Microsoft Corp. attempted to discredit an IBM Corp. witness yesterday by showing that the companies' relations in 1995 were strained due to a "smear campaign" IBM waged against Windows 95 and millions of dollars in royalties it owed Microsoft.
But the judge presiding over Microsoft's antitrust trial appears to have lost his patience with the approach of the company's legal team, and at one point today, U.S. District Court Judge Thomas Penfield Jackson snapped at Microsoft attorney Rick Pepperman.
Laying the groundwork to explore the issue of a smear campaign, Microsoft had admitted into evidence an internal IBM memo from Richard Thoman, a senior vice president, recounting a July 24,1995 phone conversation with an irate Bill Gates.
The memo read in part, "Gates was irate because of the lack of respect he feels IBM has for Microsoft. He cited Lou Gerstner's quote in Business Week that Microsoft was a great marketing company, but not a great technology company, as an example. He also cited 'smear campaigns' planned by Dan Lautenbach (an IBM vice president) and others against Windows 95 product. He mentioned that he had spoken to (Intel Corp.'s then-Chief Executive Oficer) Andy Grove who said IBM always paid Intel on time."
Pepperman had asked witness Garry Norris, the IBM official who led the Windows licensing negotiations between the companies from 1995-97, whether he had ever seen a white paper written by IBM entitled "OS/2 Warp vs. Windows 95: A Decision Maker's Guide to 32-Bit Operating System Technology." After Norris asked for a copy of the document, Pepperman insisted that he wanted to ask first whether Norris had any recollection of the document.
That's when Jackson lost his cool. "Mr. Pepperman," the judge said, taking his glasses off and his face growing red, "show him the document if you've got it."
Pepperman quickly acquiesced. But his troubles were not over. Jackson also gave the attorney a hard time about introducing correspondence that purported to show that an IBM official threatened to break off negotiations over IBM's licensing of Win95 during the summer of 1995 due to disagreements over an audit of royalties IBM owed Microsoft. Government attorney Phil Malone objected that the document hadn't been turned over by Microsoft in the course of discovery. But Pepperman argued that IBM should also have a copy of the document and yet had not turned it over to the government either.
The embarrassments for Microsoft came on top of a warning from the judge to the company's legal team at the bench Tuesday, which was released in transcripts today. During the bench conference, Pepperman said he expected to continue questioning Norris all day today but the judge seemed to say that the attorney wasn't being that persuasive.
"Well, I'm not going to tell you that you can't have it," the judge said, according to the transcripts. "I'm not sure how much progress you have made so far, but we will leave that aside. But be economical with your examination."
Norris, testifying for the third day as a government witness in this landmark case, maintained throughout his cross-examination that Microsoft attempted to dissuade IBM from competing with it in the PC operating-system market, as well as the market for office software. His testimony has been backed up with numerous documents, including handwritten notes he took during meetings that took place while negotiations for IBM's PC company to license Win95 were underway. The license wasn't signed until Aug. 24, 1995, the day of Microsoft's official launch of the product.
But Pepperman took Norris step-by-step through a document entered into evidence that listed ways that IBM could reduce its license fee for Win95. None of the bullet points suggested that IBM drop its own competing operating system, OS/2, Pepperman pointed out. But Norris maintained that Microsoft's attempts were implied. "These actions, once executed by Microsoft, would have the effect of killing OS/2," he said repeatedly.