Microsoft appeals injunction in anti-trust case

Microsoft is appealing a preliminary injunction issued by US District Judge Thomas Penfield Jackson last Thursday, barring it from requiring PC vendors licensing its Windows operating system to also preinstall its Web browser. Microsoft is making its appeal on the grounds that it was an error for the court to impose a preliminary injunction after denying the US Justice Department's petition to hold Microsoft in contempt. The software maker says it will comply with the injunction while it is appealing. In addition, Microsoft officials say the company has not yet determined the full implications of last week's ruling on the upcoming Windows 98 version of the PC operating systems.

Microsoft is appealing a preliminary injunction issued by US District Judge Thomas Penfield Jackson last Thursday, barring it from requiring PC vendors licensing its Windows operating system to also preinstall its Web browser.

Microsoft is making its appeal on the grounds that it was an error for the court to impose a preliminary injunction after denying the US Justice Department's (DOJ) petition to hold Microsoft in contempt.

The software maker, which is seeking an expedited decision by the Washington, DC court of appeals, said it will comply with the injunction while it is appealing. In addition, Microsoft officials said the company has not yet determined the full implications of last week's ruling on the upcoming Windows 98 version of the PC operating systems.

"But we are moving full steam ahead with Windows 98," said Brad Chase, Microsoft vice president, Internet marketing and developer relations, in a teleconference held today. He added that the upgrade is still due to ship in the second quarter of next year.

In the teleconference William Neukom, Microsoft's senior vice president for law and corporate affairs, said the company found a series of errors in Jackson's ruling and decided to appeal the preliminary injunction, mainly because the matter before the court was whether Microsoft could be held in contempt for violating a consent decree entered in 1995.

"The court denied the Justice Department's petition for contempt; the case should have ended there. But on its own initiative, the court proceeded to treat the matter as a tying case and, without giving Microsoft notice or an opportunity to defend itself, issued a preliminary injunction," Neukom said.

He added that it is inappropriate for the court to unilaterally expand the case beyond the scope of the government's petition, which sets a dangerous precedent, as it has the potential to give government officials a say in what features should be integrated into software products.

"It is inappropriate for the court to unilaterally expand the case beyond the scope of the government's petition," Neukom said. He added that Jackson expanded the case to include the Sherman anti-trust laws.

The DOJ will respond once it has reviewed all of Microsoft's legal papers, a spokesman said.

Neukom also said that the DOJ could have brought a tying case but chose instead to file a petition seeking an order of contempt.

In the meantime, in order to comply with the preliminary injunction, Microsoft said it has sent a letter today to all licensed computer manufacturers informing them that pending the appeal, they may continue to ship the full Windows 95 product including Internet Explorer 4.0, or remove from Windows 95 all the files that are included in the retail version of Internet Explorer 3.0.

But Microsoft's Chase said that a stripped-down version of Windows 95 will not function and behave as originally designed. In addition Microsoft is offering PC manufacturers the retail version of Windows 95 (from August 1995), with all Internet Explorer 1.0 files removed.

Removing IE files from more recent version of the operating system would disable the operating system and make it useless, Chase said.

Neukom and Chase reiterated several arguments made by Microsoft throughout the seven-week-old legal case, such as the fact that Microsoft has never prevented any OEM partner or customer from adding competing software to PCs, such as third-party Web browsers, if they choose to.

"Computer manufacturers are free to install Netscape Navigator on new computers with Windows 95 if they choose, and many have," Neukom said.

But Microsoft is requiring PC makers to install the complete versions of Windows which includes IE, Neukom said.

Separating IE and Window 95 would make it impossible for Microsoft to offer integrated products to its customers, Chase said, drawing analogies to other "integrated products" ranging from automobiles to cookies.

"The baking of the [cookies'] ingredients brings together something that has great value," Chase said. "That is what our software does."

He also said removing IE as part of the operating system, leaves many independent software providers without a development platform for services that depend on the existence of the Internet and Microsoft's Web browser. One example cited by Microsoft is Windows' ability to display information in the Internet's document format Hyper Text Markup Language (HTML).

Microsoft said Windows 95 would be lacking if it did not provide HTML support as an operating system service, making it more difficult for developers to build Internet-enabled products.

Chase also said that other operating systems vendors, such as Apple Computer Inc., have also integrated browser functionality into their operating systems.

Since Microsoft had only a few days to evaluate Jackson's ruling the company has not determined what the full impact of the ruling on Windows 98 will be, Chase said.

While saying development of Windows 98 is moving ahead at full steam, Neukom said, it depends on the status of the litigation how Windows 98 will be marketed when it ships in the second quarter of 1998, and if Microsoft will have to offer different licensing terms to OEM partners.

Chase and Neukom declined to answer several questions about whether the company is developing two versions of Windows 98, one that integrates IE 4 and one that doesn't.

Chase did say that this week the company will make a release of Windows 95 available that fully integrates IE 4.

Neukom also said that the 1995 consent decree expressly states that Microsoft is free to develop "integrated products," that Internet Explorer has been an integrated part of Windows 95 since the very first version, that the DOJ knew of the company's plans to integrate Web technology into Windows 95 even before negotiations began on the consent decree in 1994.

Microsoft, in Redmond, Washington, can be reached at http://www.microsoft.com/.

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