MS/DOJ: Monopoly? What monopoly?

Microsoft has cited the meteoric rise of Netscape Communications and the threat its sees posed by the Linux OS to attack the government's economic expert in the antitrust case. In a spirited and rapid exchange on Friday, Microsoft attorney Michael Lacovara attempted to show that Frederick R. Warren-Boulton, a former Reagan-era economist with the US Department of Justice government witness, was out of touch with the software industry. In particular, Lacovara tested Warren-Boulton's knowledge of Linux, an open-source, freely available Unix-derived operating system.

Microsoft has cited the meteoric rise of Netscape Communications and the threat its sees posed by the Linux operating system to attack the government's economic expert in the antitrust case.

In a spirited and rapid exchange on FRiday Microsoft attorney Michael Lacovara attempted to show that Frederick R. Warren-Boulton, a former Reagan-era economist with the US Department of Justice government witness, was out of touch with the software industry.

In particular, Lacovara tested Warren-Boulton's knowledge of Linux, an open-source, freely available Unix-derived operating system.

Warren-Boulton described Linux as primarily used on server applications. But Lacovara, citing Corel's porting of WordPerfect word processing software and Red Hat Software's Linux application bundle, said: "You haven't really looked into the evolutions of Linux desktop products?"

"I've followed Linux with some interest," said Warren-Boulton. But Linux, he said, was not constraining Microsoft's monopoly power.

Lacovara asked Warren-Boulton whether he knew if PCs were getting shipped with Linux.

A "small number," said Warren-Boulton, whose testimony is being used by the government in its efforts to show that Microsoft is a monopoly.

"But that number was zero a year ago," Lacovara snapped back.

"When you go from zero to a small number the growth rate is high," Warren-Boulton acknowledged with some humor.

Lacovara drew a parallel between Linux and Netscape.

If "I had asked you in January, 1995," said Lacovara, "if the browser was a threat to Microsoft's monopoly power you would have told me 'no.' "

"I don't know," said Warren-Boulton. But when asked by Lacovara whether he could predict how Linux would be doing in six months or two years from now, Warren-Boulton said the its potential threat to Microsoft would be determined by the financial markets.

"I can give you the opinion of people who are betting a lot of money on it and their opinion is 'no,' " said Warren-Boulton.

In other testimony this afternoon, Lacovara showed Warren-Boulton a July 18, 1993, memo written by Microsoft Chief Technology Officer Nathan Myhrvold that stated in part: "Any entrant in a technologically advancing market must reinvent itself and its product line on a continual basis, because any individual product will be obsolete -- even to current customers -- in a short period of time. Depending on the legal status and complexity of your intellectual property, competitors may also have the option of legally cloning your technology so that in the key area of compatibility they are just as good as you are. The rate at which a software asset can be cloned is usually even faster than the rate at which it becomes obsolete."

This memo was entitled "Telling It Like It Is" and Myhrvold indicated that while these were his thoughts, Bill Gates might want to use it to "author" an article. The section of the memo read in court was called "The Monopoly that Isn't."

Lacovara questioned Warren-Boulton about whether he believed Microsoft believed these statements and whether Microsoft would have been concerned about the rate of change in the software industry and the challenge posed by the Internet.

"If Microsoft were to rest on its laurels and not innovate and shut down its research and development labs and say 'Here's Windows 98' ... it would probably lose its monopoly," Warren-Boulton testified. But he said it is unlikely that a publicly traded corporation that looks to maximize profits for shareholders would do such a thing. "It's not rational," he added, "any more than blowing up the factory in Redmond."

"You don't believe Microsoft has been leading the 'quiet life of a monopolist,' do you?" Lacovara asked, quoting a British economist.

Warren-Boulton said the quote was referring to "sleepy English public utilities" and any analogy to Microsoft "is not appropriate."

Microsoft 's cross-examination of Warren-Boulton is expected to continue until the Thanksgiving break, starting next Wednesday.

(Patrick Thibodeau is a senior writer at Computerworld; Elizabeth Wasserman is Washington bureau chief for The Industry Standard.)

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