MS/DOJ: Compaq allegedly gave Be info to MS

A Compaq Computer witness who came to testify in Microsoft's defense of the U.S. government's antitrust lawsuit has faced allegations that his company turned over confidential information about operating system maker Be, to Microsoft. The witness, Senior Vice President John Rose, said he was unaware that Be's confidential information -- which the government says was covered by a non-disclosure agreement -- had been passed to Microsoft.

A Compaq Computer witness who came to testify in Microsoft's defense of the U.S. government's antitrust lawsuit has faced allegations that his company turned over confidential information about operating system maker Be, to Microsoft.

The witness, Senior Vice President John Rose, said he was unaware that Be's confidential information -- which the government says was covered by a non-disclosure agreement -- had been passed to Microsoft.

David Boies, the government lead attorney, raised the issue during his cross-examination of Rose, who will return to the witness stand today.

The disclosure, Boies said outside of court, "demonstrates the power that Microsoft has and the ability of Microsoft to get this kind of confidential information" about its competitors.

But Tom Siekman, Compaq's general counsel, said outside of court that it was the first they had heard of disclosure. "Obviously we will look into it, and our knowledge to date is that there is no validity to this allegation," he said.

Boies' courtroom pursuit of Rose over the charge drew an angry courtroom protest from Compaq attorney William Coston, who said it was a "cheap trial stunt to accuse somebody of a breach of agreement and to question a witness who knows nothing about that."

But Judge Thomas Penfield Jackson defended Boies' inquiry. "He doesn't know whether he knows anything about it until he asks him about it."

Boies said during an earlier court recess he gave Coston the name of the Compaq employee who had acknowledged that information about Be was shared with Microsoft. He said Coston should have called that person.

But Jackson ended the questioning on the issue because Rose knew nothing about it.

Earlier in the day, the government contended that Microsoft used its monopoly in the market of PC operating systems to prevent a rival and now defunct handheld computer maker from striking a deal with Compaq.

Rose said that the decision to use a Windows-based operating system for handheld computer products over one developed by Go Corp. rested on a desire for "seamless interoperability" between operating systems.

Boies said in court that Compaq's 1993 decision on Go came at the same time it was negotiating a 5-year Windows licensing agreement with Microsoft. Compaq had been evaluating Go's operating system software for its handheld computers.

Go was a pioneer in the personal digital assistant (PDA) market. Its operating system PenPoint competed with Pen Windows, which was made by Microsoft. The company was bought in 1993 by AT&T Corp. which ultimately got out of the handheld business.

Boies introduced evidence today that suggested that underlying Compaq's decision to use Windows over Go's operating system was a fear of retaliation from Microsoft.

A Compaq document, prepared before its 1993 agreement was signed with Microsoft, outlined how Microsoft could retaliate against Compaq.

The document titled "Judgment: How retaliatory would they get?" listed 12 ways Microsoft could attack Compaq, including eliminating its pricing advantage, cutting off early access to software developer kits, and changing its tone toward Compaq in the press, among other things.

Rose said he was not part of the negotiations and offered little in the way of testimony about it.

But in response to questions from Boies, Rose said Compaq is paying lower prices for the Windows operating system software relative to other OEMs (Original Equipment Manufacturers).

Rose said that, in return, he believes Compaq offered Microsoft more value than any other PC maker.

In addition to Compaq's "market momentum" -- Compaq's annual revenue from servers is US$23 billion and from PCs $20 billion -- the company also has 3,000 trained Windows NT specialists and 350 engineers who work with Microsoft at its headquarters in Redmond, Rose said.

But Boies continued to suggest, with new evidence, that Compaq was worried about Microsoft's muscle.

A November 1996 company memorandum pointed out that Microsoft was unhappy with the placement of Netscape Navigator on a desktop. The memo says in part: "Microsoft's stance to date raises questions of improper use of a monopoly position."

Microsoft spokesman Mark Murray described those comments as "rank speculation" by lower-level company employees.

(Thibodeau is a senior writer for Computerworld.)

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