DOJ Gates Notesgreenspun.com : LUSENET : MS-DOJ : One Thread
DOJ GATES NOTES
from Ken Murata
Please note that transcript page numbers included in parentheses throughout the document. References to government exhibits have also been included. The government exhibits are available on the course website.
The Department of Justice has attempted to advance its case by presenting evidence relating to Microsoft's attempts to (i) dissuade Netscape from competing with Microsoft in the market for browsers, (ii) limit competition in the market for runtime applications by dividing the market with Apple, (iii) exclude Netscape's browser from the OEM distribution channel, and (iv) exclude Sun Microsystems's Java from the OEM distribution channel. Note that the DOJ presented videotaped excerpts from Gates' deposition.
Market Division Proposals
The Department of Justice attempted to prove Gates' awareness of Microsoft's proposal to divide the market for browsers at the June 1995 meeting with Netscape. Gates denied having any knowledge of the proposed market division scheme in 1995. Gates claimed that the alleged overture was brought to his attention by a recent article in the Wall Street Journal. (9) Gates also indicated that a proposal of this nature would be violative of company policy. (10) The DOJ produced evidence that raised doubts about the truthfulness of Gates' denial. The DOJ submitted e-mail sent by a Microsoft employee to Gates on June 1, 1995 that set forth Microsoft's working goals in its relations with Netscape. (Gov. Exhibit number unspecified) The goals included "move Netscape out of the WIN32 internet client area" and "avoid cold or hot war with Netscape." (6) The DOJ also attempted to cast light on Microsoft's stance towards Apple's QuickTime application. Queried about whether he could recollect any attempts to "get Apple to agree not to market QuickTime in any respect, or to limit the marketing of QuickTime in any respect," Gates responded in the negative. (72-73) Gates indicated that there were technical discussions about whether "a common runtime was achievable" (75) - a product described as "something new ... which would be better for both companies." (78) In response to Gates' denial of any awareness of proposals by Microsoft officials to divide the market for runtime applications, the government introduced a July 23, 1998 article from the Wall Street Journal in which assertions to the contrary were presented. (79-80)
Exclusion of Netscape and Sun from OEM Distribution Channel
The DOJ produced e-mail sent by Gates to Microsoft executives on August 8, 1997 in which he asked "[d]o we have a clear plan on what we want Apple to do to undermine Sun?" (Gov. Exhibit 365) In the e-mail, Gates also indicated that he wanted Microsoft's relationship with Apple to yield "a real advantage against Sun and Netscape." (16) Gates' responses to questions regarding the nature of Microsoft's relationship with Apple were evasive. Other e-mail submitted by the DOJ cast additional light on Microsoft's relationship with Apple. The DOJ produced e-mail sent to Gates by a Microsoft employee on February 13, 1998 in which MacOffice is described as "the perfect club to use on [Apple]." (Gov. Exhibit 366) The e-mail indicated that Apple was concerned that if either Netscape or Microsoft ceased to develop browsers for Apple, the remaining rival would also lose interest, and that "getting Apple to do anything that significantly materially disadvantages Netscape will be tough." During the deposition Gates stated that he never directed anyone to attempt to get Apple to do things that would significantly or materially disadvantage Netscape. (22-23) Gates' testimony was unconvincing. The reference to the perfect club in the e-mail required explication. E-mail submitted by the DOJ as exhibits indicated that Microsoft executives were attempting to decide whether to proceed with MacOffice in 1997. Gates claimed that cancellation had been discussed because Microsoft executives had expressed concerns about the commercial viability of the product. (30) During the deposition, the DOJ cast doubt on the motive for cancellation proffered by Gates. E-mail from a Microsoft software developer to Gates sent on June 27, 1997 urged Gates to "[make] a final decision to finish MacOffice97 and detach this issue from the current Apple decision." (Gov. Exhibit 263) E-mail sent on January 21, 1998 by another Microsoft software developer to Gates describes MacOffice as the "biggest Apple carrot." (Gov. Trial Exhibit 267) The e-mail produced by the DOJ suggest that Gates' efforts at trial to sever the decision to produce MacOffice from other aspects of its relationship with Apple should be treated with skepticism. The decision to develop MacOffice97 was clearly an integral component of Microsoft's dealings with Apple. The DOJ focused its inquiry on Microsoft's objectives in its relationship with Apple. Gates testified that the allusions to the negotiations with Apple in the e-mail sent in June 1997 referred to ongoing discussions regarding a patent cross-license. (33) The DOJ cast doubt on the veracity of Gates' testimony by referring to an e-mail sent by Gates to Microsoft employees on June 23, 1996 in which he indicates that the two goals in investing in a relationship with Apple were maintaining their applications share on the Apple platform, and getting Apple to embrace Internet Explorer. (Gov. Exhibit 369) In spite of Gates' vehement protestations to the contrary, the goals seemed to be couched in terms of a proposed deal between Apple and Microsoft that would lead to an endorsement of Internet Explorer technology by Apple. (47, 51-53) The government introduced e-mail sent on August 21, 1997 by a member of the Microsoft executive staff following a meeting in August 1997. (Gov. Exhibit 370) The sender indicated that Gates had emphasized the importance of including Internet Explorer in the October 1997 OS release from Apple. The sender added "Bill was clear that his whole goal here is to keep Apple and Sun split." (60) The DOJ also submitted the August 5, 1997 bundling agreement between Apple and Microsoft. The agreement appears to further the goals described by Gates in earlier e-mail. (Gov. Exhibit 1167) The agreement specified inter alia that "Apple will ship Internet Explorer for Macintosh bundled in all units of Mac OS system software Apple shifts to distributors," "Apple will make Internet Explorer for Macintosh the default selection in the choice of all internet browser," and "Apple will not be proactive or initiate actions to encourage users to swap out Internet Explorer for Macintosh." The bundling is conditioned on Microsoft's continued production and development of MacOffice. (see generally 63-65) Viewed together with the earlier e-mails discussing the cancellation of MacOffice97, there is evidence that suggests that Microsoft was wielding the application as a club in its dealings with Apple. Other e-mail submitted by the DOJ lend credence to the motives imputed to Gates in the August 21 e-mail. For example, e-mail sent on April 14, 1997 by a Microsoft employee to Gates describes a conversation between the sender and Gates. During this conversation Gates is said to have asked "[o]ne, what is out business model for Java?" and "[t]wo, how do we wrest control of Java away from Sun?" (Gov. Exhibit 372)
The DOJ has succeeded in advancing its case against Microsoft on a number of fronts. The allegations of efforts to divide markets with competitors has been advanced by the evidence suggesting that Gates may have been aware of the activities of Microsoft executives. The evidence relating to Microsoft's dealings with Apple lend credence to the allegations that Microsoft was engaged in exclusionary conduct of one form or another in the market for browsers. Finally, considerable doubt has been cast on Gates' truthfulness as a witness.
-- Anonymous, November 13, 1998