March 18, 2002
States Open Microsoft Penalty Fight
By THE ASSOCIATED PRESS
Filed at 11:55 p.m. ET
WASHINGTON (AP) -- Nine states asked a judge Monday to impose tougher penalties against Microsoft (news/quote), citing internal memos as evidence the software giant had persisted in thwarting competitors even as it was being found guilty of antitrust violations.
The states asked U.S. District Judge Colleen Kollar-Kotelly to force Microsoft to create a stripped-down version of its flagship Windows software that could incorporate competitors' features and to divulge the blueprints for its Internet Explorer browser.
The latter software dominates the Web browser market and is a centerpiece of Microsoft's Internet-based business strategy.
Microsoft lawyers countered that the proposed penalties would force the company to pull Windows off the market. ``At the end of the day, the product would have very little value,'' lawyer Dan Webb argued.
Both sides made opening statements in a court proceeding to determine whether Microsoft should face additional penalties beyond those in its antitrust settlement with the federal government last fall.
The states opened their case by airing Microsoft executives' words in e-mails and internal memos detailing how the company responded to threats from competitors.
Dell Computer (news/quote) had plans to put Linux, a free operating system that competes with Windows, on some of its computers in 2000, the states' lawyers said. But Dell abandoned the plans under pressure from Microsoft, they said.
Steven Kuney, a lawyer for the states, cited an internal document that laid out talking points for a meeting between Microsoft chief executive Steve Ballmer and Dell executives.
Microsoft would give ``a reminder of the meat behind why it's smart to be partnered with,'' the document stated. ``It's untenable for our 'Premier Partner' on Windows 2000 to be doing aggressive market development for another operating system,'' the talking points said.
In an e-mail to Microsoft chairman Bill Gates, Joachim Kempin, then in charge of computer maker relations for Microsoft, said he was ``thinking of hitting the (computer makers) harder than in the past with anti-Linux actions.''
By June 2001, Dell laid off its head Linux employee and reassigned the rest of his team. Lawyers for the states said Microsoft pursued a similar course with Compaq when that company flirted with Linux in 1999.
Kuney said the events showed a ``pattern of conduct'' that can only be addressed by imposing tough new sanctions.
Webb, Microsoft's lawyer, argued against the additional penalties, saying they would let competitors confiscate billions of dollars worth of Microsoft's intellectual property.
``They're actually much worse'' that the penalty sought by the government earlier in the case that would have broken Microsoft into two separate companies, Webb said.
Microsoft argued the proposal to force it to release a ``modular'' version of Windows, in which Microsoft features can be removed in favor of alternatives from competitors, would be impossible to carry out.
Microsoft estimates the penalty would create over 4,000 ``mutant'' versions of Windows that the company would have to test to make sure they worked properly, Webb said.
The company put almost five million man-hours of testing into its latest Windows XP operating system, he said.
Microsoft lawyer Steven Holley questioned the first witness in the case, Sun executive Richard Green, about his company's assertion that Microsoft used unfair business practices to hinder Sun's Java programming language.
While touching lightly on many different and technically complex points, Holley accused Sun of ignoring the benefits Microsoft brought to Java and rebuffing Microsoft's offers to include Sun's product in Windows.
Holley also referred to Sun's recently filed private antitrust suit against Microsoft.
Holley produced an e-mail from Sun chief Scott McNealy to AOL Time Warner (news/quote), trying to create the image of the two companies partnering to hurt Microsoft.
``Does AOL have a plan to counter .NET?'', McNealy asked a top AOL executive. Microsoft.NET is Microsoft's coming suite of Web applications.
McNealy said Sun's Java would help AOL ``leapfrog'' Microsoft. ``AOL should have bought Sun first, (Time Warner (news/quote)) second,'' McNealy said.
Over the course of the hearing, which is expected to last two months, Microsoft plans to call top Microsoft executives, including Gates and Ballmer, as witnesses.
The state coalition that rejected the government's settlement with Microsoft and have continued to pursue the antitrust case are: Iowa, Utah, Massachusetts, Connecticut, California, Kansas, Florida, Minnesota and West Virginia and the District of Columbia.
------------------------------------------------------------------------------------------------------------------------------
:shrug:
Why not let the company just do business?
--------------
cheers.jay