MS/DOJ: IBM: Microsoft threatened PC makers

A top IBM executive has testified in the Microsoft antitrust case that Microsoft made threats against PC makers who were considering IBM's OS/2 OS. Garry Norris, IBM's lead negotiator in securing Windows licensing agreements from Microsoft, also said IBM saw a sharp increase in the royalties it paid to Microsoft because the software giant viewed IBM as a competitive threat.

A top IBM executive has testified in the Microsoft antitrust case that Microsoft made threats against PC makers who were considering IBM's OS/2 operating system.

Garry Norris, who was IBM's lead negotiator in securing Windows operating system licensing agreements from Microsoft, also said that IBM saw a sharp increase in the royalties it paid to Microsoft because the software giant viewed IBM as a competitive threat.

Norris, who was deposed in a Raleigh, North Carolina courtroom by Microsoft attorney Richard Pepperman, said that in 1995 IBM paid US$40 million in royalty agreements for Windows 3.1, but in 1996 it paid $220 million in royalty agreements for Windows 95. Norris is a rebuttal witness in the trial, which has been on a break for several months and is slated to resume June 1.

Norris said royalty fees increased from $9 per copy for Windows 3.1 to $45.90 per copy for Windows 95.

In addition, Norris said that Compaq Computer told him it wanted to use OS/2 but didn't because of fear of retaliation from Microsoft. Hewlett-Packard made a similar decision about OS/2 for the same reason, Norris said.

He also said the IBM PC company also feared reaction from Microsoft.

"I was simply told repeatedly that they (the manufacturers) feared retaliation from Microsoft," Norris said.

The Windows 95 agreement was signed 15 minutes before the launch of the operating system, Norris said. Prior to that agreement there was a period of time when Microsoft became unresponsive during their negotiations, he said. Norris said he was worried that IBM was going to be cut out of a deal with Microsoft.

The U.S. Department of Justice and 19 state attorneys general have sued Microsoft in federal court, alleging that the Redmond, Washington-based software maker engages in illegal business practices, including anticompetitive behavior in the Internet browser market. Microsoft has denied all charges. The case has been in recess while the judge presides over an unrelated trial.

(Patrick Thibodeau is a senior writer for Computerworld.)

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