival 
software companies believe the Justice Dept. should use the Intuit 
inquiry to look once again at broad questions about Microsoft's 
dominance of the soft ware market. Indeed, rivals say Justice has 
been asking them probing questions about Microsoft's potential 
dominance of new distribution channels much as on-line services. But 
others call another move from Justice wishfull thinking. 
"We're just going to need to slug it out in the 
marketplace," says a resigned Frankenberg at Novell. The way 
things are going, that's just going to get tougher and tougher.
    By Amy Cortese in New York, with Richard Brandt in San 
Francisco. Gail Edmundson in Pa??, and bureau reports
    TAB 6
    TO APPENDIX TO MEMORANDUM OF AMICI CURIAE IN OPPOSITION TO 
PROPOSED FINAL JUDGMENT IN CIVIL ACTION NO. 94-1564 (SS) 
SIGNED BY GARY REBACK
    BYTE May 1992 Volume 17, Number Introducing Microsoft C/C + +.
    Microsoft Borland*
    Windows Class Libraries C/C++7.0 BC++3.0
    Covers entire Windows API Y N
    Menu support Y N
    GDI support Y N
    OLE 1.0 support Y N
    Exception handling Y N
    Diagnostiucs support Y N
    Code Generation: DES
    Encryption Test C/C++7.0 BC++3.0
    EXE size 5K 7.3K
    Execution time 820 sec 1500 sec
    BYTE Build Test C/C++7.0 BC++3.0
    Using fast compile 300 sec 420 sec
    pre-compiled headers
    Optimized EXE size 162.4K 202.6K
    Compiler Features C/C++7.0 BC++3.0
    Code in pre-compiled headers Y N
    Inline any C/C++ code Y N
    Auto-inclining Y N
    P-code Y N
    Windows Tools C/C++7.0 BC/++3.0
    Windows resource Y Y
    editors tolls
    Profiler for Windows Y Y
    & MS-DOS
    Windows setup builder Y N
    Total documentation 5408pp 4038 pp
    Windows 3.1 Y $199
    debug hernel extra
    Total Price* $495 $948+
    By almost any measure, new Microsoft C/C++ Version 7.0 
development system for Windows" is the best way to create all 
your applications for the Windows and MS-DOS operating systems.
    With better code generation and precompiled headers, you'll have 
all the tools you need to write better code, faster.
    And because the Microsoft Foundation Classes have the most 
complete framework for Windows, you'll use the same building blocks 
for your products that we use for ours.
    C/C++ 7.0 also includes the Windows 3.1 debugging kernel which 
can help you find the bugs. Plus, all the tools you'll ever need to 
edit your resources, compile the help fries and even build your very 
own graphical setup programs for Windows.
    Judge for yourself. Try new Microsoft C/C++ 7.0 and, as a 
Microsoft, Borland or Zortech customer, you'll be able to upgrade 
for just $139'- and for a limited time, you'll get a free copy of 
Qualitas" 386MAX?? in the box!
    So call your local reseller now, or call Microsoft at (800) 
541-1261, Department Z71. Get your tools from the people who 
make Windows, because we've been building Windows tools longer. ??
    The best C/C++ tools for Windows are from the company that makes 
Windows.
    TAB 7
    TO APPENDIX TO MEMORANDUM OF AMICI CURIAE IN OPPOSITION TO 
PROPOSED FINAL JUDGMENT IN CIVIL ACTION NO. 94-1564 (SS)
    SIGNED BY GARY REBACK
    The Newspaper of information Systems Management October 10, 
1994, Vol. 28. No. 41. 168 Pages. $.??opy, $48/Year
    COMPUTERWORLD
    News
    Server suite could squeeze market Microsoft product linking 
plans point to another bid for dominance
    By Sluarl J. Johnsion and Fal Seannett
    Microsoft Corp.'s recently announced BackOffice server sidle is 
the first step in an evolution designed to ac complish much tighter 
integration during the next few years between the company's 
enterprise building blocks of servers and its operating systems.
    lit fact. by the time Microsoft's Cairo version of Windews NT 
arrives in late 1995, the fit may be so tight that a competitor's 
knife blade will not fit between the blocks.
    Problems could arise for competitors if Microsoft shares 
information only with its own developers on how to tightly integrate 
with the object-oriented Cairo file system, suggested Warren Smith, 
a certified public at??tant and certified information systems 
auditor in Pac??e Bell's auditing department.
    If Microsoft puts shortents into Cairo that turn out to be 
better than the industry standard implementation of Cairo, Smith 
said the situation could be a return to the .days when other third-
party vendors complained about Microsoft using application 
programming interfaces "that no one else knew about in some of 
their applications."
    At least one other observer agreed.
    "All of this is an inevitability," predicted Jerry 
Sehneider. president of Sehneider Associates, Inc., a consul taney 
in Burke, Va., and former president of the Capitol PO User Group. 
"The [operating system] is always go ing to be getting more, 
and more aggressive. No one is sate anymore."
    The very thought may further unhinge competitors, some of which 
are still smarting from the recent ,Justice Department antitrust 
settlement with Microsoft. However, many large users do not appear 
concerned. In fact, sonic said they welcome a model along the lines 
of the old IBM that positions Microsoft as the new empire builder.
    "Where Microsoft is at right now reminds me of where IBM 
was in the t970s and 1980s, [and] if it continues to do things 
right, the users will benefit," said Scott Piper, a network 
analyst at Public Service Co. of Colorado in Denyet.
    "Generally, I don't find Microsoft's proprietary elements 
to be an impediment, [and] by]; taking life simpler, it's going to 
be positive," said Colin Carpi, president and founder of 
Churtwell Advisory Services, Inc. ill Penn Valley, Pa., which is 
developing a large on-line financial services system.
    "Big is usually good [for users] because if you're gotug 
to have things work, their you [must] have standards, and that lakes 
one [dominant] company," said Briscoe Stephens, coordinator 
for splice ?? in the Advanced Scientific information Systems Group 
at NASA in Huntsville, Ala.
    Enhancing that vision of dominance are recent acknowledgments by 
Microsoft officials that over time, the line between server 
applications and systems software will begin to blur. The first step 
will be to provide tighter integration among tile components in 
Microsoft's recently announced BackOffice server suite.
    A major jumping-off point will come. however, when Microsoft 
ships tile next major release of Windows NT, code-named Cairo, which 
will include a new file system that will store information as 
objects instead of files.
    Total control
    Cairo's Object File System well provide many core fun??tions 
that users currently think of as database fun?? 
lions--functions that can become part of a standard computing 
architecture that Microsoft controls from top to bottom Cairo Is 
scheduled to ship late next year, but many analysts and industry 
observers said they do not believe it will be out until 1990, at the 
earliest.
    By the time the entire strategy unfolds, users may depend on 
Microsoft for virtually all their computing needs, which Amy Wohl, 
editor of the "TrendsLetter" industry newsletter in 
Narberth, Pa., suggests may not be a good thing.
    "Microsoft is becoming[like] IBM, land I tit,, downside 
for users is the more they do that, the less open they're going to 
be [so that] it becomes harder to swap in your favorite 
database," Wohl said.

[[Page 29247]]

    Microsoft officials deny their plans will make their systems 
more closed. Many timers agree, arguing that competitors will always 
he able to come up with innova tive products to help keep the 
systems open.
    TAB 8
    TO APPENDIX TO MEMORANDUM OF AMICI CURIAE IN OPPOSITION TO 
PROPOSED FINAL JUDGMENT
    IN CIVIL ACTION NO. 94-1564 (SS)
    SIGNED BY GARY REBACK
    Desktop Computing Carole Patton Bundles are bad news Windows 95 
is not just in operating system. When it arrives next spring, this 
tour de force from Microsoft will replace nit those (formerly) 
separate utilities you probably have on your PC right now. such as 
fax software. E-mail and communications capabilities. Especially 
neat here is that all these built-in Windows applications will be ?? 
integrated into a single common interface and even a central 
database of names and addresses.
    In fact, Windows 95. the next generation of Windows. is such a 
complete operating environment that you may never have to purchase 
another Windows utility again. Nice for you. Not so nice for 
software developers such as Lotus. Delrina or Symlmtec, whose 
Windown products are about to become "buggy whips" in 
the name of progress. Microsoft is even including a somewhat 
feature-limited version of its best-selling suite. Microsoft's 
Office. in Windows 95.
    This strut??y is a prescription for destroying the Windows 
service appications market and damaging (if not terminating) the 
market for core business software. For example, what if you buy a 
laptop preloaded with Windows 95 and Microsoft's Office. Will you 
then go out and buy SmartSuite from Lotus or PerfectOffice from 
Novell? Probably not. Consumers aren't interested In replacing 
"good enough" with "great." Most new car 
buyers keep the standard radio their car came with. Only a handful 
are willing to shop around and pay a prem??um for better audio 
quality. Bundle bandwagon Microsoft is not alone in pursuing a 
bundling strategy. IBM's OS/2 Wurp Verston 3.0 ships with a Bonus 
Pak that includes a word processor and a spreadsheet (IBM Works), 
plus a host of third-party software.
    These "free" goodies help sell the product and un?? 
those vendors whose software is bundled--"It's in there: 
it must be good." users think. But such a strategy also leaves 
out in h cold any vendor whose software was overlooked. While 
bundling is arguably anticomp??ive, the issue has expanded with 
Windows 95. IBM's Warp cannot claim the same high le??t of 
integration of Microsoft's standards. such as the internal 
communitarians process embodied in Object Linking and Embedding 
(CLE). Tuke, for instance. Lotus" SmartSuite 3.0 for Windows. 
released in September. For all intents and purposes SmartSuite is an 
office in a box. You get a word processor (Ami Pros. Lotus famed 
1-2-3 spreadsheet. a database (Approach). a calendar 
program called Organizer and Freelance Graphics presentation 
software. Lotus" SmartCenter tool for switching among these 
applications is nifty.) However. Lotus SmartSuite programmers were 
able to provide support for only part of the OLE 2.0 specification: 
the drag-and-drop among 1-2-3. Approach and SmartCenter. 
Microsoft's Office. on the other hand, supports OLE 2.0 across the 
board. (It is Microsoft's standard. after all.) It is so ??ghtly 
integrated with Windows 95 that removing it to make room for 
SmartSuite may not be practical.
    I've long thought that by selling both systems and applications. 
Microsoft would gain advantages that could eventually terminate 
competition among Windows vendors. This is especially evident now. 
With hardware prices dropping so fast. Windows (and Windows 
applications) could become "disposable" thanks to 
Windows 95. You won't ever have to replace or upgrade programs. Just 
buy a new PC that comes complete with all the software anyone is 
ever likely to need. Seen their side I can't blame Microsoft or IBM 
for trying to create a complete operating environment. We are ??ing 
the era when users cured about software and took the time to learn a 
variety of different packages and understand the differences. Most 
computers today are being bought by novice PC users. and these 
newcomers requires software that is easy to use. They want Windows 
point-and-click software, not arcane commands.
    But I believe competition is, for all practical purposes. 
"locked out" when operating systems developers can 
m??grate their own applications and so much "free" 
third-party software in a single, seamie?? package. If this doesn't 
raise a red flag in the offices of the U.S. Justice Department, then 
our regulators are asleep at the switch.
    Here's the bottom one: Will you be better off five years from 
now without Lotus" SmartSuite Windows? Without PerfectOffice? 
Without WinFax? Without any choice?
    Patton is chief analyst at the ?? Technology Group at Mend?? 
N.J. and publisher of "Windows Letter." a ?? better for 
corporate decision-maters Her book. US/? Gold??, will be available 
?? Van Nostrand Heihold in March. Contact ??
    COMPUTI[RWORLO NOVEMBER In. 199& 57
    TAB 9
    TO APPENDIX TO MEMORANDUM OF AMICI CURIAE IN OPPOSITION TO 
PROPOSED FINAL JUDGMENT
    IN CIVIL ACTION NO. 94-1564 (SS)
    SIGNED BY GARY REBACK
    Developing for next generation or Windows may mean running on NT 
??
    TAB 10
    TO APPENDIX TO MEMORANDUM OF AMICI CURIAE IN OPPOSITION TO 
PROPOSED FINAL JUDGMENT
    IN CIVIL ACTION NO. 94-1564 (SS)
    SIGNED BY GARY REBACK
    Can Microsoft get SQL Server on everything from big iron to 
steam irons? If you think OLE everywhere is the future, the answer 
is yes.
    By J. William Semich
    The LONG VIEW from Microsoft: Component DBMSs THEY JUST DON'T 
GET IT. Informix, Oracle, Sybase- all the top database-system 
companies. They watch in a dither for a year while Microsoft messes 
up their space with its dirt-cheap SQL Server For NT database 
technologies, and they think that Microsoft is being random (as Bill 
Gates might put it) with pricing that just doesn't make sense. 
Dangerously random. But the UNIX database oligopoly is only haft 
right. They got the danger part right. Because it turns out 
Microsoft has a plan. When the company announced its future SQL 
Server 95 last June. the SQL Server crew had its three-year strategy 
all mapped out. 'Course, they didn't show that map at the 
announcement-- only Micros offs top management had seen and 
approved it. But we got an in-depth look after hours, and we'd like 
to share it with you.
    Microsoft is taking a three-pronged strategy with its SQL Server 
technology. For symmetry's sake. We'll label the prongs "Three 
Hundred Million Servers." "Three Hundred 
Processors," and "Three Hundred Objects." If 
Microsoft succeeds ma all three fronts, the face of computing will 
change, and so will the trajectories of the high-flying database 
vendors.
    THREE HUNDRED MILLION SERVERS First. there's the Three Hundred 
Million Servers strategy. That's basically a price strategy. 
Microsoft thinks it can push the price of the powerful database 
server soft-ware central to enterprisewide distributed computing so 
low that all your future computing systems will be based on data-
base servers running on super powerful, cheap boxes. This is no: a 
"servers attack the mainframe" strategy, though, 
cautions Microsoft's director of enterprise computing. David 
Vaskevitch. It's more of a "servers run the business: 
approach.
    "There are 11 million places of business in the U.S. 
alone. They're "all doing things right now that servers could 
help them do better." Vaskevitch explains. "And there 
are other things they never dreamed of being able to do; servers can 
make those things happen, too." That blue-sky approach means, 
for example, that SQL servers could run your phone system, copying 
system, cash registers, all that stuff. Not hard to get to 300 
million that way, eh?
    This won't happen overnight, adds Vaskevitch. but he sees it as 
inevitable over the long term.
    THREE HUNDRED PROCESSORS
    Second. there's Microsoft's high-end corporate-computing 
strategy. By this time next year. when Microsoft ships the next 
upgrade of SQL Server For NT (code-named SQL Server 95, now 
officially named Microsoft SQL Server)," its data-base server 
will be able to run on the most powerful mainframe-class 
multiprocessor computers and virtually match the power. Features. 
and functions of the latest multiprocessor and parallel-processing 
products From the UNIX vendors.
    You could call this the Three Hundred Processors Strategy and 
you'd not be half wrong. Well. maybe not 300 processors-at least not 
right away.
    The Three Hundred Processors Strategy. is actually one way 
Microsoft plans to become a major player in large-scale, mission-
critical computing technologies. Microsoft recently restructured 
itself to better Focus resources on making it happen.
    Last year. prior to restructuring, Microsoft sold just under S5 
billion worth of PC

[[Page 29248]]

software in a market that totals barely S10 billion. With its high-
end corporate strategy, Microsoft intends to move into the S?0 
billion+ market for business software, so it can grow lickety split 
to something like $20 billion.
    "We'll need to be selling into a $100 billion software 
market to Bet to that S20 million." says Richard Tong, 
marketing director for Microsoft's new IS-focused Business Systems 
Division.
    Of course, sitting squarely in the middle of that enterprise 
computing market are the likes of Computer Associates. Oracle. 
Sybase-you know the names. They won't let on that they're really 
concerned about the competition From Microsoft. They say Microsoft's 
big talk is just smoke. So how does Microsoft intend to prove them 
wrong?
    Early prowess toward the long-term Three Hundred Million Servers 
kraal will help Microsoft achieve its aggressive revenue growth 
forecast, but performance improvements will help more.
    By 1996. when Microsoft ships its even more advanced SQL Server 
For Cairo. it expects it to actually outperform Informix-Online 
Dynamic Server 6.0. Oracle7.1. and Sybase System l0 (see "MS-
SQL,
    MS--$QL Server: Good Today, Better Tomorrow Think you'll 
ever seriously consider swapping your mission-critical DB2-based 
financial management system, or oracle 7-based airline reservation 
system, or even your Sybase SQL Server 10-based loan approval system 
for a realty complex Excel spreadsheet with a SQL Server engine? 
Hah!
    But Bill Gates is betting the company that you will. Not exactly 
an Excel spreadsheet, of course--but a whole new kind of 
mission-critical, high-availability, heavy-duty, object-oriented, 
component-based enterprise system that includes the next generations 
of Microsoft's Windows NT operating system (dubbed Calro), the new 
SQL Server 95 (and the w??announced SQL Server For Calro), and its 
coming distributed OLE technology. All this will happen in the next 
year or two, a not-so-distant future that Microsoft internally 
refers to as "the Calro timeframe." At right is the 
techno-time line Microsoft hopes will turn into reality:
    Server: Good Today, Better Tomorrow").
    THREE HUNDRED OBJECTS
    Third, there's the Three Hundred Objects prong of Microsoft's 
strategy, the component-software-system pieces. In order to build 
enterprise-computing systems From reusable mix-and-match software 
components, you need more than the object-oriented operating system 
Cairo, distributed OLE, and the Visual Basic enterprise development 
tool technologies. You need a technology that turns desktops and 
servers into peers when it comes to storing, sharing, and finding 
objects.
    To help make this happen. Microsoft is moving SQL Server 
technology down- The Metamorphosis of Microsoft SQL Server 1994
    SQL Server 4.21s ?? 1996 scale, onto the desktop.
    The plan is to use pieces of MS-SQL Server technology to rebuild 
desktop apps like Microsoft Access and Excel so desktops and server 
components can talk to each other. "There's this huge 
mismatch, in terms of semantics, between the big server-based 
database systems and the tools that run on the desktop." saves 
Gary Voth. ?? The SQL Server NT Decision: One Insider's Advice
    By an anonymous lilac resort technology partner You'd be crazy 
not to start looking seriously at Microsoft s SQL Server 95 
technology. But you'd also be crazy-OK, not crazy, just 
adventuresome--to commit your company today to Microsoft's 
component enterprise-computing plan lock, stock, and betel.
    Even so, rye looked at SQL Server 95 and 96 up close and 
undressed, sort of, and it is something really slick. Microsoft 
recently demonstrated an early, early version to my company In the 
hopes that we would port our apps to SQL Server For NT. I can't tell 
you my company's name, but it's one of the leading midrange 
manufacturing packaged software application vendors.
    First off, I was surprised and impressed at the level of the 
technology they're showing in SQL 95 and SQL 96. Microsoft looks 
like it's paying attention to the issues that are Important to 
making SQL Server an enterprise-quality database management system.
    They seem to be building In a scalabilary capability for 
symmetric multiprocessors, and they're leveraging the multithreaded 
capability of the NT operating system. That gives them leg up on the 
other database products, which rely on different versions of UNIX. 
Some versions of UNIX don't support multi-threading, so everything 
goes through a single queue. Microsoft isn't constrained by that.
    SQL Server 95's new system administration toolsets [Starfighter] 
are very impressive. Microsoft is plying a lot of attention to 
things like ease of use and the kinds of data replication issues 
that are necessary to manage performance and backup, and necessary 
for bet-back-up capabilities, parlor. mange monitoring, and job 
scheduling. The SQL 95 job scheduler is integrated into NT. That 
technology alone shows that Microsoft is trying to listen to 
enterprisewide needs. I don't see SQL 96 as a scaled-down version of 
Sybase System 10 at all. It appears to have the same robust 
capability that Sybase has.
    That said, I still chose Sybase System 20 for the next version 
of my company's packaged software. Why? Because my customers can buy 
it today, and I know it works and works well. And if I were a CI0 or 
CTO at a large enterprise, I would do the same thing.
    SQL Server 96 is an "NT only" 
solution--whatever advanced functionality Microsoft's building 
into it now is predicated on the success of fir. That's still an 
open question.
    Besides, Microsoft's track record on delivering both functional 
and technical quality products out of the box isn't what I'd like it 
to be for k kinds of solutions I'm trying to still. I'm net soiling 
spreadsheets and wad processors. Plus, Microsoft has no track record 
celling enterprise systems ?? applications. It's a gamble.
    My recommendation ?? don't bet your job or your company on 
Microsoft SQL Server and NT Server to. Let Microsoft's existing 
dedicated INT users do that instead.
    Software systems across geographically dispersed servers with 
stuff like drag-and-drop replication, automated restore and restart. 
The tools, which Microsoft previously code-named Starfighter but has 
officially named Enterprise Administration Tools For SQL Server 95. 
are "all OLE objects. Starfighter lets users build their own 
database management scripts using a new 32-bit version of Visual 
Basic. SQL Server 95 itself is. in effect. an OLE automation server 
for these OLE tools and scripts.
    In other words. Microsoft is rebuilding SQL Server so that it 
can contain and manage software components. When SQL Server For 
Cairo is shipping, Microsoft's world of computing will become a 
world of OLE objects-components that a developer can link together 
using OLE's APIs into an application. Then SQL Server won't just 
store data-it will contain components.
    Explains Casey Kiernan. Microsoft's program manager for SQL 
Server tools: ?? "All of our server apps-SQL Server. Systems 
Management Server. Information Exchange Server, and SNA 
Server--will have this single integrated model in Cairo," 
he explains. n
    The company is serious about this, too, Vaskevitch says. No 
matter how long it takes, or h6w much work has to be done to make 
the technology compelling to commercial users, the company is 
committed to making its NT-based SQL Server the enterprise launching 
pad for its Cairo component-computing system.
    "We've already invested three years in the planning 
process for SQL Server. and it doesn't bother us if it takes five. 
even eight years to Let to where we want to be--we don't give 
up." says Vaskevitch. It probably doesn't hurt to have deep 
pockets. either.
    THE FUTURE Of TECHNOLOGY & PRICING
    So there it is-the future of enterprise computing according to 
Microsoft. the world's richest software company. And where will 
"all the UNIX database companies be, come Cairo time? Today, 
at least, they still act like they don't have a due.
    They still think they can advance the technology by making their 
database systems into bigger, better, faster (and pricier) versions 
of what they've been selling for the past decade and a half-with, of 
course, the magic sobriquet "open" pasted onto it 
"all
    They may think that. But according to Microsoft's plan, all 
these big. distributed UNIX megaliths will soon seem just as rigid, 
overpriced, oversized, and outdated
    TAB 11
    TO APPENDIX TO MEMORANDUM OF AMICI CURIAE IN OPPOSITION TO 
PROPOSED FINAL JUDGMENTIN OPPOSITION TO PROPOSED FINAL JUDGMENT
    IN CIVIL ACTION NO. 94-1564 (SS)
    SIGNED BY GARY REBACK
    Preface
    The year 1993 was one of dramatic change in the PC software 
industry. This report will highlight the major events of 1993 in 
personal computing software. We analyze the positioning and 
directions of the top 10 vendors, dissect our data, and then analyze 
applications by category., operating system,

[[Page 29249]]

and region. We conclude with our forecast of future trends in the 
industry.
    Data included in this report is listed as needed for our 
discussion. For a comprehensive list of our historical data and 
forecasts, refer to the Persona/ Computing Software Worldwide Market 
Statistics, a series of three reports published in June 1994 
(product codes: PCSW-WW-MS-9401, -9402, and 
-9403).
    Dataquest's PC Software service tracks all major PC software 
business productivity applications running on the DOS, Windows, 
Macintosh, OS/2, and Windows NT operating systems and environments. 
Other services concentrate on other areas of the software market our 
Multi-media service tracks entertainment and education .software; 
our Client/Server service tracks development tools and server 
databases; and our Digital Documents and Operating Systems services 
complete the offerings.
    In Appendix A, we define our market coverage boundaries. In 
Appendix B, we discuss the methodology used to arrive at our 
decisions. We hope that you find this information useful Please 
contact us if you have any questions regarding the data or analysis.
    The PC Software Team
    Karl Wong, Principal Analyst
    internet: [email protected]; phone: (408) 
437-8213
    Bryan Fukuda, Industry Analyst
    internet: [email protected]; phone: (408) 
437-8153
    Suzanne Snygg, Industry Analyst
    internet: ssnyggdataquest.com; phone: (408) 437-8R24
    [ingsheng Huang,, Research Analyst
    internet: jhuangdataquest.com; phone: (408) 437-8g160
    FILED FEB 14
    Clerk, U.S. District Court
    District of Columbim
    (c) 1994 Dataquest Incorporated
    Personal Computing Software Worldwide
    Figure 4-2
    1993 Unit Shipments Growth by Category
    Analysis of Each Category
    This section will analyze the 1993 results for each category. 
Future trends for each category will be discussed in Chapter 7. For 
a definition of each category, see Appendix C.
    Accounting
    Intuit, a new entry in the accounting market in 1992, jumped to 
the top spot in revenue in 1993 (see Table 4-1). Realworld, 
Peachtree, and Great Plains all ship products that have a higher ASP 
than Intuit; however, revenue for all four companies is very closely 
matched in the U.S.$20 million range. A slow transition to thin 
Windows platform contributed to the revenue decline in I993.
    Communication
    The communication market exploded in 1993. Bundling arrangements 
with modem OEMs contributed significantly to the 167 percent growth 
in unit shipments (see Table 4-2)). Revenue increased by an 
impressive 47 percent. Delrina's WinFax: Pro and Datastorm's Procomm 
Plus led the charge. The growth of the laptop market also spurred 
unit sales. There is still room for growth in this [market, but 1993 
will be remembered as the year this market really took off.
    PCSW-WW--MT-9401 (c)1994 Dataquest Incorporated June 27, 
1994

                          Table 4-12.--Top Vendors in the Spreadsheet Market
                                      [Revenue in Millions of U.S. Dollars]
----------------------------------------------------------------------------------------------------------------
                                                     1993       1992     1993 Market Share
                                              Revenue    Revenue           (%)          Revenue Change  (%)
----------------------------------------------------------------------------------------------------------------
Lotus...........................................      445.9      502.2                46.1           -11.2
Microsoft.......................................      357.0      484.4                36.9           -26.3
Borland.........................................       69.5      121.4                 7.2           -42.8
    Total Spreadsheet--Market..............      968.0    1,262.3               100.0           -23.3 
----------------------------------------------------------------------------------------------------------------
Source: Dataquest (May 1994)


                            Table 4-13.--Top Vendors in the Suites Market
                                      [Revenue in Millions of U.S. Dollars]
----------------------------------------------------------------------------------------------------------------
                                                     1993       1992     1993 Market Share
                                              Revenue    Revenue           (%)          Revenue Change  (%)
----------------------------------------------------------------------------------------------------------------
Microsoft.......................................      821.2      213.0                85.4                 285.5
Lotus 114.8.....................................       16.1       11.9               612.7               
Borland 17.7....................................        0          1.8                  NA               
    Total Suite Market 961.5....................      229.1      100.0               319.7              
----------------------------------------------------------------------------------------------------------------
NA* Not applicable
Source: Dataquest (May 1994)

    Utilities/Application
    WordPerfect's Grammatik for both DOS and Windows were the two 
leading applications in 1993. WordPerfect garnered a 36 percent 
market share based on revenue in 1993 (see Table 4-14). This 
is a small market that involves small companies able to find a niche 
market. This is not a market where we will likely see one or two 
vendors dominate.

                     Table 4-14.--Top Vendors in the Application Utilities Market
                                      [Revenue in Millions of U.S. Dollars]
----------------------------------------------------------------------------------------------------------------
                                                     1993       1992     1993 Market Share   Revenue Change  (%)
                                              Revenue    Revenue           (%)           (1992-1993)
----------------------------------------------------------------------------------------------------------------
WordPerfect.....................................       24.1        0                  36.2                  NA
Wordstar........................................        5.8        9.2                 8.8           -36.5
Adobe...........................................        4.9        5.7                 7.3           -14.0
T/Maker.........................................        4.0        3.7                 6.0                   8.8
    Total Application--Utilities Market....       66.6       69.8               100.0            -4.6 
----------------------------------------------------------------------------------------------------------------
NA = Not applicable
Source: Dataquest (May 1994)


[[Page 29250]]

    PCSW-wW-MT-9401
    (c)11994 Dataquest Incorporated
    June 27. 1994
    TAB 12
    TO APPENDIX TO MEMORANDUM OF AMICI CURIAE IN OPPOSITION TO 
PROPOSED FINAL JUDGMENT
    IN CIVIL ACTION NO. 94-1564 (SS)
    SIGNED BY GARY REBACK
    FILED FOR IMMEDIATE RELEASE SATURDAY, JULY 16, 1994
    Clerk, U.S. District Court
    District of Columbia AT
    (202) 616-2771
    TDD (202) 514-1888
    MICROSOFT AGREES TO END UNFAIR MONOPOLISTIC PRACTICES 
WASHINGTON, DC--Microsoft, the world's largest and dominant 
computer software company, agreed to end its illegal monopolistic 
practices after the Department of Justice charged that the company 
used unfair contracts that choked off competition and preserved its 
monopoly position.
    The company agreed to settle the charges with a consent decree 
that will prohibit Microsoft from engaging in these monopolistic 
practices in the future.
    Microsoft, which makes the MS-DOS and Windows operating systems 
used in more than 120 million personal computers, was accused of 
building a barricade of exclusionary and unreasonably restrictive 
licensing agreements to deny others an opportunity to develop and 
market competing products.
    Attorney General Janet Reno said, "Microsoft's unfair 
contracting practices have denied other U.S. companies a fair chance 
to compete, deprived consumers of an effective choice among 
competing PC operating systems, and slowed innovation.
    (MORE)
    Today's settlement levels the playing field and opens the door 
for competition."
    "Microsoft is an American success story but there is no 
excuse for any company to try to cement its success through unlawful 
means, as Microsoft has done with its contracting practices," 
said Anne K. Bingaman, Assistant Attorney General in charge of the 
Antitrust Division.
    The settlement is the result of close coordination between the 
Department of Justice and the competition enforcement authorities of 
the European Commission, which has been investigating Microsoft 
since mid-1993, and which also initiated an undertaking containing 
essentially the same terms. This complaint and settlement marks the 
first coordinated effort of the two enforcement bodies in initiating 
and settling an antitrust enforcement action.
    Bingaman, praised the Commission, noting that, "This 
unprecedented, historic cooperative action sends a powerful message 
to firms around the world that the antitrust authorities of the 
United States and the European Commission are prepared to move 
decisively and promptly to pool resources to attack conduct by 
multinational firms that violate the antitrust laws of the two 
Jurisdictions."
    The civil complaint and consent decree were filed last night, 
July 15, in U.S. District Court in Washington, DC The consent 
decree, if approved by the court, would settle the suit.
    Until approved, Microsoft has agreed in a stipulation filed with 
the court to abide by the terms of the decree.
    The Department alleged that Microsoft used the following unfair 
practices:
    Exclusionary Per Processor Licenses--Microsoft makes its 
MS-DOS and Windows technology available on a "per 
processor" basis, which requires PC manufacturers to pay a fee 
to Microsoft for each computer shipped, whether or not the computer 
contains Microsoft operating system software. The complaint alleges 
that this arrangement gives Microsoft an unfair advantage by causing 
a manufacturer selling a non-Microsoft operating system to pay at 
least two royalties--one to Microsoft and one to its 
competitor-- thereby making a non-Microsoft unit more 
expensive.
    Microsoft has used its monopoly power, in effect, to levy a 
"tax" on PC manufacturers who would otherwise like to 
offer an alternative system," said Bingaman. "As a 
result, the ability of rival operating systems to compete has been 
impeded, innovation has been slowed and consumer choices have been 
limited." She noted that Microsoft has maintained the price of 
its operating systems while the price of other components has fallen 
dramatically. Since 1988, Microsoft's share of the market has never 
dropped below 70 percent.
    Unreasonably Lonq Licenses--The Department further alleged 
that Microsoft's contracts are unreasonably long. By binding 
manufacturers to the purchase of Microsoft products for an excessive 
period of time, beyond the lifetime of most operating system 
products, the agreements foreclose new entrants from gaining a 
sufficient toe-hold in the market.
    Restrictive Non-Disclosure Agreements--The Department also 
charged that Microsoft introduced overly restrictive non- disclosure 
agreements to unreasonably restrict the ability of independent 
software companies to work with developers of non- Microsoft 
operating systems. Microsoft sought the agreements from companies 
participating in trial testing of the new version of Windows, to be 
released later this year. The terms of these agreements preclude 
applications developers from working with Microsoft's competitors 
for an unreasonable amount of time.
    The settlement ends these practices and will help to rectify the 
effects of Microsoft's past unlawful conduct. In particular, the 
settlement prohibits Microsoft from:
    --Entering into per processor licenses.
    --Obligating licensees (manufacturers of personal 
computers) to purchase any minimum number of Microsoft's operating 
systems;
    --Entering into any licenses with terms longer than one 
year (although licensees may renew for another year on the same 
terms).
    --Requiring licensees to pay Microsoft on a "lump 
sum" basis.
    --Requiring licensees to purchase any other Microsoft 
product as a condition for licensing a particular Microsoft 
operating system.
    --Requiring developers of applications software to sign 
unlawfully restrictive non-disclosure agreements.
    The settlement is effective immediately and will be in effect 
for six and a half years.
    Bingaman said "this settlement resolves the competitive 
problems created by Microsoft's unlawful conduct quickly and 
effectively."
    Microsoft's main corporate office is in Redmond, Washington.
    ### 94-387
    ORIGINAL
    DEPARTMENT OF JUSTICE PRESS CONFERENCE
    With Attorney General Janet Reno and Assistant Attorney General 
Anne Bingaman
    Regarding the Microsoft Settlement
    Saturday, July 16, 1994
    (Transcribed from a provided audiotape.)
    ALDERSON REPORTING COMPANY, INC.
    (202)289-2260 (800) FOR DEPO
    1111 FOURTEENTH STREET, NW SUITE 400 / WASHINGTON, DC 20005
    P R O C E E D I N G S
    ATTORNEY GENERAL RENO: Good afternoon.
    The Justice Department has charged Microsoft, the world's 
largest software company, with using unfair marketing and 
contracting practices to choke off competition to preserve its 
monopoly position. Microsoft has agreed, yesterday, to settle the 
charges with a consent decree that will prohibit the company from 
continuing to engage in monopolistic practices in the future.
    While the company fairly and lawfully climbed to the top of the 
industry ladder, it used unfair and illegal practices to maintain 
its dominant position, and kept honest competition from other U.S. 
companies.
    The Justice Department has taken an action that is critical to 
the personal computer industry and the efforts to make it 
competitive. This settlement will save consumers money, enable them 
to have a choice when selecting PC operating systems, and it will 
stimulate innovation in this critical market.
    Today's settlement is the result of close coordination between 
the Department of Justice and the Competition Enforcement 
Authorities of the European Commission, which, today, also has 
indicated an undertaking containing essentially the same terms.
    This complaint and settlement marks the first coordinated effort 
of the two enforcement bodies in initiating and settling an 
antitrust enforcement action.
    I want to thank and to recognize Anne Bingaman and the fine 
staff of the Antitrust Division, who have worked through long hours 
of negotiations to resolve quickly this significant case, and 
achieve the best results for the consumers of America.
    And now I would like to ask Anne----
    MS. BINGAMAN: Thank you.
    We are proud of the achievement that the settlement filed in 
Federal District Court in Washington, the District of Columbia, at 
9:30 last night represents. It is a significant--in fact, 
historic--breakthrough for the software industry, for 
innovation, for the competitiveness of the American economy.

[[Page 29251]]

    Let me describe for you briefly what the case we filed is about 
and what the settlement achieves, because they are significant.
    Number one, the settlement will open the playing field; it will 
level the playing field for Microsoft's competitors in the operating 
system software market, to enter this important market, to bring 
down prices to consumers, to innovate, to produce better products.
    Microsoft, for years, and has today, monopoly Dower in the 
software--operating system software market AS this chart shows, 
Microsoft has 79-plus percent of that market. Its competitors are 
other American companies who have been struggling for years to enter 
this market to provide better, cheaper products to American 
consumers, and Microsoft's contracting practices, which are 
challenged in this lawsuit and which are ended by the settlement we 
achieved, have prevented those competitors from entering the market. 
They have deprived consumers of choice. And they have stopped 
innovation--slowed innovation in this important market.
    Let me describe to you the four major things that Microsoft did 
and which this settlement ends. Number one, the per-processor 
license, I'll describe in a moment.
    Number two, contracts of extraordinarily long duration which 
blocks the market. Number three, huge, 100 percent minimum 
commitments for years, which amounted to take-or-pay contracts, 
which blocked the market.
    And, four, restrictive non-disclosure agreements for software 
writers which prevented them from writing for other software 
companies in some cases. Let me turn first to the per-processor 
license, what that is and what this settlement does to stop it. 
Number one, the settlement bans it outright. That is first. What the 
per-processor license has done until last night at 9:30 was to lock 
up 60 percent of this market in the United States in per-processor 
contracts which Microsoft began using in 1988. Per-processor 
contracts are contracts which Microsoft imposed by virtue of its 
dominant monopoly position on computer manufacturers, such as Dell, 
Compaq, Gateway, you name it, the OEM's they are called in the 
business, the computer makers, who have to license from Microsoft 
because it has had this monopoly position and the products are 
demanded in the marketplace.
    Nothing wrong with that, but rather than simply sell those 
products fair and square on the merits and on price, in 1988, 
Microsoft invented a form of contracting called the per-processor 
license, under which it required the computer 
manufacturers--induced them with extremely low prices to pay 
for every processor they shipped of a certain type not just to 
Microsoft, but to the competitors. So it worked this way: Under a 
per-processor license, which 60 percent of the industry has had 
until last night, Microsoft got paid for every processor shipped by 
a computer maker, whether or not that processor had a Microsoft 
operating system loaded on it.
    Now, if you are a competitor of Microsoft and you wanted to sell 
your competing product to a consumer, you do that through these 
computer manufacturers. But they had to pay Microsoft.
    NOW, if Microsoft--take this hypothetical-- operating 
system was $15, and you came in with a better operating system or 
cheaper, it worked just as well, hypothetically $10--these 
numbers are lower than average, but for ease--under the per-
processor license, the computer manufacturer pays Microsoft 15 and 
the competitor 10 for a total of $25 on what really is a $10 item.
    The result, computer manufacturer were reluctant 
10--extremely reluctant--to buy from competitors. And that 
was the purpose and the effect of the per-processor license. It's 
obvious what it does. It drives prices up to consumers. It raises 
prices. It locks out competitors. And it slows innovation.
    So, this settlement stops the per-processor license.
    Two, Microsoft used contracts of three to five years in an 
industry that was rapidly turning over. These extraordinarily long 
contracts made it very difficult for competitors to get in. The 
settlement we achieved today reduces contract lengths to one year, 
with one, one-year extension on the same terms and conditions which 
the computer manufacturer, in its sole option, can elect.
    So, we have 9one to one-year contracts, banning of per-
processor.
    The third important feature of this settlement is abolishing 
minimum commitments. Microsoft's third way to lock up this market 
was to say to the computer makers who had to deal with it, We will 
give you a lower price if you estimate a large volume.
    Nothing inherently wrong with that volume discounting. The 
problem is Microsoft quoted these low prices in conjunction with 100 
percent minimum commitments --i.e., you get that price only if 
you sign on the dotted line to pay us every cent regardless of 
whether you actually ship our product or not--a take-or-pay 
contract. You pay no matter what.
    Well, what does that mean? Over a long-term contract, what that 
means is if the computer manufacturer's business has not gone quite 
as well as it thought, it is locked into Microsoft no matter what 
because it owes them this minimum commitment, even if it has not 
sold any machines. So, minimum commitments was a third way that 
Microsoft locked up this market, locked out competitors, and minimum 
commitments are abolished. They are zero in the settlement we 
achieved yesterday. Finally, NDA's, non-disclosure agreements, were 
restrictive agreements which Microsoft, this winter, imposed in a 
manner that had never been done before in the software industry on 
certain applications writers. It would have--the NDA's 
challenged in this lawsuit and which Microsoft in the consent decree 
agrees to stop would have prevented applications writers from 
discussing Microsoft's operating systems for as long as three years 
after public disclosure of the operating system.
    The effect could take those application writers, the software 
writers, forever out of business, in effect, except for Microsoft. 
It is another way to, in effect, lock up the market--this time 
by locking up the important software applications writers.
    Microsoft itself has said these NDA's were a mistake. It has 
agreed in this consent decree to never engage in such practices 
while this consent decree is in effect. And that also is a 
significant achievement of this settlement.
    The last thing the settlement does is prohibit the use of lump-
sum contracts, which would have been another way that Microsoft 
could have locked up this market. They had not needed to use them in 
the past because they had these other methods, but looking forward, 
our concern was that they might. And so the settlement also bans 
lump-sum contracts.
    This settlement is everything we could have hoped for in a fully 
litigated case and possibly more. It is an historic achievement. I 
tell you, the charts we have prepared today were prepared for the 
lawsuit we planned to file yesterday. The lawsuit was not filed 
because of the settlement. We filed instead a complaint with a 
settlement. We are extremely proud of this result.
    And the last point that the Attorney General noted, I think, 
deserves mention. This is the first time in history that the 
Competition Authorities of the European Commission and the 
Department of Justice have cooperated closely in investigating a 
major worldwide company, whose anti-competitive practices affected 
important markets both in Europe and the United States.
    we took this under a letter--the EC and I and the 
Department of Justice asked Microsoft last October to waive any 
confidentiality restrictions under our respective statutes so that 
we could work together and think about the case we were 
jointly--not jointly to them--but that we had each 
initiated. Microsoft agreed to that in writing. We worked with the 
EC throughout the winter. We shared documents. We worked closely 
with them. We settled this together on terms that are substantially 
identical. We negotiated in Brussels the week of July 4th with 
Microsoft. We negotiated this week at the Department of Justice with 
EC officials here. And this also is a truly historic aspect of this 
settlement.
    So, we are extremely proud of this. We are gratified that it 
concluded with a consent decree which achieves the really 100 
percent results that any lawsuit could have achieved, and possibly 
more. And I want to especially note that this was the ultimate team 
effort. We had a group of lawyers, led by Sam Miller, who is here 
today, and Don Russell, who is on his way back from Brussels 
--he has been in Brussels all week coordinating this hour by 
hour with the EC over there--we have had extraordinary people 
on this case. We had a team of lawyers I would put against anybody, 
and I would feel for the other side.
    And I want to simply state the names on the complaint we filed 
last night, because I am so proud to have been part of this group. 
The complaint was signed by Sam Miller, Don Russell, Joyce Bartu, 
Bob Zastrow, Dick Irvin, Peter Gray, Justin Dempsey, Gil O'Hana, and 
Larry Frankel. And there were more, and we had a paralegals. And 
this was an effort of a remarkable, extraordinary, incredible group 
of lawyers that I am so proud to have been part of. And I am proud 
of our partnership with the EC.
    So, with that, what can I tell you about any questions you have?

[[Page 29252]]

    QUESTION: What kind of room does this give Microsoft's 
competitors--(inaudible)--civil actions?
    MS. BINGAMAN: That is up to the competitors. I do not actually 
believe this case changes the legal status of any competitor's suit, 
because, by settling, Microsoft has admitted to no facts. It has 
consented to entry of the decree that was filed with our complaint. 
But facts are not established of record by a settlement, the way 
they are by a litigated case to conclusion, with a jury trial. So, 
my own horseback impression is that the action, as such, does not 
change the legal status. But, as far as private suits by 
competitors, it has enormous impact for competitors in opening the 
market. This is exactly what has been needed for years and years in 
the software industry. And I think, in the market-opening respects 
and for innovation, prices to consumers, it will have tremendous 
impact.
    QUESTION: Why has this taken so long, and why is there no 
monetary penalty? And I notice it says that--you say in the 
press release that it bans these practices in the future, but then 
says it only lasts six-and-a-half years.
    MS. BINGAMAN: Okay. You have got several questions there. Number 
one, we have had this case for a little less than one year. The FTC 
had it for, I think, two-and-a-half or three years before that. As 
everyone knows, or a lot of people, the FTC deadlocked two to two. 
We took the case acting as a fifth commissioner. We have looked 
carefully at this case because it is an important case, and we 
wanted to understand it fully ourselves.
    So, I have no concerns whatsoever about a one-year action by the 
Justice Department that ends these practices.
    There are no monetary penalties because they are not provided by 
any law and never have been. When the Justice Department settles a 
civil case, the Antitrust Division--the antitrust laws do not 
provide for civil penalties, period.
    We obtain adjunctive reliefs to open the market. Under the 
American legal system, private actions obtain any monetary damages, 
and that is just the way it is in all of our cases. They are no 
different. You had a third aspect.
    QUESTION: The length of time, you say--
    MS. BINGAMAN: Oh, the six-and-a-half years. Our decrees normally 
last 10 years. We negotiated long and hard with Microsoft over the 
length of the decree. The EC's decrees last four-and-a-half years. 
We obtained immediate effect of this decree. That was a crucial 
aspect of the decree. And we believe we added, in effect, three to 
three-and-a-half years on the front end of the decree because the 
contract duration stops right now. The per-processor stops as of 
last night.
    The illegal practices that had locked up the market are ended. 
And they do not have to wait for contracts now in effect to run out.
    And it was our belief that based on all of those facts, plus the 
EC's practice of four-and-a-half year decrees, that this was a fair 
balance under the circumstances.
    Let me mention something. I neglected to thank--and it was 
a major oversight on my part and I want to correct it--Henry 
Kawati is sitting here, who worked long and hard on this case, he is 
an economist with our Economic Section; Rich Gilbert, who is head of 
that section, was in Brussels with me; and Mark Schecter, who killed 
himself on the case, along with Bob Lighten, but I want to thank 
Henry Kawati and Ken Hire and Rich Gilbert, because the economics 
aspect of this case, as you can imagine, was critical. We had 
outstanding outside economists who Henry worked with tirelessly for 
many, many months. And he was a critical part of it, as was Rich 
Gilbert and Ken. So, I wanted to say that.
    QUESTION: Can you estimate how much these practices may have 
cost consumers over the years?
    MS. BINGAMAN: We have not. Because we do not bring damage 
actions, we do not put efforts into trying to figure out monetary 
total impact. But I can, to illustrate, tell you this. If you were a 
consumer and wanted to buy a competing operating system, and despite 
Microsoft's practices, there have been, in fact, four major 
competitors in this market to Microsoft, who have clawed and grabbed 
and have managed to obtain some market share, if you bought one of 
those competing companies, and 20 percent of the American public 
does, and you were under a per-processor license, and many of these 
licenses, as we saw, are per-processor, you paid not just Microsoft 
anywhere from $15 to $50 for its operating system, you paid the 
competing price on top of that.
    And so Microsoft, in effect, taxed every consumer who bought a 
competing operating system and bought it from a maker who had one of 
these per-processor contracts, or a similar one. And so it's not 
insignificant. We have not, as I said, made any effort to quantify 
it, but it is-- there are millions and tens of millions of PC's 
shipped every year, and it is a major amount of money. We can try to 
come up with some numbers after the press conference. But with all 
the other things we have done, that has not--our focus has been 
opening the market, truly, and obtaining the relief we needed.
    QUESTION: To follow that up, do you have any estimate of how 
many computers were shipped under these agreements that would have 
been effected?
    MS. BINGAMAN: I can come up with numbers on that. We have not 
tried to. It is in the tens of millions. There are 120 million total 
computers with Microsoft operating systems on them. Many, many were 
shipped with this--under these kinds of practices. And it has 
been a major market problem for competitors, and has restricted 
choice for consumers.
    Let me tell you why else this is so important to the American 
economy. We are about innovation and competition in this economy. 
That is what we are for. And Microsoft has its shot at the market. 
No problem. All we are saying is others should have their shot at 
the market, fair and square, a level playing field. That is the 
American way.
    And they may have a better mousetrap. They may not. But what we 
are saying is people should get a chance to judge it fairly on 
quality and price and the other factors. And that is what this case 
is about. It levels the playing field, opens the door.
    And if a competitor has a better product that can run computers 
faster, run them better, support better applications, build a base, 
cut into Microsoft's market share so that applications writers will 
write for it, that could have profound consequences for the American 
economy. What we are about is precisely that--promoting 
competition, innovation, better products at cheaper prices, and 
letting the market take care of whatever happens. We are not about 
driving the market; we are about letting the market operate freely.
    QUESTION: Had this settlement not been reached, what broader or 
further action could Microsoft have been subjected to? And, a second 
question is, had there been any serious consideration about 
splitting Microsoft into two?
    MS. BINGAMAN: I cannot discuss our internal considerations as 
such. I can tell you that we looked at every possible legal theory 
and at all the facts throughout the course of a long, tough winter, 
that the legal team I mentioned went through. And it was our 
conclusion at the end of that that the case to be filed was the case 
we did file. We did not bargain off any case in exchange for a 
settlement. This was the case that was there after thousands of 
hours of work. And it needed to be brought, and it was brought.
    And that is really as much as I think confidentiality permits me 
to talk about specifics.
    QUESTION: Potentially, had this gone into litigation, what could 
we have seen perhaps in terms of time and cost?
    MS. BINGAMAN: Had this been litigated, we hoped to conclude it 
within a year. We planned to file it in a district in which the 
dockets are not crowded and we could have obtained a quick 
resolution, because the markets need to be open. This needed to get 
done. But it would have been a minimum of a year at the very best. 
It undoubtedly would have been appealed. And the key point is, after 
all that, two to two-and-a-half years at best through appeal, we 
could not have achieved one thing more than we got in this 
settlement.
    And, frankly, I am not sure we would have gotten as much. I do 
not know, because I do not know what a judge would have done. But 
this settlement is 100 percent of what we would have gotten with a 
lawsuit.
    QUESTION: Can you tell us more about the EC cooperation, how and 
when was that initiated? And wasn't there a British investigation as 
well?
    MS. BINGAMAN: No, there was no British investigation. It was the 
European Commission. It was a result, actually--last September, 
I went to Europe for consultations, which are annual consultations 
with the EC that we have done for years, the Antitrust 
Division--it's a mutual cooperative thing--and Klaus 
Ailerman, the head of the Competition Directorate said to me, What 
are you doing about Microsoft, because we have a Microsoft case, 
too, you know, and I am very interested to talk to you about it?
    And I looked at him and I said, Klaus, I do not think I can say 
a word to you about Microsoft. Everything I know is under 
confidential documents. I am forbidden from talking about it. I 
can't speak to you.

[[Page 29253]]

    And he said, Well, what a great pity, because we've got, as far 
as I can tell from press reports, the same case.
    And I said, Well, it is a great pity. And I came back to the 
United States--that was the end of September--and 10 days 
or two weeks later, it just hit me out of the blue one day, we 
should ask Microsoft to waive confidentiality so that we could 
cooperate and decide whether in fact there is a case and coordinate 
remedies.
    And the coordination of remedies is really crucial for a company 
in Microsoft's position, which operates worldwide, literally, 
in--I do not know--tens of countries in the world. They 
need, for their own business reasons, to have the same contracting 
practices. It would be terribly disruptive--and I called the 
EC. We asked Microsoft. Microsoft, for its own reasons, said that 
would actually--they didn't have a problem. They waived 
confidentiality. And that is how it began last October, and it has 
continued since then.
    QUESTION: How is the Justice Department going to monitor the new 
agreements, the new contracts that Microsoft will sign with its 
OEM's? And what guarantees are there that Microsoft isn't going to 
turn around and say, you know, if we cannot do the kinds of volume 
deals that we have done in the past, we are going to charge 5, 10, 
15 percent for the operating system than we have in the past?
    MS. BINGAMAN: If they charge more for their operating system, 
the competitors are there, without question, with comparable 
products. And the market should take care of that. That is the whole 
idea of this settlement. The market should take care of it. We are 
allowed, in the monitoring provisions of this decree, which you 
should have, to request documents from Microsoft, to inspect their 
contracts, to talk to their people. We are further--the decree 
specifically provides we can cooperate with the EC in this 
monitoring, so we will continue our cooperation and close work with 
them. And we are watching. We are very much on the case.
    QUESTION: A question about the per-processor issue. From your 
presentation it wasn't entirely clear to me, but it sounds as though 
Microsoft main pressure on computer companies was that they 
got--they would offer huge, huge discounts to the companies 
that would accept a per-processor kind of agreement. That being the 
case, it seems to me that, on one level, the sin is that Microsoft 
is simply charging too little for the operating system. And, to 
follow up on that, to follow up on that, it seems to me that the 
marketplace situation may not be a whole lot different, because 
Microsoft can continue, it seems to me, to charge that same low, low 
price.
    MS. BINGAMAN: Ed, you been talking to Microsoft? That is their 
line. They are not telling you right. If that was so easy, why did 
they have per-processor licenses? They are the only company in the 
industry that did. Why did they have three- to five-year contracts? 
They are the only company that in the industry that did. Why did 
they have 100 percent minimum commitments? They are the only company 
in the industry that enforced that.
    If this was so simple, why were they locking up the market with 
practices which every computer manufacturer despised and which the 
competitors despised and which Microsoft hung tough through four 
years of Government investigation to hang on to? Do you think that 
is because it did not matter to them? That is the story they are 
putting out.
    You are darned right they are trying to spin it their way. That 
is not right. And let me tell you. Volume discounts, of course they 
can volume discount. No question. There is nothing wrong with volume 
discounting. It is done in all kinds of industries, in all kinds of 
situations. And the decree does not address volume discounts as 
such. The problem with Microsoft's practices is that they were using 
volume discounts to lock up the market with per-processor contracts 
and 100 percent minimum commitments, which then were like iron. You 
could not get out of. You could not escape.
    To get those low prices, you had to sell your soul and never 
leave Microsoft. And that is what this decree changes.
    Microsoft can compete on the basis of low price. We have no 
problem with that. That is good. We want that. What we do not want 
is competing on the basis of low price and then using that to impose 
contract terms which exclude every other competitor.
    And, Ed, the reason they were able to do that is because of 
their monopoly position in this market. I mean, this is an important 
question you are asking, because they are going to try to claim that 
this decree changes nothing. That is wrong. That is a lie. And 
people need to understand that.
    Because volume discounting, in and of itself, is not a problem. 
There are ways volume discounting can be abused. I have discussed 
those ways with Microsoft and Bill Gates. We are watching. We are 
watching closely what they do with volume discounts. They know it. I 
know it. And we are going to see what happens here.
    But volume discounting, in and of itself, is not a problem. 
There can be problems in how you structure them, whether you 
force--it's a technical discussion. But, in any event, believe 
me, they did not hang tough on this for so long, right to the brink 
of a joint lawsuit by the U.S. and the EC yesterday because these 
practices" were so harmless and meaningless and so forth. But 
I can see why they say it.
    (Laughter.)
    QUESTION: Is there going to be an immediate effect that we will 
notice for consumers?
    MS. BINGAMAN: I hope consumers, within a short period of time, 
will have more choice of operating systems, genuine choice, more 
innovation in computers. Certainly, the prices will lower for 
consumers who already buy competing operating systems. Any of these 
companies in the market right now can now sell just for their price, 
not for this double tax that Microsoft has gotten.
    So, I think prices will immediately lower, and I think, over the 
medium to long range, this will, I hope and believe, have profound 
market opening impacts. It will help innovation, help the 
competition give us better products. You may be using a different 
operating system three years from now because of this--maybe. 
And if you are, great. If you still want whatever, great. But the 
point is you should have a choice. Everyone should have a choice. 
And the companies that compete with Microsoft should be able to 
offer you that choice fairly and evenly.
    VOICE: Thank you.
    QUESTION: Microsoft's competitors in applications have 
complained about the access that they have had to all kinds of 
information about the operating system code. Did the Justice 
Department not find that Microsoft had unfairly restricted 
applications developers to various aspects of the software?
    MS. BINGAMAN: The nondisclosure agreement, the so-called NDA 
part of the case, focused on nondisclosure agreements 
required--are you talking about something else?
    QUESTION: I mean, certainly the NDA has been part of it, but 
other companies--
    MS. BINGAMAN: The so-called interoperability?
    QUESTION: Yes, yes, hidden calls and all of the charges that 
have been raised over the past few--
    MS. BINGAMAN: I can tell you we have looked closely at all 
aspects of this case. We have examined it closely. And I think all 
that I can say, because of the strictures of confidentiality and the 
law, is that we have looked at it and this is the case we chose to 
bring because this is the case that is there and needed to be 
brought. And I think that is all I should say. VOICE: Okay. Thank 
you.
    VOICE: Thank you.
    MS. BINGAMAN: Okay. Thank you.
    VOICE: Thank you very much.
    (End of proceedings.)
    TAB 13
    TO APPENDIX TO MEMORANDUM OF AMICI CURIAE IN OPPOSITION TO 
PROPOSED FINAL JUDGMENT
    IN CIVIL ACTION NO. 94-1564 (SS)
    SIGNED BY GARY REBACK
    Microsoft's Grip on Software
    Tightened by Antitrust Deal
    94-1564
    Clerk, U.S. District Court District of Columbia
    Andrew Schulman
    On Friday, July 15. Microsoft signed a consent decree with the 
Antitrust Division of the U.S. Department of Justice (DoJ), ending a 
four-year investigation by U.S. antimonopoly agencies-first the 
Federal Trade Commission (FTC) and later the DoJ--into 
Microsoft's trade practices. At the same time, Microsoft signed a 
nearly identical settlement with the Directorate-General for 
Competition of the European Commission. The judgment lasts for six 
and a half years in the U.S., four and a half in Europe.
    Microsoft agreed to immediately abandon several arrangements for 
licensing the MS-DOS and Windows operating systems to PC hardware 
vendors. It also agreed to halt some "unnecessarily 
restrictive" clauses in its nondisclosure agreements (NDAs) 
for the forthcoming "Chicago" version of Windows. The 
consent decree explicitly excludes Windows NT.
    The consent decree is still subject to a 60-day public review. 
The full text of the DoJ's July 15 complaint against Microsoft for 
violations of sections 1 and 2 of the Sherman antitrust act. the 
U.S. District Court final judgment in U.S. v. Microsoft, and the

[[Page 29254]]

"Stipulation" signed by the DoJ and Microsoft consenting 
to the final judgment. are available via Internet Gopher from the 
DoJ's Gopher server. Who Won?
    The consent decree was first viewed as a victory for the DoJ and 
Microsoft's competitors. The New York Trines (July 17) cartied the 
front-page headline. "Microsoft's Grip on Software Loosened by 
Antitrust Deal," and crowed that "the pact could reshape 
the world of computing .... The accord could undermine Microsoft's 
near total control of tile market for operating systems." The 
Boston Globe's headline was equally enthusiastic: "Microsoft 
Accord to Greate Competition in US. Europe."
    Indeed. the consent decree sounds at first as if it should cramp 
Microsoft's style, and lead to more competition in PC software. For 
years. Microsoft tins provided PC hardware manufacturers (original 
equipment manufacturers, or OEMs) with per-processor licenses to MS-
DOS and Windows. in which the vendor pays Microsoft based on the 
number of machines it think it will ship, rather than the number of 
copies of DOS or Windows it actually uses. In 1993, such per-
processor agreements accounted for about 60 percent of MS-DOS OEM 
sales, and 43 percent of Windows OEM sales. According to the DoJ, 
"Microsoft's per processor contracts penalize OEMs. during the 
Life of the contract, for installing a nonMicrosoft operating 
system. OEMs that have signed per processor contracts with Microsoft 
are deterred from using competitive alternatives to Microsoft 
operating systems."
    The consent decree put an immediate stop to this practice, 
leading to the hope that non-Microsoft operating systems would now 
have a shot at the desktop.
    But the morning after, nearly everyone realized that. in fact, 
U.S. v. Microsoft is a victory, for Microsoft. Directly 
contradicting the previous day's headline, a New York Times (July 
18) news analysis by John Markoff spoke of "Microsoft's Barely 
Limited Future": "Rather than reining in the Microsoft 
Corporation, the consent decree... frees the company to define 
compurer industry's ground rules through the rest of the 
decade." The Wall Street Journal had a similar take: "A 
Winning Deal: Microsoft Will Remain Dominant Despite Pact In 
Antitrust Dispute." According to the Journal Gates -has just 
won big again, this time by letting the Justice Department rake in a 
small pot while his company retains the power to dominate the 
nation's desktops.
    In the Fast day of trading after the settlement. Wall Street 
made its statement on the consent decree: Microsoft stock rose 
$1.87, to $50,50. Rick Sherlund, an analyst for Goldman Sachs, 
stated that with the settlement. Microsoft "should dominate 
the market for desktop software for the next 10 years." 
Another frequently quoted analyst. Richard Shaffer, announced that -
The operating system wars are over--Microsoft is the winner 
.... Microsoft is the Standard Oil of its day." But how could 
a ban on an important Microsoft trade practice be viewed as 
cementing Microsoft's hold on the industry? First. to achieve the 
DoJ's goals, the change from per-processor to per-copy licensing 
probably comes about four years too late. Despite some brave words 
from IBM and Novell after the consent decree. it seems unlikely that 
the change will lead to a larger presence for OS/2 or Novell DOS. As 
a spokesman for Compaq (which already offers OS/2 to its customers) 
noted, "Windows is the standard--not much will 
change."
    Nor does the consent decree address the key questions about 
Microsoft's role in the PC software industry. Companies such as 
Lotus and Borland that compete with Microsoft in application areas 
such as word processors and spreadsheets have long asserted that 
Microsoft "leverages" its control of the operating 
system to benefit its applications--particularly the Microsoft 
Office "suite," which bundles together Microsoft Word. 
Excel, Access, Mail, and PowerPoint--at the expense of 
applications and suites from other vendors. Grabbing the Whole Pie 
More and more. Microsoft's applications seem like part of the 
operating system. Many PCs today come. not only with MS- DOS and 
Windows preinstalled on the hard disk, but also with Microsoft 
Office. The forthcoming "Chicago" release of Windows 
will include numerous features once considered the province of 
dried-party applications developers. Microsoft not only has a near-
monopoly on the operating system. but is constantly expanding the 
definition of what belongs in the operating system.
    Some commentators see these increasing ties, and the DoJ's 
apparent refusal to touch them, as a good thing. For example, 
Steward Alsop was quoted in the New York Times (July 18) as saying, 
"If you really care about improving the personal computer, you 
want Microsoft to take over all the pieces of the pie."
    There is a certain logic in this. For example, one reason the 
Apple Macintosh was for so long far easier to use than a PC was that 
Apple had a closed architecture and completely dominated the market, 
guaranteeing that almost everything carne from a single vendor. 
Monopoly has some clear benefits. In certain situations. such as 
public utilities, monopoly may he the only viable industry 
structure, leading to a so-called "natural monopoly."
    Dr Dobb's Journal, October 1994
    Interestingly. the superb biography Gates, by Stephen Manes and 
Paul Andrews Doubleday, 1993), quotes a 1981 statement by Microsoft 
chairman Bill Gates where he noted that volume and standards in PC 
software can lead to a "natural monopoly" But companies 
in such a favored position usually are forced to make an Important 
trade-off: so-called natural monopolies are generally regulated, are 
prevented from expanding their monopoly into new areas, and so on. 
Microsoft continues to deny that it monopolizes the PC software 
industry Microsoft already has MS-DOS installed on about 120 million 
PCs in the and Windows on about 50 million. With the DoJ consent 
decree, Microsoft can move even more rapidly toward its goal of 
becoming an unregulated, nonpublic utility providing total, one-stop 
shopping for all your software needs.
    Exposing Microsoft's Monopoly Microsoft continues to deny that 
it monopolizes the PC software industry. Nor has it admitted to any 
guilt by consenting to the court's final judgment. The consent is 
explicitly "without trial or adjudication of any issue of fact 
or law: and without this Final Judgment constituting any evidence or 
admission by any party with respect to any issue of fact or 
law."
    Nonetheless. the PC software industry has been treated to some 
puzzling denunciations of Microsoft trade practices from high 
government officials. After the signing of the consent decree. U.S. 
Attorney General Janet Reno said. "Microsoft's unfair 
contracting practices have denied other U.S. companies a fair chance 
to compete, deprived consumers of an effective choice among 
competing PC operating systems, and slowed innovation."
    The Assistant Attorney General for Antitrust. Anne Bingaman, 
noted that 'Microsoft is an American success story but there 
is no excuse for any company to try to cement its success through 
unlawful means, as Microsoft has done with its contracting 
practices."
    'Microsoft has used its monopoly power, in effect, to levy 
a 'tax" on PC manufacturers who would otherwise like to 
offer an alternative system." said Binga??an. "As a 
result, the ability of rival operating systems to compete has been 
impeded. innovation has been slowed and consumer choices have been 
limited." According to a DoJ press release. Bingaman noted 
that Microsoft has maintained the price of its operating systems 
even while the price of other components has fallen dramatically, 
and that. since 1988. Microsoft's share of the market has 
never dropped below 10 percent.
    The Road Not Taken
    No matter what else it says, the fact remares that the consent 
decree addresses only a narrow issue: OEM sales represent less than 
25 percent of Microsoft revenue. The complaint notes that "At 
least 50,000 applications now run on MS-DOS and over 5000 have been 
written to run on Windows. Microsoft sells a variety of its own very 
successful and profitable applications." But that is all it 
has to say about applications!
    The complaint also notes that "All versions of Windows 
released to date require the presence of an underlying operating 
system, either MS-DOS or a close substitute." but says nothing 
about alleged tying arrangements between Windows and MSDOS (see 
"Examining the Windows AARD Detection Code" DDJ. 
September 1993).
    Similarly, the complaint mentions 'critical information 
about the interfaces in the operating system that connect with 
applications--information which the ISVs need to write 
applications that run on the operating system"--yet 
doesn't address the issue of whether or not Microsoft unfairly 
withholds some critical information. trying to give its developers 
exclusive use of undocumented interfaces.
    Likewise, the DoJ was well aware of. and quite interested in. 
the Issues surrounding Microsoft's ownership of the vastly Important 
DOS and Windows standard, Yet none of this is addressed in the 
consent decree, which ends up looking quite similar to what 
Microsoft probably could have got from the

[[Page 29255]]

FTC a year ago. Even Bill Gates, who was apparently in the habit of 
denouncing even the mildest FTC and DoJ questions as 
"communistic" and "socialistic." had to 
admit that the final settlement was no big deal saying, after years 
of investigation, that "this us what they came up with" 
(Wall Street Journal, July 18).
    Why So Little?
    Why did the DoJ settle for so little? How could they seemingly 
ignore the entreaties of so many PC software vendors? One theory is 
that the Clinton administration views Microsoft as a "national 
treasure." and put pressure on DoJ to leave Microsoft alone. 
The press made much of a May 25 meeting between Bill Gates anti 
Clinton's chief economic advisor. Robert Rubin. The date is 
significant because j?? one week later. Gates testified under a
    Dr. Dobbs Journal. October too.
    (continued from page 144)
    before the DoJ. According to one anonymous source. Gates pointed 
out to Rubin that Microsoft is responsible for a substantial portion 
of U.S. software exports (Information Week. June 27).
    Frankly. I don't buy Clinton administration pressure as an 
explanation for the DoJ's limited settlement. Microsoft may be 
highly visible, but it simply isn't that important to the U.S. 
economy, at least when compared to companies such as IBM or GM that 
make tangible goods. Microsoft, remember, produces software. While 
software is a crucial part of the modern world economy, consider 
that even "giant" Microsoft has only about 15,000 
employees and that its quarterly" sales are about $1.25 
billion, compared to $13.3 billion for IBM. or even $2.5 billion for 
Apple.
    What makes Microsoft different is its incredibly low costs. This 
is very nice for Microsoft, but it's hard to see what it does for 
the U.S. economy, especially when 45 of Microsoft's stock is owned 
by insiders. Had it wanted, the DoJ could have made a moderately 
plausible case to the American public that Microsoft. far from being 
a 'national treasure," is simply a grossly profitable 
monopolist, with few employees and few stockholders, that gives back 
little to the public.
    Another explanation is that DoJ feared a repeat of U.S. v. IBM, 
which dragged on for 13 years, only to be dropped as "without 
foundation." While you could easily imagine lawyers for the 
DoJ not wanting to stake their careers on a losing battle, you have 
to wonder whether U.S. v. IBM was such a complete washout, after 
all. Even though the case was eventually dropped, for years it had a 
serious effect on IBM. You could even argue that it was this 
supposedly unsuccessful case that caused IBM to unbundle software 
from hardware, thereby opening the way to an independent software 
market, making room for software upstarts, including a company 
called Microsoft. In many cases, Microsoft was a beneficiary of U.S. 
v. IBM, and "the next Microsoft" could have been a 
beneficiary of a U.S. v. Microsoft case.
    Ultimately, I think that the DoJ didn't push for more 
against Microsoft for the very simple reason that they felt they 
couldn't win anything else. Responding to widespread criticism of 
the settlement as a DoJ sell-out, Anne Bingaman protests, 
"folks, we looked at every aspect of this. We brought the case 
that was there to bring." According to the DoJ, the Microsoft 
settlement was "everything we could have hoped for in a fully 
litigated case. and possibly more." This is probably true. Law 
like politics. is an "art of the possible." While the 
settlement gives the Microsoft steamroller the green light, at the 
same time it's hard to see what the DoJ could have done differently. 
The DoJ's job is to enforce the antitrust laws. not to make 
industries more competitive--and the two are not the same.
    Market Share (Perc??nt)

             Operating Systems. Word Processors Spreadaheets
------------------------------------------------------------------------
                                                    
------------------------------------------------------------------------
Microsoft.......................................      66      47      52
Novell/WordPertect..............................      14      35  ------
                                                                        
Lotus...........................................   -------      3      37
                                                       
IBM.............................................      17  ------  ------
                                                               -       -
Apple...........................................       2  ------  ------
                                                               -       -
Borland.........................................  ------  ------       6
                                                       -       -
------------------------------------------------------------------------

    What all this means is that those Microsoft practices studied by 
the DoJ, but not covered in the settlement, are either not illegal, 
or would be too difficult to prove illegal.
    Where To Now?
    While there might be some private antitrust action from Novell, 
Lotus, or Borland. and while the terms of the settlement are subject 
to public review, Microsoft must be feeling emboldened by the 
limited scope of the consent de cree. Microsoft should be able to go 
fullsteam ahead with its plans to greatly expand the operating 
systems dimensions in Chicago. Microsoft Office will increasingly 
seem like an essential part of Windows. With policies such as its 
new. heavy, requirements for using the "Windows 
Compatible" logo (see "How to Adapt an App for Chicago: 
Requirements for the New Windows Logo." Microsoft Developer 
Network News, July 1994). Microsoft is raising the Windows 
developmerit bar ever higher.
    The PC-software industry is rapidly headed in the same direction 
as many other technology-based industries before it: rapid 
consolidation to a handful of vendors. There once were hundreds of 
U.S. car manufacturers: now there are just a few. With Novell's ?? 
of WordPertect and parts or the Bor??and product line, with 
Symante??s acquisition of Central Point, and Microsoft's purchasing 
a minority share in Stac Electronics, we are already seeing the same 
(,probably inevitable) process occurring in software. As Table I 
shows, market More and more, Microsoft's applications seem like pan 
of the operating system shares reflect an already highly 
concentrated industry.
    On most scales. Microsoft is about twice the size of its two 
nearest competitors combined. Lotus had 4450 employees and Novell 
also had 4450; Microsoft has 14,450. In 1993, Lotus sales were $981 
million and Novell sales were $1.123 billion; Microsoft sales were 
$3.753 billion.
    Given that the DoJ could apparently do very little about this 
increasing concentration in the software industry, what are software 
developers and vendors to do?
    It is probably stating the obvious, but there is Little point in 
trying to compete with Microsoft over productivity apps and office 
suites. These are rapidly becoming a quasi part of Windows itself, 
and even Novell and Lotus probably have little chance in this area. 
Microsoft Office is everywhere and everything. Perhaps there is 
still some room in databases. desktop publishing, and personal-
finance software.
    As always, another interesting area is plugging holes in 
Microsoft's own offerings: add-ins to Microsoft Office, remedying 
the inevitable temporary problems in Chicago, and so on.
    The best bet is to find areas where Microsoft doesn't have a 
product, and where there is a chance of a several-year window of 
opportunity before it does have a product. On the other hand, the 
only market I've ever heard of that Microsoft didn't want to get 
into was pornographic screen savers and related multimedia titles. 
As one company employee told me, "We looked carefully at adult 
software. and decided to leave that money on the table."
    TAB 14
    TO APPENDIX TO MEMORANDUM OF AMICI CURIAE IN OPPOSITION TO 
PROPOSED FINAL JUDGMENT
    IN CIVIL ACTION NO. 94-1564 (SS)
    SIGNED BY GARY REBACK
    The Economist
    A survey of the computer industry
    Trade's new diplomats
    FILED FEB 14 1995
    Clerk, U.S. District Court
    District of Columbia
    94-1564 SS
    THE COMPUTER INDUSTRY
    FOR three decades the computer industry seemed to epitomise the 
marriage of technological wizardry and business acumen. Led by IBM. 
the industry masterfully exploited a pace of technological change 
that would have left managers m most other industries gasping. It 
grew through boom and bust, and revolutionised the way nearly all 
other businesses worked. Best of all, it consistently made enormous 
profits.
    Computer executives saw themselves as both innovators and 
adventurers. Some pioneered new ways to manage armies of highly 
educated, independently minded employees. A few left the security 
and prestige of a corporate career, or went straight from the 
university classroom, to start corn- Dames from scratch. Naturally 
some computer firms failed. But the industry, as a whole was largely 
immune to the travails that periodically beset more mundane 
businesses. For many people, computers were the quintessential 
industry of tomorrow. Tomorrow has arrived and it is not a pretty 
sight. For the past two years the computer industry has been in 
turmoil: plummeting profits, flat sales, tens of thousands of jobs 
lost, vicious price wan. The industry's reversal of fortune has been 
so abrupt that it has left many of its leading comparues 
floundering. IBM, the biggest computer maker and long one of the 
most successful companies in the world, lost $4.9 billion in 1992, 
one of the biggest corporate losses in

[[Page 29256]]

history. In January John Akers. Its boss, resigned. Last year the 
company shed 40,000 of its 340,000 employees in an effort to control 
costs (which still look hopelessly bloated). Its stockmarket value 
is now about the same as Microsoft, a firm which employs only 12,000 
people. And the once-mighty Big Blue is not alone, DEC, the world's 
second-biggest computer firm, ousted its founder and chairman in 
1992 and lost a whopping $2.8 billion. Olivetti, Siemens-Nixdorf. 
Groupe Bull, Fujitsu, Hitachi and NEC have all seen profits collapse 
over the past two years. Wang, a high flier until the early 1980s, 
ended up in a bankruptcy court.
    Clearly computers are no longer recession- proof. But global 
recession is not the only, or even the primary, cause for the 
industry's recent tribulations. Recession has simply accelerated 
changes that have been reshaping the industry anyway. Un?? the mid-
1980s the computer business was dominated by a handful of large 
firms--foremost among them IBM--whose marketing and 
technological prowess let them educate, reassure and control the 
corporate customers who bought most computers. Smaller compantes 
often introduced the latest technology to the market; but usually 
their innovations were not widely accepted until they, got the im?? 
of Big Blue. These smaller firms seldom posed much of a threat.
    The invention of the personal computer (PC) in the late 1970s 
brought in a motley collection of brash, new firms. At first the 
growing popularity or PCs had little effect on me fortunes of the 
inqustry's leading firms. Indeed. IBM itself became the world's 
biggest manuracturer of PCS, and its marketing clout helped their 
sales to soar. For 20 wars IBM had skilfully coped with 
technological advances that appeared to be far more radical, or 
disruptive, than the personal computer. Few people inside or outside 
the company thought that mere relatively any and rather simple 
machines were much of a threat to IBM's hegemony or to the stability 
of the industry as a whole.
    Getting personal
    They, were spectacularly wrong, in the past few years, personal 
computers and the microprocessor chips on which they, are based have 
upturned the economics of the business. This has happened so quickly 
that many computer executives are bewildered. Their industry has 
become one of con fusing extremes. In any large industry the 
fortunes of different firms will vary. But in today's computer 
industry the differences are stark.
    While many computer firms sacked thousands of workers and last 
huge amounts of money last year, others thrived despite price wars 
and recession. On the day in August 1992 that Wang filed for 
chapter-11 bankruptcy, Dell, a personal-computer maker, reported 
quarterly sales up 129% and net profits up 77%. In 1992 some 
companies, such as Apple and Compaq, which looked doomed because of 
the price wars ravaging the PC market, staged stunning comebacks 
(though they too had to cut)obs and other costs). Price-cutting 
spread from hardware to software. And yet profits at Microsoft, the 
world's biggest personal-computer software company, leapt 53%. The 
computer business still boasts many of the world's fastest-growing 
and mast profitable firms. But it now has some of the change is 
sweeping away the established computer industry. Firms are 
scrambling to find their place in the new industry that will replace 
the old. But even for those that survive, the turmoil will continue. 
David Manasian reports Disappearing profits Return on sates* world's 
biggest loss-makers too. Today's industry offers other remarkable 
contrasts. Despite the fact that its overall profitability has 
fallen so sharp??y (see chart 1). hordes of new competitors continue 
to enter almost every part of it. And far from slowing the pace of 
innovation, as might be expected, hard times seem to have quickened 
it. An unprecedented number of new products came to market last 
year. This stream is about to become a flood. With chip technology 
improving faster than ever, a plethora of new products will reach 
the market over the next few years: pen-based PCs, hand-held 
computing and communication devices, ever more powerful versions of 
today's desktop and notebook computers, sophisticated network and 
database software. cheaper and fancier supercomputers.
    Moreover, a growing part of the computer market shows many of 
the classic characteristics of a commodity business: there are few 
discernible differences between products except price, low bamers to 
entry and razor-thin profit margins. This is a novelty for such a 
high-tech, inventive business. The large amount of intellectual 
property contained in computer products, and their complexity, ought 
to make it easy for companies to keep out new ovals, differentiate 
their products and command fat matins. Instead, even in many 
esoteric niches of the industry, growing competition is eroding 
margins.
    Equally remarkable is the web of collaborative deals that spans 
the industry. As competition has become fiercer, the number of joint 
ventures, alliances and mahatma agreements has multiplied rapidly, 
although this has done nothing to soothe the growing ferocity of 
competition. Nearly every firm, whether small or large, now has a 
vanity of ties with dozens of others. Confusingly, many alliances 
seem designed to compete with other alliances containing some of the 
same firms, as companies place multiple bets on new technologies or 
market wends. Although these agreements are often between companies 
with complementary products, many are between once-bitter rivals, 
such as Apple and IBM, who stress that their collaboration does not 
rule out tough competition between them now or in the future.
    Perhaps one of the most puzzling things about the computer 
industry is that, for all its vitality, its glory days of high 
growth and gushing profits are probably over. In a recent report on 
the industry. McKinsey, a management-consulting firm, predicts that 
the industry's sales will grow by 6% or less 3 year--scarcely 
more than me nominal growth rate for me world economy as a Whine. 
"Just surviving will be a struggle and even many of today's 
healthy companies could become extinct," says Michael Nevens, 
one of the report's authors. Others agree with this gloomy 
assessment. IBM predicts that software and services will grow at 
some 11-13% a year between now and 1997; but sales of hardware 
will lag well behind economic growth.
    Evangelical fervor One reason is that the cost of computing 
power continues to drop by 30% or more a year, became of advances in 
chip technology that show no signs of slowing. This inexorable 
improvement has now begun to outstrip the demand for more computing 
power from customers. Another reason for stow growth is that, with 
more than $300 billion in sales, the computer industry is now so 
large that it probably cannot expect to capture a much bigger chunk 
of corporate or consumer spending. Most businesses, laboratories and 
classrooms already have some type of computer, Many are crammed with 
them. Because of the rocketing popularity of notebook and laptop 
computers, so are many, briefcases.
    A barrage of new products will be needed just to keep spending 
at current levels. In fact, the amount spent on computers per white-
collar worker (the biggest users of computers) has been flat in 
America since 1983, and has recently levelled off in Europe and Asia 
as well (see chart 2). The total stock of hardware and software in 
developed economies is also set to level off in the next few years, 
according to many forecasters.
    Even if the industry must learn to live with humdrum growth, 
there will be nothing dull about the computer business itself. This 
survey will spend little time on the myriad ways computers are used 
or how they are changing lives. Instead it will try to examine the 
peculiar economics of computers, and to make sense of the blizzard 
of news the industry generates every day. Why does it present in 
many conundrums? And why has no shakeout yet ended what, compared 
with most other large industries, looks like intolerable 
instability?
    The growing number of competitors and the pace of technological 
change are raising the level of uncertainty, for both computer firms 
and that customers. As a result, the bosses of most computer 
companies are no longer the smug technologists or buttoned-down 
managers of a decade ago. They are preachers fervently trying to 
sway customers, suppliers, investors, employees--and often 
themselves--with their vision of the future. One of the 
industry's favorite verbs is to "evangelicise." This is 
an odd choice for sober-suited managers carefully investing billions 
of dollars. But it is all too appropriate to the opportunists or 
true believers now best equipped to survive in the computer 
business.
    THE COMPUTER INDUSTRY SURVEY'S
    Personal best
    TO UNDERSTAND how drastically those little personal computers 
have changed the industry, and why they have suddenly left it in 
such a fragmented state, a little history is needed. Until the late 
1970s, nearly all computers were large machines used to grind 
through mind-numbing calculations and routine book-keeping chores. 
Computers were especially useful in making the administration of 
large organizations more efficient. Outside laboratories, they were 
bought in the greatest numbers by large companies, which could 
afford to pay their

[[Page 29257]]

hefty prices and to employ the professional programmers and 
technicians needed to keep the temperamental machines from breaking 
down.
    Machines came in various sizes, the two broadest categories 
being mainframes and minicomputers. Both types could have several 
users at once, who sat at terminals to put data into the machines or 
to take it out. Mainframes soon stood at the heart of most of the 
world's biggest companies. Smaller and less expensive (though still 
quite pricey; minicomputers were often used by the divisions of the 
same firms, or by medium-sized firms which could not justify 
spending enough to buy a mainframe.
    IBM bestrode the industry, accounting in 1980 for 38% of the 
industry's revenues and 60% of its profits. Even if IBM had not 
become such a dominant firm, a small group of large firms would 
probably have controlled the industry in any case. There are two 
reasons for believing this. First, computers were the most 
complicated machines ever made, in Pact, they were so complicated 
that even individual machines were called "systems". And 
second, though the Industry was large in revenue terms, relatively 
few machines were sold each year. As recently as 1980, fewer than 
10,000 mainframes and 105,000 minicomputers were sold worldwide each 
year. Such volumes are significant for suppliers of capital 
equipment, but they are minuscule compared with those of the car or 
other consumer industries. Customers were reluctant to buy these 
cranky machines from anyone but large, established suppliers. So 
newcomers had a hard time breaking into the lousiness.
    The complexity of computers produced another crucial 
characteristic of the industry; it virtually ensured that computer 
makers would opt for vertical integration--that is, to make 
most of the parts of the machines themselves, with the software to 
run them, rather than buying parts from outside suppliers, and to do 
most of their own marketing, distribution, sales and service as 
well. A few of the smaller firms could not manage this. They, either 
specialized in supplying pieces of equipment, such as terminals, 
tape drives or printers, which were attached to computers, or they, 
bout hr what they could from outside suppliers. This put them at a 
huge disadvantage, for the simple reason that there were so few 
independent suppliers for the many components needed to build a 
computer. So the bit computer firms built their own machines from 
the ground up.
    The resulting structure of the industry looked something like 
the diagram above. Customers cared little about the various layers 
identified in this diagram, because they almost always bought all 
the layers in a stogie package from one supplier. It is useful to 
pause here to define these terms, because they will loom large later 
on.
    Basic circuitry refers to the thousands of wires, transistors 
and other electronic bits which were mall computers. In the 1970s 
and 1980s most of these bits and bobs were gradually replaced with 
integrated circuits printed onto small pieces of silicon--ie, 
microchips. This allowed some specialized chip firms, such as Intel. 
Motorola and Texas instruments, to become parts suppliers to 
computer makers. But many of the biggest computer makers, most 
notably IBM and Japan's Fujitsu, NEC and Hitachi, made their own 
chips.
    Computer platforms refers to the assembled machines. These were 
useless without operating system software, the programs needed to 
make the machines do anything but hum. Once the operating system 
enabled the machine to respond to vanous commands, application 
software told the machine what to do: compile the payroll, store 
data, solve abstruse equations, perform word-processing or whatever. 
Several applications usually ran on the same computer. As the 
diagram shows, firms did most of their own distribution, although 
some machines were sold through computer-leasing firms or 
"systems integrators".
    One more point must be made: all computer makers used 
"proprietary" standards both to build their hardware and 
write their software. Except for a few firms which tried to mimic 
IBM's standards, no firm's software worked with any other firm's 
software, or ran on any other firm's machine. This locked customers 
into a single computer supplier.
    As a customer's investment in computers grew, the more dependent 
on his supplier he became, The cost of scrapping all of a firm's 
existing hardware or application software (which big firms sometimes 
wrote themselves) to switch to another supplier became prohibitive. 
Occasionally a customer became restless, especially if a supplier 
was charging too much, fell too far behind the rest of the industry 
technologically or failed to service hrs machines properly. A few 
small, specialized firms sprang up to engineer so-called 
"gateways", bits of hardware Days of yore, when IBM was 
king and software that would allow machines from different companies 
to work together.
    For the most part, though, customers had to commit the bulk of 
their spending on computers to a stogie supplier. The safest thing 
to do for anyone who had to make this purchasing decision--in 
big companies usually the data-processing manager-- was to buy 
from the biggest supplier, no matter what the cost And that, by a 
long way, was IBM.
    Chips with everything From its inception, the personal-computer 
market assumed a different pattern from the established industry. 
PCs became possible only because chip manufacturers had managed to 
cram a simple version of a computer's central processing unit, the 
circutes that did most of the actual computing, on to a single chip. 
Appropriately, this was called a micro- processor. Around a stogie 
microprocessor, a small, cheap machine could be assembled from 
readily available parts used to supply the consumer-electronics 
industry. So most personal-computer makers were never vertically 
integrated. Separate groups of firms supplied pare, fully assembled 
machines (platforms), operating-system software and application 
software.
    Personal computers were primitive compared with mainframes and 
minicomputers. But they, could perform simple tasks such as word 
processing, keeping mailing lists or playing games, and they proved 
surprisingly popular. To grab some of the revenue from this small 
but burgeoning market, IBM launched its own PC in 1981. Because it 
wanted to do this quickly, it assembled its machine from off-the-
shelf components made by firms which were also supplying other Pc: 
makers. It arranged to buy the two most important parts of the 
machine--the microprocessor and the operating-system soft 
ware--from (respectively) Intel and a small Seattle-based 
company called Microsoft.
    With IBM's backing, personae-computer sales skyrocketed. At 
first this was great news for IBM. which had the ?? share of sales 
and considered Pc revenues simply a welcome supplement to its 
mainstream computer business. Thousands of small software companies 
ocean writing application programs for IBM's machines, boosting 
demand for mere still further.
    Still, from several points of view IBM had badly miscalculated. 
Buying the key parts of its machines from Intel and Microsoft, 
without demanding any kind of exclusive deal, effectively left 
control of the technical standards in these companies" hands. 
Scores of other firms, many of them new ones such as Compaq, quickly 
learnt to "clone" copies of IBM'S machines using Intel 
chips and Microsoft's MS-Dos operating system. Their machines also 
ran all the software written for IBM's machines. To the user, 
therefore, there was no real difference between them. Users began 
buying the machines primarily on the basis of price. As demand for 
the machines took off (see chart 3), hundreds of small, low-cost 
producers jumped into the market. Prices began to collapse, even 
while the growing power of microprocessors rapidly boosted the 
capabilities of PCS.
    Until the mid-1980s, many PCs were sold 
customers--individuals, schools, small businesses, professional 
firms--who would never have been reached by tram or other 
established computer makers. But when big corporate customers began 
tying the mast powerful PCs together into networks as alternatives 
to minicomputers and mainframes, IBM became alarmed. In 1987 it 
belatedly tried to gain control of the personal-computer market with 
new models containing a patented technology called Microchannel, 
which rivals could not copy and which made IBM's machines 
incompatible with everyone else's. Competitors aptly dubbed these 
machines "clone killers". But by then it too late. The 
PC market had slipped beyond IBM's grasp and the Microchannel 
machines flopped. Big Blue, like any other manufacturer, had to make 
its machines fit the industry's standards. Three were now set by 
millions of personal-computes users and owned by. Intel and 
Microsoft.
    In only a few wars, before IBM or the other established computer 
makers had realized what was happening, an entirely new computer 
industry had grown up next to the old one.
    Harsh new world
    The companies which made a comfortable living for so long in the 
old computer industry face a challenge rather like switching from 
making battleships to rowing-

[[Page 29258]]

boats in just a few years. Almost every defining feature of the old 
industry, has been reversed in the new one. Instead of selling 
thousands of expensive machines to an easily identifiable set of 
corporate and institutional customers, the new industry, sells tens 
of millions of cheap machines each war to individuals, businesses of 
any size and sham, and every type of organization imaginable. Unlike 
mainframes or minicomputers, personal computers need little 
maintenance. And most of their software can be bought off-the-shelf, 
like a can of beans, rather than custom-designed for each user by 
teams of expert programmers. As a result, even in large corporations 
the computer-purchasing decisions are now made by hundreds of people 
with little technical knowledge, instead of just one or two computer 
nerds. Instead of the proprietary hardware and operating-system 
software of the old industry, "open" standards now 
prevail. These permit the products of a growing number of computer 
firms to work together, which has opened the door to thousands of 
new firms that now compete at every link of the "value 
chain", from chips to distribution. Peter Shavoir. IBM's chief 
business strategist, estimates that 2,500 firms took some pan in the 
computer industry of 1965, but that 50,000 jostle for business now. 
Most of the new ones entered the industry, m the 19805 along with 
the personal computer.
    Despite this upheaval, the old computer industry will survive 
for some time yet. And mainframes, in particular, may never entirely 
disappear. Lame organizations will need to process huge mountains of 
data quickly and store it securely in a single, central machine for 
a long time to come. "Some customers will always require 
robust, bullet-proof, bet-your-business kind of applications. These 
really do belong on a mainframe," argues Nick Dono??io, head 
of IBM's mainframe unit.
    However, sales of such big machines are shrinking. Networking, 
the fastest-growing segment of the new computer industry, strikes at 
the heart of the old. At first PCs were strung together in networks 
to allow the users of individual machines to send information to one 
another. In the industry's jargon this is known as "peer-to-
peer" computing. Some peer-to-met users no longer needed to be 
connected to a larger computer to communicate.
    More ominously for the makers of big machines, the honest trend 
in the industry is now the much more sophisticated "client-
serve" network. In this type of network, a large number of 
personal computers ("clients") are connected to a 
central personal computer ("the server") which, at a 
fraction of the cost, does many of the things a minicomputer or 
mainframe once did, such as storing data, managing the flow of 
information between users and enabling them to work on the same 
documents. Many of these networks are built around a powerful type 
of personal computer called a work-station, based on a 
microprocessor called a RISC chip. Pioneered by Sun Microsystems, 
work, stations were first used by, engineers. Now they are being 
used by, businesses for a variety, of tasks and have become one of 
the fastest growing, and most fiercely contested, pans of the 
computer market.
    The rapid growth of client-server networks is eliminating the 
need for big computers in many organizations. Companies like IBM and 
DEC, which sell big machines, reply that in many cases big machines 
themselves will function as the server for a host of 
"client" PCS. Nevertheless, with spending on hardware 
unlikely to grow, some class of machine must suffer, and higher-cost 
mainframes and minicomputers seem the most likely losers.
    Even if demand for bill machines holds up longer than expected, 
the creation of the new computer industry, has wreaked havoc with 
the economics of the old. Spoilt by the convenience, choice and 
ever-falling paces offered by personal computers, buyers have 
demanded the same low mature, nance, open standards and price 
reductions from large machines. The growing use of microprocessors 
in mainframes and minicomputers has enabled the old-style computer 
makers to provide some of what their customers want. But this has 
also left them adrift with armies of surplus salesmen, service staff 
and factory workers, which accounts for the thousands of layoffs in 
the past year. Today all firms need a niche
    SURVEY THE COMPUTER INDUSTRY
    Less is more
    ?? or PC computing power views If microprocessor technology 
continues to advance as rapidly as it has clone in the past (see 
chart 41-- and everyone in the industry expects, it to do so-by 
me end of the 1990s even mainframes could be the size of PCs. They 
might be just as cheap too.
    Well before mat happens. It is likely that the new industry will 
have swallowed the old one. Because it represents the future, and is 
airea?? where most of the action takes place, the rest of this 
survey will concentrate on the new computer industry and refer to 
the old only in passing.
    Horizontal desires
    Discerning a clear structure in the new industry is hard, but 
the diagram below is one attempt to do it. Like any such diagram. It 
is a simplification: technology and competition could soon change 
it. And yet it is a useful guide to the industry today, so will be 
used as the map for the rest of this survey. Begin by comparing it 
with the much simpler diagram on page 9 of the old computer 
industry. The most stoking thing is that the new industry Is a 
series of horizontal layers, each containing many companies, rather 
than the vertical, single-company towers of the old industry. Each 
layer represents a distinct market. The barriers to entry, for new 
firms vary from layer to layer: but in no layer are they as high as 
they were for the old computer industry as a whole, in which any new 
firm hoping to challenge the established computer companies head-on 
had to build an entire vertical tower of its own. As a result, 
competition in every layer of the new industry is much fiercer than 
it ever was in the old. This explains why profits for the entire 
industry have dropped since 198&
    The diagram is borrowed from Andy Grove, the boss of a 
successful American chip maker, Intel. It is easy to see why he is 
fond of it." For us. who deal in the fundamental technology, 
it's wonderful." he says. Intel's dominance of the 
microprocessor level (layer 1) is matched only by Microsoft's 
hegemony in the client/stand-alone operating-system software level 
(layer 3) two steps above. Barriers to entry in both these layers 
are relatively high, because Intel and Microsoft have established de 
facto industry standards with their products. Supplanting them would 
be hard but (more on this shortly) neither Intel nor Microsoft is 
unassailable.
    Layer 2, computer platforms, includes assembled personal 
computers of every size and shape-- desktops, workstations, 
laptops and notebooks. Largely because Intel's dominance of 
microprocessors has established an industry standard in this layer, 
barriers to entry are minimal. Any technician who can buy intel, or 
intel-standard, chips land intel sells to anyone Jean ??oit together 
a respectable desktop PC from readily available components. So. 
predictably, this layer is where competition is fiercest. The 
continual newspaper and television advertising of computers which 
most people see, and the brutal price war which has captured so much 
attention in the business press over the past two years, come from 
firms competing in this layer.
    The next layer, operating-system software, is divided between 
the basic software needed to operate the central server of a network 
and the software needed to run diem machines in the same network or 
stand-alone PCs. The top half of the layer is much bigger than the 
bottom half--some 90m machines run these operating systems 
compared with just a few million functioning as servers. But the 
bottom layer is growing fast and is highly profitable. For the 
purposes of this diagram, their relative sizes are not relevant and 
so they are shown as equivalent.
    Layer 4. applications software, is the arena in which Microsoft, 
Lotus, WordPerfect, and Borland battle for marker share. This layer 
projects into a third dimension because a few of the biggest 
application categories--spreadsheets, word processing, database 
management and graphics--are distinct markets in themselves, 
although all fit into the layer. Barriers to entry for any new firm 
hoping to grab business in one of these categories are somewhat 
higher than to computer platforms, became writing such complicated 
programs is time-consuming and expensive. The need for a strong 
brand name, and the ability to market and distribute such general, 
purpose software packages also act as barriers to newcomers. But 
tens of thousands of small firms compete in the application layer 
outside these areas with specialized software packages.
    The layer above that is probably the most competitive of all, as 
firms scramble to find the most efficient way to reach customers 
with machines and software. In recent years, some of the industry's 
biggest winners and losers have been here. Dell grew from nothing in 
1984 to just over $2 billion in sales in 1992 because It invented a 
new, lower-cost way to distribute personal computers: mad order 
sales backed by telephone hot-lines offering technical advice. The 
barriers to entry, in this layer are low. Dell already has a host of 
imitators snapping at its heels, though this has yet to slow the 
firm.

[[Page 29259]]

    Parts of the industry are left out of this map. They include 
memory chips, which work with microprocessors, and other components 
such as disk drives: peripherals such as printers and modems, and 
services, a fast-growing part of the industry. Services come in 
various forms: "outsourcing" (performing all the data-
processing chores for a corporate or institutional customer); 
consulting (advising customers on how to reorganize their businesses 
to take advantage of computers): and systems integration (making a 
customer's computers work together).
    One reason why such services are growing so quickly is that big 
corporate customers are confused by all the products being offered 
by the new computer industry. Every lame company from the old 
computer industry--IBM. DEC. Bull, Unisys and others--is 
now hoping to win much of the service business by exploiting the 
large marketing and service operations which they built to support 
the sale of their large machines.
    Although memories, peripherals and services are sizable and 
growing segments of the computer industry, they are supplements to 
its core, represented in the diagram, where most of the strategic 
choices must be made and the technology is moving fastest. This is 
where me industry's crucial competitive Battles are being fought, 
and where firms will emerge as either victors or victims.
    Do it my way
    THE noisiest of those competitive battles wall be bout 
standards. The eyes of mast sane people tend to glaze over at the 
very mention of technical standards. But in the computer industry, 
new standards can be the source of enormous wealth, or the death of 
corporate empires. With so much at stake. standards arouse violent 
passions. Much of the propaganda pumped out by individual firms is 
aimed at convincing customers and other firms that their product has 
become a "standard".
    It is for the customer's sake that standards matter. All 
industries need them, simply because so many things made by 
different companies must fit together to be of any use. Standards 
can either be a set of specifications and practices, or they can be 
embodied in a single product, without some standards or other, no 
new industry can get off the ground. In its first two decades, the 
car industry Fought fiercely over standards for everything from the 
size of nuts and bolts to whether vehicles would have steering 
wheels or boat-like tillers. Eventually, car makers managed to 
establish standards for enough key features and components to reach 
a mass market. But even in today's cat industry, not everything is 
standardized, as anyone who has fumbled with the controls of an 
unfamiliar rental car will know.
    The world is full of standards that are entirely neutral, belong 
to nobody and simply make life easier (sliced bread fits mast 
toasters). But standards, and who owns them, have always been a 
critical competitive issue in the computer industry. In the old 
industry, standards were mealy set, and owned, by, vertically 
integrated manufacturers and used to lack in customers and lack out 
competitors. By contrast, the new computer industry has rejected, at 
least rhetorically, such proprietary standards in favour of 
"open" standards to which all firms have access. 
Customers like open standards so much that they have resisted the 
old computer industry adopt them as well. Mainframe and mini-
computer makers now declare themselves keen advocates of openness, 
although mast of their products still do not connect easily to those 
of rivals.
    Once established, open standards offer what economists call 
"network economies", which can entrench standards even 
when they are not the best available or abreast of the latest 
technology. In the case of personal computers, such network 
economies were enormous. Customers had strong reasons to buy 
machines built to the standard because they felt confident that 
large amounts of software would be available to run on them, and 
that most other machines would be compatible. Conversely, even tiny 
software firms suddenly had what promised to be a huge market at 
which to aim. Firms like Lotus, WordPerfect and Borland racked up 
hundreds of millions of dollars-worth of sales from a stogie hit 
product. A "virtuous cycle" had been created. As mote 
software was written for IBM-compatible personal computers, more 
people wanted these machines. AS more machines were sold, demand for 
software increased.
    And yet open standards represent a trade-off for both computer 
firms and that customers. If the standard is embodied in a component 
that contains much of the value of the finished product--as it 
was in Intel's microprocessor--firms which use that component 
can find it difficult to differentiate their products without 
violating the standard. The result in personal computers has been 
brutal price competition. And any standard, open or not, eventually 
becomes an obstacle to technological progress. With both 
microprocessor and software technology changing so rapidly, this 
conflict is especially acute in the computer industry. As a result, 
even agreed standards tend to be undermined by new technologies 
within a few years, compelling companies to pay the high costs of 
abandoning the old standard, and sparking a struggle among firms to 
establish a new one.
    Open standards have become the religion of the new computer 
industry, to which everyone pays obeisance, so perhaps it is not 
surprising that schismatic wars have broken out over the meaning of 
the term. All firms now claim that their products are open, but that 
those of their competitors are not.
    "The eskimos have 21 words for snow. These guys need 21 
words for 'open'." says Tim Bresnahan, an 
economist at Stanford University. Generally there are two ways to 
set open standards: through negotiations by several firms or by the 
adoption of a standard established by a single firm.
    There have been repeated efforts to establish multi-firm 
standards, especially for operating-system software. Most of these 
have been based around an operating system first developed by 
AT&T called Unix. different versions of which can run on every 
size of machine from mainframes to personal computers. AT&T 
pledged to license the basic programming code of Unix to any other 
company at minimal cost. But most multi-firm efforts have failed for 
the simple reason that the participating firms cannot trust each 
other. There are now many rival versions of Unix sponsored by 
various firms from IBM to Sun Microsystems, all of which are, to a 
significant degree, incompatible with one another, although all are 
promoted as open.
    Standard-bearers
    In fact, widespread adoption of a single firm's product is the 
only way truly open standards have been established in the new 
computer industry. "The irony of open standards is that they 
have to be based on a monopoly, which then earns enormous amounts of 
money for whatever firm owns it, observes Todd Hixon, a technology 
analyst with the Boston Consulting Group. The most famous--some 
industry executives would say infamous-example ?? Microsoft's 
MS-DOS operating-system software, which now runs on 80m PCs.
    Any firm in Microsoft's position has to make some difficult 
decisions. Owning a standard product is like possessing any 
monopoly; it is worthless unless a firm can derive income from it. 
But if a firm charges too much, other firms will rebel, and either 
try to copy the product or pay the cost of switching to another as a 
standard. Microsoft has played this delicate game with consummate 
skill. It has charged too little for MS-DOS to spark much 
rebellion, while assiduously encouraging other software firms to 
write application programmes which run on it. As the power of 
microprocessors grew, the company was also careful to develop new 
versions which took advantage of the new chips, but which were 
compatible with all earlier versions, so that users never had to 
scrap all their old software when they bought a new personal 
computer. Today nearly all PCs, except workstations and Apple's 
machines (which use Apple's proprietary operating system), come with 
MS-DOS already installed. Nevertheless, even MS-DOS's 
days are numbered, because of technological advances.
    Every firm in the computer industry, no matter what layer it 
competes in, now dreams of repeating Microsoft's triumph. 
"Even as late as 1988 no one in the industry really understood 
how lucrative owning a standard could be," says David Yoffie, 
a professor at Harvard Business School and a board member at Intel. 
"Now everyone sees it. As a result no one is willing to let 
another company establish it. That is what makes the prospects for 
profitability so problematic in this industry."
    A huge battle is shaping up in operating-system software. 
Microsoft has a big lead with a product called Windows, which runs 
on MS-DOS machines and mimics the easy point-and-click icons 
of Apple's computers. It has already sold more than 20m copies. But 
IBM is heavily promoting OS/2, its rival to Windows. In network 
operating-systems, which run on the machines at the centre of 
client-server networks, Novell has scored a success similar to 
Microsoft's. Its netware has become the standard. Netware's 
dominance is unlikely to last a decade, as Microsoft's MS-DOS 
has done. By the middle of next year. Microsoft has promised to 
launch a product called Windows NT (for "new 
technology") to compete with Netware.

[[Page 29260]]

Meanwhile Taligent, a joint venture established by Apple and IBM, is 
also working on an operating system that will run both on networks 
and on stand-alone machines. And many people in the industry believe 
that some version of Unix will ultimately prevail. In December 
Novell bought Unix Systems Laboratories from AT&T and 11 
minority shareholders, with the obvious intent of making Unix an 
alternative standard to whatever is offered by Microsoft. The battle 
over operating systems will produce the most spectacular fireworks 
over the next few years. Nonetheless, scores of similar struggles to 
establish and control "open" standards are occurring in 
every cornet of the computer industry.
    Decisions, decisions
    MANAGING any business, from a fruit stall to an oil company, is 
a complicated task. Demand and price go up and down, competitors 
disrupt the most carefully laid plans, interest rates fluctuate, 
laws change, employees blunder. The list of possible calamities is 
long, that of opportunities lamentably short. And yet for most 
businesses the rules of the game, and so tile types of calamities or 
opportunities to be faced, stay much the same for years, or even 
decades, at a time.
    For computer companies, the rules of the game itself keep 
changing, which multiplies all the normal complexities and risks of 
running any firm. There are a number of reasons for this. First, the 
basic technologies of the computer business--micro-processors, 
memory chips, screens and software-- continue to change 
quickly, creating new products and altering both the capabilities 
and pricing of existing products in every layer of the industry, 
which has knock-on effects in all the other layers.
    Second, these technologies are so widely dispersed that 
predicting which firms will succeed with a new technology, or 
suddenly spring up as a new competitor, is far more difficult than 
in most other industries. A vast corps of electronics engineers and 
programmers have been trained over the past two decades. Their job 
mobility and willingness to take risks are legendary. Firms have 
little difficulty recruiting talent, and lots of new companies are 
formed every year. Even in microprocessors--a capital-
intensive, specialized business--intel now faces competition 
from a small, Texas-based firm called Cyrix, started by two 
engineers in 1988, in the late 1980s Toshiba, a distant also-ran in 
personal computers, shocked the industry when its laptop models, not 
those of the industry's established leaders, became a hit 
everywhere. Toshiba, in its turn, was shocked when its early lead 
was eroded by a wave of imitators, most of them American.
    Third, far more often than most companies, computer firms are 
not selling their products to an established market, but trying to 
create demand for an entirely new product. This involves a lot of 
sheer guesswork. In 1991 many firms expected pen computers to take 
the industry by storm (these allow people to enter information by 
writing with a stylus on an electronic notepad rather than using a 
keyboard). Since then, sales have been disappointing. Pen computers 
are now seen as a niche product with limited potential.
    Technological change is not unique to the computer industry. But 
its pace, and the fact that it is happening in so many areas at 
once, may be. So to succeed, or even to survive, computer firms now 
have to put an inordinate amount of effort into doing three things:
    Collaborating. The multi-layered structure of the new computer 
industry and the large number of firms it now contains, mean that 
any single firm. no matter how powerful, must work closely with many 
others. Often this is in order to Detain access to technology or 
manufacturing expertise. A web of thousands of joint ventures, 
cross-equity holdings and marketing pacts now entangles every, firm 
in the industry. Even firms with a revolutionary product need to 
create a "community" of other firms to exploit it, 
argues James More, of Geo Partners, a computer-industry consultant. 
"A firm has to attract help from all others in the value chain 
and deny it to competing communities of firms."
    Successful alliances are notoriously tricky to achieve in any 
business. An added complication in most computer-industry deals is 
that few alliances are exclusive. Firms usually retain the right to 
do business, or strike a similar alliance, with other firms. And 
alliances are often between firms that compete fiercely in other 
areas. Apple and IBM are jointly developing new chips, operating 
systems and multi-media products, all critical to both firms" 
future. But Apple, like much of the rest of the new computer 
industry, also remains determined to steal business from IBM's 
corporate customers.
    Given so many uncertainties, many of the grandest computer 
alliances predictably fail. The most spectacular break-up has been 
between Microsoft and IBM. The two spent wars and hundreds of 
millions of dollars jointly developing OS/2, an operating system to 
replace MS-DOS. When an early version of OS/2 sold poorly in 
1990, Microsoft threw most of its marketing efforts behind its own 
Windows operating system. IBM felt betrayed. It has since signed 
marketing pacts with Microsoft's rivals. Novell and Lotus.
    Watching other firms. Firms must keep a close eye on the actions 
of others, even those with whom they have no formal alliance or do 
not compete. Most firms depend on those In other layers of the 
industry, to succeed. If a firm stumbles in one layer, it can deal a 
mortal blow to firms in other layers. In the 1980s Compaq owed much 
of its extraordinary success in the market for assembled PCs to 
Intel's willingness to provide it with early supplies of its latest 
microprocessor. But when new RISC micro-processors designed by Run 
and others looked as if they would leave Intel's chips Par behind. 
Compaq had no choice but to join Microsoft, and 19 other firms whose 
products depended on Intel's chips, a consortium tailed ACE 
assembled to search For an alternative. Alarmed. Intel accelerated 
plans to bring out a new generation of microprocessors and 
eventually persuaded ACE's members that it could keep up with RISC 
technology. In late 1992 ACE was disbanded. Similarly. Lotus bet 
that IBM would succeed with OS/2 after its split with Microsoft. 
When sales of Windows took off and those of OS/2 sputtered. Lotus 
was not prepared with a Windows version of 1-2-3, its 
popular spreadsheet program. As a result, Lotus lest market share to 
the Windows version of Excel. Microsoft's own spreadsheet. Lotus is 
still scrambling to catch up.
    Monitoring technology. Like any type of company, computer firms 
must track their direct competitors to avoid being caught off guard 
by a technological breakthrough. However, technology is changing so 
fast in the computer Industry that just watching competitors is not 
enough. Our map of the industry on page 18 will probably be 
completely redrawn in a few years. New technologies promise to blur 
the boundaries between today's layers, pitting supplier against 
customer and turning firms which now happily co-operate into 
competitors. Chip makers are learning to put more and mote of the 
electronic bits in complete machines on to a single piece of silicon 
along with the microprocessor. This is a direct threat to assemblers 
of personal computers, who are already struggling to find ways to 
add value to machines and so earn profits.
    In the next few years, microprocessors themselves will become so 
powerful that they will incorporate many of the functions of current 
operating-system software, or run "emulations" which 
allow them to operate with software written for other types of 
microprocessors. There is disagreement about whether such emulations 
will be efficient enough to be invisible to the user, or whether 
they, will slow computers down. If they prove efficient and 
invisible, the implications for the microprocessor and software 
markets are difficult to fathom.
    It could prove a blow to Microsoft, Novell and others which sell 
operating systems. Or it could liberate them from specific chip 
makers. Microsoft has said that Windows NT will run on a venery of 
RISC microprocessors, as well as on Inters chips. If all operating 
systems can run on all microprocessors. then the latter could become 
a commodity, like memory chips, sold primarily on price. On the 
other hand. emulation may also allow operating systems to mimic each 
other. Which would mean that software written for MS-DOS or 
Windows could run easily on Unix. Apples operating system, and any 
others may come along. This, in turn could make operating systems 
indistinguishable commodities.
    Microsoft's boss, Bill Gates, dismisses any such idea as really, 
rea?? wrong. It ignores the idea that there is incredibly innovative 
work going on in operating systems." That is just the problem, 
complain many application-software firms. They worry that Microsoft 
will incorporate so many functions into its new operating systems 
that there MR be hitie Opportunity for them to Innovate and acid 
value. Though Microsoft is a big application-software firm itself, 
it is wary of alienating other application firms because it does not 
want them to devote their best efforts to writing software for rival 
operating systems. On the other hand, the intensely competitive Mr 
Gates finds it difficult not to seize an opportunity, sitting right 
under his nose.
    Meanwhile Lotus is attempting to appropriate some of the 
functions, and value,

[[Page 29261]]

of the layer below the application-software layer where it normally 
competes with a product called Notes, which allows users on large 
networks of personal computers to communicate easily and share 
databases. Though ostensibly an applications program--it runs 
on various operating systems--Notes is also something of an 
operating system itself. Lotus is encouraging other firms to wine 
applications which, in rum. exploit the capabilities of Notes. 
Already industry pundits are calling Notes "middleware". 
an entirely new industry layer between operating systems and 
applications. Microsoft plans to incorporate many of the same 
features offered by Notes into its new server operating-system. 
Windows NT. when it appears this year, which might promptly squeeze 
middleware out of existence.
    Given all these risks, one question companies must continually 
ask themselves is whether or not they should be operating in the 
layer above or below their main business--in other words, how 
vertically integrated should they be? There is no single answer to 
this: and, because of technological changes, whatever answer looks 
right today may be wrong tomorrow. Apple and Sun Microsystems claim 
that being in both hardware and software is an advantage for making 
both work together, though they are now devoting the bulk of their 
R&D efforts to software. Mr Gates says being in both hardware 
and software is too risky, though he sees an advantage in being in 
both operating systems and application software. IBM, which is in 
every layer and every, market, is floundering.
    MOST of the computer companies mentioned in this survey art 
American. That is no oversight. The industry's direction has been 
set in America, which is also where most of the innovation occurs. 
Although large, the European and Japanese computer industries are 
rooted in their home markets. During the past two difficult veal. 
European companies have lost market share even at home to American 
rivals. Japanese companies have fared better. Their lead in memory-
chip production and their skills at low-cost manufacturing have 
brought them modest gains in the share of world hardware sales. But 
at home they are facing an onslaught from American and other 
companies in the personal-computer market. And they have yet to make 
much of a dent in software.
    Japanese firms could play a bigger role, especially if mobile, 
hand-held computers become as big a nit as many people predict. 
Until that nappens, however, strategic choices made by American 
firms will determine the direction of the industry This article 
examines the strategies of four or tile most significant American 
firms.
    As the leader of the old computer industry. IBM faces enormous 
challenges finding its place in the new industry. Its efforts to do 
so will be one of the great dramas in modern corporate history. For 
IBM. 1992 was a disastrous year. Even worse, it capped a precipitous 
slide in the company's fortunes. Since 1985 its share of the total 
computer market, including hardware, software and services. has slid 
from 30% to less than 19%. Its market capitalisation has dropped 
like a stone, from a peak of $106 billion to 1987 to $27 billion.
    IBM has already, made wrenching changes, cutting its workforce 
by a quarter to 300,000 and reducing manufacturing capacity by 40% 
since 1986. This year it is cuing another 25.000 people. It has also 
reorganised its business five times over the same period. In 
December 1991 it announced the most drastic reorganisation of all. 
the division of the company into 13 autonomous businesses, each with 
its own balance sheet, profit and loss account and financial 
targets. These businesses are supposed to establish an internal 
marks, with prices equivalent to those offered by outsiders, which 
should expose hidden subsidies and obvious laggards. Whether it will 
make ISM as a whole more competitive is debatable. "Markets 
and companies are very different things," says David Teece, a 
professor at Haas School of Business at the University of 
California's Berkeley campus. "ISM may not get the full 
benefits of either."
    Despite its troubles, IBM remains huge. Its sales are more than 
three times the computer sales of Fujitsu, the world's second-
biggest computer company. And amid the carnage of the past few 
years, it has scored some remarkable successes. Its mintcomputers 
and workstations, two markets which it entered years too late. have 
said well.
    Today technology is coming out of IBM'S vast R&D 
establishment much more quickly, producing a wave of new products in 
1992. It has also launched a range of low-cast personal computers 
and copied the direct marketing and telephone technical support 
pioneered by Dell. The inadvertent creator of the new computer 
industry, IBM has now had to adopt the new industry's ethos, 
pledging to make all its products connect easily to those of other 
companies. It has collaborative deals with thousands of firms, 
including many of those whose success has done so much to destroy 
its hegemony. Lotus, Novell. Apple and others are all too happy to 
let IBM's huge salesforce flog their products to large corporate 
customers. Whether Big Blue gets much out of this is Itself 
difficult to say. The company's top managers say they are now 
determined to give customers whatever they want, even if that means 
selling someone else's product, or helping a customer scrap an 
expensive ISM mainframe in fayour of a cheaper network of 
workstations and personal computers.
    If it is to remain a single entity. IBM has no choice but to 
adopt this strategy of being all things to all customers. But IBM IS 
competing against thousands of specialised firms aiming at every 
cor"or of its market and every lover of its value-added chain. 
Even if its mainframe patrimony, still its piggest business, 
survives longer than sceptics suggest. IBM may not be able to remain 
either so vertically integrated or so ubiquitous in an industry 
which is fragmenting quickly. IBM executives seem at a loss about 
what to do next. A new boss at the company may break it up.
    Cool operator
    Microsoft has replaced IBM as the industry's most feared and 
admired company. Its financial performance has been spectacular, 
largely because of its near-monopoly in PC operating systems, which 
account for 40% of its sales. Other firms in the industry. are 
gunning for Microsoft. Complaints by rivals of anti-competitive 
behaviour have sparked an investigation of the firm by America s 
Federal Trade Commission. which could cause Microsoft big headaches 
m the future. IBM's alliances with Apple. Novell and Lotus are 
clearly designed to deny Microsoft dominance of the next generation 
of operating systems, whether on stand-alone machines or the servers 
at the heart of client-server networks. Sun Microsystems aims to do 
the same thing. Mr Gates shrugs off criticisms from other firms. 
"Custamers don't care much about whaler other companies in the 
industry are comfortable with us," he says. "Who gives a 
damn? He rubbishes rival products. IBM'S OS/2 operating system, he 
states flatly, will be dead in two years.
    Behind the outward taunting, Mr Gates has dis. played great 
skill and determination in building Microsoft into a powerhouse. 
Ironically, in the 1980s the firm's application programs for its own
    TAB 15
    TO
    APPENDIX TO MEMORANDUM OF AMICI CURIAE IN OPPOSITION TO PROPOSED 
FINAL JUDGMENT
    IN CIVIL ACTION NO. 94-1564 (SS)
    SIGNED BY GARY REBACK
    Electronic Engineering
    TIMES
    February 18, 1991
    Windows stars at SD91
    BY RAY WEISS
    Santa Clara. Calif.--The tenor of last week's System 
Development Conference was clear evidence that Microsoft Corp.'s 
Win. dows is well on its way to becoming the dominant operating-
software platform for personal computers. SD91. here. was 
essentially a Windows show: More than one-third of the vendors in 
attendance had Windows-related products. Developers flocked to see 
Windows products, while software vendors launched the second wave of 
Windows 3.0 development software.
    A typical reaction was that of Craig A. Snow. manager, software 
engineering, at Sophia Systems Inc. (Palo Alto. Calif.): 
"Everybody is going to Windows. It's inevitable. Everybody is 
looking for the right tool or vehicle to build Windows 
products."
    Microsoft's dominance of Windows development tools was 
cha??lenged by a number of tool vendors. Archrival Borland 
International debuted its next- generation Borland C + + product for 
Windows. which can build Windows programs without the heretofore 
required Microsoft System Development Kit (SDK). Jenson & 
Partners Inc. (JPI) announced its integrated set of Top-speed 
compiler/tools for Windows and DOS. JPI's tools, too. are complete 
Windows tool kits.
    But Microsoft (Redmond. Wash.) is fighting back by preparing a 
new set of tools for reiease this year. To hold the fort in the 
meantime. Microsoft integrated its SDK and C6.0 C compiler, and 
dropped the combined price by 25 percent.
    Breakthrough product Borland's C + + is considered by many 
Windows programmers

[[Page 29262]]

to be a breakthrough product--easier and faster to use than the 
older Microsoft C6.0 and SDK tools.
    "This is the tool I've been looking for." said B.J. 
Safdie. a technology analyst with Sony Corp.
    (Woodcliff. N.J.).
    Borland C + + has a fully integrated development environme, nt. 
including the Turbo Debugger, which can run in a DOS window in 
Windows" standard protect mode. The package includes the 
interactive WhiteWater Group Resource Toolkit. with which to build 
Windows applications resources (bitmaps, fonts, dialog boxes, 
etc.)-- a job normally handled by the Microsoft SDK resource 
editors. Many developers welcome Borland's offering.
    The new C + + package supports Windows code. Users can build 
Windows programs, including DLLs (dynamic linked libraries). 
Additionally, Borland C + + minimizes compilation time by 
precompiling program header (.h) files. This saves tune. for some .h 
files, like Windows??h ??used in all Windows programs), have more 
than 20.000 lines of code.
    Interestingly. as Borland Challenges Microsoft. Borland itself 
is being challenged by Jensen & Partners. a sp??off of Borland 
International. Its CEO. Niels Jensen, was one of the cofounders of 
Borland.
    JPI's Topspeed Professional Techkit targets Borland's 
traditional strength: Turbo Pascal. "Unlike our 
competitors." said Jensen. "our Pascal compilers are ISO 
compatible, as is our C compiler." Microsoft is fighting back 
by preparing a new set of tools for release.
    The new compilers announced by JPI at SD91 brought a new tack to 
PC software tools. JPI debuted four compilers for Windows 
development: C. C + +. Modula-2 and ISO Pascal. Unlike any other PC 
compilers, all of these run in a single environment (as DLLs) and 
share a common code generator Users can buy and add as many 
compilers as they want. Addition. ally. they can compile mixed code 
concurrently, and the libraries are shared, i.e.. C or Pascal 
programs can access Pascal or C library procedures/functions.
    What's more. the JPI compilers feature some technical break. 
throughs, including virtual pointers (typed pointers, which, when 
de-referenced, cause a function to be called) and DOS-based dynamic 
linking with DLLs (an overlay manager that uses the Windows DLL 
format). Also included with the languages is a pre-emptive. 
multitasking kernel that runs on top of DOS.
    'We'll be there" Microsoft is busily working 
on its own advanced tool sets. "You can bet that we will be 
there with nextgeneration tools." said Fred Gray. Languages 
general manager at Microsoft. The company is working at both better 
Windows development tools and a C + + compiler. Additionally, the 
company already has a 32-bit compiler as part of the new SDK for OS/
2.
    Many analysts expect Microsoft to field that 32-bit compiler for 
Win. dows, undercutting Borland and JPI. whose compilers are still 
16-bit architectures, despite the fact that many developers are now 
running on 32-bit 386 and 496 machines.
    Microsoft actually helped Borland in getting its Windows product 
out. "We have a tool-independent program," said Gray, 
"that treats our own languages group the same as any other ISV 
(independent software vendor). Microsoft is out to get Windows 
accepted and will help compeutors like Borland. In fact. we get 
Windows and other operating system releases the same tune as do the 
ISVs."
    Other vendors at SD91 presented products that support the 
emerging Windows development market. These include 32-bit cornpilers 
from Zortech (C + +) and Warcom (C). as well as Windows GUI 
(graphical user interface) builders, such as Professional 
WindowsMaker from Blue Sky Software Corp. (Las Vegas. Nev.) and VZ 
Programmer for Windows.
    Additionally, two key Windows products bowed that fill critical 
needs for Windows developers: Pcsteam, a hardware ICE for Windows 
that monitors 386 systems out to 33 MHz with a fully compliant Code 
View debugger, and Distinct, the first TCP/IP package for 
Windows--it includes Berkeley Sockets. RPC/X.DR and NFS, 
Linking Windows applications to the Unix networking world.
    Getting attention
    Windows is attracting a lot of attention. "Windows 
provides a full graphics environment," said Isadore Sobkowski, 
principal. Knowledge Associates Ltd. (Riverdale. N.Y.). "It's 
a perfect base for our new generalized expert system. ACE."
    Another company. Expert-Ease Systems Inc., is moving its 
process-control software to Windows. "People want 
Windows--it's a nstrig market." said Dave Kuhlman. senior 
software engineer. ExpertEase (Belmont. Calif.). "But I will 
continue to develop using OS.2-- you can just do a lot more 
with 0S,2 than with Windows."
    Many programmers accept Windows as inevitable. "Windows 
has the market attention." said Sony's Safdie. "But it's 
a lot like those kits people used to buy and put on a Volkswagen. 
making it look like a Maserati or some luxury car. Under the hood is 
still a Volkswagen."
    Ronald Surratt, principal, C Carp Designs (Laytonville, Calif.), 
plans to use Windows as a user-interface for software tools. 
"Windows is here and accepted. It Lakes care of the graphical 
user interface as well." Surratt will combine Windows with 
Small for development. "You can do an awful lot with a small 
amount of Smalltalk code: with Windows it minimizes development 
time," he said.
    But there are others that cannot live with Windows internals. 
"Win. dows is not deterministic." said Christopher 
Bajorek, president of Telephone Response Technologies Inc. "We 
do real-time voice systerns and have built a pre-emptive 
multitasking operating system on top of DOS for our needs." 
Bruce Wallace. a development engineer at Quantum Institute, at the 
University of California at Santa Barbara, uses OS/2 for real-time 
controt of a free electron laser.
    TAB 16
    TO APPENDIX TO MEMORANDUM OF AMICI CURIAE IN OPPOSITION TO 
PROPOSED FINAL JUDGMENT
    IN CIVIL ACTION NO. 94-1564 (SS)
    SIGNED BY GARY REBACK
    Inventing-and reinventing the proprietary architectures for open 
How Architecture Wins Tech??
    by Charles R. Morris and Charles H. Ferguson
    The global computer industry is undergoing radical 
transformation. IBM, the industry's flagship, is reeling from 
unaccustomed losses and is reducing staff by the tens of thousands. 
The very survival of DEC, the industry's number two company, is open 
to question. A roll call of the larger computer corn. 
panies--Data General, Unisys, Bull, Olivetti, Siemens, Prime-
reads like a waiting list in the emergency room.
    What's more, the usual explanations for the industry's turmoil 
are at best inadequate. It is true, for example, that centralized 
computing is being replaced by desktop technology. But how to 
explain the recent troubles at Compaq, the desktop standard setter 
through much of the 1980s? Or the battering suffered by IBM's PC 
business and most of the rest of the desktop clone makers, Asian and 
Western alike?
    And the Japanese, for once, are unconvincing as a culprit. The 
fear that Japanese manufacturing prowess would sweep away the 
Western computer industry has not materialized. True, Japanese corn. 
panies dominate many commodity markets, but they have been losing 
share, even in products they were expected to control, like laptop 
computers. Earnings at their leading electronics and computer 
companies have been as inglorious as those of Western companies.
    Explanations that look to the continuing shift in value added 
from hardware to software, while containing an important truth, are 
still too limited. Lotus has one of the largest installed customer 
bases in the industry. Nevertheless, the company has been suffering 
through some very rough times. Meanwhile, Borland continues to pile 
up losses.
    Nor are innovation and design skills a surefire recipe for 
success. LSI Logic and Cypress Semiconductor are among the most 
innovative and wellmanaged companies in the industry, yet they still 
lose money. Design-based "fabless," "computer. 
less" companies such as MIPS have fared very hadly too. MIPS 
was saved from bankruptcy only by a friendly takeover. And Chips and 
Technologies is m dire straits.
    Government protection and subsidies are no panacea either. The 
European computer industry is the most heavily subsidized in the 
world but still has no serious players m global computer markets. 
Charles R. Morns is a partner in Devonshire Partners. a Cambridge. 
Massachusetts technology consulting and financial advisory firm. 
Charles H. Ferguson. an MIT Ph.D. and former MIT researcher, is an 
independent consultant, also in Cambridge, This article is based on 
their book Computer Wars: How the West Can Min in ??ost IBM World 
which was lust published by Fimes Books.
    Scale, friendly government policies, world-class manufacturing 
prowess, a strong position in desktop markets, excellent software, 
top design and innovative skills-

[[Page 29263]]

none of these, it seems, is sufficient, either by itself or in 
combination with each other, to ensure competitive success in this 
field.
    A new paradigm is required to explain patterns of competitive 
success and failure in information technology. Simply stated, 
competitive success flows to the company that manages to establish 
proprietary architectural control over a broad, fastmoving, 
competitive space.
    Architectural strategies have become of paramount importance in 
information technology because of the astonishing rate of 
improvement in microprocessors and other semiconductor components. 
The performance/price ratio of cheap processors is roughly doubling 
every eighteen months or so, sweeping greater and greater expanses 
of the information industry within the reach of ever-smaller and 
less expensive machines. Since no single vendor can keep pace with 
the deluge of cheap, powerful, mass-produced components, customers 
insist on stitching together their own local system solutions. 
Architectures impose order on the system and make the 
interconnections possible.
    An architectural controller is a company that controls one or 
more of the standards by which the HARVARD BUSINESS REVIEW March-
April 1993 entire information package is assembled. Much current 
conventional wisdom argues that, in an "open-systems" 
era, proprietary architectural control is no longer possible, or 
even desirable. In fact, the exact opposite is true. In an open-
systems era, architectural coherence becomes even more necessary. 
While any single product is apt to become quickly outdated, a well-
designed and open-ended architecture can evolve along with critical 
tech. nologies, providing a fixed point of stability for customers 
and serving as the platform for a radiating and long-lived product 
family.
    Proprietary architectures in open systems are not only possible 
but also indispensable to competitive success--and are also in 
the best interest of the consumer. They will become increasingly 
critical as the worlds of computers, telecommunication, and consumer 
electronics continue to converge. Architectures in Open Systems
    In order to understand architecture as a tool for competitive 
success in information technology, consider first the many 
components that make up a typical information system and the types 
of companies that supply those components.
    Take the computer configuration in a typical Wall Street trading 
or brokerage operation. Pow??ul workstations with 50 MIPS millions 
of instructions per second)--comparable to the power of 
standard mainframes-sit on every desk. The workstations are 
connected in a network so they can communicate with each other or 
with several others at a time. Teams of workstations can be 
harnessed together to crunch away on a truly big problem. Powerful 
computers called servers support the network and manage the huge 
databases-bond pricing histories, for instance--from which the 
workstations draw.
    Such a modern network will be almost entirely open, or 
externally accessible by other vendors; critical elements, from 
perhaps as many as a hundred vendors, plug interchangeably into the 
network. The workstations themselves are from companies like Sun 
Microsystems, Hewlett-Packard, and IBM, or they may be powerful 
personal computers from Apple or any of a number of IBM-compatible 
PC manufacturers. IBM and Hewlett-Packard make their own workstation 
microprocessors; most workstation or personal computer makers buy 
microprocessors from companies like Intel, Motorola, Texas 
Instruments. LSI Logic, AMD, and Cyrix. Almost all the display 
screens are made in Japan by Sony, NEC, and many other companies; 
the disk drives come from American companies like Seagate or Conner 
Peripherals. The memory chips are made in Japan or Korea. The 
network printers will typically have laser printing engines from 
Japan or, if they are high-performance printers, from Xerox or IBM; 
the powerful processors needed to control modern printers will come 
from AMD, Motorola, or Intel. The rest of the standardized hardware 
components on the network, like modems, accelerator boards, 
coprocessors, network interface boards, and the like, will be made 
by a wide variety of Asian and American companies.
    The network will have many layers of software, most of it 
"shrink-wrapped" from American companies. The operating 
system-the software that controls the basic interaction of a 
computer's corn. ponents-may be a version of AT&T's UNIX, 
specially tailored by the workstation vendor, as with Sun and IBM, 
or it may come from a third party, like Microsoft. Many vendors, 
like Lotus and Borland will supply applications software. The 
complex software required to manage the interaction of the servers 
and workstations on the network will, in most cases, be supplied by 
Novell The software that converts digital data into instructions for 
printer engines is sold by Hewlett-Packard. Adobe. or one of their 
many clones. Each smaller element in the system, like a modem or 
video accelerator, will have its own specialized software, often 
supplied by a vendor other than the manufacturer.
    It is possible to construct open systems of this kind because 
for each layer of the network there are published standards and 
interface protocols that allow hardware and software products from 
many vendors to blend seamlessly into the network. The standards 
define how programs and commands will work and how data will move 
around the system the communication protocols and formats that 
hardware components must adhere to, the rules for exchanging signals 
between applications software and the operating system, the 
processor's command structure, the allowable font descriptions for a 
printer, and so forth. We call this complex of standards and rules 
an "architecture."
    A small handful of the companies supplying components to the 
network will define and control the system's critical architectures, 
each for a specific layer of the system. The architectural standard 
setters typically include the microprocessor designer (such as Sun 
or Intel); operating system vendors (possibly Sun or Microsoft); the 
network system (usually Novell); the printer page-description system 
(Adobe or Hewlett-Packard); and a small number of others, depending 
on the nature of the network. Each of these is a proprietary 
architecture; although the rules for transmitting signals to an 
Intel processor, for example, are published openly for all vendors, 
the underlying design of the processor is owned by Intel, just as 
the design of Sun's operating system is owned by Sun, and so on for 
Microsoft's Windows/DOS, Novell's Netware, or Adobe's PostScript.
    Companies that control proprietary architectural standards have 
an advantage over other vendors. Since they control the 
architecture, they are usually better positioned to develop products 
that maximize its capabilities; by modifying the architecture. they 
can discipline competing product vendors. In an open-systems era, 
the most consistently successful information technology companies 
wall be the ones who manage to establish a proprietary architectural 
standard over a substantial competitive space and defend it against 
the assaults of both clones and rival architectural sponsors.
    It has been conventional wisdom to argue that users, and the 
cause of technological progress, are better served by nonproprietary 
systems architectures. This is emphatically untrue. There are many 
examples of nonproprietary architectures, like the CCITT fax 
standard or the NTSC television standard, most of them established 
by government bodies or industry groups. Because they are set by 
committees, they usually settle on lowest-common-denominator, 
compromise solutions. And they are hard to change. The NTSC has been 
upgraded only once (for color) in a half-century; committees have 
been squabbling over an improved fax standard for years. Proprietary 
architectures, by contrast, because they are such extremely valuable 
franchises, are under constant competitive attack and must be 
vigorously defended. It is this dynamic that compels a very rapid 
pace of technological improvement.
    Architectural Competitions
    The computer industry has been competing on architecture for 
years. Take the example of the product that established IBM's 
dominance in the mainframe computer business-the IBM System/360. The 
360 was arguably the first pervasive, partially open, information 
technology architecture. In the late 1960s, once the System/360 
became the dominant mainframe solution, IBM began to unbundle 
component pricing and selectively open the system, in part because 
of government pressure. Published standards permitted competitors 
and component suppliers to produce a wide range of IBM-compatible 
products and programs that were interchangeable with, and sometimes 
superior to, IBM's own. By licensing its MVS operating system to 
Amdahl, for example, IBM made it possible for Fujitsu, Amdahl's 
partner, to produce clones of the IBM mainframe. Much of what was 
not licensed away voluntarily was acquired anyway by the Japanese 
through massive intellectual property theft.
    Hundreds of new companies selling IBM-compatible mainframe 
products and software

[[Page 29264]]

placed in HARVARD BUSINESS REVIEW March-April 1993 tense competitive 
pressure on IBM. But they also assured that the IBM standard would 
always be pervasive throughout the mainframe computing world. As a 
result, even today IBM controls some two-thirds of the IBM-
compatible mainframe market and an even higher share of its profits, 
not only for central processing units but also for disk drives, 
systems software, and aftermarket products like expanded memory. 
Because they have no choice but to maintain compatibility with the 
IBM standard, competitors must wait to reverse-engineer IBM products 
after they are introduced. Typically, by the time competitive 
products are on the market, IBM is well down the learning curve or 
already moving on to the next generation. And as the owner of the 
dominant architecture, IBM can subtly and precisely raise the 
hurdles whenever a particular competitor begins to pose a threat. 
For over 20 years, in generation after generation, IBM has played 
this game brilliantly and won every time.
    Ironically, IBM badly fumbled an equivalent opportunity in 
desktop computing, handing over the two most critical PC 
architectural control points-the systems software and the 
microprocessor-to Microsoft and Intel. Since any clone maker could 
acquire the operating system software from Microsoft and the 
microprocessor from Intel, making PCs became a brutal commodity 
business. As a high-cost manufacturer, IBM now holds only about l 5 
% of the market it created.
    In a related error, Compaq made the mistake of assuming that IBM 
would always control the PC architectural standard. On that premise, 
the company geared its cost structure and pricing policy to IBM's, 
only to find itself almost fatally vulnerable when the savage PC 
price wars of the early 1990s exposed the commoditized character of 
PC manufacturing. Tellingly, while IBM and Compaq struggle to eke 
out profits from their PC businesses, Microsoft and Intel are 
enjoying after-tax margins of about 20%, on sales of more than $4 
billion and $6 billion respectively, and together they have more 
cash than IBM.
    For a similar example, consider the case of Lotus. Lotus got its 
start in a market-spreadsheet software--where products are 
complex and featurerich, hardly commodities. And over the years, the
    3. Successful architectures are proprietary, but open. Closed 
architectures do not win broad tranchises. Choosing the right degree 
or openness is one or the most subtle and difficult decisions in 
architectural contests. IBM opened its PC architecture too 
broadly--it should have, and could have, retamed control of 
either or both the operating system and microprocessor standard. 
Apple made the opposite mistake of bundling the Mac operating system 
too closely to its own hardware. Sun, in contrast to Apple, opened 
its SPARC RISC architecture very early, both to software developers 
and processor cloners; it has the lead position in workstations, and 
its broad base of third-party software support has helped maintain 
customer loyalty though a series of technical stumbles. Autodesk's 
computer-aided design (CAD) software for builders is open to add-on 
third-party packages, like kitchen design tools, and its broad base 
of supporting software has given it control of a small but very 
profitable franchise.
    4. General-purpose architectures absorb special-purpose 
solutions. Architectures that cannot evolve to occupy an ever-
broader competitive space are dead ends. Wang's lucrative word 
processor franchise was absorbed by general-purpose PCs. Special-
purpose CAD workstations from Daisy, Applicon, and others were 
absorbed by more general-purpose desktop machines. Special-purpose 
game machines will, in all likelihood, be absorbed by more general-
purpose consumer systems.
    5. Low-end systems swallow high-end systems. Minicomputers 
poached away huge chunks of mainframe territory and were assaulted 
in turn by workstations and networks. Workstations are under 
pressure by increasingly high performance PCs. Traditional 
supercomputers and very high-end mainframes are vulnerable to 
parallel arrays of inexpensive microprocessors. High-end data-
storage systems are similarly under attack from arrays of 
inexpensive, redundant disks. Although IBM helped create the 
personal computer revolution, it steadfastly refused to recognize 
its implications. Until relatively recently, it even called its 
desktop products division "Entry Systems," ignoring the 
fact that today's microprocessor-based machines are a replacement 
for traditional computers, not an entry point or way station to 
them.
    However, managers must keep in mind that even those companies 
that best follow these principles are not necessarily guaranteed 
continued success in the marketplace Architectural contests 
typically move through a number of different phases and only those 
companies that successfully Architectures that cannot evoke to 
occupy an everbroader competitive space are dead ends.
    navigate them all, maintaining their pace and direction in the 
fluid environment of rapidly evolving technologies, emerge as 
winners over the long term. It's a delicate balancing act, and one 
that requires ever-increasing flexibility as the technologies 
mature.
    There are five principal phases to architectural competition:
    Commitment. Architectural challenges usually emerge from the 
early-stage chaos of competing point products. Before the IBM PC, 
personal computers were rigid, closed systems that tended to bundle 
their own operating systems and applications software. Compaq had 
the insight that by purchasing a Microsoft operating system 
identical to that of the PC, it could ride the wave of the PC's 
success. Microsoft then insisted that all subsequent clone makers 
buy the same operating system and so seized the critical PC software 
architectural standard. Microsoft's insight was to realize that it 
was in an architectural contest and to take the appropriate steps, 
including steadily expanding the generality and scope of its systems 
to come out the winner.
    Diffusion. Large proms come from broad franchises. Open 
architectures are successful because they can be broadly diffused. 
Xerox's Interpress page-description software, which converts digital 
data into printer instructions, is excellent but can be purchased 
only with Xerox high-end printers. Adobe, by contrast, has widely 
licensed its PostScript language and has become the industry 
standard setter. Intel widely licensed the early versions of its 
xx86 processors, then sharply restricted licensing of its 386 chip 
after the Intel standard had become firmly entrenched. IBM, on the 
other hand. has long resisted diffusing its mainframe and 
minicomputer software. Of course, diffusion decisions are not 
without risk. Once again, balance and timing are essential. For 
example, Philips licensed its cornpact disc technology to Sony to 
increase market penetration. But Sony outperformed Philips and Took, 
half the market. Philips's standard was a static one that it never 
developed further.
    Lock-to. A company has a "lock" on an architecture 
when competitors are trained to wait until the architectural leader 
introduces each new product generation. Intel and Microsoft, at 
least temporarily, seem to have achieved this position in PC 
markets. Sun was on the verge of a locked in franchise in 
workstations but may have fallen short; the performance of its SPARC 
RISC processor design has been lagging behind the competition, and 
the company neglected to solidify its franchise by moving rapidly 
down to lower end platforms.
    But lock-in is sustainable only when a company aggressively and 
continuously cannibalizes its own product line and continually and 
compatibly extends the architecture itself. This is a strategic 
choice that many companies find difficult to make. Often, managers 
become overprotective of the products that brought them their 
original success. IBM, for example, has frittered away a powerful 
lock on back-office transaction processing and operating systems. In 
a misguided effort to protect hardware sales, It has refused to 
release products, long since developed internally, that would adapt 
Its best-selling AS400 minicomputer software to the RS6000 
workstation. Such reflexive self-protecnon simply hands over a 
valuable franchise to the Microsofts and other vendors storming up 
from the low end.
    Harvest. Of course, the ultimate objective of architectural 
competition is to win a market leader's share of the profits, lust 
to give one dramatic example, profit margins on Intel's xx86 family 
of chips are m the 40% to 50% range and account for well over 100% 
of the company's earnings. But no locked-in position is ever 
completely safe, and companies must be careful when they harvest not 
to rest on their previous successes. Indeed, Intel may have 
harvested too aggressively, drawing out spirited recent attacks by 
clone makers such as AMD and Cyrix.
    Obsolescence and Regeneration. lust as products must be 
cannibal??zed, so must architectures themselves. The better the 
architecture. the longer its lifespan: but sooner or later every 
architecture, no matter how well designed becomes obsolete. And 
before it does, the market leader must be prepared to move ahead, to 
do away with the old and introduce the new. Industry, leaders often 
fall to cannibalize their old

[[Page 29265]]

architectures, but although nothing IS more painful, to do so is 
absolutely necessary. Otherwise, competitors quickly move to create 
and introduce rival franchises, and these eventually dominate the 
industry. IBM's failure to cannibalize Its mainframe and 
minicomputer franchises provides a stark example of the catastrophic 
effects of waiting too long.
    DEC provides another example. The company developed outstanding 
RISC products very early. But DEC declined to cannibalize its 
profitable VAX-VMS architecture because its VMS operating system, 
the source of its franchise, was tightly integrated with its aging 
VAX hardware. Predictably, DEC was beaten out by vendors such as Sun 
Microsystems and Microsoft, which didn't hesitate to move in with 
their newer, more powerful alternatives. (The main developer of 
DEC's advanced systems, Dave Cutler, IS now In charge of developing 
NT for Microsoft.)
    There are three lessons here. First, with better architecture 
DEC could have kept VMS alive longer. If VMS had been 
"portable," that is, not restricted to VAX hardware, DEC 
could have ported VMS to other vendors" hardware, making VMS 
an industry standard. Indeed, the company could have used RISC 
technology itself without losing its VMS franchise. Second, DEC 
would have been better off cannibalizing itself, rather than waiting 
to be cannibalized by others.
    The third lesson, though, is the most important. As DEC's 
experiences with VMS and IBM's mistakes with the mainframe and 
minicomputer franchises show, the cultural and organizational 
structures useful for managing traditional, closed, integrated 
businesses will not work for companies that intend to compete with 
architectural strategy. In fact, we believe that architectural 
competition is stimulating the development of a new form of business 
organization.
    This new structure, which we call the Silicon Valley Model, has 
major implications both for information technology and for many 
other indusfeedback, at levels ranging from individuals to business 
units. At Microsoft, team members rate each other periodically In 
peer reviews. Outstanding performers are rewarded; laggards are 
warned, then fired. Technical expertise is required for a large 
fracnon or senior management, and communication occurs directly 
between the relevant parties, unbuffered by hierarchy.
    By contrast, performance ratings in traditional bureaucracies 
are determined by managers at higher levels, and compensation is 
rarely based on longterm corporate performance. The process is often 
heavily politicized; dissent is suppressed, and incompetence goes 
unpunished.
    Architectural competition also exposes Silicon Valley Model 
firms to another form of peer review-- product competition. To 
succeed as industry standard setters, firms must license their 
architectures to competitors, while also developing critical 
products themselves. As a result, each layer of the firm land of the 
architecturel is exposed to direct competition and market feedback. 
Hence although Microsoft controls Windows, application groups still 
compete individually: Excel against Lotus and QuattroPro, Word 
against WordPerfect and AmiPro, and so forth. Architectural 
leadership provides an advantage, but prevents a cover-up. Silicon 
Valley Model firms are structured so that excellence is the only 
defense.
    3. Clean boundaries, both internal and external. In architected 
corporate structures, organizations can create and dissolve 
alliances rapidly, both internally and externally. Organizations are 
very flat, and development groups have simple, clean interfaces to 
each other determined by architectural boundaries. Architecture and 
point products can be Silicon Valley Model firms take an additional 
step: the structure of the firm itself mirrors the technical 
architectures it uses.
    kept apart. Moreover, products can invisibly incorporate 
architected "engines" developed by other organizations, 
including competitors. For example, a start-up called InfoNow has 
organized alliances involving itself, Microsoft, publishers, 
computer vendors, and other software companies. InfoNow packages 
software products, together with reviews and samples of them, which 
are preloaded for free on computers, the software products, however, 
are enHARVARD BUSINESS REVIEW March-April 1993 crypted. Users can 
sample them. read reviews, and then purchase them by telephone, 
which triggers electronic decryption. Adding new software packages 
is trivial.
    4. Internal proprietary control of architecture and critical 
implementations, externalized commodities and niches. Silicon Valley 
Model firms seek to externalize the maximum possible fraction of 
their total system, while carefully controlling those at. eas 
required to establish and hold an architectural franchise. Thus core 
development of the general purpose architecture is always internally 
controlled. So usually are critical product implementations, which 
cover the broadest markets and are required either for early 
diffusion or later harvesting.
    Broad, cost-sensitive markets are the strategic high ground, if 
covered by proprietary architectures. Silicon Valley firms also 
carefully manage their dependencies, so as not to become 
unilaterally deigndent on architectural competitors.
    On balance, however, Silicon Valley Model firms are much less 
autarkic than traditional large firms. Niche products, commodity 
components, and at. chitectures controlled by others are outsourced, 
and/or relegated to licensees. In fact, Silicon Valley firms 
actively seek to commoitize regions not under their control.
    This yields several benefits. For one, companies can focus on 
what they do best and on the efforts critical to architectural 
success. For another, broad outsourcing and licensing create 
competition among suppliers and licensees, which broadens the market 
and benefits the architectural leader. PC pricee wars delight Intel, 
Microsoft, and Novell; IBM and Compaq take the heat.
    Interestingly, this contradicts the 1980s conventional wisdom 
that firms should avoid broad, costsensitive markets in favor of 
high-price niches. In fact, the broad market is the strategic high 
ground, if it is covered by a proprietary architecture. Niche 
product vendors can make profits, but they will remain minor 
players.
    5. Migration and evolution over time. Just as architectures 
evolve and eventually become obsolete, so too with organizations. 
Thus the firm's internal structure and external alliances evolve 
along with its architecture and market position. As new layers are 
added to an existing architectural position (Windows on top of DOS, 
then NT underneath Windows), new organizations are created: a 
similar situation occurs when an architecture must be cannibalized. 
Some Silicon Valley Model firms will soon face cannibalization; it 
will be interesting to see how they do.
    Broader Implications of the Silicon Valley Model
    The Silicon Valley Model is very much a product of a few 
companies in the computer sector, just as mass production was 
invented by Ford and just-intime production by Toyota. And as in 
those cases, we believe that the Silicon Valley Model will diffuse 
throughout the broader information technology sector as the 
computer, telecommunications, information services, and consumer 
electronics industries merge.
    In addition, however, as industrial competition in all 
industries becomes more complex and technological change 
accelerates, the model may have important effects upon many other 
fields. We think that it provides a framework that allows 
proprietary leaders in general to have the greatest span of control 
and profitability with the least complexity and smallest size. In 
fact, we think that the model is appropriate for small and large 
companies alike; it does, however, penalize unnecessary size. 
(Microsoft, with fewer than 15,000 employees, has a market 
capitalization equal to IBM's.) We will therefore close with an 
example of how architectural strategy and the Silicon Valley Model 
could have been used more than a decade ago, by Xerox.
    Xerox became a large, global company through a single 
proprietary technology-xerography. Xerographic "marking 
engines" are the core of photocopiers, printers, and facsimile 
machines, all or which Xerox invented. But Xerox chose to exploit 
its control of xerography using the traditonal strategy of 
integrated companies.
    Where Xerox felt it could not develop products profitably 
itself, it simply left the market vacant. As a result, when the 
company's patent position eroded, Japanese competitors took the bulk 
of the blossoming low-end markets for personal copiers, laser 
printers, and fax machines. Xerox's market share declined from 
nearly 100% to about 30%.
    Instead, Xerox could have developed an architecture for a broad 
family of machines and control systems, including interfaces for 
scanners, document handlers, and "finishers" for 
collating, stapling, and binding. It could have licensed its 
technology to other firms, and/or sold them xerographic engines. It 
could have developed products for core markets, leaving others to 
niche companies.

[[Page 29266]]

    Every few years, the company could have changed or enhanced its 
architectures to improve its products and competitive position. The 
result could have been a Microsoft-like position, with Xerox holding 
the lion's share of the profits in a highly competitive, dynamic 
market-yet one under its own effective control. We think that 
similar strate- gies are available to companies in other complex 
industries-aerospace and machine tools, among others. If so, the 
information sector's strategic and organizational innovations might 
prove as interest- ing as its technology.
    TAB 17
    TO APPENDIX TO MEMORANDUM OF AMICI CURIAE IN OPPOSITION TO 
PROPOSED FINAL JUDGMENT
    IN CIVIL ACTION NO. 94-1564 (SS)
    SIGNED BY GARY REBACK
    Corn0uter Select, October 1994
    HP Professional
    HP Professional August 1994 v8 n8 040(2)
    The winds of change.
    (Microsoft readying three 32-13it operating systems) (PC 
Tips)
    Author
    Keyhoe, Miles B.
    bstract
    Microsoft is readying three new 32-bit operating systems, each 
of which includes powerful new features and backward compatibility 
with prior operating systems. Windows NT 3.5, code-named Daytona, 
features powerful, flexible networking capabilities that will enable 
Win NT systems to fit anywhere in an organization. Version 3.5 is 
Windows-based, although MS-DOS can be used if necessary. Windows 
4.0, code-named Chicago, will provide the desktop with full 32-bit 
computing. Version 4.0 does not depend on MS-DOS and the eight-
character limit for file names has been eliminated. Files will be 
referred to as objects. Some of the "power user" 
features, such as the Windows Recorder, will be missing in the first 
version of Chicago. Microsoft is also developing the replacement for 
Windows NT, code-named Cairo, but it is not expected to be available 
until 1996.
    Full Text
    Change looms on the horizon. By this time next year, most of us 
will have first-hand experience with at least two of three new major 
Microsoft operating system releases. Representing a bold leap in 
technology, all three releases--code named Daytona, Chicago and 
Cairo--feature full 32-bit implementation, backward 
compatibility and some powerful new enhancements.
    WINDOWS NT COMES OF AGE
    Windows NT, the first 32-bit operating environment from 
Microsoft, has been shipping for almost a year. Although it brings a 
powerful platform to the enterprise, it is severely limited because 
it relies on MS-DOS as its foundation. Consequently, it has 
inherited all of the limitations we've been frustrated with for 
years: eight character file names, relatively slow and inefficient 
file systems, and a 16-bit architecture.
    The next release of Windows NT (version 3.5), aka Daytona, marks 
what I believe is Microsoft's first "professional 
quality" release of NT. It features powerful and flexible 
networking capabilities that let Win NT systems fit anywhere in a 
corporation. And, with its Advanced Server edition it's primed to 
serve as an engine for enterprise computing.
    Like its predecessor, Daytona can use MS-DOS as its foundation; 
but unlike earlier versions, Daytona doesn't require MS-DOS--it 
is finally a Windows operating system. However, giving up MS-DOS 
doesn't mean giving up MS-DOS compatibility. An important feature of 
Daytona is its ability to emulate MS-DOS to execute existing 
applications.
    While Microsoft continues to position Daytona as shared resource 
or file server for networked Windows systems, it offers a great 
opportunity for power users and programmers to begin experimenting 
with 32-bit
    or multithreaded applications right away. NEW YEARS IN CHICAGO
    After spending a New Year's holiday in Chicago, t know I'd 
rather be anyplace but on the Lake Michigan shoreline in winter. But 
by December the direction of the computer winds will be turned 
toward Chicago. Not the city, of course, but the new Windows client 
software. Although some people have called the Chicago release 
"Windows 4," I've heard rumors that the product will be 
marketed as "Windows 95."
    COPYRIGHT Cardinal Business Media Inc. 1994
    FILED FEB 14 1995
    Page 1
    94-1554
    Clerk, U.S. District Court
    District of Columbia
    Computer Select. October 1994
    No matter what it's called, Chicago will finally bring full 32-
bit computing to the desktop. Unlike Daytona and other Windows NT 
releases, Chicago is intended to replace Windows 3.1 and Windows for 
Workgroups 3.11 on everyone's desk. Those of you who have used New 
Wave will feel right at home with Chicago.
    In fact, the first time I saw Chicago working, it had the same 
dark green desktop that I've known in New Wave for years. Documents 
and applications are represented by icons. You can drag-and-drop 
documents onto applications or just double-click the document icons.
    Because Chicago does not depend on MS-DOS, file names are no 
longer limited to eight characters. However, using a scheme similar 
to New Wave, Chicago maps long file names into unique eight 
character file names when you use existing Windows and MS-DOS 
applications.
    Speaking of file names, you're likely to hear what we now call 
files referred to as objects in Chicago-- more shades of New 
Wave. However, Chicago will store file extensions, or file types, 
along with the visible document name and the operating system will 
use a scheme much like the existing Registration Database to map 
applications to document types.
    In the first release of Chicago, Microsoft will be giving up 
some of the traditional "power user" features. The 
Windows Recorder is likely to be missing, as well as a variety of 
other applications. Help will be much improved, with hypertext links 
between the help screen and the system utilities. For example, help 
on setting the system time will include a link to the Date and Time 
module of the Control Panel to change the time directly. This should 
make things easier for novices as well as for those of us who 
support them.
    LOOKING FORWARD
    Even further away from Chicago is Cairo, the eventual 
replacement for Windows NT. Don't expect to see this release until 
1996. Cairo is to Windows NT what Chicago is to Windows. Like 
Chicago, it will feature a brand new user interface (probably one 
like Chicago). But like Windows NT, it will be the workgroup. system 
that most individuals don't use at their desks. Because its release 
is so distant, it's hard to know just what will be included. But one 
thing is for certain--we'll probably wonder how we got by with 
plain old Windows 3.1.
    Type
    Column
    Company
    Microsoft Corp.
    Product
    Microsoft Windows 95 (Operating system)
    Microsoft Windows NT (Operating system)
    Topic
    Operating System
    Product Development
    32-Bit
    Record # 16 227 640
    COPYRIGHT Cardinal Business Media Inc. 1994
    TO APPENDIX TO MEMORANDUM OF AMICI CURIAE IN OPPOSITION TO 
PROPOSED FINAL JUDGMENT IN CIVIL ACTION NO. 94-1564
    SIGNED BY GARY REBACK
    Copyright 1991 IDG Communications, Inc.
    InfoWorld December 30, 1991 / January 6, 1992
    SECTION: BUSINESS; One on One; Pg. 107
    94-1564:
    FILED
    LENGTH: 955 words
    FEB 14 1995
    HEADLINE: Maples: No "Chinese Wall" at Microsoft
    Clerk, U.S. District Court
    BODY: District of Columbia
    After spending nearly 20 years at IBM, Mike Maples several years 
ago became head of the applications division at Microsoft Corp. 
Then-Microsoft-president Jon Shirley said hiring the guy from Big 
Blue was the riskiest move of his Microsoft career. Well, the risk 
eventually paid off, because Maples is still guiding Microsoft's 
applications strategy and even had extra time recently to joust with 
InfoWorld Seattle bureau chief Stuart J. Johnston.
    Johnston: How will modular applications work in the future using 
0LE?
    Maples: First let me explain that our applications were just 
getting too big. Word 1.0 had about 37,000 lines of code, while Word 
for Windows 1.0 had 408,000 lines of code. I didn't want to be here 
when they built a 4-million-line word processor, so I talked to a 
number of people at universities about moving to object-oriented 
programming. "First fire all your programmers," they 
said. "Then throw away all your programs, because however you 
got started isn't good

[[Page 29267]]

for object-oriented programming." That wasn't exactly what I 
had in mind.
    So we came up with a way to break applications down into shared 
components. We developed an architecture, which we call OLE, that 
allowed these objects to be arbitrarily linked together. Then we 
took the drawing code from PowerPoint and the charting code from 
Excel out of the products and built these larger objects. That lets 
you use a charting function from one development effort across 
multiple products. It's good for the user because it allows them to 
have absolute consistency.
    Johnston: I understand that the OLE spec is actually being 
driven by the systems side of the house, but a lot of the coding is 
done by applications.
    Maples: The original code wad done only for apps as an internal 
development. Then we decided it was a generic thing that was 
valuable to give other vendors. We could have kept it proprietary 
but didn't. So we gave the responsibility for managing that to 
systems, which works with ISVs.
    Johnston: But wasn't 0LE codeveloped with Lotus, Aldus, and 
WordPerfect?
    Maples: The No. 1 participant was Aldus. Aldus had another 
specification, so we decided to resolve a single spec. But that was 
just two app companies trying to make their lives easier.
    Johnston: Other companies are saying privately, "These are 
systems issues but they are coming from the apps division, so there 
really isn't a Chinese Wall over there, and that's what scares us in 
competing with Microsoft."
    Maples: There is no Chinese Wall. We don't want there to be a 
Chinese Wall, and I don't think we've ever claimed that there is a 
Chinese Wall. Microsoft is a single company. We have a single 
management executive in Bill. We don't try to pretend that there is 
a Chinese Wall, any more than there is at IBM or Apple or any other 
company.
    Johnston: Yet I recall Steve Ballmer using the term Chinese 
Wall. He said the apps division got the information about beta code 
and new systems designs at the same time as the people outside and 
that they were, in fact, two separate companies.
    Maples: I never heard that. I wouldn't argue that somebody said 
that, but I can tell you that I've never said that.
    The bigger issue would be, if we were using secrets or 
undocumented things, and we very consciously avoid that. A long time 
ago, when Windows was barely being strapped together, there were 
cases where things were added to make [the applications division's] 
life easier, but they were added for other apps developers too. But 
right now, to my knowledge, there isn't a single undocumented thing 
in Windows that is used by a Microsoft application.
    Johnston: Yet this issue was evidently in the Federal Trade 
Commission's mind after they did the first round of interviews with 
third parties then expanded their probe of Microsoft.
    Maples: The only things that I've ever seen reported was that 
the FTC got a number of complaints that they were investigating. 
People can make up complaints about anything. I don't see that we 
are doing anything illegal, immoral or irrational, and it is 
certainly in our interest to have a lot of Windows ISVs. As soon as 
the ISVs believe the playing field's not level they'll pick another 
platform.
    Johnston: At the Applications Horizon meeting last month there 
was a lot of hoopla attributed to you by The Wall Street Journal 
about how Microsoft, despite the FTC investigation, is trying to 
conquer the entire market. Maples: That was very much out of 
context. The question was about market share on the Mac and how 
happy would you be if you had that share of Windows? It's fair to 
say that we want to compete vigorously, but we're doing that based 
on good products and good service. Every vendor would like world 
domincation and to have 100 percent market share, but to translate 
that as a goal is a real stretch of the imagination. Windows is on 
probably 30 to 40 percent of the machines being sold today. If you 
took the number of Windows sold as a percentage of the installed 
base, it's probably 8 percent, 10 percent. To dominate the market, 
Windows would have to triple its sales rate and you'd have to get 
every Windows app sale.
    Johnston: But at that same conference, Steve Ballmer--or 
maybe it was Bill Gates--said by two years from now they expect 
most of the installed base to have migrated to Windows.
    Maples: I listened to every speech and I didn't hear that. To 
believe that Windows in the next year or two could penetrate the 
installed base would be a very difficult situation.
    Mike Maples
    Senior V.P. of Applications
    Microsoft Corp.
    Redmond, Washington
    Age: 49
    GRAPHIC: Picture, no caption
    LANGUAGE: ENGLISH
    TO APPENDIX TO MEMORANDUM OF AMICI CURIAE IN OPPOSITION TO 
PROPOSED FINAL JUDGMENT IN CIVIL ACTION NO. 94-1564
    SIGNED BY GARY REBACK
    FOUNDED IN 1978 PRODUCT COMPARISON
    Notebooks See page ??
    EMBER 16, 1992 THE VOICE OF PERSOMAL COMPUTING IN THE
    ENTERP??ISE VOLUME 14. ISSUE 46
    PAGE 98 NOVEMBER 16, 1992
    ENTERPRISE COMPUTING
    94--1 564
    FILED
    FEB 14 1995
    S. District Court;
    Columbia
    We may never know the true status of the Federal Trade 
Commission's investigation of Microsoft Corp. units the agency 
decides to go public with its case. But based on accounts by 
davelapel3, a composite of the FTC's potential casa against 
Microsoft Can be drawn.
    Research and interviews by InfoWorld have revealed at least half 
a dozen cases in which Microsoft allegedly withheld information on 
its DOS or Windows functions from outside developers, for periods 
ranging from six months to several years. During these periods. 
Microsoft's own developers appear to have used these functions in 
applications or utilities that competed with those eventually 
developed by Independent software vendors, according to programmers 
who have examined the code,
    In only one case (involving a version Of Microsoft Excel) do the 
undocumented functions appear to have saver a Microsoft application 
a performance advantage. But. in each case, the lack of 
documentation Of the functions may have given Microsoft applications 
& Lime-to-market lead of six months or more before similar 
features Could be incorporated into competing developers" 
Undocumented Windows calls
    Deciphering the charges leveled at Microsoft By B?? ??
    Applications, say cri?? of the Redmond, Wash. firm.
    ?? litVigilS1110& The FTC refers to comment on pending cases 
(or even confirm that Microsoft is the subject of an investigation). 
Lacking hard facts, observers have assumed that the FTC is 
interested in possible anticompetitive be?? that Microsoft may have 
angagged to when marketing MS-DOS. OS/2. and Windows.
    The tone of recent interviews sponsored by the FTC. however, 
suggests that the inve??tion has moved into a ?? different area: 
enforcing federal laws against unfair competion.
    Microsoft enjoys at lent a near, ?? in W market for its two main 
products: DOS and Windows, market analysts indicate that Microsoft 
controls more than 60 percent of the market worldwide for DOS-
compa??ble operat]all systems, with most of the rest accounted for 
by Novell Inc.'s DR DOS (mainly in Europe and Asia). Microsoft's 
shipments of Windows amount to 100 heroine of the market for Window 
3.l-compatible operating systems. Whether this market dominance has 
been taken advantage of by Microsoft is hotly disputed between 
Microsoft and its critics in the software Industry.
    Federal antitrust laws do not ?? one company from 
"benignly achieving an overwhelming share of a market," 
according to Gerry Elman, CEO of Elman & Will a Philadelphia law 
firm that represents software companies. The Federal Trade 
Commission Act. however. does prohibit "unfair methods of 
competition." This includes improper activities by companies 
that have a monopoly on a particular market, says Elena, who worked 
for six years m the ?? division of the U.S. Department of Justice.
    Because the relevant act is broad, the U.S. Supreme Court m 1972 
clarified the definition of unfair competition. The Court upheld an 
FTC policy against practices that are: 1. prohibited by 
"common law, statutory, or other established ?? of 
unfairness"; ". "immoral, unethical, oppressive, 
or ??": or 3. cause "substantial injury to consumers (or 
competitors or other businessmen)."
    This definition Is still quite broad
    NOVEMBER 16. 1992
    "The court interpreted congressional intent as granting 
the FTC wide discre ??on in identifying unfair behavior m the 
marketplace." Elman says.
    OPERATING SYSTEM DEFINMON. Soft ware developers do not complain 
about

[[Page 29268]]

Microsoft reserving functions of its oper ating systems solely for 
the internal use of those systems. An operating system must. m fact. 
keep a certain number o?? functions to itself. Otherwise. 
applications using these functions could mike the system unstable, 
It is only when Microsoft's utilities and applications use those 
"undocumented" functions that combating vendors 
complain.
    Software vendors often make substantial amounts of revenue by 
selling utilities that supplement Microsoft's. Prod ucts such ns the 
Norton Utilities. Mace Utilities. and PC Tools have been tremendous 
financial successes. Vendors use these revenues to fund the 
development of other applications, which may compete with Microsoft 
more directly. If Microsoft uses undocumented functions, which 
outside vendors cannot easily obtain, it would cut off a vital flow 
of cash for software development.
    Consider MS-DOS The DOS operating system consists of two hidden 
files that are installed on a PC's hard disk. In DOS 5.0. these 
files are called ??.SYS and MSDOS.SYS. These files provide the core 
services needed for Disk Operating System functionality.
    Microsoft also sells utilities, such as COMMAND.COM, which act 
as "shells" for DOS but are not the operating system 
itself. COMMAND.COM is replaceable and competes with 4DOS, by J.P. 
Soft ware: NDOS. a part of the Norton Utilities (which is based on 
4DOS): and several other DOS shells.
    Similarly. other Microsoft utilities. such as FORMAT.COM. are 
not the operating system, but use services of the 0peraline system. 
These "external" utilities compete with Novell's DR DOS 
and other vendors trying to sell operating systems compatible with 
MS-DOS.
    Windows, which Microsoft markets as an operating system, also 
has operating. system components and utilities. The operating system 
consists of three components: USER.EXE. GDI.EXE, and KRN L,X86.EXE. 
Shells, such as Program Manager and File Manager. are not part of 
the Windows operating system. These shells can be replaced by other 
shells, which are run by Windows" three essen. tial 
components. Program Manager and File Manager compete with Norton 
Desktop for Windows, WinTools, and numerous other products.
    The distinction between the kernel of an operating system and 
utilities that are bundled with that operating system is often 
unclear, even within Microsoft. "What are the areas that third 
patties can and should market?" asks Cameron Myhrvold, product 
manager for the Windows Software Development Kit (SDK). "The 
shell is not something we have encouraged a lot of people to 
replace, because of the importance of a consistent interface."
    But DOS and Windows. like most computer operating systems, are 
clearly made up of an essential OS kernel and simple but useful 
utilities that use the functions of that kernel. "Every 
operating system works that way," says Steve Gibson. the 
developer of SpinRite and other utilities. "You have a core 
operating system, and utilities that can't function without that 
core." ENTERPRISE COMPUTING
    On top of its two operating systems. and the utilities bundled 
with them. Microsoft develops and sells applies. irons. These 
applications usually compete with those of other vendors, who would 
like to make money selling similar or superior products.
    If Microsoft withholds information about important features of 
its operating systems, then uses these features in applications or 
utilities that compete with other vendors, is it practicing unfair 
competition or merely managing its business well?
    Developers themselves are of different minds. "My attitude 
toward the undocumented functions is it's a sort of a witch 
hunt." says Paul Yap. who leads Power Programming workshops 
for International Systems Design of Bellevue. Wash. "Yes, 
there are undocumented calls. At the end of one chapter of my book 
[Chapter 5 of Peter Norton's Windows .t. 0 Power Programming 
Techniques, by Peter Notion and Paul Yap. Bantam. 1990], there is a 
statement not to use these calls." Yao believes developers who 
use these functions run the risk of their applications not working 
under a later version of the operating system.
    With all these legal and technical issues, what is the FTC 
looking for in its investigation of Microsoft? The following details 
could influence a possible FTC challenge to Microsoft. 
according" to statements from Microsoft competitors. DID 
MICROSFT USE UNDOCUMENTED DOS PEATURES? To understand the roots of 
the current controversy, it is necessary to go back to the release 
of DOS 2.0.
    To a programmer, the behavior of DOS 2.0's PRINT.COM utility was 
unusual. A user was able to type a command, such as "Print 
Bigfile.txt." and almost immediately return to the DOS prompt 
. Users could start and run another program. such as Lotus 
1-2-3 or WordStar. while DOS sent Bigfile.txt to the 
printer in the background. PRINT.COM knew how to terminate, vet stay 
resident m DOS--it was the first TSR program.
    The function calls that allowed PRINT COM to multitask were not 
described m Microsoft's reference books on DOS. In fact. many other 
function calls were not documented either.
    Since it is a highly desirable feature for a program to be able 
to work m the background, programmers outside Microsoft began to 
puzzle out how this marc was accomplished. One result was a TSR 
called SideKick, released m 1984 by a troy company now known as 
Borland International Inc.
    SideKick. a personal information manager, was a remarkable 
success and was soon imitated by other programmers. Unfortunately. 
Because Microsoft had not documented several functions necessary to 
write a reliable terminateand-stay-resident program, many of these 
TSRs left out important safeguards. They crashed when more than one 
was loaded, or worse, they inter. fared with normal, foreground 
applications.
    Under fire from Borland and other companies. Microsoft 
representatives m 1986 began to discuss publicly some of the secret 
functions. But the effort was too late. Swamped with mysterious 
problems, many PC managers adopted policies forbidding the use of 
TSR programs, Other than SideKick. no TSR became a best-seller.
    Yet Microsoft released its own utilities that depended on 
undocumented TSR function calls. For example. Microsoft's CD ROM 
Extension program. MSCDEX. EXE. released in,.1987, allows files on a 
compact disc to appear in the standard DOS file system Microsoft ?? 
live To?? Rizzo said in The ?? 1987 Microsoft Systems Jour?? ?? 
grammers magazine currentl?? pu?? by M&T Publishing of Sar Mate 
Calif. that Ms??d?? used something called the DOS "network 
redirect??- But this capab?? remained un?? mented and unavailable to 
developer of competing file??system pro?? (Technically speaking. 
Ms?? used undocumented Function 1; of DOS Interrupt 2F.)
    Undocumented functions were also used In Microsoft ?? including 
Debug and CodeView. These debugger, call Interrupt 21. Function 4B. 
Sun- function 01. Microsoft ?? documentation for DOS listed only 
Subfunctions 00 and 03 until recent?? Knowing the missing 
sub??unction is a requirement for any company trying to write a 
competing debugging environment for programmers DID MICROSOFT USE 
UNDOCUMENTED FEATURES IN EXCEL? Today. Microsoft Excel is by far the 
No. 1 selling graph??- cal spreadsheet. Lotus 1-2-3 ??or 
Windows did not appear on the market until 18 months after Windows 
3.0. and Quattro Pro for Windows shipped just last month.
    With its now dominant place in the market. it's easy to forget 
that Excel originally did have stiff competition Under Windows 2.x. 
Excel had to face well-financed spreadsheet rivals such as Wingz by 
Wingz Software. and Full Impact from Ashton-Tate.
    The failure of these products was widely attributed to their 
slower performance compared with Excel. Numerous published reviews 
from that era show Wingz and Full Impact lagging behind Excel
    Tim Paterson. the author of DOS 1.0 Critics of Microsoft accuse 
the company of using undocumented features of DOS and Windows in 
applications and utilities like the ones that independent software 
vendors also want to sell. The following are some examples of the 
controversy:
    Function Use by Microsoft Discussion
    Microsoft CD-ROM Extensions Undocumented DOS "network
    redirector"
    Debug and CodeView
    Microsoft Excel
    Quick C for Windows
    Windows 3.0 SDK
    compiler (1989)
    INT 2F Funtrim1 11
    INT 21 Function 48 01
    " Define??e Table
    GetTaskQueue and
    Directed Yield
    .InitApp, InitTask,,
    WaitEvent
    . OLE 1.0 ?? PowerPoint
    Drag-and-Drop File Manager 3.1
    Server API
    <. NT DLL functions Pview
    function also used for drive remapping
    Undocumented but required to write debugging environments for 
compilers

[[Page 29269]]

Windows 2.x function, undocumented until made obsolete by Winnows 
3.0 Windows 3.0 functions; DirectedYield was documented in Windows 
3.1 SDK, but not GetTaskQueue, which Microsoft descnbes as useless 
Functions necessary to compile Windows applications, released to 
independent compiler vendors in April 1991.
    Critics charge PowerPoint was released with OLE support six 
months before 0LE specs were released to competing vendors Not 
available to outside developers until after Windows 3.1 shipped.
    Win32 developers claim Microsoft's processor-view utility uses 
functions they cannot access for their own utilities revealed an 
important reason for this difference in a two-pan article, 
"Managing Multiple Data Segment Under Microsoft 
Windows." published in the February and March 1990 issues of 
Dr. Dobb's Journal (M&T Publishing). Paterson and fellow 
programmer Steve F??enniken described undocumented function calls in 
Windows 2.x that allowed Excel to access large amounts of extended 
memory rapidly.
    Specifically, Excel used undocumented functions of Windows 2.x 
named Define Handle Table. Without these functions, Paterson and 
Flenniken wrote, an application's data was limited to "not 
more than 300K under the best conditions." However, they 
wrote. "Micro- sows own Windows applications use all of the 
techniques discussed here ... to build Windows applications with 
virtually unlimited data capacity."
    The Define Handle Table functions in Windows 2.x were documented 
by Microsoft in the Windows 3.0 SDK. But developers charge that this 
was too late, as the functions are no longer needed m Windows 3.0's 
protected mode.
    DID MIC??OSOFT USE UNDOCUMENTED FEATURES IN QUICk C7 On August 
31, 1992. Microsoft released an eight-pale statement and a In-page 
white paper on 16 undocumented Windows 3.0 functions used by 
Microsoft applications.
    These functions were raveled earlier that month in Undocumented 
Windows (Addison-Wesley, Reading, Mass.), a book by Andrew. Schulman 
(a former software engineer at Phar Lap Systems), David Maxey (a 
former Lotus developer), and Matt Pietrek (a California developer).
    In its statement, Microsoft says. "Microsoft applications 
derive no unfair advantage from the few undocumented APIs that they 
call." Additionally, "Microsoft has also provided at 
least 26 ISVs [independent software vendors] with the information on 
undocumented calls in Windows."
    Regarding some of the undocumented functions used by Microsoft 
applications, the white paper describes four of these functions as 
"documented m the Windows Software Development Kit (SDK), 
Version 3.1." six as obso??eted by Windows 3.1. and six more 
as undocumented but "with documented equivalents" or 
"entirely useless."
    For example, the white paper describes the Windows 3.0 function 
GetTaskQueue as "undocumented," with "no 
equivalent, but useless." Another Windows 3.0 function call, 
DirectedYield. is described as being documented m the Windows 3.1 
SDK.
    Undocumented Windows coauthor Schulman charges, "It's 
disbonest for Microsoft to tag as "Documented in SDK" 
functions that have only recently been documented in the 3.1 SDK, 
but that Microsoft [and others] were using long before .3.1. Timing 
is everything in this industry."
    Schulman says that the GetTaskQueue and DirectedYield functions 
are essential to the working of Microsoft's Quick C for Windows and 
are, in fact, "crucial to writinc an integrated development 
environ. ment or debugger for Windows."
    By disasembling OCWIN.EXE, the main executable file m Quick C 
for Windows, Schulman says he found at least three m- stances of the 
following code:
    if (GetTaskQ??) ?? Directed??
    The first line of code determines whether a C apple, application 
running in Quick C's development environment Juts set up a =task 
queue" for massages.
    If so, the second line posts a message to that queue. Finally, 
Quick C yields control to the application so it can process the 
message. This routine is necessary because sending a me. hate to an 
appli. cation before it's ready can cause strange system crashes.
    "We needed five undocumented to write debugging devices 
for Windows 3.0." says one developer for a major software 
firm, who spoke to Info World only on condition of anonymity. 
"Meanwhile, Microsoft came out with these devices. and it 
wasn't until sue months after the release of their [Microsoft's] 
debuggers that Microsoft provided the information."
    ?? ??
    SAUCE"? According to Undocumented Windows, several 
undocumented cells known among developers as the secret sauce were 
used to compile Windows programs using Microsoft's own Windows 3.0 
SDK, which Microsoft began selling m 1989. Competitors such as 
Borland. Zortech/Symantec, and other C language vendors] could not 
create their own stand-alone Windows compilers, which did not 
require Microsoft's SDK. without conducting project to disassemble 
Windows and discover these se. crets.
    After much criticism by competitors, several of these crucial, 
undocumented functions--including InitApp, InitTask, and 
WaitEvent--were finally unveiled by Microsoft. Most Of 
information came out April 9. 1991. in Microsoft's "Open 
Tools" binder, as weft as being documented in the Windows 3.1 
SDK later that year.
    Unfortunately for Microsoft's cornpetitors in the heated C-
language mar. ketplace, Microsoft bad already shipped more than 
48,000 copies of its SDK compiler by the tune the Open Tools release 
took place. Critics of Microsoft argue that this lave the Redmond 
company a tremendous lead with corporate and commercial programmers, 
who were actively purchasing tools to create Windows applications.
    Microsoft's Cameron Myhrvold argues that, fat from giving 
Microsoft an advantage, the extra effort that Zortech find Borland 
put into their compilers increase their market share, at Microsoft's 
expanse. "Zortech C was the first [stand-alone] compiler to 
ship for Windows in August of 1990, then Borland," says 
Myhrvold. "The first Microsoft C compiler that didn't need the 
SDK didn't ship until around Windows 3.1." As result, Myhrvold 
says, Borland and Zortech now outsell Microsoft in C language 
compilers.
    ??
    ??A hot new feature of Windows 3.1 is Object Linking and 
Embedding (OLE), feature that allows users to place text or graphic 
from one application into another and have it dynamically updated. 
Microsoft's documentation of the OLE 1.0 specification was released 
to developers m December 1990.
    But Microsoft PowerPoint 2.0, which was shipping to paying 
customers six months earlier, already had support for OLE between 
its graphing and display modules, developers point out. PowerPoint 
had OLE hard-coded into it. rather than relying on external OLE 
libraries, as became possible later. "I don't know how to call 
that one." Myhrvold says. "PowerPoint [developers] went 
ahead and shipped something before it was final, probably Version 
0.8 or something like that." He explained that Microsoft is 
trying to work more closely with independent software vendors on the 
upcoming OLE 2.0 specification, beta copies of which were shipped to 
several dozen vendors two weeks ago.
    DID MIC??OSOFT ?? OF ?? Windows 3.1 allows users to drag file 
names from the File Manager window and "drop" them onto 
other applications. The applications then automatically open or 
print the dropped documents.
    Microsoft documented how a "client" application 
should respond to a file being dropped on it. But, despite repeated 
requests from ISVs, Microsoft pointedly refused to distribute any 
information about how the Windows 3.1 File Manager acts as a 
"server" for file names dragged out of its window, 
preventing developers of competing file managers from releasing 
upgrades with the release of Windows 3.1 on April 6, 1992.
    The information needed for competing vendors to develop ,her own 
drag-and-drop servers remained undockmented until an article by 
Jeffrey Richter-- the author of Windows 3.1: A Developer's 
Guide (M&T Publishing. 1991)--appeared m the May-June 1992 
issue of the Microsoft Systems Journal. Even then, the information 
appeared only after attempts by Microsoft officials to suppress the 
article and after another publication threatened to run it.
    "The Microsoft Systems Journal article by Jeffrey Richter 
was star[led by Microsoft for months because of resistance in the 
company to publishing this article," says Undocumented Windows 
coauthor Schulman. Richter confirmed this saying. "It was held 
up by Windows 3.1 product manager," whom he declined to 
identify.
    "There were number of vendors who figured out drag-and-
drop." Myhrvold says. "With certain issues, we aren't 
going to sue Norton [Desktop] or stop them. but we're not going to 
assist them in doing a shell" Server drag-and-drop 
"wasn't implemented robustly in Windows 3.1, and we wanted to 
improve it [in later version]. It's important for consistency for 
the user."
    ??Outside developers have found parts of Windows NT that ate 
undocumented but are

[[Page 29270]]

being used in Microsoft utilities that compete with utilities they 
would like to sell. Although NT is still in beta tearing. several 
vendors are already selling NT development toolkits to numerous 
commercial and corporate sites.
    Microsoft's Win32 Software Develop ment Kit (required [or 
developing NT applications) includes a utility calie??
    Pview. This tool lets developers look. a: the tasks assigned to 
one of more processors. The utility uses functions such as 
NtQuerySystemlnformation.
    QueryPerformanceCounter, and NT. QueryInformationThread, 
according to Schulman. These functions, although contained in?? 
(which will be included in the shipping version of NT). are all 
undocumented.
    "If NT is to be successful." Schulman says, 
"won't it need the same rind of active third party-utilities 
market that DOS and .Windows have? So won't developers need to be 
able to write their own utilities, such as Pview?"
    Microsoft ?? to provide this information to developers. Myhrvold 
says. "We're going to document the NT API. Some of it is in 
the NT DDK [Device Driver Kit]." which shipped to developera 
last week. "We're also looking at producing technical 
reference, or putting it m the MSDN [Microsoft Developer Network CD 
ROM]. That will be forthcoming near or just alter NT ships."
    ?? of undocumented functions m applications and utilities that 
compete with independent software vendors something that developers 
(or the FTC) should complain about? Or is it ?? good business?
    For whatever reasons, Microsoft has become by far the world's 
largest software company. In the last four quarters (ending 
September 30). it had sales of S3.0 billion add net income of $773 
million.
    Microsoft's sales represent 7 percent of all sales made by U.S. 
companies in the =computer software and data proceasing" 
category, according to Media General Financial Services, a market 
analysts firm. But Microsoft's net, income represents 25 percent of 
all profits made by those same firms-- fact that causes 
resentment among other developers.
    Whether its share of the operating systoms market has given 
Microsoft an unfair advantage in marketing DOS and Windows 
applications is open to dispute. What is certain is that Microsoft 
is now selling more than 60 percent of all Windows applications, 
according to Jesse Berst, editor of the Windows Watcher newsletter m 
Redmond, Wash.. which tracks software sales.
    Because of this dominance, some vendors argue that Microsoft 
should be broken into separate companies responsible for systems, 
languages, and applications. These "Baby Bills," like 
the "Baby Bell" telecommunications companies that 
resulted from the 1984 breakup of AT&T, would presumably improve 
competition.
    Only history will tell d this is whet the FTC seeks. Since the 
present FTC investigation of Microsoft will wind slowly through the 
courts-- if the agency takes any action at all--it may be 
years before anyone knows the final outcome. Brian Livingston is a 
contributing editor at Infoworld and the author of Windows 3.1 
Secrets ??DG Books).
    Jeanette Borzo, Jim Hammett, Doug Barney, David Cours??y, and 
Stuart Johnston contributed to this report.
    In bus new book. unauth??- ?? Windows 95 (IDG Books. (800) 
762-2974 ?? [415] 312-06500. Schulman lists these new 
requirements
    Aside from the tea??res an appl?? cation ar??uably needs to 
qualif?? as "Windows 95 compatible"--it must be a 
32-but application. It must handle filenames longer than eight 
characters, and so on-- there are several requirements that 
have nothing to do with Windows 95 companbility Quoting from 
Microsoft Developer network News, July 1994 issue:
    ?? It must run on Windows NT 3.5
    ?? It must have OLE 2.0 contamer and/or object and OLE 2.0 drag-
and-drop support
    ?? It must include a Send or Send Ma?? command on the File menu 
land support the Common Messaging Call API). Although Microsoft 
allows some exceptions to the last two rules for applications that 
don't deal with files (such as games), all three of these new 
requirements have raised eyebrows with developers.
    ???
    ???
    SOFTWARE
    WINDOW MANAGER.BRIAN LIVINGSTON
    Will 'Windows compatible" really mean what it says?
    ADEVELOPER WITH WIDE -RANDING
    experience in Windows programming will announce a new book on 
Nov. 15 that will reveal many of the undocumented features 
Microsoft's Windows 95 shell takes advantage of.
    Along the way, Andrew Schulman (coauthor of Undocumented DOS and 
Undocumented Windows. Addision-Wesley. (800 822-6339 or 
67 944-3700) shows who will benefit 
from the release of Windows 95 and who will be hurt. In particular. 
Schulman points to those developers who will be handicapped by some 
of the new requirements that Microsoft Corp, has tacked onto its 
"Windows-compatible" logo, which it licenses to vendors 
of shrink-wrap software.
    ???
    ???
    In his forthcoming book. Schu??man w??
    "Microsoft is simply raising the cost of developing 
Windows applications, and not necessarily in ways that will benem 
end-users."
    As examples, he c??es the requirements to support NT and OLE. 
"The NT requirement seems like nothing more than an attempt to 
leverage Microsoft's control over the upcoming Windows95 market to 
assist its lackluster Windows NT product. The OLE 2.0 requirement is 
odd, given that Microsoft itself hasn't used OLE for the Windows 95 
shell."
    That new shell is an application called EXPLORER.EXE. In recent 
betas o Windows 95, the line SHELL+EXPLORER.EXE appears in the 
SYSTEM.INI file, rather than SHELL= PROGMAN.EXE as in Windows 3.x.
    In Unauthorized Windows 95. Schulman reveals that this shell 
application uses several as-yet-undocumented features of the new 
operating system. These calls include such intriguing-sounding 
func?? as Register-ShellHook. FSNotif?? ??, and SHFindFiles. These 
?? (and how they work) might be of no signincance, except th?? many 
developers have expressed interest in selling improved shells to 
Windows 95 users.
    It's easy to switch shells. Simply change the SHELL=line in 
SYSTEM.INI for in the new Registry database, which will likely be 
the repository of this kind of information by the time Windows 95 is 
released??. But developers will need to get or create documentation 
on these functions in order for their products to emulate 
Microsoft's own shell.
    The NT requirement particularly bothered several developers 1 
spoke with. As it turns out. NT differs from Windows enough that 
supporting both environments can be a fulltime job. Some API 
tunctions use different parameters, some th?? that work in one 
environment don't work in the other, and so on. I'd say the 
"Windows 95" logo is going to be meaningless in 
determinine the real com?? ibility of new programs. I'll have more 
on this next week.
    Brtan Livingston is the author of Windows ?? Secrets and More 
Windows Secrets and co-author of Windows ?? Books). Send ups to ?? 
infowori??.com. or tax: (206) 282-1248
    FEB 14 1995
    Clerk, U.S. District Court
    District of Columbia
    MICROSOFT CORPORATION PERFORMANCE REVIEW FORM FOR EXEMPT 
EMPLO.YEES
    NAME:
    GROUP: Languages Marketing.
    EDACTED
    POSITION TITLE: Group Protract Marketing Mann.,
    REVIEW PERIOD: April 87--Sept 87
    Instructions to the Manager:
    1. Give the review form to the employee for their evaluation of 
work performed since the review.
    2. Once completed, determine your own evaluation and ratings of 
the employee's performs Discuss these with the employee.
    3. Finally, f11 out the final overall rating below and 
jointly establish objectives and pertir performance factors for the 
next review period.
    Instructions to the Employees:
    1. In one or two sentences, describe the overall function or 
purpose of your position.
    2. Complete both sections entitled: Major Activity/Objectives 
and Performance Factors evalua your performance since the last 
review.
    3. Return the review form to your manager for his/her rating, 
and once completed, dis??ss ratings and pertinent performance 
factors for you and your position, and future objectives.
    RATING DEFINITIONS: Ratings should be given in 0.5 increments. 
For example, 3.5 is a valid rating, but 3.7 is not.
    (5) EXCEPTIONAL PERFORMANCE; Consistently exceeds all position 
requirement; v consistently exceeds quantity, quality, cost,, and 
time standards. Consistently meets big standards of excellence.

[[Page 29271]]

    (4) EXCEEDS PERFORMANCE STANDARDS: Consistently exceeds most 
position requirements expectations. Work exceeds most standards 
often; meets high standards of excellence.
    (3) MEETS PERFORMANCE STANDARDS: Consistently meets requirements 
and job standards; require assistance with complex or new 
assignments. Work regularly meets standards of competent 
performance.
    (2) NEEDS IMPROVEMENT: Does not meet standards of the job 
consistently; may need additi?? time-in-job, further training of 
more than normal supervision; may meet some posi?? requirements but 
possess one or more Performance deficiencies in critical job areas.
    (I) UNSATISFACTORY: Falls short of minimum requirements in 
critical aspect of job.
    FINAL.OVERALL NUMERICAL RATING (to be completed by manager):.
    This retting should be a composite of the Major Activity/
Objective and Performance Factor sections.
    Remember that 5 is high and I is low. FILED ??TED
    (Your signature does not?? mean that you agree, but affirms that 
this review has been liscussed in detail with you.)
    MANAGER: EDACT?? Of Columbia DATE:
    APPROVING MANAGER: DATE: 15 6 4
    MICROSOFT CORPORATION
    PERFORMANCE REVIEW FORM FOR EXEMPT EMPLOYEES
    REDACTED
    NAME:
    CROUP: Languages
    CON??
    POSITION TITLE.: Group Product Manager
    REVIEW PERIOD: 11/86--5/87
    Instructions to the Manager:
    Give the review Form to the cmployee for their evaluation of 
work performed since the last review.
    Once. completed, determine your own evaluation and ratings of 
the employee's performance
    Discuss these with the employee.
    Finally, fill out the final overall rating below and jointly 
establish objectives and 0erriaea performance factors for the next 
review period.
    RATING DEFINITIONS:
    Ratings should be given in 0.5 increments. For example, 5.5 is a 
valid rating, but 3.7 is not.
    (??)
    EXCEPTIONAL PERFORMANCE: Consistently exceeds all position 
requirements; wor?? consistently exceeds quantity, quality, cost, 
and time standards. Consistently meets highe?? standards of 
excellence.
    EXCEEDS PERFORMANCE STANDARDS: Consistently exceeds most 
position requirements an expectations. Work exceeds moor standards 
often; meets high standards of excellence.
    MEETS PERFORMANGE STANDARDS: Consistently meets requirements and 
job standards: m: require assistance with complex or new 
assignments. Work regularly me=is standards of rule competent 
performance.
    NEEDS IMPROVEMENT: Does not meet standards of the job 
consistently; may need addition time-in-job, Further :raining or 
more than normal supervision; may meet some positi?? requirements 
but possess one or more performance deficiencies in critical job 
areas.
    UNSATISFACTORY: Falls short of minimum requirements in critical 
aspects of job.
    FINAL OVERALL NUMERICAL RATING (to be completed by manager):
    This rating should be a composite of the Major Activity/
Objective and Performance Factor sections.
    Remember that 5 is high. and I is low.
    REDACTED
    EMPLOYEE:
    agree, but affirms that this review has been
    not nee?? mean that you
    ??
    MANAGER REDACTED
    APPROVING MANAGER: DATE:
    ?? ACTIVITY/OBJECTIVE: Compete with Borland y most important 
activity is to be sure that Microsoft competes effectively with 
Borland. This includes
    ??ecting intelligence about Borland activities and products. 
making sure that our products are competitive.
    // building awareness among end users and gateskeepers about how 
we compare with Borland products.
    MPLOYEE EVALUATION:
    ??all/ I did a very good job in the BASIC market and my work in 
C has been fair but not outstanding.
    Then Borland announced TurboBASIC at the November Comdex. I 
collected information about his product and moved quickly to 
formulate a response strategy. My strategy involved a rapid product 
response to ?? that could hold out position until QB4 (then called 
QB3) hit the market.
    ?? QB3 instend of QB2.5 in order to make the release sound more 
significant. I worked with LenO and TomC ?? develop a QB3 spec that 
could bent TurboB. In addition to mobilizing development. I flew to 
Dallas to attend a region manager's meeting where we formulated a 
retail promotion strategy intended to fill the channels with QB 
before TurboB shipped. I reviewed he promotion plan with BillG 
before implementation began. I also flew to L?? to meet with KDP 
about the QB3 ad. In that meeting we decided that to compete ?? 
Borland's inside-front-cover advertising, we would need to use a big 
media unit with heavy paper. I also ??tioned QB against TurboB for 
the ad. Rayka and I-met-with CorpCom and came up with the idea of QB 
??ters. I have also been working with the press to be sure that 
comparisons are not made against QB2 (see press objective section). 
My rapid response strategy was correct: we would be in a very poor 
position today ?? QB3 were not available (the Byte article bears 
that out). I was able to mobilize development. retail, and ?? media 
unit and my positioning of QB3 are sound. The results of the spiff 
promotion have been spotty, ??ew distributors have had success with 
it.
    We are not as far along on the response to TurboC because we are 
further from product announcement. I developed a rollout plan for 
QuickC and CS that focused on minimizing Borland's first mover 
advantage by preannouncing with an aggressive communication 
campaign. I determined that we should preannounce in ??ty June 
because that is when editorial should be light and it is when BillG 
speaks at BCS. At SteveSn's suggestion. I worked with KathrynH to 
make the BCS announcement a rent extravaganza. I also proposed a new 
early beta program for QuickC that would help us to get press 
coverage sooner after shipment. I chaired a meeting with BillG. 
JonS. and steveB to run through the plan. While we were well 
prepared to discuss QuickC they were more interested in discussing 
how we would protect our high end product.
    This meeting would have gone better if I had met with Bill first 
to determine an appropriate agenda. We still need to figure out how 
to protect the high end product from price cutters. We should be 
prepared to offer a stripped town high-end conipiler (i.e., no 
CodeView, and no QuickC) at a lawer price point if TurboC begins to 
cannibalize the high end.
    MANAGER'S EVALUATION AND RATING: 44
    did a very good job shaping our product direction in response to 
the Turbo Basic product announcement. Alternative strategies were 
formulated, evaluated, and a decision was reached swiftly. role in 
this was highly analytical; in the future, should strive to play a 
more active role in driving the decision process.
    The marketing response to Turbo Basic was mixed. did a good job 
working with the press-- although, the final results remain to 
be seen. Also, she User Group program appears to be going well.
    Never, other promotional programs were haphazard at 
best--and our educational thrust is virtually ?? existant. More 
creativity is needing in developing marketing programs, and better 
follow-through is required to implement.
    played an important role in Turbo C product response, although 
the contribution was not as significant as Quick Basic. We all 
missed the boat on the key marketing issue--a preliminary 
discussion with Jons would have prevented this. Again, needs to be 
more pro-active in driving
    ?? ACTIVITY/OBJECTIVE: Public relations is my responsibility to 
get coverage for our language products, and to be sure that the 
coverage is fair and curate. My activities include press planning, 
tours. issueing press releases with followup, and working with 
??iewers.
    MPLOYEE EVALUATION:
    have made some strides with the press in terms of getting them 
to use our benchmarks. I am working th PcMag to help them develop a 
set o] benchmarks for testing BASIC and C compilers. They also 
??cted Its before printing their QB benchmarks. We identified 
problems in their tests and worked with em to correct the problems 
before the article was run.
    press trips for FORTRAN got us news coverage in InfoWorld. and 
PC Week. We will also see feature ticles in Computer Languages. PC 
Tech. Dr. Dobbs. and probably Byte. For this trip put together a 
esentation and materials that emphasised the connection between 
FORTRAN and C. and defined our longer ?? strategy for

[[Page 29272]]

optimization. That approach was very well received by the press 
because C is hot and cause of the long term strategic implications 
of tile optimization work.
    have been working with PC Tech. PcMag. and Computer Languages on 
QB3. They have held off on their ??parison articles until version 
three, but they have all said they would not wait for version four.
    ??
    ?? to release a QB3 has proven to be correct. also formulated 
the PR strategy with Waggener for FORTRAN. QB3. QB4. and the C 
preannouncement.
    hese plans have all been approves and I think have some exciting 
elements.
    I think that our relationships with the press have been very 
good with the notable exception of Byte.
    : is my goal over the next six months to turn that relationship 
around.
    IANAGER'S EVALUATION AND RATING: 5-
    Agreed. The only thing I would add is to continue to improve 
your listening skills during visits with
    TO APPENDIX TO MEMORANDUM OF AMICI CURIAE IN OPPOSITION TO 
PROPOSED FINAL JUDGMENT IN CIVIL ACTION NO. 94-1564
    SIGNED BY GARY REBACK
    94-1564
    Multimedia Systems
    Development Partner Program
    FILED FEB 14 1995
    Clerk, U.S. Cio?? Court
    District of Columbia
    Program Application
    Please return signed copy to: Submitted by:
    Cornelius Willis
    ------------
    Microsoft Corporation Company
    Multimedia Systems Group.
    One Microsoft Way
    Redmond. WA 98052-6399
    ------------
    Signature
    ------------
    Name
    ------------
    Title (CEO . President or Key Manager with overall 
responsibility for this project)
    Microsoft Confidential
    The Multimedia Systems Development Partner program exists to 
provide developers with necessary and appropriate resources, 
education, and support to ensure the successful and timely 
implementation of their projects.
    Microsoft views Development Partners as essential parts of ou?? 
multimedia business plan. This application will help us understand 
your company's ideas and qualifications. It will also help us to 
assess your product's development and introduction schedule so that 
Microsoft may determine your level of interest and commitment.
    Qualifying for this development program may later entitle you to 
participate in a marketing support program. Please fill it out as 
completely as possible and return it, along with all requested 
materials, to the address indicated on the cover. Microsoft looks 
forward to your participation in what we expect to be an extremely 
successful multimedia marketplace.
    Developer
    ------------
    Information Company Name
    ------------
    Address
    ------------
    City State Zip
    ------------
    Telephone FAX Telex
    ------------
    Development Contact Title Phone
    ------------
    Marketing Contact Title Phone.
    Please describe your company's important business relationships 
(distributors, venture capitalists, etc.) on a separate sheet.
    ------------
    Company
    Background Type of company:
    ------------
    Publicly held If publicly hem please
    ------------
    Privately held include annual report
    ------------
    Subsidiary
    ------------
    Name of parent ( if subsidiary)
    ------------
    Number of employees
    ------------
    Primary business activities:
    -------- business software
    -------- consumer information
    -------- productivity software
    -------- business information
    -------- education software
    -------- CD-ROM publisher
    -------- entertainment software
    -------- on-line information provider
    -------- productivity software
    -------- other electronic info publisher
    -------- development tools
    -------- magazine, newspaper publisher
    -------- other software publisher
    -------- broadcast media producer
    Product Proposed product areas (check all that apply):
    Information
    Applications: Toots:
    -------- adult
    education -------- animation editing
    -------- business productivity
    -------- authoring/scripting tools
    -------- business information
    -------- image processing
    -------- consumer information
    -------- music editing
    -------- entertainment/games
    -------- programming tools
    -------- home business
    -------- search / retrieval engines
    -------- home management
    -------- sound processing
    -------- K-I2 education
    -------- storyboarding/prototyping
    -------- music
    -------- other data preparation
    -------- on-line services
    ------------
    -------- personal creativity
    -------- personal development
    -------- other programming tools
    -------- publishing
    ------------
    -------- reference
    -------- other applications
    -------- other tools Current Current key 
software products (in order of market share and importance to your 
com- Products pany):
    ------------
    Product name Description Supported Platforms
    ------------
    ------------
    Product name Description Supported Platforms
    ------------
    ------------
    Product name Description Supported Platforms
    ------------
    Product name Description Supported Platforms
    Please include any appropriate product descriptions or brochures 
with this application.
    Developer What is the extent and nature of your group's relevant 
technical experience, particularly
    Qualifications in the areas of multimedia production, Microsoft 
Windows or other windowing systems programming, or new technology 
implementation in general?
    ------------
    Microsoft Confidential
    ??cept Please provide a short conceptual description of your 
product(s). Description How will you enrich your application so that 
it is compelling, make: use of this machine, and helps to define 
multimedia personal computing?
    (Please respond to the following questions on experience?
    Describe a typical user session with this product. What will a 
user separate sheets).
    List a "table of contents" for this product. If it 
consists of only one thing (such as "?? game") then list 
its components as appropriate.
    Is this product bated on an exiting application? If so:
    On which product is it based ?
    What is the history of this product?
    ------------
    Market Who is the target audience for your product?
    Analysis Explain why you think this is an important product for 
the machine introduction.
    What is the proposed price of your product?
    What competition do you perceive for this product? How will you 
differentiate this product from its competition?
    ------------
    Product What is your expected shipping date for retail 
distribution?
    ------------
    Development When do you project that you will reach these 
project milestones?
    ------------
    Software Design Complete Date
    ------------
    Alpha Level Code Date
    ------------
    Beta Level Code Date
    ------------
    ----------
    Final product available for shipment Date
    Do you perceive any other critical milestones in your 
development schedule?
    ------------

[[Page 29273]]

    If any of the above milestones are contingent on external 
events, please indicate below:
    ------------
    How it this project funded ? (Please answer on a separate 
sheet).
    Microsoft
    August 1990
    Multimedia Windows Pre-Release Program
    This paper will give you important information about Microsoft's 
plans for the Multimedia
    Windows Pre- Release Program and information on how to use it 
most efficiently.
    Multimedia Windows Pre-Release Program Objectives
    1. Distribute pre-release software and documentation to 
qualified developers.
    2. Relay information and schedules to multimedia developers in a 
timely, efficient manner.
    3. Educate hardware and software developers on the capabilities 
of Multimedia Windows.
    4. Obtain valuable feedback about Multimedia Windows that will 
continue to enhance and improve it
    The success of Multimedia Windows system software and its 
applications depend upon effective communication between Microsoft 
and the hardware and software communities. Microsoft is committed to 
this mutually beneficial relationship.
    Requirements for Participation
    To participate in the Multimedia Windows Pre-Release Program, 
your company must meet all of the following requirements:
    1. Sign the enclosed Pre-Release Program Non-Disclosure 
Agreements
    Enclosed you will find a non-disclosure agreement for the 
Multimedia Windows Pre-Release Program. By signing this agreement, 
you agree to participate in the program under confidential 
restraints, meaning that you will not discuss any information that 
you receive from Microsoft about this Windows product, with anyone 
outside of your company. This requirement will be in place until 
Multimedia Windows is publicly announced. Enclosed you will also 
find a master Non-Disclosure Agreement A completed copy of this 
Agreement must be on file at Microsoft and covets additional 
confidential information you may receive as a participant in the 
Multimedia Windows Pre-Release Program.
    2. Submit a program application to participate in future support 
programs and to include your company in the Multimedia Windows 
Hardware and Software Directory database.
    By submitting the program application, you become eligible to 
participate in future technical seminars or marketing programs that 
Microsoft may offer to Multimedia Developers. Furthermore, this 
application allows our staff to build an accurate database of active 
developers and vendors involved in this program so that we can 
beater track your interests and your needs. This tracking system 
will become even more important as the program grows.
    When Microsoft announces its plans for Multimedia Windows, we 
may publish a directory of company names and product summaries 
derived from this database. Until that time, the list will only be 
available to developers in the Pre-Release program.
    3. Include a check or P.O. for $495 to Microsoft
    This fee enrolls you in the Pre-release program and covers the 
cost of technical support until product release. A majority of the 
support for the Pre-Release program will be conducted via Microsoft 
OnLine, our electronic technical support service. Microsoft will use 
this communication service to inform participants of plans, changes, 
and updates. We may also provide incremental software release, via 
OnLine, which you can download at your convenience. Any feedback or 
problems you encounter with the product must be reported through 
Microsoft OnLine.
    This special OnLine account will allow your development staff to 
ask questions about Windows 3.0, the Windows 3.0 SDK, Multimedia 
Windows MDK and DDK, and the Microsoft languages and tools that 
support multimedia software development under Windows 3.0. It will 
also provide them access to all Microsoft product information in the 
OnLine Knowledge Base.
    4. Sign the signature block at the end of this letter, and 
return the entire package.
    By signing this letter, you indicate that you have read and 
understand this letter and ague to abide by the Pre-Release Program 
objectives and intentions.
    What you can Expect from the Multimedia Windows Pre-Release 
Program
    If you meet all of the above requirements, you will become an 
on-going member of the Multimedia Windows Pre-Release Program. After 
Microsoft receives the signed agreements, and application, your 
Microsoft OnLine account will be activated or modified and your 
company and product summary entered in the Multimedia Windows 
database.
    Microsoft Online Account
    When you return your signed OnLine Agreement, you will receive a 
Microsoft OnLine access ID number that can be used to access 
Multimedia Windows we-release information. OnLine documentation and 
software will also be sent to all new subscribers.
    If you already have an active OnLine Account, a special 
Multimedia Windows-specific OnLine account will be set up for you. 
The Multimedia Windows Pre-Release access number for Microsoft 
OnLine will be dissolved at the termination of the Pre-Release 
program. You may continue to use the existing account until your 
Microsoft OnLine subscription terminates. Renewal of your OnLine 
account will be at the standard price of $795.00.
    If you would like to change the billing name and address for 
that account please fill out the information below:
    ------------
    Yea, please change billing name/address for Windows Pre-Release 
OnLine access ID number
    ------------
    Billing contact name
    ------------
    Billing company name
    ------------
    Billing address
    ------------
    City State/Country Postal Code
    International Developers:
    International developers are not required to obtain a Microsoft 
OnLine account Instead, please contact your local Microsoft 
Subsidiary for information on their support programs.
    check here if you will be obtaining support from a Microsoft 
Subsidiary
    2. Review/Sign/Copy/Return the enclosed Non-Disclosure Agreement 
As stated earlier, them agreements allow us to disclose confidential 
information about our product development plans without compromising 
marketing plans that we have. If you have any questions about the 
agreement, please state them in a letter and send to Multimedia 
Windows Product Marketing address listed below. Since there is no 
signature block for Microsoft. your copy of each agreement is all 
that is needed for your records.
    If there is a business reason for you to communicate information 
to another company, please outline your needs/reason and the contact 
information for that company and return this letter to the 
Multimedia Windows Product Marketing address given at the end of 
this letter. You will be notified of the outcome of your request.
    3. Complete and return the enclosed Development Program 
Application
    If you are currently working on a Multimedia Windows product but 
would prefer not to be listed in the distributed directory, your 
information will be kept confidential until you notify us otherwise. 
Please mark your preference on the application.
    If your company is considered a Corporate Account and are using 
Multimedia Windows as an end-user product only, it is not necessary 
to complete this step.
