[Federal Register Volume 67, Number 90 (Thursday, May 9, 2002)]
[Notices]
[Pages 31373-31380]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-11539]


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DEPARTMENT OF JUSTICE

Antitrust Division


United States v. Microsoft Corporation; Addendum to Public 
Comments

    The United States hereby publishes corrected versions of thirteen 
(13) of the Tunney Act public comments it received on the Revised 
Proposed Final Judgment in United States v. Microsoft Corp., Civil 
Action No. 98-1232, pending in the United States District Court for the 
District of Columbia. The text of these comments was either incorrect 
or incomplete when originally submitted to the Federal Register for 
publication. This addendum is being published concurrently with the 
text of all of the public comments, including the incorrect versions of 
these thirteen comments, received on the Revised Proposed Final 
Judgment.

MTC-00000827

From: Steve Chambers
To: Microsoft ATR
Date: 11/17/01 11:59 a.m.
Subject: MS Antitrust Settlement
    To who it may concern,
    I have been following the Microsoft Antitrust case with a great 
deal of interest and have to say that I am absolutely apalled at the 
reports that I see in most of the online media on the details of the 
proposed agreement.
    I am a computer support technician. I hold 4 Microsoft 
Certifications and spend 90 percent of my time working on and 
supporting Microsoft applications and operating systems.
    You could say that my job depends on Microsoft. But regardless 
of that Microsoft must be prevented from continuing on a course that 
they seem hell bent on: controlling the very fabric of computing and 
in perpetuity. Additionally they must be punished for past misdeeds.
    Microsoft's whole modus operandi (observed from over 10 years in 
the business) is to embrace (purchase) new technology, extend that 
technology in Microsoft-Proprietary ways to essentially lock out 
competitors.
    At the very least severe structural penalties must be 
implemented to prevent these continued egregious behaviors from 
continuing. Additionally Microsoft must be made to pay penalties for 
past misdeed. These penalties could be anything from monetary to 
release of Microsoft Intellectual Property into the public domain.
    I am further disturbed by the proposed settlement, in that it 
seems to be nothing more than a politically motivated ``slap on the 
wrist.'' I respectfully urge you to reconsider your current proposed 
settlement. It is vastly insufficient to reign in the abuses and 
punish Microsoft.
    Cordially,
    Steve Chambers
    Monmouth Junction, NJ

MTC-827

MTC-MTC-00000830

From: Charles McKnight
To: Microsoft ATR
Date: 11/17/01 12:26 p.m.
Subject: Settlement comments
    Greetings,
    I would like to express my concern about the settlement reached 
during the recent Microsoft antitrust case. In the past Microsoft 
has openly flaunted its disregard of any attempt to impose 
regulation. The 1995 settlement was essentially toothless, and led 
to the demise of Netscape as a separately operating company. As a 
Judge Sporkin pointed out. ``simply telling a defendant to go forth 
and sin no more does little or nothing to address the unfair 
advantage it has already gained.'' The current ``sanctions'' can be, 
and most likely will be largely ignored by Microsoft. The entire 
settlement comes across as wishful thinking on the part of the 
government that this leopard will change its spots.
    Although I have no desire to see Microsoft broken up, I am 
concerned about the predatory tactics it has used in the past and 
continues to employ. Given the similarities between the 1995 
settlement and the currently proposed settlement, I do not believe 
that any positive effects will be achieved. I believe that Microsoft 
will continue to drive other companies out of business by bundling 
software into the operating system, much as they have done with the 
browser, and are attempting to do with the Windows Media Player and 
its proprietary formats.
    I ask that you reconsider the settlement terms, and offer 
protection for the smaller companies that are trying to make a 
living. Don't deny them their chance to enjoy some portion of the 
same level of success that Microsoft currently enjoys.
    Thank you for you time.
    Charles McKnight
    Disclaimer: My opinions are my own and do not necessarily 
reflect the opinions of my employer.

MTC-830

MTC-00000831

From: Joel (038) Sandy Harris
To: Microsoft ATR

[[Page 31374]]

Date: 11/17/01 12:25pm
Subject: Antitrust penalty
    It is interesting to me that after a very strong case in the 
court system and in reality a very good view by the appellate court 
that the government would go for such a weak penalty. Especially one 
that is worded in ways that sound like Microsoft actually wrote the 
document.
    Has Microsoft demonstrated that they will abide by consent 
decrees in the past? No. In fact their behavior in the development 
and release of Windows XP has demonstrated that they have no intent 
of behaving in a way that allows for competition.
    It is completely unreasonable to assert that it is good for the 
economy for the government to go lightly on Microsoft. The entire 
basis for antitrust legislation is that it is better for the economy 
for there to be competition. This proposed ``penalty'' will not help 
competition return to the PC desktop. It will, in reality, enable 
Microsoft to continue with their monopoly and will also allow them 
to continue the anti-competitive practices well into the future.
    Remember: you WON the trial. Please don't let Microsoft off the 
hook for their abominable behavior. It most likely is not in the 
best interest of the country for you to come to any kind of 
agreement with them--it should be a court imposed sentence. This 
penalty is like a terrorist negotiating his own sentence.
    Regards,
    Joel Harris
    harrisj @iquest.net

MTC-831

MTC-00000834

From: [email protected]@inetgw
To: Microsoft ATR
Date: 11/17/01 12:28pm
Subject: ANTITRUST SETTLEMENT
    100% BEHIND U.S. DECIDING AGAINST FORCING MICROSOFT REVEALING 
SECRET BLUEPRINTS OF WINDOWS.
    OUR COUNTRY WAS BUILT ON THE IDEA THAT IF YOU BUILT A BETTER 
PRODUCT BUYERS WOULD BEAT A PATH TO YOUR DOOR.
    I CANT BELIEVE THE 9 STATES THAT ARE MONEY HUNGRY ASKING 
MICROSOFT TO REVEAL THEIR SECRETS. THEY MUST BE OUT OF THEIR MINDS. 
THEY WOULD PROBABLY INSIST THAT RANDY JOHNSTON TELL THE BATTER WHAT 
THE NEXT PITCH WOULD BE TO EVEN COMPETITION.
    YOURS TRULY,
    J.G. HOLLAND
    J.L. HOLLAND,Ph.D.

MTC-834

MTC-00000835

From: michael baxter
To: Microsoft ATR
Date: 11/17/01 12:44pm
Subject: what a fucking joke!
    bush sold out.
    justice department? no justice here.

MTC-835

MTC-00000838

From: Eric Bohm
To: Microsoft ATR
Date: 11/17/01 12:48pm
Subject: Sad about the Settlement
    Greetings,
    I thank you for the opportunity to convey my opinion about the 
DOJ vs Microsoft case. As a professional software developer I am 
quite interested in the future of my industry. I am deeply saddened 
that you have decided not to punish Microsoft for their illegal 
practices.
    I have personally felt the insidious power of their monopoly. 
Few executives are expert enough in the actual technology to make 
well informed decisions. This leaves them extremely vulnerable to 
the lies and manipulations of the Microsoft Marketing department. 
This puts a tremendous additional burden on software developers.
    Any time we analyze a problem we try to find the best and least 
expensive solution. If that solution doesn't involve Microsoft 
products its requires a great deal of additional justification. That 
justification requires considerable research time and effort. Their 
monopoly power forces us to consider them the default solution to 
any problem, completely independent of the quality of the products. 
Their misleading marketing material about the actual nature of those 
products further confounds realistic analysis. Their monopoly power 
permits them to get away with delivering a shoddy product masked by 
clever marketing.
    In the process of your prosecution you proved that Microsoft has 
abused their monopoly power many times. You proved that the results 
of their action have been detrimental to the american people. And 
now you suggest the solution to these problems is a toothless 
watchdog committee. In order for them to apply any punishment for 
violation they have to go back through the court system again. Thus 
giving Microsoft more time and weasel room to ensure that the 
intended results of their misbehavior are accomplished.
    You have betrayed us.
    Sincerely,
    Eric Bohm

MTC-838

MTC-00000842

From: John Keelin
To: Microsoft ATR
Date: 11/17/01 12:49pm
Subject: Microsoft Settlement
    Hello,
    Some comments regarding the proposed settlement.
    According to an article at USA Today.com, ``The Justice 
Department also considered trying to force Microsoft to sell a 
stripped-down version of Windows that did not include built-in 
software for browsing the Internet, reading e-mail, listening to 
music or sending instant-messages.''
    I believe that you should have pursued this approach for several 
reasons. I use both the Windows and Apple Macintosh Operating 
Systems on a regular basis. Both of these products offer bundled 
software, which I would agree benefits the consumer. It is the way 
in which Microsoft leverages the bundled software that highlights 
Microsoft's abusive behavior.
    The following outlines some of the key differences in the way 
software is bundled by these two leading operating system providers:
Internet Explorer (Microsoft product available on Both MacOS and 
Windows)
    On a macintosh, if a web site address is entered into Internet 
Explorer incompletely (e.g. news. vs. www.news.com) the browser 
assumes and correctly takes the user to the requested site (e.g. 
www.news.com).
    On Windows, incomplete web address entries take you to a 
Microsoft-branded search site.
    Conclusion: The bundled web browser on Windows gives Microsoft 
an unfair advantage on promoting it's web properties.
Software Update Features
    On the Macintosh, there is a program called ``Software Update'' 
that logs onto an Apple Computer FTP server and provides the user 
with a list of updated system software. The user selects the updates 
and the ``Software Update'' program downloads and installs the new 
software accordingly.
    Windows offers the same feature called ``Windows Update.'' 
``Windows Update'' REQUIRES that a user connect with Internet 
Explorer to update their system software. instead of a separate 
program, like Apple Computer offers for the same software update 
ability, Microsoft requires the use of Internet Explorer to perform 
these actions.
    Conclusion: On the Macintosh, If I remove Internet Explorer and 
decide to use Netscape, it doesn't take away my ability to update my 
system software. On Windows, even if a user ``chooses'' to use the 
Netscape Browser, they must still rely on Internet Explorer for 
keeping their systems up to date. Microsoft could have easily 
separated this update feature from the Browser, but chose to mandate 
that everyone keep a copy of Internet Explorer on their machines for 
this purpose.
Instant Messaging
    On the Macintosh, a user can choose from many different instant 
messaging clients. There are no Instant Messaging clients installed 
by default--the user is free to evaluate, download and use their 
preferred Instant Messaging Client.
    Microsoft's new ``Passport'' user authentication plan is being 
closely tied in with their Instant Messaging client, which is the 
default Instant Messaging client on Windows. They plan to require 
that a web user that wishes to visit a Microsoft-branded site have a 
valid passport account. If they succeed in making Passport a 
standard for web authentication, they will essentially force 
everyone to have a copy of their Instant Messaging product installed 
in order to gain access to web sites.
    Incidentally, integration with Microsoft Passport is touted as 
one of the key new ``features'' of MSN Messenger 2.0 for Macintosh. 
Why does this matter? It means that if Passport becomes the web-
authentication standard, they'll be able to become the market share 
leader for Instant Messaging clients on the Macintosh platform as 
well as Windows.
    Conclusion: This approach is similar to the software update 
feature--a back door approach to making a bundled product the

[[Page 31375]]

market share leader since everyone is essentially required to have 
the product installed.
Summary
    These are just a few of the ways in which Microsoft uses its 
bundled software in monopolistic ways. Bundled software is not the 
problem with Windows, it is how Microsoft leverages its bundled 
software. A user shouldn't have to keep Microsoft's version of a 
product on their machine to perform operating system functions if 
they decide to use a competitive product. Even in the midst of the 
DOJ inquiry, Microsoft continued down the path of leveraging its 
bundled software.
    I believe that there are two primary remedies for this 
fundamental problem:
    1. Prevent Microsoft from bundling software and allow computer 
users to make real choices in selecting software. (Put another way--
Force Microsoft to sell a stripped-down version of Windows that does 
not include built-in software for browsing the Internet, reading e-
mail, listening to music or sending instant-messages.)
    2. Mandate that Microsoft discontinue the practice of tying non-
related features together to essentially require that their products 
be installed even if a user chooses a competitive product.
    The second remedy would be difficult to oversee and enforce, 
making the first remedy a seemingly preferred approach.
    Sincerely,
    John

MTC-842

MTC-00000846

From: Kevin Goeke
To: Microsoft ATR,tom wible,[email protected]@inetgw
Date: 11/17/01 12:53pm
Subject: I disapprove...
    I disapprove of the Microsoft antitrust settlement. Microsoft 
has done way too much damage to the computer industry and consumers 
for this litigation to settled in such a manner. They are *NOT* a 
nice company; they always go out of their way to ensure their 
dominance, no matter what the cost to the industry, the science, and 
the individual, who may not know any better.
    Kevin J. Goeke
    I have learned from mistakes I may or may not have made.''--
George W. Bush

MTC-846

MTC-00000851

From: johnh@mail.truesdail.com@lanset.com@inetgw
To: Microsoft ATR
Date: 11/17/01 1:11pm
Subject: MS-Only EPA Web Sites
    I work at an environmental testing laboratory. I would like to 
move away from the Windows operating system to Linux as a company-
wide standard. But we have to submit UCMR data to the EPA via http://epa.lmi.org. This web site ONLY works with Microsoft Internet 
Explorer 5.0 or 5.5. It cannot be made to function effectively with 
any other browser. It is unlikely that Microsoft will port Internet 
Explorer to Linux, or any other platform at this point. Therefore, I 
do not have a real choice of operating systems. If this were an 
isolated example, I would not be writing this. But it is not. There 
are similar situations at GSA, and probably elsewhere.
    This restriction apparently arose because the lmi.org website 
was built with Microsoft tools, and these tools are designed to 
render other browsers unusable.
    My real concern is the new .NET strategy which Microsoft is 
pushing so hard. If a significant number of new services are created 
in a framework that also forces anyone wishing to use them to do so 
from a Microsoft platform, then Microsoft will be in a position to 
take the whole World Wide Web private.
    The Web was >created by Tim Berners-Lee at CERN, and given away. 
Microsoft likes to use the word `innovation' from time to time, 
often in the context of Open Source projects, as in `Open Source 
projects are not a true source of innovation'. I do not think that 
anything Microsoft has ever created (including Excel and Powerpoint, 
for which credit is due) comes anywhere near the creation of the Web 
in terms of innovation. Consider how long the Internet existed prior 
to the creation of the Web, compare the rate of growth and reach 
during the pre-Web and post-Web periods, and see if you don't agree. 
Most people today are unable to distinguish between the Internet and 
the Web.
    So, why should Microsoft be permitted to use its monopoly (which 
never seemed to be questioned during the trial) to take the Web 
private?

MTC-851

MTC-00000852

From: Maness, Deborah
To: `Microsoft.atr(a)usdoj.gov'
Date: 11/17/01 2:37pm
Subject: Microsoft Settlement
    I am in favor of the Settlement that the DOJ has entered into 
with microsoft. I would like for the states to accept this as soon 
as possible.
    Deborah Maness.

MTC-852

MTC-00000853

From: Evan Chaney
To: Microsoft ATR
Date: 11/17/01 2:54pm
Subject: Disappointed
    Dept. of Justice:
    I am upset with how easily the D.O.J. has given up after all of 
these years of pursuing a resolution that would be beneficial to the 
consumers/states who brought about this case. The settlement that 
has been agreed to is too kind towards Microsoft. Obviously, they 
can now declare a major victory. The consumer is in no better 
position than they were when this case started several years ago. 
What a waste of time and money, all for nothing.
    Sincerely,
    Evan Chaney
    U.S. Citizen & Software Consumer

MTC-853

MTC-00000854

From: Kenneth Nicholson
To: Microsoft ATR
Date: 11/17/01 2:50pm
Subject: Microsoft Settlement
    Recommend that ALL legal action against Microsoft be 
discontinued immediately in order to permit the company to focus 
full attention in providing those products that most of us need and 
require in our business.

MTC-854

MTC-00033650

From: Jonathan H. Bari
To: Renata Hesse
Date: 1/28/02 3:23pm
Subject: Microsoft Settlement
    Dear Renata,
    Pursuant to the Tunney Act, attached please find our comments on 
the Revised Proposed Final Judgment.
    Thank you.
    Jon
Jonathan H. Bari
Chairman and CEO
CATAVAULT
100 West Elm Street, Suite 400
Conshohocken, PA 19428
610.941.3388
610.828.9966 (fx)
[email protected]
http://www.catavault.com/company
CC: Microsoft ATR, wtom@morganlewis.com@inetgw,dan@cata...
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
District of Columbia
COMMENTS OF CATAVAULT ON THE REVISED PROPOSED FINAL JUDGMENT
INTEREST OF THE COMMENTER
    Given that Microsoft's Net Passport is the heart of Windows XP, 
Microsofts new Operating System that was officially launched on 
October 25, 2001, Catavault, a software company addressing online 
identification and authentication, unfortunately finds itself in the 
cross-hairs of the most powerful software company in the world, 
since Microsoft has tied its .Net Passport to Windows XP. Pursuant 
to the Tunney Act, this document sets forth Catavault's comments on 
the Revised Proposed Final Judgment because we feel that competing 
products such as Catavault will still unfortunately be set at a 
disadvantage which is not related to price or quality. If the 
Revised Proposed Final Judgment is accepted as is, the result will 
be a weakening of effective competition in the market, a reduction 
in consumer choice and less technological innovation, generally 
speaking and specifically to online identification and 
authentication.

[[Page 31376]]

    Catavault has developed, commercially licensed and deployed 
patent pending software that is both complementary and competitive 
with Microsoft .Net Passport in online identity and authentication 
services. Although Microsoft's September 20, 2001 announcement that 
a future version of .Net Passport will be federated,\1\ and thus may 
be interoperable with rivals' services, we believe this in no way 
alters the extremely serious concerns articulated herein. Moreover, 
in spite of the Revised Proposed Final Judgment announced between 
the United States Department of Justice, nine states Attorneys 
General and Microsoft Corporation, Catavault believes this in no way 
alters the extremely serious concerns articulated herein. As such 
Catavault has been encouraged that various states Attorneys General 
still have the resolve and resources necessary to continue the fight 
in ensuring conduct remedies that are timely, effective, certain and 
practical when it comes to curbing Microsoft's recidivistic 
behavior.
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    \1\ See http://www.microsoft.com/presspass/press/2001/sep01/09-20PassportFederationPR.asp
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    While these Tunney Act comments were prepared from the heart so 
to speak of the entreprenours managing Catavault, Catavault has been 
working to promote vigorous competition in computer industry 
platforms and gateways with our antitrust counselors from Morgan, 
Lewis and Bockius including Mr. Willard K. Tom based in Washington, 
D.C. and Mr. Julian M. Joshua based in Brussels.
CATAVAULT OVERVIEW
    Catavault is a pioneer in the online user identification and 
authentication space. Catavault's technology powers the ``All Access 
Pass to the Internet,'' and it allows users to access more than 
3,500 sites ranging from Amazon.com to ZDNet, a couple of orders of 
magnitude more than Microsofts .Net Passport currently enables 
access to, without the need to remember all of their authentication 
credentials for those sites. Unlike .Net Passport which is only 
accessible from a PC, Catavault is accessible from a PC, PDA, Mobile 
Phone and Set-top Box, so users can access their information from 
any device, at any time and from anywhere. CNN Headline News has 
called Catavault--``one site that can get you in everywhere...'' 
Business Week has called Catavault, ``An Open Sesame for the Whole 
Web.'' Despite these arguably superior features of its services, 
Catavault is severely endangered by the steps Microsoft is taking to 
ensure that .Net Passport becomes the dominant occupant of the 
online identity and authentication space. Accordingly, Catavault is 
endangered by the Revised Proposed Final Judgement. The remedial 
principle is straightforward enough: the remedy should unfetter a 
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.\2\ However, in spite of the 
overwhelming en banc victory on liability, the Revised Proposed 
Final Judgement does little to ensure that conduct remedies are 
timely, effective, certain and practical in curbing Microsoft's 
anti-competitive behavior.
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    \2\ United States v. Microsoft Corp., slip op. at 99-100, No. 
00-5212 (D.C. Cir. June 28, 2001), quoting Ford Motor Corp V. United 
States, 405 U.S. 562,577 (1972); United States v. United Shoe Mach. 
Corp., 391 U.S. 244,250 (1068).
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NETWORK CHARACTERISTICS & MICROSOFTS HAILSTORM STRATEGY
    Microsoft fully recognizes that, because of the network 
characteristics of the industry, only subtle uses of its monopoly 
position are necessary in order to gain an unwarranted, but 
insuperable dominance in this field. Indeed, its choice of 
``HailStorm'' as a metaphor speaks volumes. As you may know, with 
each updraft in the natural weather-related occurrence of a hail 
storm, hail stones get larger as more water molecules attach to the 
crystalline structures of the hail stones. Similarly, Microsoft 
makes its monopoly position more impregnable with every adjacent 
space it dominates. Each layer creates another multiple-level entry 
problem for potential competitors, as described in the United States 
Department of Justice's 1984 Merger Guidelines to which the United 
States Federal agencies still refer in non-horizontal matters. 
Figure 1 is a visual representation of the troubling processes that 
Catavault see at work with respect to a monopolist bundling its own 
applications to its dominant Operating System.
    As reported in The Wall Street Journal on September 20, 2001, 
Microsoft changed the name of its HailStorm initiative to ``.Net My 
Services''--possibly because they realized that its very name, 
HailStorm, has strong whiffs of antitrust violations.
    One can argue that network effects require a lock-in mechanism. 
However, the traditional lock-in mechanism is access to complements. 
Some of the services offered by Catavault and .Net Passport require 
cooperation from third party Internet site(s). If .Net Passport has 
a much larger number of users, gained through the use of its 
operating system monopoly, then why would the sites would want to 
work with Catavault? If the sites cease to work with Catavault, then 
why would users find Catavault attractive? These questions and their 
answers are paramount to understanding how market signaling and 
network effects work towards the monopolists advantages when it ties 
its own applications to its dominant Operating System.
NETSCAPE--FRUITS OF MICROSOFT'S STATUTORY VIOLATIONS
    Most harmful of all is the message that Microsoft's actions have 
conveyed to every enterprise with the potential to innovate in the 
computer industry. Through its conduct toward Netscape, IBM, Compaq, 
Intel and others, Microsoft has demonstrated that it will use its 
prodigious market power and immense profits to harm any firm that 
insists on pursuing initiatives that could intensify competition 
against one of Microsoft's core products. Microsoft's past success 
in hurting such companies and stifling innovation deters investment 
in technologies and businesses that exhibit the potential to 
threaten Microsoft. The ultimate result is that some innovations 
that would truly benefit consumers never occur for the sole reason 
that they do no coincide with Microsoft's self-interest.\3\
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    \3\ Judge Thomas Penfield Jackson's Finding of Fact, 412th and 
final paragraph, November 5, 1999.
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    Accordingly, When Microsoft destroyed Netscape as a potential 
rival platform, it did more than achieve dominance in browsers. It 
also prevented rival applications developers from playing Microsoft 
off against Netscape in the battle to ensure the survival of their 
applications programs and services. If Netscape and/or other 
browser/middleware platform software had survived as a serious 
competitor to Microsoft, competitive pressures would have forced one 
or more platforms to carry Catavault, because doing so would have 
provided a competitive advantage. The platform itself would have 
become more attractive if, through accessing Catavault, users were 
freed from cumbersome authentication procedures on a much larger 
number of sites. That competitive pressure is now gone. Thus, 
Catavault's current predicament flows directly from Microsoft's 
earlier unlawful acts against Netscape.
MARKET EXPECTATIONS STIFLE INNOVATION AND COMPETITION
    Moreover, the very public humbling of an 85 percent market share 
player like Netscape in itself creates market expectations that 
where Microsoft announces an intention to dominate a strategic 
space, it will succeed in doing so. .Net Passport occupies a 
strategic space as the on-ramp to the Internet as illustrated in 
Figure 2, and Microsoft has been quite public about that fact as has 
been reported in articles in The Industry Standard.\4\ Consequently, 
merchants, investors and other marketplace participants become 
highly resistant to dealing with Microsoft's competitors in such 
spaces. For example, Benjamin D. Black, a principal of the Rosewood 
Venture Group, a U.S. venture capital firm in San Francisco, 
California has stated, ``I still won't invest in companies that are 
directly in front of Microsoft's development path.'' \5\ And Stewart 
Alsop, a general partner of New Enterprise Associates, a Silicon 
Valley venture capital firm in the U.S., has been quoted as saying, 
``The most common question for potential investors is: ``What about 
Windows XP?'' You can still compete but if Microsoft bundles it in 
Windows it makes it much more difficult for nay kind of innovation 
that is in Microsoft's path.\6\ Thus, in this sense, too, 
Microsoft's earlier unlawful acts against Netscape directly cuts 
Catavault off from access to important complements.
---------------------------------------------------------------------------

    \4\ http://www.thestandard.con/article/0,1902,27686,00.html.
    \5\ The New York Times, September 7, 2001, Competitors See a 
Giant That is Now Largely Unfettered, by Michael Brick.
    \6\ The New York Times, September 7, 2001, Pendulum Swings to 
Microsoft, But the Degree Remains Unclear, by Steve Lohr.
---------------------------------------------------------------------------

    To that end, one could argue that the competition is ultimately 
not for the end-user, but for the online service providers who 
actually pay for online identity and authentication services. 
Signing up 200 million Hotmail accounts gives Microsoft a huge 
critical mass of users, but what does it do to get third party sites 
to work with .Net Passport? To answer this effectively, one

[[Page 31377]]

must understand that having so many users signals to the marketplace 
that Microsoft will dominate online identity and authentication 
services. Moreover, these third party businesses are motivated to 
work with Microsoft based on the marketing support that Microsoft 
can provide them--thus creating value propositions from Microsoft's 
monopoly position. If third party businesses believe that Microsoft 
will also succeed in using its Operating System monopoly to push 
Catavault and/or others aside in terms of subscribers or utilities, 
then third party firms will not have an incentive to work with 
Catavault. As former United States Deputy Assistant Attorney General 
Carl Shapiro has described in his writings, expectations play a very 
large role in network markets.\7\
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    \7\ Speech by Carl Shapiro, Deputy Assistant Attorney General, 
Antitrust Division, United States Department of Justice. American 
Law Institute and American Bar Association, ``Antitrust/Intellectual 
Property Claims in High Technology Markets,'' San Francisco, 
California, January 25, 1996.
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MAKING .NET PASSPORT THE DE FACTO IDENTITY SERVICE IN WINDOWS XP
    Microsoft has taken a number of steps to ensure, and to make 
consumers believe, that having a .Net Passport account is necessary 
in order to access features of Windows XP an/or other Microsoft 
goods and services. Indeed, the press, encouraged by Microsoft, has 
come to the conclusion that Microsoft .Net Passport ``will be the 
exclusive identity service on the new Windows XP operating system. 
Any XP user who wishes to access key services such as Windows 
Messenger (for Instant Messaging) will have to register for a 
Passport.'' \8\ Microsoft has not achieved its claimed 2000 million 
.Net Passport subscribes by offering a superior service. 
(Competitive market research indicates that .Net Passport is 
currently accepted by only about 35-70 sites, most of which are 
owned by Microsoft, have received substantial Microsoft investment 
or partnered with Microsoft in some sort of business arrangement.) 
Instead, it has done so by these kinds of suggestions of 
inevitability and by automatically opening .Net Passport accounts 
for all Hotmail and MSN users, and even hinting at future 
integration and potential incompatibilities. Thus, in published 
reports regarding .Net Passport 2.0, it is stated, ``...with this 
release, Hotmail will move to the Passport code base for easier 
integration.'' \9\
---------------------------------------------------------------------------

    \8\ Source: http://www.thestandard.com/article/0,1902,27685,00.html, attached.
    \9\ Source: http://www.wininformant.com/Articles/Index.cfm?ArticleID=22174, attached.
---------------------------------------------------------------------------

    Catavault experienced this directly in early September 2001 when 
a Catavault employee tried to access the latest release candidate of 
XP. First, he learned that one could not get the latest preview of 
XP online without a .Net Passport account.\10\ Then, after 
downloading that version of XP and rebooting, he got a blank 
desktop, but in the system tray in the bottom right, a message 
popped up that said:

    \10\ Source: http://www.microsoft.com/windowsxp/preview/systemreq.asp.
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``Add your. NET Passport to Windows XP! You've just connected to the 
Internet. You need a Passport to use Windows XP Internet 
communications features (such as instant messaging, voice chat, and 
video), and to access .NET-enabled services on the Internet. Click 
here to set up your Passport now.''

    When he clicked, it went to the .NET Passport Wizard to let him 
sign up for Passport. Thus, whether or not there are actual 
incompatibilities, Microsoft has been representing to users that 
they must sign up for .Net Passport in order to access key XP 
features or other Microsoft services. In a network business, that 
may be all Microsoft needs to maintain and extend its dominance to 
this space as well. These network characteristics undoubtedly 
underlie some of the ``vaporware'' aspects of Microsoft's dramatic 
announcements but slow rollout. We have already mentioned how small 
the number of third party sites accepting .Net Passport is. In the 
same vein, ZDNet has reported that American Express has yet to sign 
a contract with Microsoft for HailStorm services. This despite the 
fact that Microsoft touted American Express as a partner at the very 
announcement of the HailStorm initiative, by featuring American 
Express' Chief Information Officer in that announcement.\11\
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    \11\ http://www.zdnet.com/zdnn/stories/news/0,4586,5096385,00.html.
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PROPOSED CONDUCT REMEDIES TO CURB ANTI-COMPETITIVE PRACTICES
    If there is no efficiency justification for Microsoft s tactics 
such as bundling and/or market signaling, they may be acts of 
monopolization in themselves. But regardless of whether they are or 
not, the current situation flows directly from Microsoft's earlier 
unlawful acts against Netscape. While one can never know with 
certainty exactly what that but-for world would have been had 
Netscape survived, it was reasonably certain that, for some 
significant period of time there would have been a competitive 
struggle between Microsoft and Netscape as alternative nuclei around 
which other providers of applications and services would coalesce. 
Both would seek to commoditize the other's space. If Netscape gained 
the upper hand, multiple operating systems would become available to 
computer users. If Microsoft gained the upper hand, multiple 
browsers would become available. Consequently, any remedy for those 
earlier acts needs to include some kind of mandated intra-system 
competition to take the place of the competition that would have 
existed between the two systems to add attractive applications 
through a Ballot Screen with choices for online identity and 
authentication services such as Catavault.
    We have given a great deal of thought to what order language 
would be needed to implement the concept of a Ballot Screen. 
Following is the rationale and the result can be found in Figure 3 
with the language marked as to revisions. It uses Microsoft's 
inclusion of middleware products in its operating system software as 
the benchmark for what types of products should be included, with 
the slight modification that it remedies the continuing effects of 
past inclusions as well as remedying the effects of future 
inclusions. As you will see, there is a provision for approval by 
some entity, corresponding to Commission approval in the AOL Time 
Warner, in order to ensure that the competing products are serious 
competitors to Microsoft. In the case of online identity and 
authentication, the seriousness of the competition can be measured 
by the number of sites, users, and devices accessed by the 
competitor. These metrics could be written into the order if 
desired, but in any event the existence of available metrics would 
ensure that the entity charged with approval would have an objective 
way of exercising that discretion. As you will also see, when we 
reviewed Judge Jackson's order, we concluded that online identity 
and authentication service software would fit comfortably into the 
definition of ``middleware,'' but for the avoidance of doubt, we 
included it specifically in the list of examples. In addition to 
offering services via communications interfaces as now occurs, it is 
entirely possible that in the future, programmers of sites or of 
programs used to build sites will write software built upon a 
Catavault platform.
    We have also given further thought to the Department of Justice 
s observation that a possible standard for relief is that it should 
be aimed at opening the operating system market to competition. 
After reflection, we believe that our proposed Ballot Screen relief 
does in fact further that goal, but that such a standard is 
nonetheless wrong, in spite of that standard appearing in the 
Department of Justice's September 6, 2001 press release.
    The relief we propose does further the goal of operating system 
competition, because allowing Microsoft to use its operating system 
monopoly to obtain a dominant position in the authentication gateway 
to the Internet will mean the creation of yet another applications 
barrier to entry, because it will be extremely difficult to police 
the ways in which Passport could be used to favor Windows if a 
credible threat to Windows arose.
    There is, however, a more fundamental issue: the proper standard 
must be to restore the competitive conditions that would have 
existed but for the illegal conduct. It is, of course, too late to 
revive Netscape as a credible threat to Microsoft's operating system 
monopoly. One approach might be, as the Department of Justice once 
proposed, to find in Microsoft's applications software--particularly 
its dominant Office suite--a sufficiently dangerous competitive 
threat to the operating system monopoly. As in the competition 
between Microsoft and Netscape in the but-for world, the point of 
that remedy was not to assure ultimate, long-term competition in 
operating systems. The operating system company might with the 
competitive struggle, and ultimately maintain its monopoly position 
through lawful means. The point of the remedy was the competitive 
struggle itself. That remedy was imperfect, as are all the 
alternatives. But of better or worse, it is now off the table.
    Whatever replaces it, the goal should not be to assure ultimate, 
long-term competition in operating systems. The but-for world did 
not do so. Microsoft might well have won the competitive struggle, 
and maintained its monopoly. The point of the Netscape threat to the 
operating system monopoly was that Microsoft had to compete with 
better

[[Page 31378]]

products and prices, and in the meantime the rest of the computer 
industry would be vigorously competitive and innovative, and might 
nurture the next threat to its surviving monopolist. It is the 
strangling of that dynamic from which the market must be unfettered, 
and it is Microsoft's freedom from that dynamic that constitutes the 
``fruits of its statutory violation.'' At this point in the 
evolution of the computer industry, after Microsoft's misconduct, it 
might well be a hopeless task to restore competition in operating 
systems.
    It is not too late, however, to restore the competitive dynamic 
that ensured that, while Microsoft battles its chief rivals in the 
most strategic battleground at any given time, innovators in the 
next strategic space could play one against the other in order to 
survive. At the moment, the inter-system competition that Netscape 
represented is gone, and the Department of Justice is no longer 
seeking to have competition from Microsoft Office take its place. 
Thus, the temporary stopgap by which the next strategic space can 
develop must be intra-system competition, or ``must-carry.'' That 
will revive some of the competitive dynamic that Microsoft has cut 
off, and allow competition to flourish in--and on the other side 
of--those gateways. Ergo, just as Microsoft agreed to change its 
digital imaging features to give users easier access to digital 
imaging software from a number of providers such as Kodak, not just 
those affiliated with Microsoft, so there needs to be a requirement 
that Microsoft incorporate Catavault (and other online identity and 
authentication services that may arise) into XP as a complementary 
and competitive service. Thus, doing some kind of a ``Ballot 
Screen'' for consumers to select which online identity and 
authentication service they would like may be as close as one can 
get to the competitive landscape that would have existed but for 
Microsoft's already adjudicated unlawful conduct.
    In addition, of course, one would need to prohibit Microsoft 
from introducing incompatibilities, to forbid Microsoft from making 
use of .Net Passport as a prerequisite to use other Microsoft goods 
and services, and so forth. Otherwise, the need to sign up with .Net 
Passport to get the XP preview is likely to continue to be the 
typical pattern for accessing anything that Microsoft can control or 
influence.
MICROSOFT'S FEDERATED ANNOUNCEMENT & INTERNET TRUST NETWORK--ITS 
EFFECTS AND RELATION TO FEAR, UNCERTAINTY & DOUBT
    A ``Ballot Screen'' remedy would be far superior to waiting to 
see how Microsoft's latest federated announcement plays out. As the 
Department of Justice well knows, a ``fear, uncertainty and doubt'' 
strategy relies heavily on the passage of time and the uncertainty 
of the future. (This is undoubtedly why Microsoft has been making 
every effort to delay judicial and legislative proceedings in the 
United States.) As of January 28, 2002, Catavault has neither been 
invited to any Microsoft developers conference yet, nor has it 
learned of any developers conference yet, albeit Catavault has 
informed Microsoft about its potential willingness to participate in 
the conference. Additionally, XP has already been launched with an 
aggressive marketing campaign and with .Net Passport as the 
exclusive online identity and authentication service. .Net Passport 
will have a huge user base that will undoubtedly get larger between 
now and the time that any Microsoft federation conference or any 
competitive and/or complementary solution such as the Liberty 
Alliance initiated by Sun Microsystems produces any tangible results 
in the marketplace. The agenda of the federated conference and other 
like it such as the Liberty Alliance may be to develop standards for 
implementation of online user identification and authentication 
services, and in the case of Microsoft's Internet Trust Network, 
built upon a technology platform of Microsoft's choosing, regardless 
of consumer preferences. Following that developers' conference, 
there may be a long period of back-and-forth over technical 
standards. Next may come a period in which Microsoft sows 
uncertainty about the extent to which other services are fully 
interoperable, perhaps because of peculiarities in Microsoft's 
implementation of the common standard. During all that time, .Net 
Passport will become more and more entrenched, regardless of 
consumers' preferences as to the features and scope of completing 
online user identification and authentication services.
    Industry pundits used to subscribe to the notion that first 
mover advantage was the most important mission of many new 
technology ventures. However, based on present market conditions, we 
argue that it has nothing to do with first mover advantage anymore; 
rather it has everything to do with the concept of last man 
standing. Accordingly with over US $36 billion in case reserves on 
hand, Microsoft is well positioned to be the last man standing in 
many industries including online identity and authentication.
PROBLEMS WITH THE REVISED PROPOSED FINAL JUDGEMENT
    While there are many troubling issues with the Revised Proposed 
Final Judgement, two of the more salient problems for the online 
identity and authentication sector involve the following terms and 
provisions:
     OEMs--The fact is that Original Equipment Manufacturers 
(OEMs) are a sub-optimal source to serve as an adequate check and 
balance on Microsoft's anti-competitive actions. For example, the 
provisions that allow OEMs to have greater freedom to select which 
software to use and not to use do absolutely nothing to protect 
consumer choice and technological innovation.
    Thus, providing the OEMs greater freedom as a conduct remedy 
against Microsoft is meaningless today given consolidation in the PC 
industry, slumping PC sales, depressed PC margins, and the fact that 
the OEMs do not want to bite the hand that feeds them--Microsoft.
    Moreover, the OEMs know very well that small companies such as 
Catavault cannot afford to compete against Microsoft, both in terms 
of operations and marketing. Case in point, Windows XP launched on 
time because Microsoft lobbied that XP would help revive slumping PC 
sales, and Microsoft is spending approximately US $250 million just 
on marketing for XP. As such, OEMs do not necessarily want to bet on 
smaller players which find themselves in the cross-hairs of 
Microsoft--thus consumer choice and technological innovation are 
still harmed.
     AUTHENTICATION LOOPHOLE--The following provision from 
the proposed settlement seems to be the veritable loophole large 
enough to drive a truck through, particularly affecting Catavault 
and other online identity and authentication services.
    J. No provision of this Final Judgment shall:
    1. Require Microsoft to document, disclose or license to third 
parties: (a) portions of APIs or Documentation or portions or layers 
of Communications Protocols the disclosure of which would compromise 
the security of anti-piracy, anti-virus, software licensing, digital 
rights management, encryption of authentication systems, including 
without limitation, keys, authorization tokens or enforcement 
criteria; or (b) any API, interface or other information related to 
any Microsoft product if lawfully directed not to do so by a 
governmental agency of competent jurisdiction.\12\ Identification 
and authentication is singled out for a loophole to free Microsoft's 
.Net Passport from scrutiny and permit Microsoft to bind a universal 
identification and authentication service utility to its monopoly 
operating system without scrutiny under the Revised Proposed Final 
Judgement. By permitting Microsoft to withhold key part of 
encryption, digital rights management, authentication, and other 
security protocols, the Revised Proposed Final Judgement effectively 
clears the way for the desktop monopolist to the Web-services 
monopolist in a distributed computing environment. The Revised 
Proposed Final Judgement could hardly try to place a clearer stamp 
of approval on an expansion of the scope of an illegally maintained 
monopoly.
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    \12\ http://www.usdoj.gov/atr/cases/f9400/9462.htm
---------------------------------------------------------------------------

CONCLUSION
    The Revised Proposed Final Judgement agreed to by the United 
States Department of Justice, the Attorneys General on nine states 
and Microsoft Corporation does not attain its goals of curbing 
Microsoft's recidivistic behavior in maintaining and extending its 
operating system monopoly into Web-services such as online 
identification and authentication, which Microsoft has bet will be 
the next gateway to the Internet. Specifically, the Revised Proposed 
Final Judgement does not provide adequate incentives across 
constituent bodies and penalties for Microsoft to ensure that the 
Revised Proposed Final Judgement goals are attained. Moreover, the 
lenient conduct remedies imposed on Microsoft are essentially a slap 
on the wrist for its illegal conduct and anti-competitive practices. 
Unfortunately, technological innovation and consumer choice will 
continue to be harmed, and this will be exacerbated in challenging 
economic conditions if the Revised Proposed Final Judgement is 
accepted as is. As such, the Revised Proposed Final Judgement needs 
to be revised significantly if it is to have any

[[Page 31379]]

real impact in the marketplace in curbing Microsoft's recidivistic 
behavior. Specifically, as it pertains to the heart of Windows XP 
and Microsoft's goal of dominating online identification and 
authentication with .Net Passport, we believe quite passionately 
that implementing a Ballot Screen for users to choose which 
identification and authentication service that they would like would 
go a long way to providing a conduct remedy that was more timely, 
effective and certain.
Figure 1
    ``The world of operating systems becomes more homogeneous over 
time. Today something like 85 percent of the computers on the planet 
run the same operating system [Microsoft's]. There is sort of a 
positive feedback cycle here. If you get more applications, it gets 
more popular, if it gets more popular, it gets more 
applications.''--Bill Gates keynote address, Conference on Internet 
and Society at Harvard in May 1996; World War 3.0 by Ken Auletta. On 
June 28, 2001, the District of Columbia Court of Appeals unanimously 
held that Microsoft engaged in unlawful monopolization. 
Notwithstanding Judge Jackson's ruling and the appellate ruling, 
Microsoft prominently announced its major corporate initiative 
called HailStorm in March 2001; the very choice of HailStorm as a 
name serves as a metaphor for a positive feedback cycle in Bill 
Gates opinion or network effects and increasing returns in an 
antitrust perspective. The heart of HailStorm is based on .Net 
Passport, Microsoft's proprietary online identification and 
authentication service. This market signaling transcends into 
Microsoft's strategy and tactics to gain market advantage in new 
sectors using .Net Passport. .Net Passport is the exclusive online 
identification and authentication service on Windows XP. 
Accordingly, .Net Passport will be the de facto online 
identification and authentication service which will limit consumer 
choice and undermine innovation. As reported in The Wall Street 
Journal on September 20, 2001, Microsoft changed the name of 
HailStorm to ``.Net My Services''--possibly because they realize 
that its very name--HailStorm--has strong whiffs of antitrust 
violations.
    Note: In its natural weather-related occurrence, hail stones are 
large frozen raindrops produced by intense thunderstorms. As the 
frozen drops fall, liquid water freezes onto them forming ice 
pellets that continue to grow as more and more droplets accumulate. 
Upon reaching the bottom of the cloud [symbolic for the Internet], 
some of the ice pellets are carried by the updraft back up to the 
top of the cloud. As the ice pellets once again fall through the 
cloud, another layer of ice is added and the hail stones grow even 
larger. Typically the stronger the updraft, the more times hail 
stones repeat this cycle and consequently, the larger the hail 
stones grow. Once the hail stones become too heavy to be supported 
by the updraft, they fall out of the cloud toward the surface. The 
hail stones reach the ground as ice since they are not in the warm 
air below the thunderstorm long enough to melt before reaching the 
ground. And as one knows, you should take cover from a hail storm. . 
. .
Figure 2
    Microsoft s .Net Passport online identification & authentication 
technology controls the gateway to all applications in Windows XP
    Windows XP
    It's our goal to have virtually everybody who uses the Internet 
to have one of these Passport connections--Bill Gates
    Source: The Industry Standard--July 3, 2001
    http://www.thestandard.com/article/0,1902,27685,00.html
    While digital photography, instant messaging and streaming media 
all are very important issues to constituents such as Kodak, AOL 
Time Warner and Real Networks respectively, the backbone to 
Microsoft s HailStorm (renamed .Net My Services) initiative and full 
utilization of Windows XP is the Microsoft .Net Passport 
identification and authentication service. Microsoft has stated that 
.Net Passport will be the exclusive Internet identity service on 
Windows XP, and Passport will be required to utilize some or all of 
the features noted above. Thus, even if competition in those areas 
is assured, Microsoft will still hold the real keys to access and 
conceivably will be able to use its .Net Passport monopoly to direct 
traffic away from competing digital photography, instant messaging 
and streaming media applications.
    Instant Messaging
    Digital Imaging Streaming Media
    Microsoft s .Net Passport
    Identification & Authentication
    Technology
    Microsoft Office XP
    Internet Explorer
Figure 3 Proposed Order (Marked with changes)
    3g. Restriction on BindingIncluding Middleware Products toin 
Operating System Products.
    Microsoft shall not, in any Operating System Product distributed 
six or more months after the effective date of this Final Judgment, 
Bind include any Middleware Product toin a Windows Operating System 
unless:
    i. that Operating System also includes at least two (2) 
comparable Middleware Products offered by non-affiliated firms 
approved by the [Antitrust Division] [Department of Justice] [Court] 
[Trustee] or Microsoft demonstrates to the satisfaction of [___] 
that fewer than two such products exist, in which case Microsoft 
shall include all that exist. The option of using such non-
affiliated products shall be displayed to the user on terms no less 
favorable than those accorded to the Microsoft products.
    ii. Microsoft also offers an otherwise identical version of that 
Operating System Product in which all means of End-User Access to 
that those Middleware Products can readily be removed (a) by OEMs as 
part of standard OEM pre-installation kits and (b) by end users 
using add-remove utilities readily accessible in the initial boot 
process and from the Windows desktop.; and
    iii. when an OEM removes End-User Access to a Microsoft 
Middleware Product from any Personal Computer on which Windows is 
preinstalled, the royalty paid by that OEM for that copy of Windows 
is reduced in an amount not less than the product of the otherwise 
applicable royalty and the ratio of the number of amount in bytes of 
binary code of (a) the Middleware Product as distributed separately 
from a Windows Operating System Product to (b) the applicable 
version of Windows.
    3g. Middleware Products Included in Previously Distributed 
Operating System Products. If Microsoft has, in any Operating System 
Product distributed less than six months after the effective date of 
this Final Judgment, included any Middleware Product in a Windows 
Operating System, it shall within six months after the effective 
date of this Final Judgment:
    i. release a version of its most recent Operating System that 
includes at least two (2) comparable Middleware Products offered by 
non-affiliated firms approved by the [Antitrust Division] 
[Department of Justice] [Court] [Trustee], unless Microsoft 
demonstrates to the satisfication of [___] that fewer than two such 
products exist, in which case Microsoft shall include all that 
exist. The option of using such non-affiliated products shall be 
displayed to the user on terms no less favorable than those accorded 
to the Microsoft products.
    ii. offer an otherwise identical version of that Operating 
System Product in which all means of End-User Access to those 
Middleware Products can readily be removed (a) by OEMs as part of 
standard OEM preinstallation kits and (b) by end users using add-
remove utilities readily accessible in the initial boot process and 
from the Windows desktop.
    7q. 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, including such Operating Systems and 
database management systems on an Internet site) 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, online identity and authentication service 
software, 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.
    r. Middleware Product means
    i. Internet browsers, e-mail client software, multimedia viewing 
software, instant messaging software, online identity and 
authentication service software, and voice recognition software, or
    ii. software distributed by Microsoft that--
    (1) is, or has in the applicable preceding year been, 
distributed separately from an Operating System Product in the 
retail channel or through Internet access providers, Internet 
content providers, ISVs or OEMs, and
    (2) provides functionality similar to that provided by 
Middleware offered by a competitor to Microsoft.

[[Page 31380]]

MTC-00033650

Dorothy B. Fountain,
Deputy Director of Operations.
[FR Doc. 02-11539 Filed 5-8-02; 8:45 am]
BILLING CODE 4410-11-M