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Microsoft feared "patent terrorism" if Apple collapsed

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Paul Maritz' testimony does give some useful information not previously disclosed about Microsoft's relationship with Apple, and in particular more details about litigation issues. It turns out that Microsoft's use of Apple code in Microsoft Video for Windows did indeed violate Apple's intellectual property rights, and that the case was settled out of court. Although Microsoft officially denies any liability -- and, for once, its hands were clean because its chum Intel passed Microsoft the duplicated code -- the legal wording used is a well-known shorthand for Microsoft having paid Apple a sufficient sum of money for it to be allowed to proclaim its innocence. The Apple claim for $1.255 billion evidently caused Microsoft a great deal of anguish, and there must have been good reason for this. Apple says that 24 of its patents were infringed, and possibly 12 more. Apple lost the intellectual property case it launched in 1988 after the Supreme Court said in 1995 that it would not hear the appeal. Microsoft crows that it received attorney's fees. Apple was unaware at the time of some key evidence that might well have changed the result of this case: it shows that Microsoft did copy the Apple GUI, since a mistake in the Apple GUI was copied into Windows and still exists. There is also a witness to Microsoft having received the source code listing from Apple, but he was never deposed. Microsoft's particular concern was that if Apple went to the wall, as it was close to doing in 1996/97, it might fight a mighty patent battle and win. Maritz' testimony says in its defence that "patent liability can be found even when the product in question was developed wholly independently" but that is unconvincing. A side issue is that a so-called "patent terrorism" fight, as Maritz described it, doesn't put Microsoft in a strong position, because the opponent isn't going to be a customer. The real problem is that patents are an unsuitable means for protecting intellectual property. Apple software VP Avie Tevanian, who gave evidence at the trial, was one of those who advocated suing Microsoft. In any event, if Apple went ahead, Microsoft was planning a counteraction, as it always does, however absurd it may be. Two days after Gates called Amelio to try to persuade him to make Internet Explorer the preferred browser, Apple board member Edgar Woolard called Amelio to suggest he resign. Maritz, however, says: "Apple dismissed Amelio as CEO". With the arrival of Steve Jobs as acting CEO on 9 July 1997, it only took until 5 August to agree the cross-licensing of patents. Jobs had an interesting encounter with Microsoft treasurer Greg Maffei in San Jose on 20 July, Maritz said in cross-examination. Jobs was wearing no shoes and was standing under a tree. The message that Maritz was anxious to get across was that Apple's use of IE was not even being discussed at the time. This is hard to swallow. Maffei distinctly recalls that he raised the subject of Internet Explorer with Jobs while standing under a tree in Palo Alto on 20 July, only after they had already settled the broad terms of the patent licence and Microsoft's commitment regarding Office for the Mac. Microsoft is a master at reconstructing a version of history to meet new requirements. The evidence that Microsoft was very concerned about the threat of serious litigation from Apple is not wholly convincing, and it seems more probable that Gates' desire for Apple to use IE as the default browser was much more important. In a 27 April 1997 proposal from Maffei to Apple, the cross-patent licence proposal by Microsoft is at 10th position in a list of 12 items and Apple offering IE as the default browser is at 5th position, which shows that these were issues before the bare-footed Palo Alto meeting. This new exhibit evidently caught Maritz unawares. A Microsoft document was produced by Maritz to lend support to the importance of the barefoot encounter, but it had not been produced to the DoJ as it should have been. This raised grave doubts about what other documents Microsoft might not have produced in discovery. Judge Jackson appeared to be getting cynical about the storyline, and asked Maritz a pointed question as to why the patent dispute was not mentioned prominently in an email from Maffei to Gates on 21 July 1997. Maritz said: "The words 'cross licence' don't occur, but it's taken for granted," and settling the dispute was taken for granted, which sounded rather unlikely. Maritz defended there being three documents for the August 1997 legal agreements with Apple, but the same argument could be used for keeping IE and Windows separate: different people are concerned with each component, and keeping them separate is more convenient. On 1 July 1997, Gates called Amelio because Maffei said he was getting nowhere. Gates was very unhappy at the OS, applications and patents situation. Amelio was on vacation. Gates threatened him: "I asked how we should announce the cancellation of Mac Office. Did he want to sue for patents first or should we announce with other ISVs that we are reducing out Mac support?" Amelio tried to be accommodating, but indicated that the Apple Board was split, but he agreed to draft a proposal that week. There is a most remarkable statement by Gates at the end of the email (which summarises the call and was sent to Maritz and relevant execs): "Gil did sound more concerned about Apple than I have heard him before. I don't envy him being in his job." It's hard to think of a single instance where Gates has previously expressed concern for anybody in business, apart from in PR stunts, and it was unexpected. It would seem to make it less likely that Microsoft was instrumental in Amelio's departure, and that as he suggests in his book, 500 Days in the Firing Line, he was in effect pushed by the Apple Board. Microsoft's head of Mac development, Ben Waldman, emailed Gates the same day asking if finishing Office was contingent on a deal with Apple. He needed to know because of a pending interview with the Washington Post. "WagEd feels that delaying again will cause suspicion and potentially a negative speculative story. MacWorld [Expo] is in four weeks and we need to do some sort of communication (under NDA) with press, or else also arouse suspicion," wrote Waldman. ® Complete Register trial coverage

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