Opposition Brief — Microsoft Corp. v. United States
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(7 Supreme Co It.
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No. 00-139
i. 27000
In the Supreme Court of the United States
Ne .
MICROSOFT CORPORATION, APPELLANT ~~~
U.
UNITED STATES OF AMERICA, ET. AL.
ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR
THE DISTRICT OF COLUMBIA
BRIEF FOR THE UNITED STATES IN RESPONSE TO
THE JURISDICTIONAL STATEMENT
SETH P. WAXMAN
Solicitor General
Counsel of Record
JOEL I. KLEIN
Assistant Attorney General
LAWRENCE G. WALLACE
Deputy Solicitor General
A. DOUGLAS MELAMED
Deputy Assistant Attorney
General
JEFFREY P. MINEAR
Assistant to the Solicitor
General
CATHERINE G. O’SULLIVAN
Attorney
Department of Justice
Washington, D.C. 2050-0001
(202) 514-2217
„% „„
22
QUESTIONS PRESENTED
Microsoft Corporation’s statement of the questions pre-
sented (J.S. i-ii) identifies seven issues for review by this
Court:
1. Whether the district court erred in holding that Micro-
soft violated Section 2 of the Sherman Act, 15 U.S.C. 2, by
engaging in a course of exclusionary conduct to protect and
maintain its personal computer (PC) operating system mo-
nopoly.
2. Whether the district court erred in holding that Micro-
soft violated Section 2 of the Sherman Act, 15 U.S.C. 2, by
attempting to monopolize the market for Web browsers.
3. Whether the district court erred in holding that Micro-
soft violated Section 1 of the Sherman Act, 15 U.S.C. 1, by
tying its Internet Explorer Web browser to its Windows
operating system through contracts and technological arti-
fices.
4. Whether any of the district court’s procedural and
evidentiary rulings constituted an abuse of discretion requir-
ing reversal of the judgment.
5. Whether the district court abused its discretion by
ordering structural separation of Microsoft into two entities
and transitional restrictions on its conduct.
6. Whether the district court erred in dismissing Micro-
soft’s counterclaim under 42 U.S.C. 1983, alleging that state
attorneys general, under color of state law, sought relief in
this case that would deprive Microsoft of its rights under
federal copyright law.
7. Whether the district judge’s extrajudicial comments
about the case require reversal of the judgment.
(I)
TABLE OF CONTENTS
Page
Statement 1
Argument:
I. This case warrants the Court’s immediate
consideration because the appeal is of “general
public importance in the administration of justice 13
II. Microsoft’s contentions that the Court should
deny the appeal, despite its importance, are
unpersuasive 18
A. The legal issues are appropriate for direct
appeal 19
B. The factual record presents no obstacle to
direct review 25
C. Postponing this Court’s review to permit re-
view by the court of appeals would not promote
the administration of justice 28
Conclusion 30
Addendum A la
Addendum B 0 7a
TABLE OF AUTHORITIES
Cases: ö
AT&T Corp. v. lowa Utils. Bd., 525 U.S. 366
(1999) 19
Amadeo v. Zant, 486 U.S. 214 (1988) 27
American Textile Mfrs. Inst. v. Donovan, 452 US.
490 (1981) , 27
Anderson v. City of Bessemer City, 470 U.S. 564
(1985) 2, 26, 28
Aspen Skiing Co. v. Aspen Highlands Skiing Corp.,
Fe Ee —ͤüKAK44.⁊ — 20
Brooke Group Ltd. v. Brown & Williamson Tobacco
Corp., 509 U.S. 209 (1993) 26
California v. United States, 464 U.S. 1013 (1983) 15
(III
IV
Cases—Continued:
Citizen Publ g Co. v. United States, 394 US.
131 (1969)
Clinton v. New York, 524 U.S. 417 (1998) —
Colorado v. New Merico, 467 U.S. 310 (198)
Eastman Kodak Co. v. Image Technical Servs.,
xxx
Ford Motor Co. v. United States, 405 U.S. 562
(1972)
Gay v. Ruff, 292 U.S. 25 (4980 ————
IBM Corp. v. United States, 480 F. 2d 293 (2d Cir.
1973), cert. denied, 416 U.S. 980 (1974)
International Boxing Club v. United States, 358
US. 242 (1959)
International Salt Co. v. United States, 332 US.
392 (1947)
Jefferson Parsh Hosp. Dist. No 2 v. Hyde, 466
U.S. 2 (1984)
Kansas v. Colorado, 514 U.S. 673 (1995)
Maryland v. United States, 460 U.S. 1001 (1983) ............
Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574 (1986)
Multi-Medical Convalescent & Nursing Ctr. v.
NLRB, 550 F 2d 974 (4th Cir.), cert. denied, 434 U.S.
835 (1977)
National Soc y of Prof Engers v. United States,
435 US. 679 (1978)
Neumann v. Reinforced Earth Co., 786 F.2d 424
(D.C. Cir.), cert. denied, 479 U.S. 851 (1986)
Rodriguez de Quijas v. Shearson/American Express,
Inc., 490 U.S. 477 (1989)
Roe v. Wade, 410 U.S. 113 (1978) ———.——.—.—.—
Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447
(1993)
United States v. Alaska, 521 U.S. 161997).
5
F IS RN N B SN B VSE
Ss 8 N B 8
ss
Cases—Continued:
United States v. Crescent Amusement Co., 323
U.S. 173 (1944)
United States v. E. du Pont de Nemours & Co.,
366 U.S. 316 (1961)
United States v. Fordice, 505 U.S. 717 (19927
United States v. Griffith, 334 U.S. 100 (1948)
United States v. Matlock, 415 U.S. 164 (1974) .................
United States v. Microsoft Corp, 147 F.3d 935
(D.C. Cir. 1998)
United States v. Paramount Pictures, Inc., 334
US. 131 (1948)
United States v. Taylor, 487 U.S. 326 (1988)
United States v. United Shoe Mach. Corp., 391
U.S. 244 (1968)
United States v. United States Gypsum Co., 333
U.S. 364 (1948)
United States v. Western Elec. Co.:
552 F. Supp. 131 (1982), aff d sub nom. Maryland v.
United States, 460 U.S. 1001 (1983) 16
569 F. Supp. 1057 (D.D.C.), aff d sub nom. California
v. United States, 464 U.S. 1013 (1983) 16
1983-2 Trade Cases (CCH) 1 65,596 (D. D.C. 19883) . . 14,15
United States Dep't of Commerce v. Montana, 503
US. 442 (1992) 19
Zenith Radio Corp. v. Hazeltine Research, Inc., 395
U.S. 100 (1969) : 2
Statutes and rules:
Expediting Act of 1903, ch. 544, 32 Stat. 823 13
15 U.S.C. 290) 13
15 U.S.C. 2%b) 1, 13, 14, 15
Sherman Act:
§ 1,15 U.S.C. 1 (1994 & Supp. IV 1998) 1,12
§ 2,15 U.S.C. 2 1, 11, 20, 21, 23
28 U.S.C. 1254 15
S » BE S USE ew &
VI
Rules—Continued:
Fed. R. Civ. P. 52(a)
Sup. Ct. R. 18.2
Miscellaneous:
3 Phillip Areeda & Donald F. Turner, Antitrust Law
(1978)
119 Cong. Rec. 24,599 (1973)
120 Cong. Rec. (1974):
pp. 38,583-38,587 . 1
pp. 39, 123-39, 124 1 —
H.R. Rep. No. 1463, 93d Cong. 2d Sess. (1974)
S. Rep. No. 1214, 91st Cong., 2d Sess. (1970)
S. Rep. No. 298, 98d Cong., Ist Sess. (1973)
Robert L. Stern et al., Supreme Court Practice
(7th ed. 1993) .
BRIEF FOR THE UNITED STATES IN RESPONSE TO
THE JURISDICTIONAL STATEMENT
Because immediate consideration of this appeal is of
general public importance in the administration of justice,
the Solicitor General, on behalf of the United States, urges
this Court to note probable jurisdiction under the Expedit-
ing Act of 1903, as amended, 15 U.S.C. 29(b).
STATEMENT
On May 19, 1998, the United States filed a civil complaint
alleging that Microsoft Corporation has engaged in an anti-
competitive course of conduct in violation of Sections 1 and 2
of the Sherman Act, 15 U.S.C. 1, 2 (1994 & Supp. IV 1998).
At Microsoft’s request, the district court consolidated the
case for all purposes with a similar case brought by 20 States
and the District of Columbia. The district court conducted
the proceedings expeditiously and, after a 78-day trial, en-
tered its findings of fact (FF), App. 46-246, and its con-
clusions of law, App. 1-43. On the central issue in the case,
the district court found that Microsoft had successfully en-
gaged in a series of anticompetitive acts to protect and main-
tain its personal computer operating system monopoly, in
violation of Section 2 of the Sherman Act. App. 3-21.
On June 7, 2000, the district court entered its final judg-
ment. App. 253-279. That judgment requires Microsoft to
submit a plan to reorganize itself into two separate firms
and to comply with transitional injunctive provisions. Ibid.
Microsoft filed notices of appeal. App. 280-283. Upon motion
of the United States and the State plaintiffs, the district
court concluded that Microsoft’s appeal presents a matter “of
general public importance in the administration of justice”
and certified the case for direct appeal in accordance with
the Expediting Act, 15 U.S.C. 29(b). At Microsoft’s request,
the district court stayed the judgment. See App. 284-285.
(1)
Microsoft opposes expedition of its own appeal. See J.S.
15-30. We submit, however, that direct appeal to this Court
is warranted. In describing the case, we rely on the district
court’s factual findings, which “shall not be set aside unless
clearly erroneous.” Fed. R. Civ. P. 52(a). See Anderson v.
City of Bessemer City, 470 U.S. 564, 573 (1985).
1. Personal computers (PCs), including the familiar
“Intel-compatible” PCs (see Add. B, infra, 7a), accomplish
useful tasks, such as word processing, through the use of an
operating system and applications programs. FF 1-4 (App.
47-48). An operating system is “a software program that
controls the allocation and use of computer resources”: it
serves as a “platform” for applications “by exposing
interfaces, called ‘application programming interfaces,’ or
‘APIs,’” that applications invoke. FF 2 (App. 47). Microsoft
“possesses a dominant, persistent, and increasing share of
the worldwide market for Intel-compatible PC operating
systems.” FF 35 (App. 60). That share “has stood above
ninety percent” for a decade. Ibid. The “original equipment
manufacturers” of PCs (OEMs) “uniformly are of a mind that
there exists no commercially viable alternative” to
Microsoft’s Windows operating system. FF 54 (App. 70-71).
The Windows monopoly is protected by an “applications
barrier to entry.” FF 30-32, 36 (App. 58-60, 61). The
pervasiveness of the Windows operating system induces
developers to create vastly more applications for Windows
than for other PC operating systems. The availability of a
rich array of applications in turn “attracts consumers to
Windows.” FF 37 (App. 61-62). A competing operating
system will not attract a large number of users unless those
users believe that there is and will continue to be a sufficient
For the Court’s convenience, we have provided, as addenda to this
brief, an index to the appendix that accompanies Microsoft’s jurisdictional
statement (Add. A) and a glossary defining frequently used terms (Add.
B).
and timely array of applications for use on that operating
system, FF 30-31, 37 (App. 58-59, 61-62), but software
developers have little incentive to write applications for an
operating system without a large number of users. FF 40-41
(App. 63-64).
This formidable entry barrier can be eroded through
“middleware.” A middleware program invokes the APIs of
the operating system on which it runs, but also exposes its
own APIs and thus can serve as a platform for other appli-
cations. FF 28 (App. 57). An application written to rely on a
middleware program’s APIs thus could run on all operating
systems on which that middleware runs. FF 68 (App. 78).
Applications developers would have incentives to write for
widely used middleware, and so users would not be reluctant
to choose an alternative operating system for fear that it
would run an insufficient array of applications. FF 29, 68
(App. 57-58, 78).
Microsoft “was concerned with middleware” because
middleware could severely weaken the applications barrier
and threaten the dominance of Windows. FF 29, 68 (App.
57-58, 78). Microsoft particularly focused “on two incarna-
tions of middleware that, working together, had the
potential to weaken the applications barrier severely * * *.
These were Netscape’s Web browser [Navigator] and Sun’s
implementation of the Java technologies.” FF 68 (App. 78);
see also FF 69-77 (App. 78-82).
a. Within months after Netscape publicly released
Navigator in December 1994, Navigator became the pre-
eminent Web browser. FF 72 (App. 79-80). Because of the
likelihood that Web browsers would become ubiquitous, and
because Navigator also has middleware capabilities, Micro-
soft soon perceived Navigator as a threat to the applications
barrier to entry that protected its Windows operating
system monopoly. In May 1995, Microsoft Chief Executive
Officer William Gates wrote that Netscape was “pursuing a
multi-platform strategy where they move the key API into
4
the client [Web browser] to commoditize the underlying
operating system.” FF 72 (App. 80). Microsoft determined
to eliminate the threat that Navigator would become a viable
alternative platform for applications. FF 133, 142 (App. 108-
109, 113-114).
Microsoft first tried to reach a “market allocation” agree-
ment with Netscape. App. 21-22; FF 79-92 (App. 83-89).
The proposed agreement would have required Netscape to
stop its efforts to develop Navigator into “platform-level”
(i.e., API-exposing) browsing software for the upcoming
Windows 95 operating system in return for Microsoft’s re-
fraining from developing browser products for other operat-
ing systems. FF 83 (App. 85). Microsoft warned“ (FF 91
(App. 89)) Netscape that its access to critical techni-
cal information about Windows APIs—information that
Netscape needed to make its browser run well on
Windows 95 (FF 82 (App. 84-85))—depended on Netscape’s
acquiescence. FF 84, 90 (App. 85-86, 88-89). Had Netscape
gone aiong with Microsoft’s scheme, it would have become
“all but impossible” for Navigator or any other browser rival
to pose a platform threat to Windows. FF 88-89 (App. 87-
88). Netscape, however, refused to agree to Microsoft’s pro-
posal, FF 88, 91 (App. 87, 89), and Microsoft then withheld
important technical information needed by Netscape. FF 91-
92 (App. 89).
Microsoft understood that large numbers of developers
would write to the APIs exposed by Navigator only if they
believed Navigator would become “the standard” Web
browser, FF 133 (App. 108), and that, if developers expected
Microsoft’s own browser, Internet Explorer (IE), to attract
a large share of usage, they would continue to focus their
efforts on the Windows platform, ibid. Microsoft therefore
decided to engage in a multifaceted campaign to maximize
IE’s share of usage and minimize Navigator’s. FF 133 (App.
109). Between 1995 and 1999 Microsoft spent more than
$100 million each year and increased to more than a thou-
5
sand the number of developers working on IE, FF 135 (App.
109), even though Microsoft has given IE away free since its
release in July 1995, FF 137 (App. 111). In addition,
Microsoft decided “to constrict Netscape’s access to the
distribution channels that led most efficiently to browser
usage” (FF 143 (App. 115))—installation by OEMs on new
PCs and distribution by Internet access providers (IAPs)
such as America Online. FF 144-145 (App. 115-116).
Because “no other distribution channel for browsing soft-
ware even approaches the efficiency” of those two channels,
FF 145 (App. 116), Microsoft sought to “ensure that * * *
OEMs and IAPs bundled and promoted Internet Explorer to
the exclusion of Navigator,” FF 148 (App. 117).
Microsoft’s campaign to foreclose Netscape from the OEM
channel involved a “massive and multifarious investment” in
a “complementary set of tactics”: (1) contractual restrictions
forcing OEMs to take IE with Windows 95 and 98 and for-
bidding them from removing or obscuring it; (2) “additional
technical restrictions to increase the cost of promoting
Navigator”; (3) exchanging valuable incentives for OEMs’
commitments to promote IE exclusively; and (4) threats to
“penalize individual OEMs that insisted on pre-installing and
promoting Navigator.” FF 241 (App. 160-161).
Microsoft’s contractual bundling of IE and Windows
conflicted with the interests of its OEM customers and
browser users, for “Web browsers and operating systems
are separate products,” FF 154 (App. 119), and Imlany
consumers desire to separate their choice of a Web browser
from their choice of an operating system,” FF 151 (App. 118).
Nevertheless, by July 1995, Microsoft had concluded that
bundling Windows 95 and IE, contrary to its initial plan, FF
156 (App. 120), was the “most effective way” to diminish
Navigator’s threat to the operating system monopoly. FF
157 (App. 120). Its OEM licenses required that OEMs not
delete or modify any part of what Microsoft defined to be
“Windows,” including IE, FF 158 (App. 120), even by using
6
the “Add/Remove” capability Microsoft included in Windows
95 and promoted to users. FF 165, 175-176 (App. 123, 128-
129). OEMs acquiesced, even though that prevented them
from meeting consumer demand for PCs without IE, because
“they had no commercially viable alternative to pre-
installing Windows 95 on their PCs.” FF 158 (App. 120-121).
Microsoft’s licensing requirement had no technical justifica-
tion, FF 175-176 (App. 128-129), and “guaranteed the pre-
sence of [IE] on every new Windows PC system,” FF 158
(App. 121). Microsoft “knew that the inability to remove
[IE] made OEMs less disposed to pre- install Navigator onto
Windows 95.” FF 159 (App. 121).
Despite those contractual restraints, Microsoft officials
believed they were not “going to win” the browser war
simply by Aplitting browser against browser,” FF 166 (App.
124), so they decided to make technical changes in Windows
98 to ensure that removing IE from Windows is difficult and
“running any other browser is a jolting experience.” FF 160
(App. 122).2, Unlike Windows 95, Windows 98 thus did not
allow even users to “uninstall” IE with the Add/Remove
feature, although Gateway, a major OEM, had expressly
requested such a feature, and although users were permitted
to uninstall numerous other features that Microsoft held out
2 Microsoft Senior Vice President James Allchin complained to Group
Vice President Paul Maritz that (wle are not leveraging Windows from a
marketing perspective * * * . [W]e are not investing sufficiently in
finding ways to tie IE and Windows together.” FF 166 (App. 124-125). In
Allchin’s view, treating IE as just an add-on to Windows which is cross-
platform [means] losing our biggest advantage—Windows marketshare.”
FF 166 (App. 123-124). Maritz agreed and, to “combat” Netscape, FF 168
(App. 125), decided to delay the release of Windows 98 until IE 4.0 could
be bound with it, “even if OEMs suffer[ed)” by missing important seasonal
sales opportunities. FF 167 (App. 125). That decision “delayed the debut
of numerous features * * * that Microsoft believed consumers would find
beneficial, simply in order to protect the applications barrier to entry.”
FF 168 (App. 126).
7
as integrated into Windows 98. FF 170 (App. 126-127).
Binding IE to Windows 98 also produces “unpleasant conse-
quences for users” of Navigator, FF 172 (App. 127), because
it can “override the user’s choice” of browsers and require
even Navigator users “to employ [IE] in numerous situa-
tions that, from the user’s perspective, are entirely un-
expected.” FF 171 (App. 127). There is no technical justifi-
cation for that binding.
Despite those technical obstacles, Microsoft still feared
that OEMs might install Navigator in addition to IE and
might even configure the icons on the initial computer
screen, and arrange the boot (start-up) sequence, to promote
the use of Navigator rather than IE. FF 202-203 (App. 139-
140). Microsoft thus “threatened to terminate the Windows
license of any OEM” that did so or added “programs
that promoted third-party software to the Windows ‘boot’
sequence.” FF 203 (App. 140); see also FF 206, 208 (App.
141-142). Microsoft’s tactics “soured” its relations with
OEMs generally and also “stymied innovation that might
have made Windows PC systems more satisfying to users.
Microsoft would not have paid this price had it not been
convinced that its actions were necessary to ostracize
Navigator from the vital OEM distribution channel.” FF 203
(App. 140).
3 Microsoft “could offer consumers all the benefits of the current
Windows 98 package by distributing the products separately and allowing
OEMs or consumers themselves to combine the products if they wished.”
FF 191 (App. 134); see also FF 187-193 (App. 133-136). Microsoft’s techni-
cal binding of IE made OEMs even less likely to install Navigator on their
PCs. FF 172 (App. 127).
Furthermore, although IE was a “no revenue” product, FF 142
(App. 114), Microsoft nevertheless offered OEMs valuable incentives and
discounts “to promote [IE] and, in some cases, to abstain from promoting
Navigator,” FF 139, 231-234 (App. 112, 155-157). Together with the other
components of its campaign to foreclose the OEM channel to Netscape,
these measures required Microsoft to pay out “huge sums of money, and
8
Microsoft “largely succeeded in exiling Navigator from
the crucial OEM distribution channel.” FF 239 (App. 159).
By January 1998, Microsoft executive Joachim Kempin was
able to report to CEO Gates and others that Navigator was
being shipped through only four of the 60 OEM distribution
sub-channels. FF 239 (App. 160). Even then, Navigator was
most often in a position “much less likely to lead to usage”
than IE’s position. Ibid. Within a year, “Navigator was pre-
sent on the desktop of only a tiny percentage of the PCs that
OEMs were shipping.” Ibid.
Microsoft’s strategy for foreclosing Netscape from the
other crucial channel of distribution, Internet access pro-
viders that provide browser software to neir customers, FF
242 (App. 161-162), similarly involved both huge expendi-
tures and substantial sacrifices of revenue that made no
business sense except as a way of protecting the applications
barrier to entry. FF 139, 247 (App. 111-112, 163). Microsoft
“believed that, if IAPs gave new subscribers a choice be-
tween [IE] and Navigator, most of them would pick Navi-
gator.” FF 243 (App. 162). Accordingly, Microsoft gave
IAPs valuable incentives to promote and distribute IE and
to inhibit promotion and distribution of Navigator. FF 139
(App. 112). Its actions, which “sealed off a major portion of
the IAP channel from the prospect of recapture by
Navigator,” FF 247 (App. 164), “had, and continue to have, a
substantial exclusionary impact,” FF 308 (App. 194).°
sacrifice[] many millions more in lost revenue every year.” FF 139 (App.
111). The campaign was “only profitable to the extent that it protected
the applications barrier to entry” and so preserved the operating system
monopoly. FF 141 (App. 113).
5 For example, Microsoft exchanged valuable promotional placement
on the Windows desktop for the leading IAPs’ agreement to distribute
Navigator to no more than 15%-25% of their subscribers even when more
of them wanted Navigator, to refrain from promoting Navigator, and even
to refrain from mentioning to subscribers that they could use a browser
other than IE. FF 244-245, 258 (App. 162-163, 168-169). Microsoft also
9
Microsoft’s resulting control of the two distribution chan-
nels through which “a very large majority of those who
browse the Web obtain their browsing software,” FF 144
(App. 115), together with its other efforts to protect the
applications barrier, caused browser usage shares to
“change[] dramatically in favor of [IE].” FF 360 (App. 220).
This prevented Navigator from becoming “an attractive
enough platform * * * to weaken the applications harrier
to entry.” FF 378 (App. 229).° Microsoft’s numerous and
varied actions against Navigator “‘would not be considered
profit maximizing except for the expectation that . . the
entry of potential rivals’ into the market for Intel-compatible
PC operating systems will be ‘blocked or delayed.’” App. 20
(citation omitted); see also FF 136-142 (App. 110-114).
b. Microsoft also feared another middleware technology—
Sun Microsystems’ Java—a programming language with re-
lated middleware that enables applications “written in Java”
to run on different operating systems. FF 73-74 (App. 80-
81). Java technology threatened to erode the applications
barrier to entry, FF 75-77 (App. 81-82), and Microsoft sought
to extinguish the Java threat by “maximizing the difficulty
with which applications written in Java could be ported [i.e.,
adapted] from Windows to other platforms, and vice versa.”
FF 386 (App. 232).
Microsoft induced the development of Java programs that
performed well on Windows but would not run on other
operating systems without significant modifications. FF
gave IAPs financial incentives. FF 246 (App. 163). Microsoft “invested
[these] great sums, and sacrificed potential sources of revenue, with the
sole purpose of protecting the applications barrier to entry.” FF 308
(App. 194); see also FF 247 (App. 163-164).
§ Microsoft improved IE over time, but it still recognized in May 1998
that “IE4 is fundamentally not compelling” and In lot differentiated from
Netscape v[ersion]4—seen as a commodity.” Thus, “superior quality was
not responsible for the dramatic rise [in IE’s] usage share.” FF 375 (App.
227).
10
387-394 (App. 232-236). Microsoft, like others, developed a
“Java Virtual Machine” (JVM) for the Windows operating
system. FF 388 (App. 233). A JVM is a computer program
that translates Java-based programs into instructions that
the operating system can understand and execute. FF 73
(App. 80); see Add. B, infra, 8a. Microsoft’s JVM and
developer tools incorporated Windows-specific features in a
way that makes a Java program designed to rely on those
features more difficult to port to another operating system.
FF 388-390 (App. 233-234). Microsoft took steps to ensure
that developers would write Java programs that used those
features; it conditioned early access to Windows technical
information on using Microsoft’s JVM as the default, FF 401
(App. 239), and it failed to warn applications developers
about the porting consequences of reliance on Windows-
specific features of its development tools, FF 394 (App. 235-
236). Microsoft undertook other actions to discourage de-
velopers from creating Java applications compatible with
non-Microsoft JVMs, and those actions made no business
sense except as a means of protecting the applications bar-
rier to entry. FF 388-394, 401-404, 406 (App. 233-236, 239-
242).
Microsoft’s avowed aim was not to innovate, or to give
consumers a better product; it directly acted to prevent Sun
7 Microsoft’s determination to cripple Sun’s cross-platform Java was
related to its actions against Netscape’s Navigator. FF 77 (App. 82). In
May 1995, Netscape announced that it would include a Sun-compliant
Windows JVM with every copy of Navigator, creating the possibility that
Sun’s Java implementation “would achieve the necessary ubiquity on
Windows” to pose a threat to the applications barrier to entry. FF 395
(App. 237). Microsoft responded not only by restricting distribution of
Navigator and bundling its own JVM with IE, but also by pressuring
Intel, which was developing a high-performance Windows-compatible
JVM, not to “share its work with either Sun or Netscape, much less allow
Netscape to bundle the Intel JVM with Navigator.” FF 396-397 (App.
237-238); see also FF 405 (App. 241).
11
from creating Java APIs, and, as Microsoft executive Erie
Engstrom put it, “especially ones that run well * * * on
Windows.” FF 406 (App. 242). Microsoft ultimately
succeeded in impeding Java’s ability to weaken the appli-
cations barrier to entry with a series of actions “whose sole
purpose and effect were to do precisely that.” FF 407 (App.
243). Microsoft pursued its “dedication to the goal of pro-
tecting the applications barrier to entry” despite “the fact
that its efforts to create incompatibility between its JVM
and others resulted in fewer applications being able to run
on Windows than otherwise would have.” Ibid.
2. Based on the conduct described above, along with nu-
merous other instances of predatory and exciusionary con-
duct detailed in other findings, see, e.g., FF 93-132 (App. 89-
108), the district court found that, “[t]o the detriment of con-
sumers,” Microsoft had undertaken a coordinated series of
actions “designed to protect the applications barrier to
entry, and hence its monopoly power, from a variety of
middleware threats.” FF 409 (App. 244). The district court
entered conclusions of law holding that Microsoft violated
Section 2 of the Sherman Act by engaging in anticompetitive
acts to maintain its operating system monopoly, App. 3-21,
and that it had committed other violations of antitrust law,
App. 21-42.°
8 Microsoft’s anticompetitive campaign “has retarded, and perhaps
altogether extinguished, the process by which these two middleware
technologies could have facilitated the introduction of competition into an
important market.” FF 411 (App. 246). Furthermore, “Microsoft has
demonstrated that it will use its prodigious market power and immense
profits to harm any firm that insists on pursuing initiatives that could
intensify competition against one of Microsoft’s core products. * * * The
ultimate result is that some innovations that would truly benefit con-
sumers never occur for the sole reason that they do not coincide with
Microsoft's self-interest.” FF 412 (App. 246).
® The court concluded that Microsoft violated Section 2 of the Sher-
man Act by attempting to monopolize the market for Web browsers, App.
12
The district court thereafter entered its final judgment,
which requires Microsoft to submit a plan to reorganize itself
into two separate firms (“OpsCo” to receive the operating
system business and “AppsCo” to receive the rest) and to
comply with transitional injunctive provisions.” App. 253-
257. The court found that a structural remedy is “impera-
tive,” App. 249, and that the government’s plan addressed
“all the principal objectives of relief in such cases,” App. 251.
The court found Microsoft’s alternative proposal “plainly
inadequate.” Ibid. This appeal followed."
21-24, and Section 1 of the Sherman Act by tying its Web browser to its
operating system, App. 25-33. The court found that the conduct that
violated the Sherman Act also violated various state laws. App. 39-42.
The court rejected the United States’ claim that Microsoft’s exclusive
dealing contracts violated Section 1 of the Sherman Act, but it did so on
the basis of its analysis of effects in the Web browser market. App. 34-39.
The court recognized that those contracts contributed, however, to Micro-
soft’s maintenance of the operating system monopoly. App. 38. Although
we disagree with the legal standard that the court arguably applied to the
exclusive dealing claim, the United States has had no occasion to seek
further review of the court’s exclusive dealing ruling because the court
has effectively terminated the unlawful practices as part of its Section 2
remedy. See note 10, infra.
10 The final judgment, inter alia, requires Microsoft to treat major
OEMs uniformly in licensing its operating system (J 3(a)(ii) (App. 260-
261)) and to disclose the same technical and interface information to
software and hardware developers that its own software developers use
(J 3(b) (App. 262-263)). It prohibits adverse action against OEMs based
on OEM decisions to use or promote products that compete with Microsoft
products (J 3(a)(i) (App. 259-260)); bans exclusive dealing agreements that
restrict third parties from using or promoting competing products
(J 3(e) (App. 264)); and bans contractual tying and binding of certain
middleware to its operating system ({ 3(f) and (g) (App. 265-266)). Those
provisions remain in effect for three years after implementation of
divestiture. 1 3 (App. 259).
1! On June 13, 2000, Microsoft appealed to the court of appeals, App.
280, 282, which the same day ordered the case to be heard en banc, App.
311-312. On June 20, 2000, the district court determined that the final
judgment should be appealed directly to this Court under the Expediting
13
ARGUMENT
The Expediting Act expressly provides for direct appeal
to this Court in that rare instance in which immediate
consideration of an appeal in a civil injunctive antitrust case
brought by the United States is of “general public impor-
tance in the administration of justice.” 15 U.S.C. 29(b). This
is such a case. The suit has immense importance to our
national economy. It is especially important to the rapidly
developing high-technology sectors, which need to know how
they will be affected by the remedies resulting from this case
and, more generally, how this Court’s antitrust juris-
prudence applies to a dominant firm in their marketplace.
The public interest requires prompt and final resolution of
the issues on appeal, both so that effective remedies can be
put in place to restore competitive conditions and protect
consumers and so that the computer and software industries
can plan for the future. The findings of fact are cogent and
complete, and the legal issues are ready for this Court’s
review. The Court should note probable jurisdiction.
I. This Case Warrants The Court’s Immediate Con-
sideration Because The Appeal Is Of “General
Public Importance In The Administration Of
Justice”
From 1903 to 1974, this Court directly reviewed all ap-
peals in civil injunctive antitrust cases brought by the
United States. See Expediting Act of 1903, ch. 544, 32 Stat.
823. Over time, Congress determined that direct appeal in
all such cases posed an unnecessary burden on this Court. In
1974, Congress gave the courts of appeals jurisdiction over
routine appeals. See 15 U.S.C. 29(a). At the same time,
Act and, as requested by Microsoft, stayed the final judgment in its
entirety pending appeal. App. 284-285. The court of appeals immediately
suspended its proceedings in the case.
14
Congress gave this Court discretion to hear a direct appeal if
the district court certified, at the request of any party, that
“immediate consideration of the appeal by the Supreme
Court is of general public importance in the administration of
justice.” 15 U.S.C. 29(b).
This Court should exercise its discretion under 15 U.S.C.
29(b) in light of Congress’s expressed desire to preserve
direct appeals in that limited situation. Congress relieved
the Court of the task of reviewing routine antitrust appeals,
but Congress concluded, as a matter of national policy, that
the Court should continue to decide direct appeals “where
the underlying antitrust judgment involves matters of great
and general importance to the public interest because of
their impact on the economic welfare of this nation,“
United States v. Western Elec. Co., 1983-2 Trade Cas.
(CCH), 1 65,596, at 68,971 (D.D.C. 1983) (quoting H.R. Rep.
No. 1463, 93d Cong. 2d Sess. 14 (1974)).”
2 The legislative history of the 1974 Expediting Act amendments re-
veals that the Senate and the House disagreed over whether the Attorney
General or the district court should be responsible for certifying that the
case is of “general public importance,” but both chambers agreed that the
Court would be the final judge of that matter and expected that the Court
would accept review if it agreed that the case satisfied that standard. See
generally H.R. Rep. No. 1463, supra, at 12-14; S. Rep. No. 298, 98d Cong.,
Ist Sess. 3-4, 7-8 (1973); 120 Cong. Rec. 38,583-38,587 (1974); 119 Cong.
Rec. 24,599 (1973). The House acceded to the Senate proposal, which
empowered the district court to certify and expressly acknowledged the
Court’s “discretion” to accept or deny review. See 120 Cong. Rec. 39,123-
39,124 (1974). As the Senate floor manager noted, the Senate proposal
differed from the House proposal “only in the way the [certification]
decision is made.” Id. at 38,585. The legislative history also reveals that
Congress understood that the “general public importance” standard
reaches cases affecting “the economic welfare of this nation.” H.R. Rep.
No. 1463, supra, at 14; see also S. Rep. No. 1214, 91st Cong., 2d Sess. 4
(1970) (letter of Attorney General Mitchell to the Vice President) (such
appeals will usually involve novel legal questions pertaining to the
interpretation or enforcement of the antitrust laws or may have serious
15
Congress’s grant of jurisdiction under the Expediting Act
differs fundamentally from, and operates in addition to,
Congress’s open-ended grant of certiorari jurisdiction under
28 U.S.C. 1254. The Expediting Act, unlike the certiorari
statute, is limited by subject matter and requires district
court certification. See 15 U.S.C. 29(b). But most
importantly, it provides the Court with an express standard
—“general public importance in the administration of
justice”—to guide the Court’s exercise of discretion. The
purpose of the amended Act remains to “[e)xpedit[e]” the
final resolution by this Court of cases meeting that standard.
Congress plainly intended that the Court would decide
whether to accept review based on the appeal’s practical
consequences for the national economy and the needs of
effective antitrust enforcement—not on whether the Court
would normally grant certiorari (or certiorari before judg-
ment) in such a case. See Robert L. Stern et al., Supreme
Court Practice § 2.7, at 53 (7th ed. 1993) (“Whether a case
warrants direct review under § 29(b) turns on the impor-
tance of a prompt decision by the Court, not on the general
significance of the legal issues presented.”).
The United States recognizes that the need for direct
appeal arises infrequently and does not lightly seek it. The
United States has invoked the Expediting Act’s direct re-
view provisions in only two previous instances in the past
26 years. Those requests both arose from United States v.
Western Electric Co., supra, a Sherman Act suit against
AT&T and its subsidiaries that bears close similarities to
this case. In each instance, the Court accepted direct re-
view. See California v. United States, 464 U.S. 1013 (1983);
Maryland v. United States, 460 U.S. 1001 (1983).
The California and Maryland appeals arose from inter-
venor challenges to the AT&T consent decree, which re-
legal or economic consequences going beyond the mere private interests of
the individual litigants”).
16
quired AT&T to divest assets and restructure its opera-
tions.” Like the appeal in this case, the appeals in Cali-
fornia and Maryland involved a government enforcement
action against an “overwhelmingly dominant firm” in an
important market and had resulted in a “structural remedy”
to prevent abuse of monopoly power and “further the public
interest in competition.” 82-952 MA, at 13; see 83-737 MA, at
10-11. The United States urged the Court to hear the
appeals, stating that “[wJhether a case warrants direct re-
view * * * turns on the importance of a prompt decision of
the case by this Court.” 82-952 MA, at 10-11. The United
States explained that “delay in resolving the validity of the
decree will have a broad and significant adverse impact on
the telecommunications industry, on related industries
including data processing, and thus on the public in general.”
82-952 MA, at 12; see also 83-737 MA, at 8-11.“
13 See Western Elec., 569 F. Supp. 1057; 552 F. Supp. 131. See also.
Maryland, 460 U.S. at 1001 (Rehnquist, J., dissenting); 82-952 et al.,
Motion of the United States to Affirm (82-952 MA) at 2-9; 83-737 et al.,
Motion of the United States to Affirm (83-737 MA) at 2-7; Supreme Court
Practice, supra, at 54.
4 Microsoft offers nothing to support its supposition that the Court
accepted those appeals solely because (1) they involved a negotiated
consent decree”; (2) they “raised narrow legal questions” that the Court
could resolve summarily; and (3) “AT&T supported immediate con-
sideration.” J.S. 26. The Court did not explain its reasons for accepting
the direct appeal, but it is reasonable to presume that the Court relied on
the Expediting Act’s express criterion. The Act is clearly not limited to
cases that involve a “consent decree” or “narrow legal questions” that are
susceptible of summary disposition. The United States noted that e
“issues raised by appellants are particularly suited to expedited direct
review” (82-952 MA, at 16), but the United States did not suggest that
that factor was a controlling consideration (see id. at 10-15). There is also
no reason to believe that the defendant's support for direct review was a
decisive factor. AT&T expressly supported direct review because the cor-
poration had an interest in prompt resolution of the issues. See 82-952
Motion of AT&T to Affirm at 16-17. In this case, Microsoft, which has the
benefit of a stay, apparently sees value in delay.
17
This case, like the California and Maryland appeals,
clearly satisfies the Expediting Act’s “general public impor-
tance” standard. The district court has determined that
Microsoft, one of the Nation’s largest companies and the
dominant participant in the Intel-compatible PC operating
system market, has taken unlawful actions to maintain its
monopoly in that market. The court’s remedy will directly
impact competition in that important market and other
related sectors, which in turn will directly affect the
information-processing choices of virtually every computer
user, including virtually every business and governmental
entity, as well as hundreds of millions of consumers world-
wide. In addition, the pendency of the appeal will likely
affect Microsoft’s workforce and its relations with other
computer and software entities that form the burgeoning
high-technology sectors of the economy.“
Microsoft itself has acknowledged the significance of this
ease to the Nation’s economy. See, e. g., J.S. 28. Indeed,
Microsoft recently told the court of appeals that the district
court’s judgment may cause “the entire United States
economy [to] * * * suffer.” Microsoft Motion For Stay
Pending Appeal 37 (D.C. Cir. June 13, 2000) (No. 00-5212).
Recognizing “the exceptional importance” of the case, the
court of appeals took the extraordinary step of ordering en
banc consideration within an hour of the filing of Microsoft’s
notices of appeal. See J.S. 13; App. 311-312. To be sure, the
court of appeals has taken steps within its power to expedite
the appeal. But Congress has concluded that, in cases of
“general public importance,” those steps are not enough.
The Expediting Act provides a mechanism, beyond the mea-
15 See, e., Microsoft Memorandum in Support of Motion for Summary
Rejection of the Government’s Breakup Proposal 5-6 (May 10, 2000) (“Not
only may Microsoft lose irreplaceable employees, but third parties may be
unwilling to enter into routine business agreements with Microsoft while
its continued corporate existence remains in doubt”).
18
sures available to the court of appeals, that should be utilized
here.
Expedition is justified for a related reason as well. At the
same time that the district court certified the case as one of
general public importance, it also stayed its judgment pend-
ing appeal. App. 285. Prompt resolution of the appeal is
therefore critical to effective federal and state antitrust
enforcement. Microsoft steadfastly maintains that every-
thing it has done was legal, see App. 249, so it likely will
continue such conduct until the judgment goes into effect,
ibid. Delay will postpone, and likely complicate sub-
stantially, the restoration of competition in the affected high-
technology industries, which evolve at an extraordinary
pace. Moreover, prolonged uncertainty about the outcome of
this case creates significant inefficiencies. No firm in the
affected industries can confidently plan or commit resources
until it knows whether or when the final judgment will take
effect.
In sum, all agree—and the evidence establishes—that the
stakes in this case for the national economy are immense. If
this case does not qualify for direct review under the Ex-
pediting Act, it is difficult to imagine what future case
would.“
II. Microsoft's Contentions That The Court Should
Deny The Appeal, Despite Its Importance, Are
Unpersuasive
This case epitomizes the exceptionally important public
antitrust case for which Congress has preserved direct re-
view under the Expediting Act. For that reason alone, the
16 Indeed, Microsoft does not contest the practical importance of its
appeal. See J.S. 30. Rather, citing pre-1974 cases, Microsoft contends
(J.S. 24-29) that the Court should ignore—effectively nullify—the
amended statutory standard in a major category of cases to which the Act
undeniably applies, by adopting a general policy of denying all direct
appeals in contested cases under the Expediting Act.
4
19
Court should note probable jurisdiction. But even if the
Court accepts Microsoft’s invitation to look beyond the im-
portance of the case and the consequent need for immediate
resolution, Microsoft’s rationales for denying direct review
are not convincing. Microsoft essentially argues that this
ease is too legally and factually complex for this Court’s
review. J.S. 16-23. But this Court regularly decides complex
cases, and, from 1903 to 1974, the Court routinely decided all
such antitrust appeals. Congress has relieved the Court of
that routine chore. The Court will not be unduly burdened
by undertaking to resolve the singularly important appeal in
this case—the first such appeal in 17 years.
A. The Legal Issues Are Appropriate For Direct Appeal.
Microsoft argues that the legal issues it intends to raise are
too complex and numerous for direct review. J.S. 19-23.
Microsoft, however, overstates the complexity of this case,
underestimates this Court’s capabilities, and disregards the
responsibility of cownsel to “clear out”—rather than
cultivate—“procedural and factual underbrush” (J. S. 23).””
Viewed realistically, Microsoft’s appeal would require the
Court to make, at most, five inquiries: whether the district
court properly applied this Court’s antitrust decisions
respecting (1) monopoly maintenance, (2) attempted mono-
polization, and (3) tying; and whether the district court
7 The Court regularly deals with legal issues that involve complex
subject matter under its certiorari jurisdiction, e.g., AT&T Corp. v. Iowa
Utils. Bd., 525 U.S. 366 (1999) (validity of regulations implementing the
Telecommunications Act of 1996), and on direct appeal, e.g., United States
Dep't of Commerce v. Montana, 503 U.S. 442 (1992) (statistical techniques
for apportionment). Furthermore, Microsoft’s appeal—whether it pro-
ceeds in this Court or in the court of appeals—is unlikely to involve the
number of inquiries that Microsoft projects. See J.S. 21-23 (cataloguing a
non-exhaustive list of 19 issues). Imaginative appellate counsel can
compile a long list of possible issues in almost any case, but the appellate
process demands that counsel identify and limit themselves to questions
that are worthy of the appellate court’s consideration.
20
abused its discretion (4) in expediting the trial and admitting
evidence, and (5) in selecting a remedy. See J. S. i-ii.” This
Court is no less capable than the court of appeals of deciding
those matters. And unlike the court of appeals, this Court
can dispositively resolve the appeal and vindicate the
enormous public interest in swift resolution of the case.
1. The central issue in this case is whether Microsoft
violated Section 2 of the Sherman Act by engaging in a
course of exclusionary conduct to protect and maintain its
PC operating system monopoly. As this Court’s decisions
explain, the proscribed practice of monopolization is the
illful acquisition or maintenance of monopoly power by the
use of anticompetitive means “to foreclose competition, to
gain a competitive advantage, or to destroy a competitor.”
Eastman Kodak Co. v. Image Technical Servs., Inc., 504
U.S. 451, 482-483 (1992) (quoting United States v. Griffith,
334 U.S. 100, 107 (1948)). This Court has described such
conduct as “exclusionary” and “predatory.” Aspen Skiing
Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 602
(1985). If there are no “valid business reasons” for conduct
that tends to impair the opportunities of a monopolist’s
rivals, it is exclusionary. See Eastman Kodak, 504 U.S. at
483; Aspen, 472 U.S. at 605 & n.32 (quoting 3 Phillip Areeda
& Donald F. Turner, Antitrust Law 1 626b at 78 (1978)); see
also, e.g., Neumann v. Reinforced Earth Co., 786 F.2d 424,
427 (D.C. Cir.) (Bork, J.), cert. denied, 479 U.S. 851 (1986).
The district court applied that standard (App. 6-8) to its
findings of fact (App. 51-246), which describe a textbook
example of monopoly maintenance (App. 9-21). See pp. 2-11,
18 Microsoft’s statement of the questions presented also includes a
challenge to the district court’s rejection of Microsoft's civil rights
counterclaim against the state attorneys general, App. 42-43, and its
suggestion that the district court’s decision should be reversed on the
basis of the judge’s statements to the press. J.S. i- ii. Although Microsoft
is free to raise those issues, they are not substantial questions that would
warrant any significant expenditure of a reviewing court’s time.
21
supra. The district court was accordingly correct in
concluding that Microsoft has violated Section 2. The
district court properly determined that Microsoft had
monopoly power in a relevant market. App. 3-6. The court
also concluded that Microsoft has engaged in a broad-
ranging course of predatory conduct in which Microsoft
sacrificed current wealth and opportunities to “perpetuate
the applications barrier to entry” that protected its mono-
poly power. See App. 6-21. The court’s decision on
monopoly maintenance cogently addresses the relevant
considerations and frames the issues for this Court’s review.
Indeed, the court explicitly addressed and rejected the
arguments respecting monopoly maintenance that Microsoft
proposes to raise on appeal. Its decision accordingly
provides a systematic guide for addressing those arguments
on appeal. App. 4-20.”
2. The district court’s monopoly maintenance ruling is
sufficient to establish liability and support all the relief in the
final judgment. The district court additionally ruled, how-
ever, that Microsoft has violated Section 2 of the Sherman
Act by unlawfully attempting to monopolize the market for
Web browsers. App. 21-24. The court correctly stated that
liability for attempted monopoly will attach if the plaintiff
proves: “(1) that the defendant has engaged in predatory or
anticompetitive conduct with (2) a specific intent to mono-
polize” and (3) that there is a “dangerous probability” that
the defendant will succeed in achieving monopoly power.
App. 21 (quoting Spectrum Sports, Inc. v. McQuillan, 506
U.S. 447, 456 (1993)). The court properly ruled that the
19 Compare J.S. 21-22 (raising questions of market definition, barriers
to entry, monopoly power, anticompetitive conduct, and causation), with
App. 4 (market definition); App. 5 (existence of the applications barrier to
entry); App. 5-6 (Microsoft’s possession of market power); App. 6-9
(definition of proscribed anticompetitive acts); App. 9-19 (description of
specific instances of anticompetitive conduct); App. 19-20 (identification of
Microsoft’s “single, well-coordinated course” of anticompetitive action).
22
plaintiffs proved each of those elements. App. 21-24. As in
the case of the monopoly maintenance claim, the court
addressed Microsoft’s specific objections, and the attempted
monopolization claim is therefore also well postured for this
Court’s review. App. 21-24.”
3. The district court also ruled, on another matter that is
not necessary to support the prescribed relief, that “Micro-
soft’s combination of Windows and [IE] by contractual and
technological artifices constitute[s] unlawful tying to the
extent that those actions forced Microsoft’s customers and
consumers to take [IE] as a condition of obtaining Windows.”
App. 25. The district court acknowledged that its conclusion
“is arguably at variance” with the court of appeals’ prior
decision in United States v. Microsoft Corp., 147 F.3d 935
(D.C. Cir. 1998). App. 25. But the court concluded that the
relevant passages of the court of appeals’ decision, which
dealt only with obligations under a consent decree, were
dicta and did not control this Sherman Act case. App. 26.
The court additionally concluded that this Court’s decisions
in Eastman Kodak and Jefferson Parish Hospital District
No. 2 v. Hyde, 466 U.S. 2 (1984), support its conclusion that
Microsoft unlawfully tied its products. App. 27-33. If Micro-
soft intends to dispute the district court’s understanding of
this Court’s decisions—or seeks a special exception from
those decisions—then this Court provides the proper forum
in which to address that matter. See, eg., Rodriguez de
Quijas v. Shearson/American Express, Inc., 490 U.S. 477,
484 (1989).
4. Microsoft argues that the district court unduly expe-
dited the proceedings in this case and improperly admitted,
at the bench trial, hearsay evidence. J.S. 21. Resolution of
those matters would not significantly burden the Court. A
20 Compare J. S. 22 (raising questions respecting specific intent and
probability of success), with App. 21-22 (proof of specific intent); App. 22-
24 (proof of a “dangerous probability of success”).
23
“trial court is endowed with great discretion to make de-
cisions concerning trial schedules,” United States v. Taylor,
487 U.S. 326, 343 (1988), and Microsoft must demonstrate
that the court’s scheduling actions in this case amount to an
abuse of discretion. Microsoft has failed to identify an action
that would constitute an abuse.” Similarly, a judge does not
commit reversible error in admitting hearsay in a bench trial
unless the judge improperly relies on that evidence. See
United States v. Matlock, 415 U.S. 164, 175 (1974); Multi-
Medical Convalescent & Nursing Ctr. v. NLRB, 550 F.2d
974, 977 (4th Cir. 1977), cert. denied, 434 U.S. 835 (1977).
The district court stated repeatedly that it would assess
hearsay evidence to determine what weight, if any, to give it.
See, e.g., Tr. 10:9-11 (2/11/99 am); Tr. 5:21-24, 10:19-23
(1/25/99 pm); Tr. 4:21-5:3 (10/20/98 pm). In so doing, the
court acted well within its discretion. Microsoft has not
identified any finding of fact supported only by inadmissible
hearsay.
5. Microsoft’s proposed challenge to the district court’s
remedy (J.S. 11-12, 23) presents a matter that ought to be
decided by this Court, rather than the court of appeals, in
2 Microsoft objects that the district court limited discovery to five
months (J.S. 5-6, 21), but it is essential—if the antitrust laws are to be
enforced efficiently and effectively in high-technology industries—that
courts at all levels expedite important antitrust litigation. Microsoft has
specified no prejudice to it from the discovery schedule. The pre-trial
schedule was issued pursuant to a joint proposed scheduling order.
Scheduling Order at 2 (Aug. 20, 1998). The district court fixed no upper
limit to the number of interrogatories Microsoft could serve or depositions
it could take, Pretrial Order No. 1, at 2 (June 12, 1998), and Microsoft has
not explained how, in light of its virtually unlimited resources, its ability
to conduct discovery was constrained. Microsoft’s related assertion that
the district court permitted plaintiffs to “broaden their case dramatically”
(J.S. 21) simply ignores the complaint and the pretrial record. The Section
2 monopoly maintenance claim has been in the case from the outset, see,
e.g., Compl. 11 13, 36, 38, 98, 122, 138-139, and was the principal focus of
the government’s discovery and proof at trial.
24
light of the extraordinary public and private interests at
stake. The task is an important one, but it is facilitated, to a
considerable extent, by the applicable standard of review.
District courts “are invested with large discretion to model
their judgments to fit the exigencies of the particular case,”
International Salt Co. v. United States, 332 U.S. 392, 400-
401 (1947), and this Court has long held that it “will not
direct a recasting of the decree except on a showing of abuse
of discretion.” United States v. Crescent Amusement Co.,
323 U.S. 173, 185 (1944).”
In examining the remedy, the Court ‘would obtain con-
siderable assistance from the district court’s cogent and
thorough findings. The court found that Microsoft engaged
in a pattern of predatory activity directed at innovations
that threatened its monopoly. See App. 19-21. Its “cor-
porate practice [has been] to pressure other firms to halt
software development that either shows the potential to
2 The established standards for antitrust relief also provide guidance.
Relief in a Sherman Act case must (i) end the unlawful conduct, (ii)
prevent its recurrence, and (iii) undo its anticompetitive consequences.
See National Soc’y of Prof Eng’rs v. United States, 435 U.S. 679, 697
(1978); Ford Motor Co. v. United States, 405 U.S. 562, 573 (1972); United
States v. E. . du Pont de Nemours & Co., 366 U.S. 316, 326 (1961). The
district court unquestionably had power to order divestiture in this Sec-
tion 2 case. See, e.g., United States v. United Shoe Mach. Corp., 391 U.S.
244 (1968) (reversing denial of petition for divestiture). “[CJourts are
authorized, indeed required, to decree relief effective to redress the
violations, whatever the adverse effect of such a decree on private
interests.” du Pont, 366 U.S. at 326 (approving a divestiture). See
International Boxing Club v. United States, 358 U.S. 242, 255-256 (1959);
United States v. Paramount Pictures, Inc., 334 U.S. 131, 171-172 (1948).
The question before this Court with respect to structural relief is limited
to whether the district court abused its discretion in ordering a
divestiture. The judgment appropriately directs Microsoft to propose a
plan for the divestiture and leaves the details of that plan to future
proceedings. App. 254-257. See, e.g., Citizen Publ’g Co. v. United States,
394 U.S. 131, 135 (1969). 0
25
weaken the applications barrier to entry or competes di-
rectly with Microsoft’s most cherished software products.”
FF 93 (App. 89). The divestiture remedy limits OpsCo’s
ability to engage in that and other similar forms of anti-
competitive conduct, while giving AppsCo increased incen-
tives to offer applications that run on alternative operating
systems and to develop cross-platform middleware.
The divestiture remedy responds directly to the district
court’s finding of monopoly maintenance by weakening the
barrier to entry that Microsoft’s predatory practices main-
tained and creating an independent entity, AppsCo, well
positioned to renew the challenge to the operating system
monopoly that Microsoft’s restraints on Netscape and Java
suppressed. Moreover, it does so without the need for an
intrusive and cumbersome regulatory decree. The
transitional conduct restrictions, which expire when di-
vestiture is fully effective, are designed to address the
specific exclusionary strategies that Microsoft pursued or
similar strategies that may fairly be anticipated. Such
remedies also fall well within the district court’s discretion.
Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S.
100, 132 (1969).
B. The Factual Record Presents No Obstacle To Direct
Review. Microsoft argues that this Court should deny direct
appeal because Microsoft intends to raise numerous compli-
cated factus) issues” that will require the Court to “sift
through an extensive record.” J.S. 16-19. Microsoft’s pre-
3 Microsoft proposes to argue that the district court erred in entering
the final judgment without holding a new evidentiary hearing on remedy.
J.S. 23. That argument should not detain the Court. The court had
discretion to decide whether additional hearings were needed, and it was
entitled to conclude that the trial itself, which detailed the scope of the
antitrust violations, provided an adequate basis for determining the scope
of relief. The district court did not abuse its discretion in refusing to
accede to Microsoft's belated requests for further delay. See App. 248-
251.
26
diction, at the outset, is implausible. The district court trial
was the “main event” for purposes of determining disputed
facts. See Anderson, 470 U.S. at 575. The district court
made cogent and comprehensive factual findings based on
the evidence at trial. See App. 46-246. This Court has re-
peatedly emphasized that the “clear!y erroneous standard,”
which governs review of district cour’. factfinding, is highly
deferential. Anderson, 470 U.S. at 571-576. That standard,
by its own force, imposes inherent limits on the scope of fact-
based challenges in a case such as this.™
Even if Microsoft is inclined to raise record-based chal-
lenges, that prospect would provide no basis for declining
review. When Congress amended the Expediting Act, it was
well aware that the records in government civil antitrust
cases are frequently voluminous. S. Rep. No. 298, supra, at
8. Congress relieved the Court of the burden of routinely
reviewing trial records in government civil antitrust cases,
but it did so knowing that the Court would not shrink from
that task in cases of general public importance. This Court
has not been daunted by large antitrust records in exercising
its certiorari jurisdiction.” It is, of course, counsel’s respon-
sibility to relate their contentions to the portions of the
record that are pertinent. The Court’s task here is not
2 See, e.g., 470 U.S. at 574 (“Where there are two permissible views of
the evidence, the factfinder’s choice between them cannot be clearly
erroneous.”); id. at 575 (“{[WJhen a trial judge's finding is based on his
decision to credit the testimony of one of two or more witnesses, each of
whom has told a coherent and facially plausible story that fs not con-
tradicted by extrinsic evidence, that finding, if not internally inconsistent,
can virtually never be plain error.”).
2 See, e.g., Brooke Group Ltd. v. Brown & Williamson Tobacco Corp.,
509 U.S. 209, 254 (1993) (Stevens, J., dissenting) (private antitrust action
involving “2,884 exhibits, 85 deposition excerpts, and testimony from 23
live witnesses”); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475
U.S. 574, 577 (1986) (private antitrust action involving 217-page district
court decision and a 40-volume joint appendix in this Court).
27
onerous. The Court regularly reviews cases that rest on
factual records that are more challenging than this appeal
would present.“ Indeed, the Court regularly does so when
exercising its original jurisdiction, where the Court must act
as the ultimate finder of fact and review the evidence de
novo. See Colorado v. New Mexico, 467 U.S. 310, 317
(1984).”
To the extent Microsoft elects to challenge the district
court’s findings, the Court should encounter no difficulty in
applying the clearly erroneous standard. The district court
has distilled the record into clear and well-organized findings
of fact that provide a detailed roadmap of its reasoning. See
App. 46-246; Add. A, infra.” The clearly erroneous stan-
See, e., United States v. Fordice, 505 U.S. 717, 725 (1992) (deseg-
regation suit based on testimony of 71 witnesses and 56,700 pages of
exhibits); American Textile Mfrs. Inst. v. Donovan, 452 U.S. 490, 501
(1981) (challenge to OSHA “Cotton Dust” standards, which were based on
a highly technical 105,000-page administrative record).
27 For example, in United States v. Alaska, 521 U.S. 1(1997), the Court
decided a federal-state dispute over the location of Alaska's entire
northern coast line, relying on a 565-page Special Master's report and a
voluminous record that embraced a series of complex trials that began in
1980 and continued through 1986. In Kansas v. Colorado, 514 U.S. 673
(1995), the Court decided an interstate dispute over use of the Arkansas
River, relying on a 459-page Special Master’s report and a record,
compiled over 141 trial days, that included a 19,735-page trial transcript
and more than 2000 exhibits. Each of those cases involved highly technical
factual and legal issues. In each instance, upon receiving the Master's
report, the Court nevertheless considered the briefs, heard oral argument,
and issued its opinion in the course of a single Term. Contrary to
Microsoft’s suggestion (J.S. 26-27), there is no reason to think that the
Court cannot likewise resolve this case in a single Term.
8 Microsoft complains that the court’s findings do not cite to record
evidence (J.S. 19), but courts are required to make findings of fact, not to
cite evidence. See Fed. R. Civ. P. 52(a); see also Amadeo v. Zant, 486 U.S.
214, 228 (1988). The absence of record citations poses no obstacle to
review because the party challenging a particular finding must identify
the evidence on which it relies to show clear error. See, e., United States
dard is extremely demanding, and Microsoft’s examples
of purported error—which are presumably its strongest
examples—do not come close to satisfying the test. See
Anderson, 470 U.S. at 573- 576.”
C. Postponing This Court’s Review To Permit Review By
The Court Of Appeals Would Not Promote The Admini-
stration Of Justice. Microsoft argues (J.S. 23-24, 29) that
v. United States Gypsum Co., 333 U.S. 364, 392-399 & nn.15-17 (1948)
(reviewing, with no evident difficulty, findings of fact lacking record
citations).
29 Microsoft asserts (J. S. 18) that no “probative evidence” supports the
district court’s finding that “Microsoft has largely succeeded in exiling
Navigator from the crucial OEM distribution channel.” FF 239 (App. 159-
160). The court, however, explicitly relied on a Microsoft document re-
porting that Navigator was being shipped through only four of the sixty
OEM sub-channels. /bid.; see GX 421.
Contrary to Microsoft’s contention (J.S. 18), the court’s further finding
that “Navigator was present on the desktop of only a tiny percentage of
PCs that OEMs were shipping,” FF 239 (App. 160), is supported not only
by the evidence from Microsoft's own document that Navigator is shipped
through only four OEM sub-channels, GX 421, but also by the testimony of
Franklin Fisher. Tr. 7:20-8:10, 11:15-12:10 (1/7/99 am) Tr. 42:15-21 (6/3/99
am). Microsoft ignores that evidence and cites a single document, con-
taining an estimate that Navigator was included in “22% of OEM
shipments.” J.S. 18. But that estimate, which expressly states that Navi-
gator shipments were “with minimal promotion,” see GX 2440, does not
reflect shipments in which Navigator is “on the desktop” rather than
shipped “in a manner much less likely to lead to usage than if its icon
appeared on the desktop.” FF 239 (App. 159-160); see also GX 2116
(sealed).
Microsoft additionally asserts that “no probative evidence” supports
the district court’s finding (FF 161 (App. 122)) that “Microsoft bound
Internet Explorer to Windows 98” by commingling code specific to Web
browsing with code that provides operating system functions. J.S. 18.
Microsoft relies on testimony of its Senior Vice President James Allchin
that there is no code specific to Web browsing in Windows 98 (J.S. 19), but
on cross-examination Allchin admitted that Windows 98 contains code
used only to browse the Web. Tr. 65:10-67:25 (2/2/99 am); see also Tr.
60:15-25 (12/14/98 am) (testimony of Edward Felten).
direct review is inappropriate because the court of appeals
should be entitled to weigh in on this case. That argument
disregards the purpose of the Expediting Act, which, “as its
very title indicates, is to eliminate piecemeal appeals and to
bring to the Supreme Court expeditiously, the entire case
without intervening appeals to the Courts of Appeals.“ JBM
Corp. v. United States, 480 F. 2d 293, 296 (2d Cir. 1973), cert.
denied, 416 U.S. 980 (1974). A litigant in federal court is
normally entitled to only one appeal as of right. The Ex-
pediting Act reflects Congress’s considered judgment that,
when a government antitrust case presents an issue of
“general public importance to the administration of justice,”
that appeal should take place in this Court.
Congress wisely preserved the Court’s availability to hear
cases of “general public importance” because it recognized
that only this Court can ensure expeditious resolution of the
appeal. If the Court accepts direct review in this case, it can
surely complete the review process within the 2000 Term.
See note 27, supra. If the Court declines, then the timing of
a final resolution will be beyond any single court’s control.
The proceedings in the court of appeals are likely to consume
at least as much time as proceedings in this Court, and the
case is virtually certain to return to this Court on petition for
a writ of certiorari. As a result, the final resolution of the
appeal would likely be delayed by at least one year.
The district court, which commendably expedited the trial
proceedings, certified this case for direct review in light of
its awareness that a lengthy appeals process could irrepa-
rably harm competition in a vital and rapidly evolving sector
of the national economy. The United States agrees. This
Court alone has the authority, and therefore the responsi-
bility, to ensure that the public interest is not harmed and
that justice is not denied through delay.”
0 Microsoft argues (J.S. 27) that the presence of the State plaintiffs
provides a reason to deny the direct appeal under the Expediting Act. At
30
CONCLUSION
The Court should note probable jurisdiction and set the
case for briefing and argument.
Respectfully submitted.
SETH P. WAXMAN
Solicitor General
JOEL I. KLEIN
Assistant Attorney General
LAWRENCE G. WALLACE
Deputy Solicitor General
A. DOUGLAS MELAMED
Deputy Assistant Attorney
General
JEFFREY P. MINEAR
Assistant to the Solicitor
General
CATHERINE G. O’SULLIVAN
Attorney
AUGUST 2000
Microsoft's request, the district court consolidated the States’ case with
that of the United States “for all purposes” (Order (May 22, 1998)). There
was a single trial, a single set of findings of fact, a single set of conclusions
of law, and a single final judgment from which this appeal is taken.
Although the States alleged violations of state antitrust laws, the district
court applied Sherman Act standards. App. 39-40. In these circumstances,
the States may be deemed “parties to the proceeding” and “[pjarties
interested * * * in the judgment.” Sup. Ct. R. 18.2. In any event, as a
precautionary measure, the States intend to file a petition for certiorari
before judgment in this case. Thus, if the Court concludes that it may lack
jurisdiction over the state-related aspects of the appeal, it can either grant
the petition or hold it pending resolution of the appeal and thereby avert
any danger of redundant or inconsistent proceedings in the court of
appeals. See Gay v. Ruff, 292 U.S. 25, 30 (1934); Roe v. Wade, 410 U.S.
113, 123 (1973); Clinton v. New York, 524 U.S. 417, 455 (1998) (Scalia, J.,
concurring and dissenting in part).
ADDENDUM A
Index to the Appendix to the
Jurisdictional Statement in
Microsoft Corporation v. United States,
No. 00-139
Conclusions of law ...... —
I. Section Two of the Sherman Ae . *
A. Maintenance of monopoly power by anti-
competitive means —
1. Monopoly power . . . . . . . .
2. Maintenance of monopoly power by anti-
competitive means —
a. Combating the browser threat —
i. The OEM channel . . . .
li. The IAP channel . .
iii. IC Ps, ISVs and Apple .
b. Combating the Java threat
e. Microsoft’s conduct taken as a whole
B. Attempting to obtain monopoly power ina
second market by anticompetitive means
II. Section One of the Sherman Act
A. Tying . —ꝛů— —
B. Exclusive dealing arrangements
III. The state law claims . .
—ͤ ¹ 22¹ͤ W eee
II. The relevant market —
A. Demand substitutability . . .
1. Server operating systems —
2. Non- Intel- compatible PC operating
— — — —
3. Information appliances . . .
4. Network computers q
(la)
2a
ADDENDUM A—Continued:
III.
IV. The middleware threats
V.
5. Server-based computing generally
6. Middleware a
B. The possibility of supply responses ............
Microsoft’s power in the relevant market .
A. Market share
B. The applications barrier to entry .
1. Description of the applications barrier
to entr7uuu——æ—•õůõ—2w.. .... ...—ͤ.—: ...
2. Empirical evidence of the applications
barrier to entry —
2 082 92629 Ä—X——
b. The Mae 06 ....ccccccscscscccsccscscscsessersssees
e. Fringe operating systems
3. Open-source applications development .
4. Cloning the 32-bit Windows APIs
Viable alternatives to Windows
Price restraint posed by Microsoft’s
installed base
Price restraint posed by piracy
Price restraint posed by long-term
threats
Significance of Microsoft’s innovation
. Microsoft’s pricing behavior
. Microsoft’s actions toward other firms
nme Bm OF
A. The Netscape Web browser ..
B. Sun’s implementation of the Java
techno 2 —j—— —
C. Other middleware threats ———
Microsoft's response to the browser threat .....
A. Microsoft’s attempt to dissuade Netscape
from developing Navigator as a
platform —
3a
ADDENDUM A—Continued:
B. Withholding crucial technical
information
C. The similar experiences of other firms in
dealing with Microsoft
1. Intel
2. Apple
3. RealNetworks
4. IBM
D. Developing competitive Web browsing
software
E. Giving Internet Explorer away and
rewarding firms that helped build its
usage share
F. Excluding Navigator from ——
distribution channels
1. The importance of the OEM ond IAP
channels
2. Excluding Navigator from the OEM
channel
a. Binding Internet Explorer to Win- ö
dows
i. The status of Web browsers as
separate products
ii. Microsoft’s actions
iii. Lack of justification
iv. The market for Web browsing
functionality ..........
b. Preventing OEMs from removing
the ready means of accessing
Internet Explorer and from
promoting Navigator in the
Q
S 388 8
1
85
110
114
115
117
117
117
119
128
138
139
4a
ADDENDUM A—Continued:
e. Pressuring OEMs to promote
Internet Explorer and to not
pre · install or promote Navigator
d. The effect of Microsoft's actions in
the OEM channel
3. Exeluding Navigator from the IAP
channel
a. The Internet Explorer access kit
agreements
b. The referral server agreements .......
e. The online services folder agree-
ments —
14 2
ii. Other online services :
d. Effect of Microsoft’s actions in the
IAP channel
4. Inducing ICPs to enhance Internet
Explorer’s usage share at Navigator’s
expense LL
5. Directly inducing ISVs to rely on
Microsoft’s browsing technologies
rather than APIs Sar by
Navigator
6. Foreclosing Apple as a » distribution
channel for Navigator...
G. Mierosoft's success in excluding Navigator
from the channels that lead most efficiently
to browser usage .—œõ:ö
H. The success of Microsoft's effort to
maximize Internet Explorer’s usage
share at Navigator’s expense.
1. The change in the usage shares of
Internet Explorer and Navigator
219
219
5a
ADDENDUM A- Continued:
2. The cause of the change in usage
shares
I. The success of Microsoft’s effort te protect ö
the applications barrier to entry from the
threat posed by Navigator
VI. Microsoft’s response to the threat posed by
Sun’s implementation of Java
A. Creating a Java implementation for
Windows that undermined portability and
was incompatible with other implementa-
tions
B. Inducing developers to use the Microsoft. 8
implementation of Java rather than Sun-
compliant implementations . . ..
C. Thwarting the expansion of the Java elass
c ͤ ;¶Ä Ä [
D. The effeet of Mierosoft's efforts to prevent
Java from diminishing the applications
barrier to entry
VII. The effect on consumers of Microsoft’s efforts to
protect the applications barrier to entry
Memorandum and Order
Final Judgment
Notice of appeal (No. 98-1232) ..
Notice of appeal (No. 98-1233) :
Order (Nos. 98-1232, 98-1233) . . . . . 5
Statutory provisions involved . .
.
Order (No. 98-1233
SOOTHE TORE HEE EOOS
—
8
8
8
=
L88888 8
S w
— —
do —
7a
ADDENDUM B
Glossary of Frequently Used Terms
API
IAP
IE
Intel-
compatible PC
Internet
Java
Application programming interface. APIs
“exposed” by a computer program, such
as an operating system or middleware,
provide other computer programs with
means of access to blocks of code that per-
form particular tasks, such as displaying
text on the computer screen. FF 2 (App.
47).
Internet access provider. IAPs, such as
America Online and MindSpring, provide
computer users with access to the Inter-
net. FF 15 (App. 50).
Internet Explorer, Microsoft’s Web brow-
ser. FF 17 (App. 51).
A PC designed to use a microprocessor in,
or compatible with, Intel’s 80x86/Pentium
microprocessor family. FF 3 (App. 47).
A global electronic network of computers.
FF 11 (App. 49).
A programming language and related
middleware that enable applications writ-
ten in that language to run on different
operating systems. FF 73 (App. 80).
JVM
Middleware
Navigator
OEM
Operating
System
PC
Platform
Web
8a
Java Virtual Machine, a program that
translates a Java-coded program into
instructions that the operating system can
understand and thus allows applications
written in Java programming language to
run on the operating system for which the
JVM was written. FF 73 (App. 80).
Software that relies on the APIs provided
by the operating system on which it runs,
but also exposes its own APIs. FF 28
(App. 57).
Netscape Communications Corp.’s Web
browser. FF 17 (App. 50-51).
Original equipment manufacturer. FF 10
(App. 49). In this brief, a manufacturer of
PCs.
A software program that controls the
allocation and use of computer resources.
FF 2 (App. 47).
Personal computer. FF 1 (App. 47).
Software that exposes APIs. FF 2 (App.
47).
The World Wide Web; a collection of dig-
ital information resources stored on
servers throughout the Internet. FF 12
(App. 49).
Web Brower
(or Browser)
Windows
9a
Software that enables a user to select,
retrieve, and perceive resources on the
Web. FF 16 (App. 50). In this brief, the
term “browser” by itself means “Web
browser.”
A family of software packages produced
by Microsoft, each including an operating
system. The principal members of this
family for purposes of this case are Win-
dows 95, Windows 98, and successors,
which include operating systems for Intel-
compatible PCs. FF 6-8 (App. 48-49).
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.