UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
STATE OF NEW YORK, et al.,
Plaintiffs
v. Civil Action No. 98-1233 (CKK)
MICROSOFT CORPORATION,
Defendant.
TABLE OF CONTENTS
MEMORANDUM OPINION
INTRODUCTION .............................................................1
I. PROCEDURAL HISTORY ..............................................1
II. LAW OF THE CASE ...................................................5
A. Court of Appeals Opinion ..........................................6
1. Market Definition ...........................................6
2. Theory of Liability ...........................................7
3. Four-Part Test for Liability ...................................9
4. Original Equipment Manufacturer ("OEM") Licenses ............11
5. Integration of Internet Explorer ("IE") and Windows .............11
6. Agreements with Internet Access Providers ("IAPs") ..............13
7. Agreements with Internet Content Providers ("ICPs"), Independent
Software Vendors ("ISVs"), and Apple .........................13
8. Java .....................................................15
9. Intel .....................................................16
10. Vacating the District Court's Order of Remedy ...................18
11. Remand ..................................................21
B. District Court's Findings of Fact and Surviving Conclusions of Law .....21
C. General Antitrust Law of Remedies .................................25
III. SCOPE OF THE REMEDY .............................................32
A. Legal Authority Related to Scope of the Remedy ......................38
B. Findings of Fact Related to Scope of the Remedy ......................44
1. Introduction ...............................................44
2. Treatment of Middleware ....................................47
a. "Middleware" and Related Definitions in Microsoft's Proposal
...................................................47
i. "Non-Microsoft Middleware" in the SRPFJ .........49
ii. "Non-Microsoft Middleware Product" in the SRPFJ ..51
iii. "Microsoft Middleware Product" in the SRPFJ ......53
iv. "Microsoft Middleware" in the SRPFJ .............54
b. "Middleware" and Related Definitions in Plaintiffs' Proposal
...................................................57
i. "Middleware" in the SPR ........................58
ii. "Microsoft Middleware Product" in the SPR ........60
3. New Technologies ..........................................63
a. Server/Network Computing ............................64
ii
b. Set-Top Boxes and Interactive Television Software .........68
c. Handheld Devices ....................................70
d. Web Services ........................................72
C. Conclusions Regarding Scope of the Remedy .........................76
1. Server/Network Computing ..................................77
2. Set-Top Boxes and Interactive Television Software ...............79
3. Handheld Devices ..........................................81
4. Web Services ..............................................85
5. Middleware ...............................................88
D. Alleged "Bad" Acts by Microsoft ...................................93
1. Findings of Fact-Allegedly New "Bad" Acts Relating to Interoperation
.........................................................96
a. Kerberos ............................................96
b. CIFS ..............................................98
c. Directory Services, LDAP, ADSI ........................99
d. TDS ..............................................100
e. MAPI .............................................101
f. MUP ..............................................102
2. Old "Bad" Acts Relating to Interoperation .....................103
3. Conclusions Regarding "Bad" Acts Evidence ...................104
a. Insufficient Nexus to Java Developer Tools Deception .....104
b. Insufficient Nexus to First Wave Agreements .............107
c. Nexus to Old "Bad" Acts .............................109
iii
E. Causation Analysis ..............................................110
1. Microsoft's Simple Injunction Argument ......................110
2. Economic Testimony .......................................113
a. Dr. Shapiro's Causation Analysis ......................114
i. Factual Findings ..............................114
ii. Conclusions ..................................116
b. Dr. Murphy's Causation Analysis ......................117
i. Factual Findings ..............................117
ii. Conclusions ..................................118
IV. REMEDY-SPECIFIC CONCLUSIONS ..................................118
A. Original Equipment Manufacturer ("OEM") Configuration Flexibility ..119
1. Windows Licenses .........................................119
2. Installation and Display of Icons, Shortcuts, and Menu Entries ....121
3. Insertion of Internet Access Provider ("IAP") Registration Offers ..123
4. Automatic Launching of Applications .........................124
B. End-User Access ................................................126
C. Additional Protection for OEM Flexibility ..........................139
D. Other Participants in the Ecosystem ...............................146
1. Ban on Retaliation ........................................146
2. Agreements Limiting Support for Competing Products ...........148
3. Exclusive Agreements ......................................150
4. Agreements Regarding Placement on the Desktop ...............153
iv
E. Explicitly Forward-Looking Remedies .............................154
1. API Disclosures (Interoperation between Windows and Microsoft
Middleware) ..............................................155
2. Communications Protocols (Interoperation Between PC Operating
Systems and Server Operating Systems) .......................156
3. Plaintiffs' Flawed Arguments for Overly Broad Disclosures .......158
a. Insufficient Connection to the Liability Findings ..........158
b. Harmful Effects of Cloning ...........................162
c. Harmful Effects of Disclosing Internal Interfaces .........164
4. Reasonable, Non-Discriminatory Licenses .....................165
5. Protection Against Hackers, Viruses, and Piracy ................167
F. Compliance and Enforcement Provisions ...........................168
G. Term of the Decree .............................................176
H. Other Provisions in Plaintiffs' Proposed Remedy ....................178
1. Open-Source IE and Mandatory Auction of Office ..............179
2. Ban on Knowing Interference ...............................181
3. Support for Predecessor Versions ............................182
4. Ban on Contractual Tying ..................................183
5. Ban on Retaliation for Participation in This Case ...............184
6. Mandatory Java Distribution ................................186
7. Adherence to Industry Standards .............................188
8. Monitoring of Microsoft's Intellectual Property Claims ...........190
9. Investment Reporting ......................................191
v
V. CONCLUSION ......................................................192
APPENDIX A
FINDINGS OF FACT
I. ORIGINAL EQUIPMENT MANUFACTURER ("OEM") FLEXIBILITY .....198
A. License Provisions ..............................................199
1. Plaintiffs' Third-Party Licensing Proposal .....................199
2. Icon Design and Placement .................................202
3. Automatically Launching Software ...........................204
4. Registration Sequences .....................................208
B. Remedies Related to the "Binding" of IE and Windows ...............210
1. "Add/Remove" Utility ......................................210
2. Default Settings ...........................................213
3. Respect for OEM Settings ...................................220
II. UNIFORM OEM LICENSES ...........................................223
III. PROTECTION FROM RETALIATION .................................229
A. Independent Software Vendors ("ISVs") and Independent Hardware
Vendors ("IHVs") ..............................................229
B. Original Equipment Manufacturers ("OEMs") ......................233
IV. TERMINATION OF AN OEM'S WINDOWS LICENSE ...................239
V. OTHER PARTICIPANTS IN THE ECOSYSTEM .........................242
A. Agreements Limiting Support for Competing Products ...............242
B. Exclusive Agreements ...........................................247
1. Independent Software Vendors ("ISVs") and Original Equipment
vi
Manufacturers ("OEMs") ..................................247
2. Internet Access Providers ("IAPs") ...........................252
VI. DISCLOSURE OF APIs AND COMMUNICATIONS PROTOCOLS .........254
A. Plaintiffs' Disclosure Proposal ....................................254
B. Microsoft's Disclosure Proposals ..................................267
VII. ENABLING LICENSES ...............................................271
VIII. SECURITY EXEMPTION .............................................274
IX. TERM OF THE DECREE .............................................277
X. OTHER PROVISIONS IN PLAINTIFFS' REMEDY PROPOSAL ...........279
A. Plaintiffs' Proposed Remedy ÛÛ 12, 14 ..............................280
B. Plaintiffs' Proposed Remedy Û 1 ...................................287
C. Plaintiffs' Proposed Remedy Û 5 ...................................305
D. Plaintiffs' Proposed Remedy Û 3 ...................................307
E. Plaintiffs' Proposed Remedy Û 7 ...................................310
F. Plaintiffs' Proposed Remedy Û 9 ...................................312
G. Plaintiffs' Proposed Remedy Û 13 ..................................313
H. Plaintiffs' Proposed Remedy Û 16 ..................................318
I. Plaintiffs' Proposed Remedy Û 19.f ................................322
J. Plaintiffs' Proposed Remedy Û 20 ..................................323
APPENDIX B
FINAL JUDGMENT
vii
MEMORANDUM OPINION
"There is a remedy for all things but death . . . ."1
INTRODUCTION
Presently pending before the Court are two dueling remedy proposals seeking to redress
the wrongs inflicted upon competition by Defendant Microsoft Corporation. These proposals
were presented to this Court following the district court's determination of liability for violation
of the Sherman Act, a partial affirmance by the United States Court of Appeals for the District of
Columbia Circuit, and an order of remand by the appellate court accompanied by instructions to
impose a remedy. Upon review of the entire factual record in this case, the determinations of
liability affirmed by the D.C. Circuit, the parties' legal memoranda, and the relevant legal
authority, the Court enters the following legal and discretionary conclusions and order of
remedy. The Court bases such conclusions and remedy upon its findings of fact, entered below
and in Appendix A.
I. PROCEDURAL HISTORY
On May 18, 1998, simultaneous with the filing of a complaint by the United States in a
related case, a group of state plaintiffs filed a civil complaint alleging antitrust violations by
Microsoft and seeking preliminary and permanent injunctions barring the company's allegedly
unlawful conduct.2 See Microsoft, 253 F.3d at 47. In United States v. Microsoft Corp., No. 98-
1MIGUEL DE CERVANTES, DON QUIXOTE, Part 2, Book 5, Chapter 10 (1615).
2Despite the 1998 filing of the instant suit, the antitrust issues raised in this litigation
commenced in the mid-1990s. See United States v. Microsoft Corp., 253 F.3d 34, 49 (D.C. Cir.
2001) (en banc).
1
1232 (D.D.C.), the federal government brought claims pursuant to federal law, while in State of
New York, et al. v. Microsoft Corp., No. 98-1233 (D.D.C.), the Plaintiff States3 brought claims
pursuant to both federal and state law. These two cases were consolidated, and following a
bench trial in the consolidated cases, Judge Thomas Penfield Jackson concluded that Microsoft
had violated ÛÛ 1 and 2 of the Sherman Act, 15 U.S.C. ÛÛ 1, 2, imposing liability for illegal
monopoly maintenance, attempted monopolization, and unlawful tying. United States v.
Microsoft Corp., 87 F. Supp. 2d 30, 35 (D.D.C. 2000). Correspondingly, Judge Jackson held
that Microsoft had violated the state antitrust laws analogous to ÛÛ 1 and 2 of the Sherman Act in
each of the nineteen plaintiff states and the District of Columbia.4 Id. at 54. To remedy these
findings of liability, Judge Jackson ordered the division of Microsoft into two separate
corporations. United States v. Microsoft Corp., 97 F. Supp. 2d 59, 64 (D.D.C. 2000). Microsoft
filed an appeal in both cases. On appeal, the D.C. Circuit deferred to Judge Jackson's factual
findings, Microsoft, 253 F.3d at 118, altered his findings of liability-affirming in part and
reversing in part, and vacated the remedy decree, id. at 46.
The appellate court remanded the cases to this Court with instructions to hold a
"remedies-specific evidentiary hearing," id. at 103, and to "fashion an appropriate remedy" in
3The "Plaintiff States" for purposes of this opinion are the States of California,
Connecticut, Florida, Iowa, Kansas, Minnesota, Utah, and West Virginia, the Commonwealth of
Massachusetts, and the District of Columbia. Also plaintiffs in the suit, though their claims are
not addressed in this Memorandum Opinion, are the States of New York, Ohio, Illinois,
Kentucky, Louisiana, Maryland, Michigan, North Carolina, and Wisconsin.
4This suit was originally brought by twenty states and the District of Columbia. One
state withdrew from the action prior to the issuance of liability findings by the District Court.
Another state settled its claims in July of 2001. The claims of the States of New York, Ohio,
Illinois, Kentucky, Louisiana, Maryland, Michigan, North Carolina, and Wisconsin were
litigated through liability and have been conditionally settled as to the issue of remedy.
2
light of the revised liability findings, id. at 105. Following remand, pursuant to Court Order, the
parties in the two consolidated cases entered into intensive settlement negotiations. See United
States v. Microsoft Corp., Nos. 98-1232 and 98-1233 (D.D.C. Sept. 28, 2001) (order requiring
the parties to enter into settlement negotiations). The settlement negotiations did not resolve
both cases in their entirety. However, the United States and Microsoft were able to reach a
resolution in United States v. Microsoft Corp. in the form of a proposed consent decree. The
settlement negotiations were partially successful with regard to the states' case, State of New
York, et al. v. Microsoft Corp.; a portion of the plaintiffs in that case joined the settlement
between the United States and Microsoft.5 Consequently, those states have elected not to
proceed to a remedies-specific hearing in State of New York, et al. v. Microsoft Corp. The states
which opted not to join the settlement between the United States and Microsoft have proposed a
remedy distinct from that presented in the proposed consent decree.
Following expedited discovery, on March 18, 2002, an evidentiary hearing on the issue
of the remedy commenced. The parties submitted the direct testimony in written format, while
cross-examination and re-direct testimony were offered in open court. Over thirty-two trial days,
the Court reviewed the written direct testimony and heard the live testimony of fifteen witnesses
5The so-called "Settling States" are the States of New York, Ohio, Illinois, Kentucky,
Louisiana, Maryland, Michigan, North Carolina, and Wisconsin.
3
proffered by Plaintiffs6 and nineteen7 witnesses proffered by Microsoft.8 Of these witnesses,
Plaintiffs offered expert testimony from Dr. Andrew Appel, Professor of Computer Science at
Princeton University, whom the Court qualified as an expert in the field of computer science and
software engineering. Plaintiffs' only other expert was Dr. Carl Shapiro, Professor of Business
Strategy at the University of California at Berkeley. The Court qualified Dr. Shapiro as an
expert in the field of economics. Microsoft presented expert testimony from Dr. John Bennett, a
professor in the Department of Computer Science and Electrical Computer Engineering at the
University of Colorado at Boulder, and Dr. Stuart Madnick, Professor of Information
Technology at the Sloan School of Management and Professor of Engineering Systems in the
Engineering Division of the Massachusetts Institute of Technology's School of Engineering.
Both Drs. Madnick and Bennett were qualified by the Court as experts in the field of computer
science. Microsoft also offered the expert testimony of Dr. Kenneth Elzinga, Professor of
Economics at the University of Virginia, and of Dr. Kevin Murphy, Professor of Business
6Plaintiffs presented the testimony of thirteen fact witnesses: (1) Peter Ashkin, (2) James
Barksdale, (3) John Borthwick, (4) Anthony Fama, (5) Richard Green, (6) Mitchell Kertzman,
(7) Dr. Carl Ledbetter, (8) Michael Mace, (9) Steven McGeady, (10) Larry Pearson, (11) David
Richards, (12) Jonathan Schwartz, and (13) Michael Tiemann; and two expert witnesses: (1) Dr.
Carl Shapiro; and (2) Dr. Andrew Appel.
7One of these nineteen witnesses was James Thomas ("Tom") Greene, Senior Assistant
Attorney General for the State of California, an adverse witness whose testimony Defendant
presented in the form of videotaped deposition excerpts and the transcript thereof. Def. Ex. 1530
(Greene). When referring to Mr. Greene's testimony, the Court cites to the page number which
appears on the deposition transcript.
8Defendant presented the testimony of fifteen fact witnesses: (1) Dr. James Allchin,
(2) Linda Wolfe Averett, (3) Scott Borduin, (4) David Cole, (5) Heather Davisson, (6) Brent
Frei, (7) William H. Gates, III, (8) James Thomas ("Tom") Greene, (9) Chris Hofstader,
(10) Christopher Jones, (11) Will Poole, (12) W. J. Sanders, III, (13) Robert Short, (14) Gregg
Sutherland, and (15) Richard L. Ulmer; and four experts: (1) Dr. John K. Bennett, (2) Dr.
Kenneth G. Elzinga, (3) Dr. Stuart E. Madnick, (4) Dr. Kevin M. Murphy.
4
Economics in the Graduate School of Business at the University of Chicago. The Court
qualified Drs. Elzinga and Murphy as experts in the field of economics.
At the outset of this phase of the proceeding, both parties proposed to offer expert
testimony on the subject of decree enforcement from "legal experts." In response to a request by
Microsoft to exclude such testimony, see generally "Defendant Microsoft Corporation's Motion
in Limine to Exclude the Expert Report of John H. Shenefield Which Improperly Proffers a
Legal Conclusion," the Court raised a concern that the expert legal testimony, at least as framed
by the parties, was improper. The Court also expressed the opinion that the "expert legal
testimony" would be presented more appropriately by the attorneys in the form of oral argument.
In response to the Court's concern, the parties voluntarily withdrew their presentation of these
expert witnesses and opted instead to present the information to the Court in the form of legal
briefs and argument. See Trial Transcript ("Tr."). at 1633-40, 1835-40.
II. LAW OF THE CASE
When issues have been resolved at a prior stage in the litigation, based upon principles of
judicial economy, courts generally decline to revisit resolved issues. More than a mere rule-of-
thumb, the "`[l]aw of the case doctrine' refers to a family of rules embodying the general concept
that a court involved in later phases of a lawsuit should not re-open questions decided (i.e.,
established as the law of the case) by that court or a higher one in earlier phases." Crocker v.
Piedmont Aviation, Inc., 49 F.3d 735, 739 (D.C. Cir. 1995). Similar to the law of the case
doctrine is the "mandate rule," a "`more powerful version' of the law-of-the-case doctrine, which
prevents courts from reconsidering issues that have already been decided in the same case."
Independent Petroleum Ass'n of Am. v. Babbitt, 235 F.3d 588, 597 (D.C. Cir. 2001) (quoting
5
LaShawn A. v. Barry, 87 F.3d 1389, 1393 n.3 (D.C. Cir. 1996) ("[A]n even more powerful
version of the [law-of-the-case] doctrine--sometimes called the `mandate rule'--requires a lower
court to honor the decisions of a superior court in the same judicial system.")). "Under the
mandate rule, `an inferior court has no power or authority to deviate from the mandate issued by
an appellate court.'" Id. (quoting Briggs v. Pennsylvania R.R. Co., 334 U.S. 304, 306 (1948)).
In this case, the mandate of the appellate court requires this Court to fashion a remedy
appropriately tailored to the revised liability findings. Microsoft, 253 F.3d at 105. Not
surprisingly then, the starting place for this Court's determination of an appropriate remedy is
the appellate opinion in this case. As the sole issue remaining in the case concerns a remedy for
Microsoft's violation of Û 2 of the Sherman Act, rather than a reassessment of liability, the
relevant portions of the appellate opinion consist of that court's discussion of Û 2 liability. For
background purposes, the Court shall summarize the pertinent portions of the appellate decision,
placing the primary focus upon the appellate court's determination of Û 2 liability.
A. Court of Appeals Opinion
1. Market Definition
The appellate court began its opinion by examining Plaintiffs'9 Û 2 Sherman Act claims
and, specifically, whether the district judge had identified the proper market for purposes of
assessing Microsoft's monopoly power. The appellate court concluded that the district court had
9In referring to "Plaintiffs" in this context, the Court refers to those Plaintiff States which
the Court identified in footnote 3. The Court notes, however, that the appellate court's opinion
applies not only to the claims brought by the "Litigating States" in this case, but to the claims
brought by the so-called "Settling States" in this action and by the United States in United States
v. Microsoft, No. 98-1232 (D.D.C.).
6
properly defined the relevant market as "the licensing of all Intel-compatible PC10 operating
systems11 worldwide." Microsoft, 253 F.3d at 52 (quoting Microsoft, 87 F. Supp. 2d at 36).
Having agreed with the district court's definition of the relevant market, the appellate court
adopted the district court's determination that "circumstantial evidence proves that Microsoft
possesses monopoly power." Id. at 56. The appellate court further noted that "if we were to
require direct proof [of monopoly power], . . . Microsoft's behavior may well be sufficient to
show the existence of monopoly power." Id. at 57.
2. Theory of Liability
Integral to the appellate court's adoption of the market definition was its simultaneous
acceptance of Plaintiffs' theory of Microsoft's market dominance. Both the district and appellate
courts noted that Microsoft's lawfully-acquired monopoly is naturally protected by a "structural
barrier," known as the "applications barrier to entry." Id. at 55. "That barrier . . . stems from
two characteristics of the software market: (1) most consumers prefer operating systems for
which a large number of applications have already been written; and (2) most developers prefer
10"PC" is short for "personal computer." United States v. Microsoft, 84 F. Supp. 2d 9, Ï 1
(D.D.C. 1999) (hereinafter cited as "Findings of Fact").
11The appellate court, relying upon the factual testimony presented to the district court,
explained the functions of a PC operating system:
Operating systems perform many functions, including allocating computer memory
and controlling peripherals such as printers and keyboards. Operating systems also
function as platforms for software applications. They do this by "exposing"-i.e.,
making available to software developers-routines or protocols that perform certain
widely-used functions. These are known as Application Programming Interfaces, or
"APIs." For example, Windows contains an API that enables users to draw a box on
the screen. Software developers wishing to include that function in an application
need not duplicate it in their own code. Instead, they can "call"-i.e., use-the
Windows API. Windows contains thousands of APIs, controlling everything from
data storage to font display.
Microsoft, 253 F.3d at 53 (citations omitted).
7
to write for operating systems that already have a substantial consumer base." Id. (citing
Findings of Fact ÏÏ 30, 36). This barrier creates a "chicken-and-egg" or network effects
situation, which perpetuates Microsoft's operating system dominance because "applications will
continue to be written for the already dominant Windows,12 which in turn ensures that consumers
will continue to prefer it over other operating systems." Id. Because "[e]very operating system
has different APIs,"13 applications written for one operating system will not function on another
operating system unless the developer undertakes the "time consuming and expensive" process
of transferring and adapting, known in the industry as "porting," the application to the alternative
operating system. Id. at 53.
Plaintiffs proceeded under the theory that certain kinds of software products, termed
"middleware,"14 could reduce the "self-reinforcing cycle," Findings of Fact Ï 39, by serving as a
platform for applications, taking over some of the platform functions provided by Windows and
12"In 1985, Microsoft began shipping a software package [for the PC] called Windows.
The product included a graphical user interface, which enabled users to perform tasks by
selecting icons and words on the screen using a mouse." Findings of Fact Ï 7. In 1995,
Microsoft introduced an updated version of its Windows software known as "Windows 95."
Id. Ï 8. Similarly, in 1998, Microsoft released "Windows 98." Id. Since that time, Microsoft
has continued to update, revise, and re-create its "Windows" PC operating system. Microsoft's
most current version of Windows is "Windows XP," which is available in both a "Home" edition
and a "Professional" edition.
13"APIs" are applications programming interfaces. As Judge Jackson explained:
[An] operating system supports the functions of applications by exposing interfaces,
called "application programming interfaces," or "APIs." These are synapses at
which the developer of an application can connect to invoke pre-fabricated blocks
of code in the operating system. These blocks of code in turn perform crucial tasks,
such as displaying text on the computer screen.
Findings of Fact Ï 2. For a supplemental definition of "API," see infra note 35.
14Such software takes the name "middleware" because "it relies on the interfaces
provided by the underlying operating system while simultaneously exposing its own APIs to
developers" and, therefore, is said to reside in the middle. Findings of Fact Ï 28.
8
thereby "weaken[ing] the applications barrier to entry," id. Ï 68. One of middleware's defining
characteristics as a software product is its ability to "expos[e] its own APIs." Findings of Fact
Ï 28. Eventually, reasoned Plaintiffs, if applications were written to rely on the middleware API
set, rather than the Windows API set, the applications could be made to run on alternative
operating systems simply by porting the middleware. Ultimately, by writing to the middleware
API set, applications developers could write applications which would run on any operating
system on which the middleware was preset. Plaintiffs focused their attention primarily upon
two such middleware threats to Microsoft's operating system dominance-Netscape Navigator15
and the Java technologies. See Microsoft, 253 F.3d at 53. The district and appellate courts
accepted Plaintiffs' theory of competition despite the fact that "neither Navigator, Java, nor any
other middleware product could [at that time], or would soon, expose enough APIs to serve as a
platform for popular applications." Id.; Findings of Fact ÏÏ 28-29.
3. Four-Part Test for Liability
Having concluded that the district court properly identified the relevant market as the
market for Intel-compatible PC operating systems and properly excluded middleware products
from that market, the appellate court turned its attention to the issue of whether Microsoft
responded to the threat posed by middleware in violation of Û 2 of the Sherman Act.
Specifically, the appellate court set out to determine whether Microsoft "maintain[ed], or
attempt[ed] to . . . maintain, a monopoly by engaging in exclusionary conduct." Microsoft, 253
F.3d at 58. The appellate court recounted that the district court answered that inquiry in the
15"Although certain Web browsers provided graphical user interfaces as far back as 1993,
the first widely-popular graphical browser distributed for profit, called Navigator, was brought to
market by the Netscape Communications Corporation (`Netscape') in December 1994."
Findings of Fact Ï 17.
9
affirmative, finding Microsoft liable for violating Û 2 of the Sherman Act:
by engaging in a variety of exclusionary acts . . . [s]pecifically . . . : (1) the way in
which it integrated [Internet Explorer] into Windows; (2) its various dealings with
Original Equipment Manufacturers ("OEMs"), Internet Access Providers ("IAPs"),
Internet Content Providers ("ICPs"), Independent Software Vendors (ISVs), and
Apple Computer; (3) its efforts to contain and to subvert Java technologies; and (4)
its course of conduct as a whole.
Id. In order to review the district court's findings on this point, the appellate court outlined a
four-part test for determining whether particular conduct can be said to violate antitrust law.
"First, to be condemned as exclusionary, a monopolist's act must have an `anticompetitive
effect.' That is, it must harm the competitive process and thereby harm consumers." Id. at 58
(emphasis in original). Second, the plaintiff must "demonstrate that the monopolist's conduct
harmed competition, not just a competitor." Id. at 59. Third, "the monopolist may proffer a
`procompetitive justification' for its conduct." Id. (quoting Eastman Kodak Co. v. Image
Technical Servs. Inc., 504 U.S. 451, 483 (1992)). If this justification stands unrebutted by the
plaintiff, the monopolist may escape liability. Therefore, the fourth prong of the inquiry requires
that the plaintiff "demonstrate that the anticompetitive harm of the conduct outweighs the
procompetitive benefit." Id. The appellate court stressed that, although evidence of intent is
relevant "to understand the likely effect of the monopolist's conduct," when assessing the
balance between the anticompetitive harm and the procompetitive effect, the trial court should
focus on the "effect of [the exclusionary] conduct, not the intent behind it." Id.
Using this framework, the appellate court addressed Microsoft's challenge to each of the
findings by the district court. The appellate court examined the district court's four basic areas
of findings with regard to Û 2 liability in an order different from that of the district court. The
Court presents these holdings, in the order addressed by the appellate court.
10
4. Original Equipment Manufacturer ("OEM") Licenses
Commencing its analysis with the "[l]icenses [i]ssued to [o]riginal [e]quipment
[m]anufacturers,"16 id. at 59, the appellate court focused upon three license provisions
"prohibiting the OEMs from: removing any desktop icons, folders, or `Start' menu entries;
(2) altering the initial boot sequence; and (3) otherwise altering the appearance of the Windows
desktop," id. at 61 (citing Findings of Fact Ï 213). Into the category of "otherwise altering the
appearance of the Windows desktop," the appellate court subsumed the automatic launch of an
alternative user interface, the prohibition against the addition of icons and folders different in
size and shape from those used by Microsoft, and the prohibition against the use of the "Active
Desktop" feature17 to display third-party brands. Id. at 62; see also Findings of Fact Ï 213. Of
these license provisions, the appellate court concluded that, "with the exception of the one
restriction prohibiting automatically launched alternative interfaces, all of the OEM license
restrictions at issue represent uses of Microsoft's market power to protect its monopoly,
unredeemed by any legitimate justification." Id. at 64. In commencing its next area of analysis,
the appellate court noted with regard to the license restrictions imposed upon OEMs that they
"have a significant effect in closing rival browsers out of one of the two primary channels of
distribution." Id.
5. Integration of Internet Explorer ("IE") and Windows
The appellate court next turned its attention toward the "[i]ntegration of [Internet
16Manufacturers of PCs are known as "original equipment manufacturers" or "OEMs."
Findings of Fact Ï 10.
17"The Active Desktop was a Microsoft feature that, if enabled, allowed the Windows
user to position Web pages as open windows that appear on the background, or `wallpaper' of
the Windows desktop." Findings of Fact Ï 314.
11
Explorer ("IE")]18 and Windows." Id. At the outset of its analysis, the appellate court took a
narrow view of the district court's determination, noting that the district court's "broad[]"
condemnation of "Microsoft's decision to bind `Internet Explorer to Windows with . . .
technological shackles'" is supported by only three specific actions taken by Microsoft.
Id. (quoting Microsoft, 87 F. Supp. 2d at 39). The appellate court identified these three as (1)
"excluding IE from the `Add/Remove Programs' utility"; (2) "designing Windows so as in
certain circumstances to override the user's choice of a default browser other than IE"; and (3)
"commingling code related to browsing and other code in the same files, so that any attempt to
delete the files containing IE would, at the same time, cripple the operating system." Id. at 64-
65. Pursuant to its four part test for liability, the appellate court concluded that Microsoft could
be held liable for the first and the third of these actions. Id. at 65-67. As to the second of these
actions, the override of the user's choice of default in certain circumstances, the court
determined that Microsoft had proffered a procompetitive justification that went unrebutted by
Plaintiffs, namely that the override was the result of "valid technical reasons" which justified the
override in a "few out of the nearly 30 means of accessing the Internet." Id. at 67 (quotation
marks omitted). Finding that Plaintiffs had neither rebutted Microsoft's procompetitive
justification, nor demonstrated that the anticompetitive effect of the challenged act outweighed
such justification, the appellate court held that "Microsoft may not be held liable for this aspect
of its product design." Id.
18Internet Explorer is Microsoft's Web browser. Findings of Fact Ï 17.
12
6. Agreements with Internet Access Providers ("IAPs")
Directing its attention to Microsoft's "agreements with various IAPs,"19 which the district
court "condemned" as exclusionary, the appellate court identified five Microsoft actions
specifically relied upon by the district court for this condemnation:
(1) offering IE free of charge to IAPs[;] . . . (2) offering IAPs a bounty for each
customer the IAP signs up for service using the IE browser[;] . . . (3) developing the
IE Access Kit ("IEAK"), a software package that allows an IAP to "create a
distinctive identity for its service in as little as a few hours by customizing the [IE]
title bar, icon, start and search pages," Findings of Fact Ï 249[;] . . . (4) offering the
IEAK to IAPs free of charge, on the ground that those acts, too, helped Microsoft
preserve its monopoly[,] [Microsoft, 87 F. Supp. 2d] at 41-42[;] . . . (5) agree[ing]
to provide easy access to IAPs' services from the Windows desktop in return for the
IAPs' agreement to promote IE exclusively and to keep shipments of internet access
software using Navigator under a specific percentage, typically 25%. See [Microsoft,
87 F. Supp. 2d] at 42 (citing Findings of Fact ÏÏ 258, 262, 289).
Id. at 67-68. Grouping the first four of these actions together as "Microsoft's inducements," the
appellate court held that these four actions merely "offer[ed] a consumer an attractive deal" and,
therefore, could not be treated as anticompetitive. Id. at 68. In contrast, the appellate court
agreed with the district court that Microsoft's exclusive contracts with IAPs "are exclusionary
devices, in violation of Û 2 of the Sherman Act." Id. at 71.
7. Agreements with Internet Content Providers ("ICPs"), Independent Software
Vendors ("ISVs"), and Apple
The appellate court next considered Microsoft's "dealings with ICPs, which develop
websites; ISVs, which develop software; and Apple, which is both an OEM and a software
developer." Id. at 71. The "deals" at issue in this portion of the case are grants of "free licenses
to bundle IE with [the ICPs' and ISVs'] offerings" and the exchange of "other valuable
19"PCs typically connect to the Internet through the services of Internet access providers
(`IAPs'), which generally charge subscription fees to their customers in the United States."
Findings of Fact Ï 15.
13
inducements for [ICPs' and ISVs'] agreement to distribute, promote, and rely on IE rather than
Navigator." Id. (quoting Microsoft, 87 F. Supp. 2d at 42-43) (brackets and quotation marks
omitted). The district court held these agreements to be anticompetitive in violation of Û 2 of the
Sherman Act because they had the effect of "directly induc[ing] developers to focus on
[Microsoft's] own APIs rather than ones exposed by Navigator." Id. (quoting Microsoft, 87 F.
Supp. 2d at 42-43) (quotation marks omitted).
At the outset of its analysis in this context, the appellate court concluded bluntly that
"[w]ith respect to [Microsoft's] deals with ICPs, the District Court's findings do not support
liability." Id. In contrast, the appellate court sustained the district court's finding of liability
with regard to Microsoft's agreements with ISVs because Plaintiffs made "a prima facie showing
that the deals have an anticompetitive effect," and Defendant did not successfully rebut this
showing. Id. at 72. In particular, the appellate court found that the exclusive provisions in these
so-called "First Wave Agreements" with ISVs foreclosed a substantial share of the market for
Navigator. Id.
Turning its attention in this context finally to Microsoft's relationship with Apple, the
appellate court concluded that Microsoft's agreement with Apple was exclusionary in violation
of Û 2 of the Sherman Act. Id. at 72-74. The appellate court recounted that in mid-1997,
Microsoft and Apple entered into an agreement which obligated Microsoft to continue to release
"up-to-date" versions of its office productivity software for Apple's systems, Mac Office. Id. at
73 (citing Findings of Fact ÏÏ 350-52). The agreement further obligated Apple to make IE the
default browser. Id. (citing Findings of Fact ÏÏ 350-52). Pursuant to this same agreement,
Apple promised not to install Navigator during the "default installation," and not to "position
14
icons for non[-]Microsoft browsing software on the desktop of new Macintosh PC systems or
Mac OS upgrades." Id. (quoting Findings of Fact ÏÏ 350-52). Similarly, the agreement
prohibited Apple "from encouraging users to substitute another browser for IE, and state[d] that
Apple [would] `encourage its employees to use IE.'" Id. (quoting Findings of Fact Ï 352)
(brackets omitted). The appellate court concluded that "[t]his exclusive deal between Microsoft
and Apple ha[d] a substantial effect upon the distribution of rival browsers." Id. Given the
absence of a "procompetitive justification for the exclusive dealing arrangement," the appellate
court affirmed the district court's finding of Û 2 liability based upon Microsoft's exclusive deal
with Apple. Id. at 74.
8. Java
The appellate court grouped the next category of Microsoft conduct under the heading
"Java" in reference to "a set of technologies developed by Sun Microsystems" ("Sun"). Id. The
Java technologies are described as "another type of middleware posing a potential threat to
Windows' position as the ubiquitous platform for software development." Id. (citing Findings of
Fact Ï 28). The appellate opinion recounts that the district court identified four steps taken by
Microsoft to "exclude Java from developing as a viable cross-platform threat: (a) designing a
[Java Virtual Machine ("JVM")20] incompatible with the one developed by Sun; (b) entering into
contracts, the so-called `First Wave Agreements,' requiring major ISVs to promote Microsoft's
20"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. [Findings of Fact]
Ï 73. Programs calling upon the Java APIs will run on any machine with a `Java runtime
environment,' [`JRE'] that is, Java class libraries and a JVM. Id. ÏÏ 73, 74." Microsoft, 253
F.3d at 74. The terms "JRE" and "JVM" are sometimes used interchangeably to refer to the Java
platform. The court uses the term JVM throughout this Memorandum Opinion for that purpose.
15
JVM exclusively; (c) deceiving Java developers about the Windows-specific nature of the tools
it distributed to them; and (d) coercing Intel to stop aiding Sun in improving the Java
technologies." Id. Of these actions, the appellate court concluded that all but the first action
were anticompetitive in violation of Û 2. Id. at 74-78. With regard to the first enumerated
action, the incompatible JVM, the appellate court held that because the incompatible JVM did
not have an anticompetitive effect which outweighed the procompetitive justification for the
design, it could not provide a basis for antitrust liability. Id. at 75.
Specifically, with regard to the First Wave Agreements, the appellate court observed that
the district court had found the agreements, "although not literally exclusive . . . were exclusive
in practice." Id. at 75. Although the district court did not enter precise findings as to the effect
of the First Wave Agreements upon rival Java distribution, the appellate court determined that
"the record indicates that Microsoft's deals with the major ISVs had a significant effect upon
JVM promotion." Id. In the absence of procompetitive justification, the appellate court imposed
liability for this aspect of the First Wave Agreements. Id. at 76.
As to the Java developer tools, the appellate court's imposition of liability focused not
upon the fact that the tools created programs which were not cross-platform, but upon the fact
that Microsoft deceived software developers about the Windows-specific nature of the tools.
Id. at 76-77. The appellate court found that Microsoft's deception was intentional and without
procompetitive explanation. Id. at 77. As a result, the appellate court imposed liability for
Microsoft's deception. Id.
9. Intel
As noted above, the appellate court's final imposition of liability arose out of a "threat"
16
by Microsoft directed at Intel. Id. at 77. "Intel is [a firm] engaged principally in the design and
manufacture of microprocessors." Findings of Fact Ï 95. A segment of Intel's business
develops software, with the primary focus upon "finding useful ways to consume more
microprocessor cycles, thereby stimulating demand for advanced Intel microprocessors." Id.
The appellate court recounted that in 1995, Intel was in the process of "developing a high
performance, Windows-compatible JVM." Microsoft, 253 F.3d at 77. Furthering its efforts to
combat the cross-platform threat of Java to the Windows platform, Microsoft repeatedly "urged
Intel not to help Sun by distributing Intel's fast, Sun compliant JVM." Id. Eventually, Microsoft
"threatened Intel that if it did not stop aiding Sun . . . then Microsoft would refuse to distribute
Intel technologies bundled with Windows." Id. Intel capitulated after Microsoft threatened to
support an Intel competitor, AMD, if Intel's efforts with Java continued. Id.
The appellate court acknowledged Microsoft's anticompetitive intent, as well as the
anticompetitive effect of Microsoft's actions toward Intel. Id. Microsoft did not offer a
procompetitive justification for its treatment of Intel, but "lamely characterize[d] its threat to
Intel as `advice.'" Id. Rejecting the characterization of Microsoft's threat as mere "advice," the
appellate court found the district court's imposition of liability to be supported by both fact and
law. Id. at 77-78. On this basis, the appellate court imposed Û 2 liability for Microsoft's threat
to Intel.
Corresponding to the above-described imposition of liability pursuant to Û 2 of the
Sherman Act, the appellate court imposed liability upon Microsoft for violations of the relevant
"state law counterparts of" the Sherman Act. Id. at 46. Beyond these findings, the appellate
court did not find Microsoft liable for any additional antitrust violations. Specifically, the
17
appellate court reversed the district court's conclusion that Microsoft's "course of conduct" as a
whole constitutes a separate violation of Û 2. Id. at 78. In addition, the appellate court rejected
the district court's finding of attempted monopolization and remanded the Û 1 tying claim for
further proceedings at the district court level.21 Plaintiffs opted not to pursue the tying claim on
remand.22 Joint Status Report (Sept. 20, 2001) at 2.
10. Vacating the District Court's Order of Remedy
Following its review of the district court's conclusions with regard to liability, the
appellate court considered the district court's choice of remedy. Over the objection of Defendant
Microsoft, the district court decided to consider the merits of Plaintiffs' remedy proposal in the
absence of an evidentiary hearing. Microsoft, 253 F.3d at 98-99; see also Microsoft, 97 F. Supp.
2d at 61. The district court did so based on the rationale that Microsoft's evidentiary proffers
largely concerned "testimonial predictions about future events" which would be of little use to
the court in identifying an "optimum remedy." Microsoft, 253 F.3d at 99 (quoting Microsoft, 97
F. Supp. 2d at 62). Based upon its finding of liability for illegal monopoly maintenance,
attempted monopolization, and illegal tying, the district court entered a remedy "nearly identical
to plaintiffs' proposal" mandating the divestiture of Microsoft Corporation into an "Operating
Systems Business" and an "Applications Business." Id. at 99-100 (quoting Microsoft, 97 F.
21Plaintiffs' complaint also included a separate claim of "monopoly leveraging" under Û 2
of the Sherman Act. Judge Jackson granted summary judgment in favor of Microsoft as to this
claim on the grounds that the theory runs "contrary to both economic theory and the Sherman
Act's plain language." United States v. Microsoft, 1998 WL 614485, at *27 (D.D.C. Sept. 14,
1998).
22Plaintiffs' tying claim alleged that "Microsoft's contractual and technological bundling
of the IE [W]eb browser (the `tied' product) with its Windows operating system (`OS') (the
`tying' product) resulted in a tying arrangement that was per se unlawful." Microsoft, 253 F.3d
at 84.
18
Supp. 2d at 64). The original decree entered by the district court, often referred to as the Initial
Final Judgment ("IFJ"), also included a number of "interim restrictions on Microsoft's conduct."
Id. at 100. The interim restrictions included, inter alia, mandatory disclosure "to third-party
developers the APIs and other technical information necessary to ensure that software effectively
interoperates with Windows," id. (describing IFJ Û 3.b), a prohibition on Microsoft's ability to
enter into contracts which oblige third parties to limit their "`development, production,
distribution, promotion, or use of, or payment for' non-Microsoft platform-level software," id.
(quoting IFJ Û 3.e), and a "`Restriction on Binding Middleware Products to Operating System
Products' unless Microsoft also offers consumers `an otherwise identical version' of the
operating system without the middleware," id. (quoting IFJ Û 3.g).
The appellate court found three fundamental flaws in the district court's order of remedy,
each of which alone justified vacating the remedial decree. The appellate court first concluded
that the failure to hold an evidentiary hearing in the face of disputed facts concerning the remedy
violated the "cardinal principle of our system of justice that factual disputes must be heard in an
open court and resolved through trial-like evidentiary proceedings." Id. at 101. The appellate
court rejected the district court's conclusion that evidentiary proceedings would not be useful,
noting that "a prediction about future events is not, as a prediction, any less a factual issue." Id.
at 102. Moreover, noted the appellate court, "drafting an antitrust decree by necessity `involves
predictions and assumption concerning future economic and business events.'" Id. (quoting
Ford Motor Co. v. United States, 405 U.S. 562, 578 (1972)).
In addition to the failure to hold an evidentiary hearing, the appellate court faulted the
district court for its "fail[ure] to provide an adequate explanation for the relief it ordered." Id. at
19
103. Finding the trial court's devotion of "a mere four paragraphs of its order to explaining its
reasons for the remedy" insufficient, the appellate court observed that the initial remedy was not
accompanied by an explanation of the manner in which the remedy would accomplish the
objectives of a remedial decree in an antitrust case. Id. In this regard, the appellate court recited
that "a remedies decree in an antitrust case must seek to `unfetter a market from anticompetitive
conduct,' Ford Motor Co., 405 U.S. at 577, to `terminate the illegal monopoly, deny to the
defendant the fruits of its statutory violation, and ensure that there remain no practices likely to
result in monopolization in the future,' United States v. United Shoe Mach. Corp., 391 U.S. 244,
250 (1968)." Id. (internal citations in original).
Lastly, the appellate court concluded that the substantial modifications to the liability
imposed by the district court merited a new determination of the remedy for the surviving
antitrust violations. In particular, the appellate court noted that of the three original findings of
liability, only liability for illegal monopoly maintenance in violation of Û 2 of the Sherman Act
had survived, and even this aspect of liability had been modified. Id. at 103-04. The appellate
court determined that where "sweeping equitable relief is employed to remedy multiple
violations, and some-indeed most-of the findings of remediable violations do not withstand
scrutiny" the remedy decree must be vacated because there no longer exists a rational connection
between the liability imposed and the remedy ascribed thereto. Id. at 105. Accordingly, the
appellate court remanded the case for this Court to resolve any factual disputes surrounding a
remedy and for this Court to exercise its "broad discretion" in imposing the "relief it calculates
will best remedy the conduct . . . found to be unlawful." Id.
20
11. Remand
The appellate court offered specific guidance to this Court regarding the inquiry to be
undertaken following remand. In this regard, the appellate court focused most of its attention on
the merits of a structural remedy, noting in particular that if, in fact, Microsoft is a "unitary
company," rather than the product of mergers and acquisitions, it is not scissile. Id. In addition,
the appellate court reiterated its concern over the quantum of proof provided to support a causal
connection between the exclusionary conduct and Microsoft's persistence in the dominant
market position. Id. at 107. Notably, however, the appellate court did not remark that this Court
should consider whether or not to impose any remedy. Instead, the appellate court advised this
Court to "consider which of the [original] decree's conduct restrictions remain viable in light of
[its] modification of the original liability decision," id. at 105, and admonished that the remedy
imposed should be carefully "tailored to fit the wrong creating the occasion for the remedy," id.
at 107 ("[W]e have drastically altered the scope of Microsoft's liability, and it is for the District
Court in the first instance to determine the propriety of a specific remedy for the limited ground
of liability we have upheld.").
B. District Court's Findings of Fact and Surviving Conclusions of Law
As this Court noted above, the inquiry on remand is fundamentally constrained and
guided by the conclusions of the appellate court. The appellate court's conclusions, in turn, rely
heavily upon the findings of fact entered by the district court following the liability trial. After a
76-day bench trial, Microsoft, 253 F.3d at 47, Judge Jackson entered 412 numbered paragraphs
as his "Findings of Fact," see Findings of Fact, 84 F. Supp. 2d 9. These findings provided the
factual basis for the district court's ensuing conclusions of law, issued some four months later.
21
See Microsoft, 253 F.3d at 48. In considering Microsoft's challenge to the district court's factual
findings, the appellate court applied the usual deference to the district court's factual conclusions
and found no "clear error," see id. at 118. Additionally, the appellate court held that the district
court's factual findings permitted meaningful appellate review. Id. In particular, the appellate
court refused to reverse the district court's factual findings relevant to the "commingl[ing] of
browsing and non-browsing code." Id. at 66. Faced with Microsoft's continuing protestations
that the district court's commingling finding was clearly erroneous, the appellate court
specifically denied Microsoft's plea that it vacate Finding of Fact Ï 159 "as it relates to the
commingling of code." Id.
Because all of the district court's factual findings survived challenge on appeal, they
comprise the law of this case and may be relied upon during the remedy phase of this
proceeding. Crocker, 49 F.3d at 739. Indeed, it would make little sense to proceed to craft a
remedy in the absence of substantial reliance upon the factual foundation which underlies the
liability entered in this case. Hence, the factual findings of the district court, like the conclusions
of the appellate court, comprise the foundation upon which this court must construct a remedy.
Still, the Court remains mindful of the vital distinction between factual findings, however
adverse, and legal conclusions.
A somewhat more complex problem is presented by the legal conclusions of the district
court. Although exceedingly thorough in its analysis, the opinion of the appellate court did not
specifically address at least one of the legal conclusions reached by Judge Jackson during the
liability phase. In Part I.A.2.a.i of its opinion, the district court addressed the manner in which
Microsoft battled the browser threat in the OEM channel of distribution. Microsoft, 87 F. Supp.
22
2d at 39. The district court concluded that "Microsoft's campaign proceeded on three fronts":
First, Microsoft bound Internet Explorer to Windows with contractual and, later,
technological shackles . . . . Second, Microsoft imposed stringent limits on the
freedom of OEMs to reconfigure or modify Windows 95 and Windows 98 . . . .
Finally, Microsoft used incentives and threats to induce especially important OEMs
to design their distributional, promotional and technical efforts to favor Internet
Explorer to the exclusion of Navigator.
Id. In its review of the district court's liability findings, in Part II.B.1 and 2 of its opinion, the
appellate court addressed these findings in a different sequence, considering first the license
restrictions Microsoft imposed upon the OEMs, Microsoft, 253 F.3d at 59-64, and second the
binding or "integration" of IE and Windows, id. at 64-67. The appellate court concluded its
analysis of the OEM channel with its discussion of integration, never squarely discussing the
district court's finding with regard to the use of "incentives and threats." See id. at 59-67.
Microsoft acknowledges that the appellate court declined to address individually all of
Judge Jackson's specific findings of liability. Microsoft Proposed Conclusions of Law
(hereinafter cited as "Microsoft Prop. Concl. of Law") Ï 79. Microsoft contends that the "acts
condemned by Judge Jackson," but not specifically addressed by the appellate court, "apparently
were the basis for his conclusion that `Microsoft's conduct as a whole . . . reinforces the
conviction that [Microsoft] was predacious.'" Id. (quoting Microsoft, 87 F. Supp. 2d at 44)
(emphasis omitted) (alteration by Microsoft). Drawing further upon this rationale, Microsoft
argues that the appellate court's reversal of the "course of conduct" liability determination
implicitly reverses any of the district court's liability findings not specifically addressed by the
appellate court. See id.
While an attractive and simple resolution to a complex quandary, Microsoft's reasoning
is flawed. In conflating all of Judge Jackson's remaining liability findings, Microsoft ignores the
23
express holding of the appellate court. The appellate court determined to reverse the "course of
conduct" liability on the grounds that the district court had failed to identify the acts sufficient to
support its finding of liability: "[T]he District Court did not point to any series of acts, each of
which harms competition only slightly but the cumulative effect of which is significant enough
to form an independent basis for liability." Microsoft, 253 F.3d at 78 (emphasis added).
Tellingly, the appellate court enumerated "the only specific acts" relied upon by the district court
in assessing liability on a "course of conduct" theory. Id. (emphasis added). In this vein, the
appellate court recounted that "the only specific acts" identified by the district court, namely
"Microsoft's expenditures in promoting its browser," were "not in themselves unlawful." Id.
"Because the District Court identifie[d] no other specific acts as a basis for `course of conduct
liability,'" the appellate court reversed that liability determination. Id.
In light of the basis for the appellate court's reversal on this point, it is antithetical to
conclude that specific anticompetitive acts clearly described by the district court elsewhere in its
conclusions of law are somehow reversed by the appellate court's rejection of the "course of
conduct" finding of liability. Indeed, if these findings of anticompetitive conduct could have
been treated as the basis for the district court's "course of conduct" liability finding, the
appellate court would have considered such findings in reviewing the basis for the district
court's "course of conduct" liability determination. Because the appellate court declined to look
beyond the particular acts enumerated by the district court in conjunction with its "course of
conduct" analysis, there is no basis upon which this Court can conclude that, by reversing
liability based upon a "course of conduct," the appellate court implicitly reversed findings of
anticompetitive conduct entered by Judge Jackson elsewhere in his opinion.
24
Although the Court rejects Microsoft's argument in this regard as without rational
support, the Court need not dwell long on the appropriate treatment of acts identified by the
district court as anticompetitive but not addressed by the appellate court, as Plaintiffs do not rely
on any of these acts. Although Plaintiffs contend that Microsoft simply did not appeal Judge
Jackson's finding of liability based upon the "incentives and threats" described in Findings of
Fact ÏÏ 230-38, Plaintiffs assert that the clearly affirmed bases of liability are sufficient to guide
this Court's consideration of "the appropriate remedial provisions as to Microsoft's relations
with OEMs." Plaintiffs' Proposed Conclusions of Law (hereinafter cited as "Pl. Prop. Concl. of
Law") at 5. Plaintiffs argue that the Court may make its determination of an appropriate remedy
in the absence of any reliance upon the "incentives and threats" liability finding entered by Judge
Jackson.23 Because Plaintiffs denounce any reliance upon Judge Jackson's apportioning of
liability for coercing OEMs with incentives and threats, neither will the Court rely upon such a
finding of liability in its consideration of the appropriate remedy.
C. General Antitrust Law of Remedies
It has long been established that it is the job of the district court to frame the remedy
decree in an antitrust case, and the district court has broad discretion in doing so. Int'l Salt Co.
v. United States, 332 U.S. 392, 400-01 (1947). "The relief in an antitrust case must be `effective
to redress the violations' and `to restore competition.'" Ford Motor Co., 405 U.S. at 573
(quoting United States v. E. I. Du Pont De Nemours & Co., 366 U.S. 316, 326 (1961)). Not only
should the relief ordered "cure the ill effects of the illegal conduct, and assure the public freedom
23Beyond this single liability finding, which the Court raised with the parties, Plaintiffs
have not directed the Court to other instances where the district court ascribed liability, and the
appellate court's treatment of that finding is unclear or absent.
25
from its continuance," id. at 575 (quoting United States v. United States Gypsum Co., 340 U.S.
76, 88 (1950)), "it necessarily must `fit the exigencies of the particular case,'" id. (quoting Int'l
Salt, 332 U.S. at 401). Ultimately, the goal of a remedy in an equitable suit is not the
"punishment of past transgression, nor is it merely to end specific illegal practices." Int'l Salt,
332 U.S. at 401. Rather, the remedy should "effectively pry open to competition a market that
has been closed by [a] defendant['s] illegal restraints." Id. Equitable relief in an antitrust case
should not "embody harsh measures when less severe ones will do," 2 PHILLIP E. AREEDA ET AL.,
ANTITRUST LAW Ï 325a, at 246 (2d ed. 2000), nor should it adopt overly regulatory requirements
which involve the judiciary in the intricacies of business management, United States v.
Paramount Pictures, 334 U.S. 131, 163 (1948).
In crafting a remedy specific to the violations, this Court is empowered to enjoin not only
the acts for which the defendant was found liable, but "other related unlawful acts," lest "all of
the untraveled roads to [restraint of trade] be left open and [] only the worn one be closed."
Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 133 (1969) (internal quotation
marks and citations omitted). In this regard, the Court's remedy "is not limited to prohibition of
the proven means by which the evil was accomplished, but may range broadly through practices
connected with acts actually found to be illegal." Gypsum Co., 340 U.S. at 88-89; see also
United States v. Bausch & Lomb Optical Co., 321 U.S. 707, 724 (1944) ("Equity has power to
eradicate the evils of a condemned scheme by prohibition of the use of admittedly valid parts of
an invalid whole."). Notwithstanding this flexibility, the Court may not simply enjoin "all future
violations of the antitrust laws." Zenith Radio, 395 U.S. at 133. Rather, a remedy "should be
tailored to fit the wrong creating the occasion for the remedy." Microsoft, 253 F.3d at 107.
26
Moreover, the case law counsels that the remedial decree should be "as specific as possible, not
only in the core of its relief, but in its outward limits, so that parties may know[] their duties and
unintended contempts may not occur." Int'l Salt, 332 U.S. at 400.
In reversing the district court's original order of remedy in this case, the appellate court
criticized the district court for failing to explain how the remedy would "`unfetter a market from
anticompetitive conduct,' Ford Motor Co., 405 U.S. at 577 . . . `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 Shoe, 391 U.S. at 250]."
Microsoft, 253 F.3d at 103. In attempting to provide the explanation sought by the appellate
court, this Court notes at the outset that the facts and circumstances of this case necessarily affect
the extent to which this Court's order of remedy will "accomplish those objectives." Id. It bears
repeating that the monopoly in this case was not found to have been illegally acquired, see
United States v. Microsoft, 56 F.3d 1448, 1452 (D.C. Cir. 1995),24 but only to have been illegally
maintained. See Microsoft, 253 F.3d at 46. Moreover, the appellate court observed that "the
District Court expressly did not adopt the position that Microsoft would have lost its position in
the OS market but for its anticompetitive behavior." Id. at 107 (citing Findings of Fact Ï 411).
In this regard, the "causal connection between Microsoft's exclusionary conduct and its
continuing position in the operating systems market" was established "only through inference."
Id. at 106-07. Given these circumstances, as the parties concede, it does not seem to be a valid
objective for the remedy in this case to actually "terminate" Microsoft's monopoly. Rather, the
24In that case, which is often recognized as the precursor to this case, the appellate court
noted that "[t]he government did not allege and does not contend-and this is of crucial
significance to this case-that Microsoft obtained its alleged monopoly position in violation of
the antitrust laws." Microsoft, 56 F.3d at 1452 (emphasis in original).
27
proper objective of the remedy in this case is termination of the exclusionary acts and practices
related thereto which served to illegally maintain the monopoly.
The fact that the "causal connection between Microsoft's exclusionary conduct and its
continuing position in the operating systems market" was established "only through inference,"
id., has given rise to significant disagreement between the parties as to Plaintiffs' burden on
remand. In its appeal, Microsoft "urge[d]" the circuit court to "reverse on the monopoly
maintenance claim, because plaintiffs never established a causal link between Microsoft's
anticompetitive conduct, in particular its foreclosure of Netscape's and Java's distribution
channels." Id. at 78. Relying heavily on the treatise on antitrust law authored by Phillip E.
Areeda and Herbert Hovenkamp, the appellate court determined that liability in this case could
be established through an inference of causation. Id. at 79 (citing 3 PHILLIP E. AREEDA &
HERBERT HOVENKAMP, ANTITRUST LAW Ï 651c, at 78 (rev. ed. 1996)). Applying this "rather
edentulous test for causation" the appellate court identified two relevant inquiries, the
satisfaction of which would result in liability:
(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.
Id. at 79-80. On the record from the district court, the appellate court readily concluded that both
inquiries had been satisfied and that liability must be imposed. Id.
The appellate court noted, however, that Microsoft's "concerns over causation have more
purchase in connection with the appropriate remedy." Id. at 80. In particular, the appellate court
noted that the strength of the causal connection is to be considered "in connection with the
appropriate remedy issue, i.e., whether the court should impose a structural remedy or merely
28
enjoin the offensive conduct at issue." Id. Again relying upon Areeda and Hovenkamp, the
appellate court focused on the structural remedy that had been imposed by Judge Jackson and
identified a relationship between the evidence of causation and the imposition of such a "radical"
remedy:
As we point out later in this opinion, divestiture is a remedy that is imposed only
with great caution, in part because its long-term efficacy is rarely certain. Absent
some measure of confidence that there has been an actual loss to competition that
needs to be restored, wisdom counsels against adopting radical structural relief. See
3 AREEDA & HOVENKAMP, ANTITRUST LAW Ï 653b, at 91-92 ("[M]ore extensive
equitable relief, particularly remedies such as divestiture designed to eliminate the
monopoly altogether, raise more serious questions and require a clearer indication
of a significant causal connection between the conduct and creation or maintenance
of the market power.").
Id. (internal citation omitted). Later in the opinion, the appellate court again quoted from Areeda
and Hovenkamp, highlighting the need for "a clearer indication of a significant causal
connection between the conduct and the creation or maintenance of the market power" where the
remedy is structural relief. Id. at 106 (quoting 3 AREEDA & HOVENKAMP, ANTITRUST LAW
Ï 653b, at 91-92) (emphasis added by appellate court). The appellate court instructed that in the
absence of "a sufficient causal connection between Microsoft's anticompetitive conduct and its
dominant position in the OS market . . . the antitrust defendant's unlawful behavior should be
remedied by `an injunction against the continuation of that conduct.'" Id. (quoting 3 AREEDA &
HOVENKAMP, ANTITRUST LAW Ï 650a, at 67).
In effect, the appellate court appears to have identified a proportionality between the
strength of the evidence of the causal connection and the severity of the remedy. Accordingly,
the "[m]ere existence of an exclusionary act does not itself justify full feasible relief against the
monopolist to create maximum competition." Id. (quoting 3 AREEDA & HOVENKAMP,
29
ANTITRUST LAW Ï 650a, at 67). Similarly, because structural relief is "designed to eliminate the
monopoly altogether," 3 AREEDA & HOVENKAMP, ANTITRUST LAW Ï 653b, at 91, "wisdom
counsels against adopting radical structural relief" in the "absen[ce of] some measure of
confidence that there has been an actual loss to competition that needs to be restored," Microsoft,
253 F.3d at 80. Instead, the court crafting a remedy must assess the strength of the causation
evidence that established liability and tailor the relief accordingly. Id. at 107.25
While the appellate court's discussion of causal connection in Parts II.C and V.F of its
opinion remains instructive on the issue of remedy, it bears emphasizing that the appellate court
was largely concerned in those portions of its opinion with the propriety of a structural remedy
of dissolution. Because Plaintiffs have not persisted in their request for a structural remedy of
dissolution, for the most part, this Court examines the existing causal connection through a
different lens than that anticipated and addressed by the appellate court.26 Nevertheless, the
Court's determination of the appropriate remedy in this case reflects, among other
considerations, the strength of the evidence linking Defendant's anticompetitive behavior to its
25Relying upon the appellate court's discussion of causation, Microsoft has argued that
Plaintiffs have not satisfied the requirements of antitrust standing ("causation") and "antitrust
injury" and must do so in this remanded proceeding in order to obtain any remedy. As explained
in great detail in the Court's Memorandum Opinion dated June 12, 2002, these issues were, of
necessity, addressed in conjunction with the finding and affirmance of liability by the district
court and appellate court. See State of New York, et al. v. Microsoft Corp., No. 98-1233, slip op.
passim (D.D.C. June 12, 2002). In setting up this straw-man argument, Microsoft ignores the
distinction between the establishment of some type of causation, which is fundamental to a
finding of liability and an assessment of the strength of the causal connection between the
anticompetitive behavior and the maintenance of the monopoly for purposes of crafting a
remedy. Only the latter of these inquiries is presently before the Court.
26As the parties' arguments reflect, it is unclear whether the appellate court intended only
for this court to re-examine the existing evidence relevant to the "causal connection" in
conjunction with crafting a remedy, or whether Plaintiffs were to be given an opportunity to
supplement the evidence relating to causation.
30
present position in the market.
The appellate court also noted a "practical" difficulty facing this Court relevant to the
issue of remedy. Microsoft, 253 F.3d at 48. The appellate court appropriately observed at the
outset of its review the "problematic" fact that over six years, now seven, "have passed since
Microsoft engaged in the first conduct plaintiffs allege to be anticompetitive." Id. at 49. This
span of time is an "eternity in the computer industry," which is characterized by rapid change.
Id. The appellate court further acknowledged that the "dramatic" changes that can occur in the
computer industry in such a short period of time "threaten[] enormous practical difficulties for
courts considering the appropriate measure of relief in equitable enforcement actions." Id. The
appellate court recognized that in such cases "[c]onduct remedies may be unavailing . . . because
innovation to a large degree has already rendered the anticompetitive conduct obsolete (although
by no means harmless)." Id. At a minimum, opined the appellate court, such complexities
demand an "evidentiary hearing on remedies-to update and flesh out the available information."
Id.
The parties and the Court undertook the lengthy process of precisely such an evidentiary
hearing and endeavored to update and flesh out the relevant factual information.
Notwithstanding these substantial efforts and the benefits derived therefrom, as the appellate
court certainly anticipated, there remain difficulties inherent in crafting conduct remedies an
"eternity" after commencement of the relevant conduct. Aware, though undeterred, by these
difficulties, the Court, in the exercise of its discretion, has arrived at an appropriate remedy for
Microsoft's illegal behavior. Ever-mindful of the complexities identified by the appellate court
and guided by the words of the Immortal Bard that "it is excellent [t]o have a giant's strength,
31
but it is tyrannous [t]o use it like a giant,"27 the Court sets forth its findings of fact, order of
remedy, and justification therefor.
III. SCOPE OF THE REMEDY
On December 7, 2001, Plaintiffs and Defendant simultaneously filed their competing
proposals for a remedy in this case. In response to Plaintiffs' proposal and the discovery which
ensued, Microsoft filed a motion in limine seeking "to exclude all evidence concerning server
operating systems, hand-held devices, television set-top boxes and Web services." Def. Mot. in
Limine to Exclude Testimony on Products Unrelated to the Limited Ground of Liability Upheld
by the Ct. of Appeals at 1. Microsoft argues, inter alia, that these devices and products fall
outside of the monopoly market and are unrelated to the conduct found to be anticompetitive
and, therefore, are inappropriate for consideration and coverage by the remedy in this case. Id.
All of the Microsoft conduct which was found to be exclusionary in violation of Û 2 of the
Sherman Act was directed at "preventing the effective distribution and use of products that might
threaten that monopoly." Microsoft, 253 F.3d at 58. The type of products at which Microsoft
directed this conduct were identified by the district court as "middleware," with a specific focus
on the Navigator and the Java technologies. Having reserved ruling on Microsoft's motion and
permitted the parties to further develop the relevant facts, the Court now addresses as a threshold
matter the manner in which Plaintiffs propose to treat "middleware" in the remedial phase of this
case.
Ordinarily, the Court might conclude rather swiftly that products which fall outside of the
relevant market are inappropriate for discussion and consideration by the Court in conjunction
27WILLIAM SHAKESPEARE, MEASURE FOR MEASURE, act 2, sc. 2.
32
with the crafting of a remedy for illegal monopoly maintenance. The Court does not do so in this
case because the theory of liability pursuant to which Plaintiffs' prevailed involved Microsoft's
response to a type of product which did not fall within the monopoly market, but nevertheless
posed a potential threat to Microsoft's monopoly. Accordingly, the Court pauses to examine the
monopoly market, the products which were excluded from that market, and the relationship of
middleware to this market.
The definition of the relevant product market is a necessary element of a monopolization
charge. See United States v. Grinnell Corp., 384 U.S. 563, 570 (1966); Microsoft, 253 F.3d 51.
As noted above, the monopoly market in this case is the market for Intel-compatible PC
operating systems. See Microsoft, 253 F.3d at 51. Microsoft objected to this market definition,
arguing that the district court had defined the market too narrowly, improperly excluding "three
types of products: non-Intel compatible operating systems (primarily Apple's Macintosh
operating system, Mac OS), operating systems for non-PC devices (such as handheld computers
and portal [W]ebsites), and `middleware' products, which are not operating systems at all."
Id. at 52. The appellate court summarily rejected Microsoft's challenge with regard to the
exclusion of the first two types of products, observing that Microsoft had not challenged the key
district court findings of fact which determined that the products were not likely to perform the
functions of a PC anytime in the near future. Id. The appellate court considered more carefully
Microsoft's argument with regard to the exclusion of middleware from the market, but ultimately
concluded, id. at 54, that middleware did not meet the test of "reasonable interchangeability,"
id. at 53.
Microsoft subsequently challenged as inconsonant the exclusion of middleware from the
33
market and Plaintiffs' theory of liability that Microsoft's suppression of the middleware threat
could amount to illegal monopoly maintenance in violation of Û 2. Id. at 54. The appellate court
rejected this contention based upon the distinction between the level of competitive threat
relevant to establishing a market definition and the level of competitive threat relevant to the
imposition of Û 2 liability. Id. "Nothing in Û 2 of the Sherman Act limits its prohibition to
actions taken against threats that are already well-developed enough to serve as present
substitutes." Id. The appellate court observed, in this regard, that because middleware was
merely a nascent threat, id., it may simultaneously threaten to "become a viable substitute for
Windows" and yet, remain outside of the relevant monopoly market because it is "not presently a
viable substitute for Windows." Id. (emphasis added). Based upon this analysis, the appellate
court affirmed the district court's identification of the relevant market and determined that
Microsoft possessed monopoly power in that market. Id. at 54-58.
Notably, the district court in the liability phase provided only a general definition of what
exactly constitutes "middleware," defining the term largely through example and the
identification of key attributes, rather than absolute characteristics. As the district court pointed
out in its Findings of Fact, Navigator had "three key middleware attributes that endow[ed] it
with the potential to diminish the applications barrier to entry." Findings of Fact Ï 69. The
Navigator browser was a complement to Windows, rather than a substitute operating system and,
therefore, had the potential to gain widespread use. Id. Additionally, Navigator exposed "a set
(albeit a limited one) of APIs" which provided platform capabilities, and "it ha[d] been ported to
more than fifteen different operating systems." Id. Similarly, the Java technology exposed its
own APIs and, thus, enabled applications written in Java to be ported with relative ease. Id. Ï
34
74. Java had the potential to achieve the necessary ubiquity because it could be, and ultimately
was, distributed along with Navigator. Id. Ï 76. It is noteworthy that the district court regarded
the potential of Navigator and Java to "hasten the demise of the applications barrier to entry" as
a "combined effort" resulting from the "symbiosis" between the two technologies, which
exceeded the potential independently held by either of the technologies. Id. Ï 77. Although they
played, at best, an extremely limited role in the liability findings, mention was made of the
potential threats to Microsoft's monopoly by (1) Lotus Notes, which presented "a graphical
interface that was common across multiple operating systems; . . . exposed a set of APIs to
developers; and, like Navigator, . . . served as a distribution vehicle for Sun's Java runtime
environment," id. Ï 78; (2) Intel's Native Signal Processing software, "which interacted with the
microprocessor independently of the operating system and exposed APIs directly to developers
of media content," id.; and (3) Apple's and RealNetworks' multimedia playback technologies,
"which ran on several platforms (including the Mac OS and Windows) and similarly exposed
APIs to content developers," id.
Drawing from this rather amorphous definition, as noted above, Plaintiffs identify a
broad new set of technologies which they believe merits treatment by the remedy in this case.
Plaintiffs appear to recognize that it is insufficient to simply identify other technologies that the
district court excluded from the monopoly market and argue that these technologies are relevant
to the remedy in this case on those grounds alone.28 Instead, Plaintiffs attempt to establish a
nexus between the newly identified technologies and the acts for which Microsoft was found
28The technologies identified by Plaintiffs in this phase of the proceeding include
products which, like middleware, were excluded from the monopoly market, but which, unlike
middleware, did not play a role in the attribution of liability to Microsoft for exclusionary
conduct. Microsoft, 253 F.3d at 52.
35
liable. To establish this nexus, Plaintiffs propose that the newly identified technologies are
"middleware," see States' Proposed Remedy ("SPR") Û 22.w, or are software that poses a
platform threat similar to that posed by middleware. Such a nexus, argue Plaintiffs, justifies
imposition of a remedy for Microsoft's antitrust violations that broadly addresses these newly
identified technologies, despite their virtual absence from the liability phase. Not surprisingly,
Microsoft vehemently disagrees with the proposition that the technologies identified by Plaintiffs
are sufficiently like Navigator and Java such that these technologies should be addressed by the
Court's remedy in this case. As a result, the Court's consideration of the relevance of these
newly identified technologies to the remedy in this case turns predominantly upon whether the
particular technology can be viewed as a kind of middleware, or at least as a "nascent" threat
which is similar to the middleware threats addressed during the liability phase.
In the following section, the Court examines factually the various middleware and
middleware-related definitions proposed in the parties' two remedies. To provide the necessary
background to this discussion, the Court commences the discussion with a brief examination of
the case law relied upon by Plaintiffs that is specifically relevant to the scope of the remedy.
The Court next addresses and renders factual findings regarding the treatment of middleware
under the two competing remedy proposals, as these definitions play a significant role in
defining the scope of the remedy. The Court then examines the new technologies identified by
Plaintiffs, as well as the theories advanced by Plaintiffs to relate these technologies to the theory
of liability in this case. Following the entry of factual findings on these topics, the Court applies
the relevant case law and, in the exercise of its discretion, reaches appropriate conclusions
regarding the inclusion or exclusion of these technologies from the scope of the remedy. The
36
Court's determination with regard to these technologies then informs the Court's assessment of
the appropriate treatment of middleware in the remedy. Lastly, the Court addresses, both
factually and legally, other attempts by Plaintiffs to broaden the scope of the remedy in this case,
as well as Microsoft's opposing view, which advocates a severe narrowing of the scope of the
remedy in this case.
From this analysis the Court ultimately concludes that Plaintiffs' proposed definition of
"middleware" is inconsonant with the treatment of the term during the liability phase of this
case. Plaintiffs include in their definition of "middleware" almost any software product, without
regard to the potential of the product to evolve into a true platform for other applications. In
addition, the Court observes that Plaintiffs' middleware definition, because of its use throughout
their proposed remedy, renders various provisions of Plaintiffs' remedy ambiguous and,
therefore, unenforceable. A further flaw in Plaintiffs' treatment of middleware is the inclusion
of technologies which fall outside of the relevant market and which do not pose a threat to
Microsoft's monopoly similar to the threat posed by nascent middleware. While the Court does
not fault Plaintiffs' general approach in looking beyond the relevant market to search for the new
nascent threats, the Court is unable to conclude that Plaintiffs have established that all of these
technologies have the capacity to increase competition within the relevant market.
Notwithstanding the Court's rejection of Plaintiffs' "middleware" definition, the Court
concludes that one of the technologies identified by Plaintiffs, server/network computing, has the
capacity to function in a role akin to middleware, and thereby increase competition in the
relevant market. Accordingly, the Court determines to address this technology in a portion of
the remedy where the Court need not corrupt the definition of "middleware" in order to do so.
37
A. Legal Authority Related to Scope of the Remedy
"The determination of the scope of the decree to accomplish its purpose is peculiarly the
responsibility of the trial court." Gypsum, 340 U.S. at 89. Plaintiffs premise their theory with
regard to the appropriate scope of the remedy for Microsoft's antitrust violations on Supreme
Court precedent that instructs that an appropriate remedy in antitrust cases typically exceeds "a
simple proscription against the precise [unlawful] conduct previously pursued," Nat'l Soc'y of
Prof'l Eng'rs v. United States, 435 U.S. 679, 698 (1978), because "a mere prohibition of the
precise scheme would be ineffectual to prevent restraints," Bausch & Lomb, 321 U.S. at 727.
See Pl. Supp. Mem. in Opp'n to Def. Mot. in Limine to Exclude Testimony on Products
Unrelated to the Limited Ground of Liability Upheld by the Ct. at 37. Indeed, the Supreme
Court has long held that in order to "cure the ill effects of the illegal conduct, and assure the
public freedom from its continuance," the remedial decree imposed by the Court in this case
should "range broadly through practices connected with acts actually found to be illegal."
Gypsum, 340 U.S. at 88-89. Yet despite unquestionable legal authority which indicates that the
Court may address conduct beyond the precise parameters of that found to violate the antitrust
laws, Plaintiffs advocate an extraordinarily expansive view of the conduct that can be
encompassed by a remedy in this case.
Plaintiffs rely chiefly upon four cases in which the Supreme Court sanctioned behavioral
remedies that governed conduct beyond the parameters of the antitrust violation. The earliest of
the cases heavily relied upon by Plaintiffs is International Salt Co. v. United States, 332 U.S.
392 (1947). In that case, the defendant, engaged in the commerce of salt and related products,
owned patents "on two machines for utilization of salt products." Id. at 394. The defendant
38
distributed the machines principally through leases. Id. The terms of the equipment leases
required the lessees to purchase from the defendant "all unpatented salt and salt tablets
consumed in the leased machine." Id. Discussing whether this aspect of the leases
impermissibly restrained trade, the Supreme Court concluded that although the patents conferred
upon the defendant a "right to restrain others from making, vending or using the patented
machine . . . the patents confer no right to restrain use of, or trade in, unpatented salt." Id. at
395-96. As a result, the defendant was held liable for the violation of antitrust law. Id. at 396.
To redress the liability finding, the defendant proposed a decree that enjoined it from refusing to
license, lease, or sell any machine on the grounds that a licensee, lessee, or purchaser had used or
planned to use salt not manufactured by defendant. Id. at 399 n.8. The government, however,
sought and obtained a decree that, inter alia, directed the defendant to lease or sell the salt
utilization machines generally to any applicant on non-discriminatory terms and conditions, id. at
398 n.7, notwithstanding the fact that the record did not reflect any "threat [by the defendant] to
discriminate after the judgment of the Court is pronounced," id. at 399.
In response to the defendant's challenge to the decree on the grounds that "the injunction
should go no farther than the violation or threat of violation," the Supreme Court explained:
We cannot agree that the consequences of proved violations are so limited. The fact
is established that the appellant already has wedged itself into this salt market by
methods forbidden by law. The District Court is not obliged to assume, contrary to
common experience, that a violator of the antitrust laws will relinquish the fruits of
his violation more completely than the court requires him to do. And advantages
already in hand may be held by methods more subtle and informed, and more
difficult to prove, than those which, in the first place, win a market. When the
purpose to restrain trade appears from a clear violation of law, it is not necessary that
all of the untraveled roads to that end be left open and that only the worn one be
closed. The usual ways to the prohibited goal may be blocked against the proven
transgressor and the burden put upon him to bring any proper claims for relief to the
court's attention.
39
Id. at 400. With this statement, the Supreme Court made clear that once liable for an antitrust
violation, a defendant may be restricted in its business so as to force a relinquishment of the
fruits of the anticompetitive conduct. It is this surrender which is to assist the courts in "pry[ing]
open to competition a market that has been closed by defendants' illegal restraints." Id. at 401.
Notably, however, despite the language regarding "relinquishment" of illegally obtained "fruits,"
the remedy affirmed by the Court in International Salt did not mandate a divestiture of the
defendant's assets or a structural division of the defendant, but merely regulated the terms
pursuant to which the defendant could engage in its business of leasing or selling the salt
machines. Id. at 398 n.7.
The following year, in United States v. Paramount Pictures, 334 U.S. 131 (1948), the
Supreme Court reiterated its view that the equitable powers of the courts to remedy antitrust
violations may justify "uproot[ing] 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 anticompetitive actions. Id. at
148. The underlying facts of that case concerned, among a number of other restraints,
agreements between movie distributors and exhibitors, known as "clearances," which were
"designed to protect a particular run of a film against a subsequent run."29 Id. at 144-45. The
district court in that case concluded that these agreements while not per se unlawful, could
constitute unreasonable restraints of trade in some instances. Id. at 146-47. On the facts before
it, the district court imposed liability upon the defendants for "a conspiracy to restrain trade by
imposing unreasonable clearances." Id. at 147. Having affirmed the finding of liability on this
29"A clearance is the period of time, usually stipulated in license contracts, which must
elapse between runs of the same feature within a particular area or in specified theatres." Id. at
144 n.6.
40
point, the Supreme Court examined the remedial decree provision that placed the burden on the
defendant distributor to prove the legality of any clearance that was subsequently challenged.
The Supreme Court concluded that the remedy imposed by the district court was appropriate
because the district court "could . . . have eliminated clearances completely for a substantial
period of time, even though . . . they were not illegal per se." Id. at 148. The Supreme Court
observed in this regard that "[t]hose who have shown such a marked proclivity for unlawful
conduct are in no position to complain that they carry the burden of showing that their future
clearances come within the law." Id.
With these two rulings, the Supreme Court confirmed that a remedy in an antitrust case
seeks not only to eliminate illegal conduct, but to address the effects of that conduct upon the
marketplace. Pursuant to this view, therefore, it may be appropriate in some instances that a
remedy address some legal conduct which, by its relation to the illegal and anticompetitive
conduct, perpetuates the antitrust violator's restraint on trade. At the same time, however,
nothing in these two cases indicates that an antitrust violator should be subject to an outright
denial of the ability to continue to do business and to compete with other participants in the
market and in other markets.
Plaintiffs next direct the Court to the Supreme Court's holding in Zenith Radio Corp. v.
Hazeltine Research, Inc., 395 U.S. 100 (1969). In that case, the Supreme Court considered
antitrust claims relating to various unlawful "patent pools," including those in Canada, England,
and Australia. Id. at 105. The trial court found liability relating to all of the "patent pools" and
entered "injunctive relief against further participation in any arrangement to prevent Zenith from
exporting electronic equipment into any foreign market." Id. at 107 (emphasis added). The
41
Supreme Court agreed with the court of appeals that there was insufficient evidence to support a
claim for money damages relating to the Australian and English markets, id. at 126-28
(England), 129 (Australia), but agreed with the district court that defendant and another entity
"were conspiring to exclude Zenith and others from the Canadian market," id. at 131.
Accordingly, the Supreme Court concluded that, "[j]udged by the proper standard, the record
before [it] warranted the injunction with respect to Canada." Id. Notwithstanding this
conclusion, the Court went on to "reinstate the injunction entered by the District Court insofar as
it more broadly barred [the defendant] from conspiring with others to restrict or prevent Zenith
from entering any other foreign market." Id. at 132. The Court explained:
In exercising its equitable jurisdiction, "(a) federal court has broad power to restrain
acts which are of the same type or class as unlawful acts which the court has found
to have been committed or whose commission in the future unless enjoined, may
fairly be anticipated from the defendant's conduct in the past." . . . We see no
reason that the federal courts, in exercising the traditional equitable powers extended
to them by Û 16, should not respond to the "salutary principle that when one has been
found to have committed acts in violation of a law he may be restrained from
committing other related unlawful acts."
Id. at 132-33 (quoting NLRB v. Express Publishing Co., 312 U.S. 426, 435, 436 (1941)). It is
from this passage that Plaintiffs appear to derive their familiar refrain that the remedy imposed
by this Court should reach the conduct found to violate the antitrust laws, as well as conduct
which is "the same or similar" to such illegal conduct. Importantly, however, as the Zenith
Radio Court expressed the rule, the related acts must also be "unlawful" or of the "same type or
class" in order to warrant injunction. Id. In this regard, the Zenith Radio case does not support
so broad a reading as to say that clearly lawful practices may be enjoined simply because they
will weaken the antitrust violator's competitive position.
Finally, Plaintiffs call to this Court's attention the Supreme Court's holding in National
42
Society of Professional Engineers v. United States that an injunction that "goes beyond a simple
proscription against the precise conduct previously pursued . . . is entirely appropriate." 435
U.S. at 698. In that case, upon finding that an association's cannon of ethics prohibiting
competitive bidding by its members was unlawful per se, the district court enjoined the
association "from adopting any official opinion, policy statement, or guideline stating or
implying that competitive bidding is unethical." Id. at 697. The Supreme Court affirmed
liability and rejected the defendant's contention that the provision should be struck down
because of its potential, if broadly read, to "block legitimate paths of expression on all ethical
matters relating to bidding." Id. at 698. Quoting from International Salt, the Supreme Court
noted that the "transgressor" could "bring any proper claims for relief [from the remedy] to the
court's attention," id. (quoting 332 U.S. at 400) (quotation marks omitted), should the defendant
"wish[] to adopt some other ethical guideline more closely confined to the legitimate objective of
preventing deceptively low bids," id. at 699 (quoting the court of appeals opinion in that case)
(quotation marks omitted).
These four cases, argue Plaintiffs, comprise a "rich body of case law" which supports
their expansive view of the remedy. Pl. Supp. Mem. in Opp'n to Def. Mot. in Limine to Exclude
Testimony on Products Unrelated to the Limited Ground of Liability Upheld by the Ct. of
Appeals at 40. The Court does not agree that this body of law, though it may be "rich," can
withstand the heavy burden heaped upon it by Plaintiffs. Undoubtedly Plaintiffs are correct that
there is ample precedent to support the imposition of conduct remedies which go beyond the
specific acts found to be anticompetitive, as the Supreme Court stated in a more recent summary
of its own body of law on the subject:
43
The suggestion that antitrust violators may not be required to do more than return the
market to the status quo ante is not a correct statement of the law. In United States
v. Paramount Pictures, Inc., 334 U.S. 131, we sustained broad injunctions regulating
motion picture licenses and clearances which were not related to the status quo ante.
Ford Motor Co., 405 U.S. at 573 n.8 (citations and quotation marks omitted). Plaintiffs' remedy,
however, extends this precedent well beyond its clear and logical application. In each of the
cases relied upon by Plaintiffs, to the extent that the remedy imposed exceeded the specific
anticompetitive conduct, the restrictions were closely related to the anticompetitive conduct. As
the Court explains in detail below, in this case, the scope of Plaintiffs' proposal exceeds most
rational extensions of injunctive relief for the anticompetitive conduct. While some of the areas
of expansion proposed by Plaintiffs are closely related to the circumstances which gave rise to
liability in this case, the majority of practices that Plaintiffs seek to enjoin in relation to alleged
"bad" acts by Microsoft do not fall squarely within the category of "acts which are of the same
type or class" as those found to violate the antitrust laws. Zenith Radio, 395 U.S. at 132.
B. Findings of Fact Related to Scope of the Remedy
1. Introduction
"[A] `full exploration of facts is usually necessary in order (for the District Court)
properly to draw (an antitrust) decree' so as `to prevent future violations and eradicate existing
evils.'" United States v. Ward Baking Co., 376 U.S. 327, 330-31 (1964) (quoting Associated
Press v. United States, 326 U.S. 1, 22 (1945)). The Court observes at the outset of its
examination of the evidence in this case that, in the present context, the ability of the Court to
render findings of fact, in the ordinary sense, is rather limited. As the appellate court itself
observed, "drafting an antitrust decree by necessity `involves predictions and assumptions
concerning future economic and business events.'" Microsoft, 253 F.3d at 102 (quoting Ford
44
Motor Co., 405 U.S. at 578). Whether or not this Court accepts a particular factual prediction
often rests upon whether the witness has identified a sound basis in fact or logic to justify the
prediction. Where no such basis has been identified, unless self-evident to the Court, the Court
may accord little weight to the prediction. Similarly, because of the predictive nature of the
testimony, much of the factual testimony is meaningless unless such testimony is considered
together with the accompanying argument regarding the intended use of the testimony. The
Court observes in this regard that, quite often, Plaintiffs' arguments are presented primarily
through the testimony of their witnesses. Recognizing the importance of addressing these
intertwined factual and legal assertions, the Court sets forth this testimony as a part of its factual
discussion. In many instances, however, the Court neither credits nor rejects these intertwined
assertions in its factual discussion because the Court ultimately finds the argument based thereon
to be unpersuasive or irrelevant.
The Court further observes that, in this proceeding, factual testimony often resembles that
which would otherwise appear to be a legal or discretionary conclusion. This convergence is
understandable given that issues of fact and law tend to lose their already faint distinctions in the
context of any discussion regarding what constitutes an appropriate or sufficient remedy.
Nevertheless, in rendering its separate factual findings pursuant to Rule 52 of the Federal Rules
of Civil Procedure, the Court has endeavored to draw the necessary distinction between
predictive factual assertion and legal conclusion.
Prior to entering factual findings, the Court pauses to address the role played by
Microsoft's competitors in this proceeding. It is both understandable and expected that Plaintiffs
would turn to industry participants to develop the factual record regarding the impact of
45
Microsoft's illegal conduct upon competition, to identify any new technologies which may be
relevant to the issue of remedy, and to explain the relation of such technologies to the monopoly
market. Undoubtedly, testimony from industry participants played a role during the liability
phase, as such participants are most likely to have the relevant factual knowledge. See
Microsoft, 87 F. Supp. 2d 34; Findings of Fact, 84 F. Supp. 2d 9. Thus, to the extent that
Microsoft's competitors have offered testimony explaining various technologies and the impact
of potential remedial provisions, their testimony is often useful to the Court. Nevertheless,
where such testimony reveals a self-interest in a particular remedial provision which is not
balanced by a particular benefit to competition as a whole or to other participants in the industry,
the Court, of necessity, considers with caution the views of these industry participants. The
Court takes careful note of those remedial proposals which advance the interests of particular
competitors and takes pains to ensure that the remedy in this case is not a vehicle by which such
competitors can advance their own interests. See Spectrum Sports, Inc. v. McQuillan, 506 U.S.
447, 458-59 (1993); Cargill, Inc. v. Monfort of Colo., Inc., 479 U.S. 104, 110 (1986); see also
Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 488 (1977). Any other result would
run contrary to antitrust law and principles of equity.
The Court has considered the evidence submitted by the parties, made determinations as
to its relevancy and materiality, assessed the credibility of the testimony of the witnesses, both
written and oral, and ascertained the probative significance of the documentary and visual
evidence presented. Based upon the Court's consideration of the entire record in this case and
all of the reasonable inferences to be drawn therefrom, the Court sets forth the following factual
findings. The Court sets forth additional factual findings in Appendix A.
46
2. Treatment of Middleware
Plaintiffs and Defendant have proposed detailed injunctive relief as the remedy in this
case. See Pl. Ex. 1509 (hereinafter "States' Proposed Remedy" or "SPR"); Def. Ex. 1020
(hereinafter "Second Revised Proposed Final Judgment" or "SRPFJ"). Integral to understanding
the two remedies proposed in this case is a preliminary understanding of the manner in which the
two remedies treat middleware. In simple terms, the treatment of middleware in the two
remedies plays a significant role in defining the scope of products which will receive various
protections under the terms of the respective remedies. For example, both proposed remedies
impose restrictions upon Microsoft's ability to retaliate against companies which sell or support
third-party middleware. See, e.g., SPR Û 8; SRPFJ Û III.A. In addition, both proposed remedies
address the middleware portions of Microsoft's operating system, imposing certain requirements
upon Microsoft with regard to its product design related to these portions of its operating system.
See, e.g., SPR Û 2.c; SRPFJ Û III.H. By way of further example, both proposed remedies require
Microsoft to provide certain kinds of technical information with regard to the interaction
between its operating system and its software products which are treated as Microsoft
middleware. See, e.g., SPR Û 4; SRPFJ Û III.D. By addressing middleware of various types,
both remedies intend to increase the ability of third-party middleware to provide platform
capabilities which rival the platform function of the Windows operating system.
a. "Middleware" and Related Definitions in Microsoft's Proposal
Despite these similarities in addressing the treatment of middleware, the two remedy
proposals adopt rather distinct and divergent approaches to defining the term. Microsoft's
proposed remedy does not actually use the term "middleware" standing alone, but instead
47
addresses primarily two types of software: "Microsoft Middleware Products" and "Non-
Microsoft Middleware Products." As is quite apparent from the terminology, Microsoft's
remedy proposal draws a distinction between middleware technology incorporated into
Microsoft's own products and the middleware capabilities of third-party software products.
Somewhat counter-intuitively, "Microsoft Middleware Products" and "Non-Microsoft
Middleware Products," as defined in the SRPFJ, do not mirror each other, meaning that
"Microsoft Middleware Products" are not defined as the Microsoft versions of "Non-Microsoft
Middleware Products." See SRPFJ Û VI.K, N. This unexpected relationship between the two
definitions results from the different uses of the definitions in specific portions of Microsoft's
remedy proposal.
The term "middleware," as used in the liability phase of this case, was not limited to
precise types of functionality, but instead encompassed products displaying certain "key"
attributes that "endow" the technology with the "potential to diminish the applications barrier to
entry." Findings of Fact Ï 69. In other words, the middleware in need of protection was
characterized as the software products which "Microsoft feared . . . because they facilitated the
development of user-oriented software that would be indifferent to the identity of the underlying
operating system." Findings of Fact Ï 78. The liability findings of this case primarily concern
Microsoft's efforts to compete with two specific middleware products: (1) the Navigator Web
browsing software from Netscape and (2) Sun's Java technologies. See Microsoft, 253 F.3d at
53. Plaintiffs established that Navigator and Java, because they were cross-platform-meaning
they ran on multiple PC operating systems-had the potential to develop into software
development platforms that would attract the attention of applications developers. See id. The
48
district and appellate courts accepted Plaintiffs' theory that, if a sufficient number of ISVs wrote
applications that drew on capabilities provided by these middleware platforms, consumers would
have less interest in running applications on Windows and might use non-Microsoft operating
systems under their Web-browsing and/or Java software layer, such that the Windows base could
be replaced with some other operating system that would support the middleware. Id. at 55;
Findings of Fact ÏÏ 28-29. In this regard, the surviving liability determinations turn largely on
Microsoft's efforts to thwart Netscape's ability to distribute Navigator and Sun's ability to
distribute Java in the primary channels of distribution. See Microsoft, 253 F.3d 59-78.
The potential competitive significance of Navigator and Java turned on the key attributes
of those programs which, together, held the potential to provide an easily portable software
development platform.30 Findings of Fact ÏÏ 69-77. First, the software provided a complement
to Windows, rather than a replacement. Id. ÏÏ 69-70, 73-74. In addition, Navigator and Java
exposed a set of APIs which provided a platform so that developers, relying on the platform
capabilities of the programs, could write multiple types of applications to run on Navigator and
Java. Id. Ï 69, 74. Finally, Navigator and Java both ran on Windows, as well as other PC
operating systems, such that reliance on Navigator and Java's API set would render applications
instantly portable to multiple operating systems. Id. Adding to this potential was the newly
emerging popularity of the Internet and Internet browsing software, which provided a significant
purchasing incentive to first-time PC buyers. Id. Ï 70.
i. "Non-Microsoft Middleware" in the SRPFJ
Given the defining trait of running on multiple operating systems, "middleware," as the
30A "platform" is software that provides functionality upon which ISVs can call during
the creation of their own software programs. See Gates Ï 52.
49
term was utilized during the liability phase, most frequently refers to third-party, non-Microsoft
software. Microsoft's own software products are unlikely to behave as true middleware because
Microsoft, as the monopolist, has little interest in creating an alternative platform which is
portable from Microsoft's operating system to a non-Microsoft operating system. Still, because
Microsoft software products often provide a functionality similar to that provided by a third-
party middleware product, such software is often treated as Microsoft middleware. Microsoft's
remedy proposal therefore uses the term "Non-Microsoft Middleware" to make clear the
reference to third-party software. "Non-Microsoft Middleware" is defined in the SRPFJ as:
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.
SRPFJ Û VI.M. "Non-Microsoft Middleware," as that term is defined in the SRPFJ, captures the
essence of the middleware threats which were discussed during the liability phase. See id. In
fact, the definition of "Non-Microsoft Middleware" expands beyond the middleware discussed at
the liability phase in that it does not require that the software products already run on multiple
PC operating systems, only that they have the potential, if ported to such operating systems, to
serve as platforms for applications. See id.
The term "Non-Microsoft Middleware" is noteworthy for the breadth of its coverage of
software products without limitation as to specific types of functionality. Consistent with the
liability phase, these software products are principally limited by the requirement that they run
on Microsoft's monopoly product-Windows, while exposing a range of functionality through
published APIs. Id. "Non-Microsoft Middleware" is utilized in significant portions of
50
Microsoft's remedy proposal and is the term which most often identifies the products which will
receive some form of protection under Microsoft's remedy proposal. For example, Û III.A of the
SRPFJ prohibits Microsoft, inter alia, from retaliating against OEMs for supporting in any way
"Non-Microsoft Middleware." Id. Û III.A. Likewise, Û III.C of Microsoft's remedy proposal
restricts Microsoft's ability to impose license restrictions upon OEMs with regard to the
installation and display of icons, shortcuts, and menu entries for "Non-Microsoft Middleware."
Id. Û III.C. Therefore, under the umbrella of "Non-Microsoft Middleware," Microsoft's remedy
proposal affords coverage or protection to a wide variety of third-party software products.31
ii. "Non-Microsoft Middleware Product" in the SRPFJ
Microsoft's proposed remedy also uses the term "Non-Microsoft Middleware Product,"
which is defined similarly to "Non-Microsoft Middleware," but adds a requirement that "at least
one million copies" of the product "were distributed in the United States within the previous
year." SRPFJ Û VI.N. Some of Plaintiffs' witnesses contended that the definition of "Non-
Microsoft Middleware Product" is in discord with the use of the term "middleware" during the
liability phase because it requires some degree of popularity for the product before it is covered
by the definition as a middleware product. Specifically, Plaintiffs' witnesses pointed to the
"one-million-copies" threshold mark in the "Non-Microsoft Middleware Product" definition and
argued that it excludes the kinds of nascent threats which are most similar to the products toward
which Microsoft was found to have directed its illegal conduct. See, e.g., Ashkin Ï 169;
Richards Ï 139. To the contrary, the one-million-copies threshold is consistent with the
31For example, pursuant to the definition of "Non-Microsoft Middleware," products
competitive with Microsoft Office would receive protection from various types of adverse action
by Microsoft, notwithstanding the fact that Microsoft Office is a product which has always been
separate and distinct from Microsoft's operating system.
51
treatment of middleware in the liability phase of this proceeding. The one-million-copies
distribution requirement in the definition of "Non-Microsoft Middleware Products" is reflective
of the treatment of middleware threats in this case because the district and appellate courts did
not merely focus on any software with the potential to serve as a multi-purpose platform, but
specifically focused upon middleware which could "gain widespread use based on its value as a
complement to Windows." Findings of Fact Ï 69; see also id. ÏÏ 72 (describing Navigator's
widespread adoption after its release), 76 (describing Java's inclusion in Navigator). The
products upon which Judge Jackson focused in imposing liability were not merely middleware,
but were middleware threats, because of their popular use, platform capabilities, and their
ensuing ability to reduce the applications barrier to entry. Findings of Fact ÏÏ 69-78.
Additionally, it is noteworthy that the term "Non-Microsoft Middleware Product" is
utilized in only one section of Microsoft's proposed remedy, Û III.H. This portion of Microsoft's
remedy proposal requires Microsoft to configure its operating system products so as to permit
the removal of end-user access to, and certain "automatic invocations"32 of "Microsoft
Middleware Products," as well as "Non-Microsoft Middleware Products." SRPFJ Û III.H.1.
This portion of the SRPFJ also provides for the replacement of "Microsoft Middleware
Products" with "Non-Microsoft Middleware Products" in very specific instances. Id. Û III.H.2.
Because this portion of Microsoft's proposed remedy requires Microsoft to undertake the
redesign of its own product, Jones Ï 119, the one-million-copies threshold relieves Microsoft of
the obligation to redesign its product to accommodate a particular piece of software with
extremely limited use. Elsewhere in Microsoft's remedy proposal, where there is no burden
32The term "automatic invocations" refers generally to the launching of a particular piece
of software functionality without the direct invocation of such software by the user.
52
upon Microsoft to redesign its product, the one-million-copies distribution threshold does not
apply. See, e.g., SRPFJ Û III.A, C.
To emphasize the limited relevance of the one-million-copies threshold, the Court
reiterates that Microsoft's remedy proposal primarily utilizes the term "Non-Microsoft
Middleware," which does not incorporate any minimum threshold for distribution, in its
extension of protection to products well beyond the types of products that were addressed during
the liability phase. This lack of a threshold leads to the inclusion in the remedy of virtually any
nascent "middleware" technology, regardless of its popularity or promise of success. Therefore,
the key distinction between the two definitions is rooted in the liability determination, as well as
practical considerations attendant to the imposition of design obligations upon Microsoft.
iii. "Microsoft Middleware Product" in the SRPFJ
In contrast to the broad definitions of "Non-Microsoft Middleware" and "Non-Microsoft
Middleware Products," the term "Microsoft Middleware Product" is defined according to a
specific set of existing Microsoft functionalities, as well as future Microsoft functionality. The
existing set of functionalities which are included in "Microsoft Middleware Product" are those
provided by Internet Explorer, Microsoft's Java Virtual Machine, Windows Media Player,
Windows Messenger, Outlook Express, and their successors in Windows. SRPFJ Û VI.K.1. The
future technologies captured by the definition of "Microsoft Middleware Product" encompass
software included in Windows that provides the functionality of Internet browsers, email client
software, networked audio/video client software, and instant messaging software. Id. Û VI.K.2.
Other future technologies captured in the definition of "Microsoft Middleware Product" are
those functionalities which are both distributed as part of Windows and distributed separately
53
from Windows by Microsoft, trademarked by Microsoft, and which compete with third-party
middleware products. Id.
"Microsoft Middleware Product" extends well beyond the Microsoft counterparts to the
two non-Microsoft technologies which were primarily at issue in the liability phase of this case
(Java and Navigator) to include media playback technology, which was addressed briefly during
the liability phase, Findings of Fact Ï 78, and to govern the Microsoft counterparts to other well-
recognized potential middleware threats to Windows' dominance, such as email client software
and instant messaging software. See SRPFJ Û VI.K. The term "Microsoft Middleware Product,"
as defined in the SRPFJ, focuses upon software technologies which have been incorporated or
"integrated" into the Windows operating system, in reflection of the fact that the two
technologies principally at issue during the liability phase were mirrored by Microsoft
technologies that had been incorporated into Windows. See Findings of Fact ÏÏ 133, 155, 397-
98. The focus on technologies incorporated into Windows further reflects the fact that Microsoft
software technologies that have never been part of Windows fall outside of Microsoft's
monopoly product, which, of course, is the focus of this proceeding.
iv. "Microsoft Middleware" in the SRPFJ
In portions of Microsoft's proposed remedy, there is a need to identify the specific code
in Windows. Hence, Microsoft's remedy proposal uses the term "Microsoft Middleware," which
is largely reflective of the definition of "Microsoft Middleware Product," but which is further
limited to the code separately distributed and trademarked or marketed as a major version of the
Microsoft Middleware Product. SRPFJ Û VI.J. The term "Microsoft