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MS could still be found guilty in Bristol antitrust case

The jury said no case last year, but the judge is getting very uppity...

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Analysis US federal judge Janet Hall of the Connecticut District Court, who is presiding over the Bristol Technologies case against Microsoft, said in her Ruling last week (in which Bristol was awarded $1 million punitive damages against Microsoft) that "Microsoft could be exposed to civil and criminal penalties under other unfair and deceptive trade practice statutes for its deceptive conduct". Criminal penalties sounds ominous - jail at last for some of the excs?

The judge was also critical of a speech by Bill Gates in which he made "an affirmatively false statement and not merely an omission of material fact" at the Unix expo in New York (attended by some 20,000 people) in October 1996. Gates said: "... we work together with [Bristol and Mainsoft] to make sure they've got the very latest Windows API technology. Bristol and Mainsoft also provide source and binary compatibility, and again that's a close relationship where it's not just some old version of Windows, it's the very latest." It's the bit about the Microsoft claiming to offer the latest version of Windows that particularly caught the court's eye, because in fact Microsoft had refused to give Bristol access to the latest version of Windows.

Lie or lapse?
It appears that Gates believed until August 1997 that Microsoft's WISE program (Windows Interactive Source Environment) was actually doing what it publicly said it was going to do. In an email he said that "we should be taking the entire COR infrastructure to all platforms" [COR is a key component of Windows], evidently not knowing that Microsoft was in fact already undermining Bristol's ability to develop its WIND/U (Windows/Unix) product by refusing to provide the latest source code, and that Bristol's users would be unable to get the expected functionality to run Windows programs on Unix as Microsoft would only supply Bristol with a subset of the NT code.

It was left to Microsoft vp Bob Muglia to break to Gates what was actually happening. When Gates realised this, he signalled his understanding of the consequences ("less than eloquently", in Judge Hall's view) in an email that noted that ISVs who wrote applications to the NT4 APIs expecting that they would be able to port to Unix would be "just fucked".

Muglia purred to Gates, "We prefer that ‘they are taking full advantage of our platform', Bill." Meanwhile, Microsoft vp John Ludwig wrote in an email that he and others were "rolling on the floor at the irony" of the situation. In fact, the irony was that Gates may actually have been innocent of any subterfuge on this occasion for the humiliating reason that nobody had previously told him what was happening in his company. It's also clear from this that Gates should not always be portrayed as the Machiavellian strategist he's reputed to be.

"Court does not believe ms witnesses"
Gates was not the only person to be criticised by the judge. The hapless Jim Allchin (who still seems to be absent from his key job at Microsoft running Windows) followed up Gates' speech by suggesting to Paul Maritz that Microsoft should deliver a "you're safe with our cross-platform tools" message, only to do a U-turn a couple of weeks later when he caught on that the policy was going to be to cut down on the APIs and provide limited subsets to WISE programme developers.

Judge Hall also decided that Bob Kruger, Microsoft's director of systems marketing and standards, was not telling the truth when he claimed that Microsoft had decided not to include porting tools in the WISE programme from the beginning. The judge also decided that Microsoft did not make an offer to Bristol for key NT4 or NT5 source code "for a premium royalty" during a licence renewal meeting with Bristol in April 1998, and that "the court does not, in short, believe Microsoft's witnesses on this issue".

The judge also said that Microsoft and was playing a bait-and-switch game in which it "baited" Bristol into continually devoting substantial resources to developing and selling WISE software, and "switched" on these converted Microsoft customers (and Bristol).

Coming more than a year after the trial, the judge's Ruling was both unexpected and surprising. Her view that "a punitive damages award of $1,000,000 serves the purpose of deterring Microsoft from ongoing and future deceptive conduct" might be regarded as rather optimistic - especially by those who have had direct experience of Microsoft's business practices. Almost certainly, Microsoft will have spent more on PR in connection with the Bristol case than the $1 million punitive damages award, with its legal costs being a multiple of that.

Microsoft had tried to distort the jury's finding, Judge Hall declared: "Contrary to Microsoft's repeated suggestions throughout its briefs, the jury did not find that Bristol was unharmed by Microsoft's deceptive act or practice." Bristol sought and has now won injunctive relief that the judge said was necessary "to prevent continued public deception" by Microsoft claiming that it did not harm Bristol, or misrepresent the WISE programme.

A guilty verdict still possible?
It is not generally realised that the jury's antitrust finding in favour of Microsoft has still not been entered by the judge. Jean Blackwell of Bristol told The Register that the judge does not have to accept the jury's opinion that Microsoft committed no antitrust offence. With Microsoft's appeal in the antitrust case brought by the DoJ being sweated over by the Supremes, it is rather unlikely that Judge Hall will be in any hurry to enter a decision on this.

It is not in itself unreasonable that Microsoft should wish to change its strategy as it gained market share with NT, and to make it impossible for Bristol to continue with its WIND/U product. However, Microsoft's public pretence that it was making it possible for Bristol to do this when the plain fact was that it was setting up all manner of obstacles to make this impossible was unfair and illegal, the judge has ruled.

Obstacle one was Microsoft's claim that its agreement with Bristol did not include NT4, but Bristol showed in its evidence that Microsoft "made numerous representation to the effect that NT4 would be licensed to Bristol" when the contract came up for renewal in September 1997.

Obstacle two was Microsoft's pretence that it was still supporting the WISE program when it was not. Judge Hall found that "the deceptive conduct engaged in by Microsoft clearly rises to the level of reckless and wanton indifference to the harm it caused Bristol and others". Microsoft decided to hold back key APIs from the source code it licensed to Bristol, despite a letter Microsoft sent to developers and ISVs that the WISE programme would "make Windows APIs ‘universally available' for Intel x86 and Unix platforms". Microsoft claimed in 1994 that cross-platforming under the WISE programme represented "an open system", and in 1995 that the WISE programme would "maximise applications compatibility ... well into the future".

Microsoft did not help its case when it sent source code for NT4 to Bristol, and then in its legal pleadings try to claim in hindsight that this was "in error". It was very clear that Microsoft had suddenly thought of a ruse to deny NT4 and NT5 (Windows 2000) code to Bristol, against the terms of the agreement and representations it had made, by supplying only a subset of the NT source code.

All a ghastly cockup?
As to the $1 award by the jury to Bristol, it appears that this may have resulted from a misunderstanding by the jury of the judge's Jury Charge. At the end of a long and complex paragraph about damages, the judge had said that "You may decline to award damages... or you may award a nominal amount, say $1." The most plausible explanation of what happened seems to be that the jury, who had considered their verdict for less than a day after a six week trial, did not understand that they could have awarded a very substantial sum indeed.

Judge Hall also found in her Ruling that "Microsoft engaged in deceptive conduct", and tried "to undermine the competitive threat of Unix". As has been seen in the case brought by the DoJ, there are many similarities to Microsoft's behaviour when it was threatened by Apple, Intel, Netscape, OS/2 and Java. It was however perhaps a little strange that Judge Hall decided that findings of fact and conclusions of law in US v Microsoft were not relevant, as Bristol had claimed, just because the monopoly leverage was in a different market.

The present legal situation is that Microsoft's Motion last year for entry of the antitrust judgement was ruled premature in view of Bristol's Motion for punitive damages (which it won) and injunctive relief (which it partially won). Microsoft now has until 15 September to file a Motion on the antitrust part of the case, and Bristol until 30 September to respond. A further potential problem for Microsoft is that all fifty states and DC have unfair and deceptive trade practice statutes, so the potential for further cases against Microsoft is considerable.

Microsoft has said that it will appeal, but of course two can tango. It remains to be seen whether Bristol will advocate adding a few more zeroes to the damages award to make it punitive rather than derisory. ®

Related story:
Antitrust suit from Beyond the Grave hits MS for $1m

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