Microsoft responds to DOJ court challenge

Not only did the US Justice Department know at the time it signed a consent decree with Microsoft that the company was integrating browser functionality with its operating system, but a provision in their agreement gives Microsoft explicit permission to do so, Microsoft says in court documents filed late last week. Microsoft also argues that the DOJ has failed to realise that Internet Explorer is not a browser per se, but an 'umbrella term' referring to various Internet-related and other technologies.

Not only did the US Justice Department (DOJ) know at the time it signed a consent decree with Microsoft that the company was integrating browser functionality with its operating system, but a provision in their agreement gives Microsoft explicit permission to do so, Microsoft says in court documents filed late last week.

In its initial response to the DOJ's petition seeking to hold Microsoft in contempt for violating the 1995 consent decree, Microsoft also argues that the DOJ's challenge to Microsoft's non-disclosure agreements with original equipment manufacturers (OEMs) should not be part of the proceeding.

In addition, Microsoft is asking the court to adopt a pretrial procedure allowing for discovery and motions before scheduling an evidentiary hearing on the merits of the DOJ's claim. This would enable Microsoft to review the DOJ's evidence and gather evidence of its own for defence.

A week ago, the DOJ asked a federal court to hold Microsoft in contempt and charge the software giant US$1 million daily for requiring PC manufacturers to license and distribute Internet Explorer as a condition of licensing Windows 95. The DOJ complaint charges that Microsoft violated a 1995 court order obtained by the US government barring Microsoft from conducting anticompetitive licensing practices.

Microsoft had until Oct. 30 to respond to the DOJ complaint filed in U.S. District Court for the District of Columbia.

At the heart of the litigation lies the question of whether Internet Explorer is a separate product, as the DOJ claims, or whether it represents a transformation of the browser into part of the operating system, as Microsoft claims. While Windows 95 has Internet access capabilities, the pending Windows 98 will fully integrate Internet Explorer. Microsoft claims it is melding the two formerly disparate products into one product in response to customer demand.

Offering Internet Explorer with Windows 95 is akin to adding new features and functionality to the operating system, Microsoft claimed in its court documents. "The inclusion of Internet-related technologies in Windows 95 is simply a step in the process of rapid innovation that has characterised the software industry since its inception," the Microsoft documents said.

The DOJ "had full knowledge more than two years ago of Microsoft's incorporation of Internet-related technologies, including "browsing' functionality, into Windows 95," the documents allege. The consent decree was entered August 1995, the same month Windows 95 was commercially released and one month after Windows 95 was made available to computer manufacturers, Microsoft asserts.

Secondly, Microsoft cites a provision in the consent decree which "explicitly states that this section will not be construed to prohibit Microsoft from developing 'integrated products ... without reference to whether the integrated technology might in some sense be considered 'separate.'" The company goes on to define "integrated" as "combined," "united" or "incorporated into" and accuses the DOJ of relying on "amorphous considerations such as the 'perceptions' of competitors and customers about whether Windows 95 and IE are separate products."

The provision was included to protect Microsoft's right to design products "free from government interference," Microsoft said, noting that Windows 95 resulted from combining Windows 3.1 and MS-DOS 6.0 -- two separately-offered products.

In its eight-page response, Microsoft also claims that the DOJ's petition raises "extraneous issues." The DOJ asked the court to strike down sections of non-disclosure agreements (NDAs) Microsoft requires PC manufacturers to sign. The DOJ alleged the NDAs might deter companies from voluntarily providing information in the department's ongoing investigation of Microsoft.

The DOJ's challenge to the NDAs should not be part of the petition, Microsoft argues, because it "is based entirely on the DOJ's unsupported speculation that these NDAs may have a chilling effect on potential complaining witnesses." The DOJ failed to identify any provision of the consent decree the NDAs allegedly violate and failed to provide any evidence that the NDAs have prevented anyone from complaining about Microsoft, the documents claimed.

In addition, Microsoft argues, the DOJ's petition indicates it is confused about the "nature" of Internet Explorer, and therefore, it is unclear what the DOJ expects Microsoft to remove from Windows 95. Internet Explorer is an "umbrella term" referring to various Internet-related and other technologies, and not merely "browsing" software, according to Microsoft. "Consequently, any requirement that Microsoft rip technologies referred to as IE out of Windows 95 would degrade the operating system, to the serious detriment of personal computer users," the documents said.

Finally, Microsoft requested that it be given until Nov. 10, rather than Nov. 1 to file a protective order to prevent the unsealing of sealed exhibits in the case. Microsoft also asked the court to prevent the DOJ from making public any additional Microsoft documents until Microsoft can file an order asking that they be sealed.

Microsoft's alleged attempts to coerce OEMs to remove competing browser icons from their systems and other tactics were revealed in depositions taken by the DOJ for its petition from people at Compaq Computer, Micron . and Gateway 2000. The details were reported in numerous publications after the documents were made public in the court.

In addition to the DOJ petition, six state attorney generals have confirmed that they are investigating alleged anti-competitive practices on the part of Microsoft, and the DOJ is reviewing Microsoft's acquisitions in the area of video streaming and its recent investment in Apple Computer. Furthermore the European Commission, the legislative body of the European Union, has launched an investigation of Microsoft on a variety of issues including the Internet, services discounting and licensing activities.

Meanwhile, consumer advocate Ralph Nader is sponsoring a conference Nov. 13 and 14 entitled "Appraising Microsoft and its Global Strategy."

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