SCHEDULED FOR ORAL ARGUMENT APRIL 21, 1998
IN THE UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT
No. 97-5343
MICROSOFT CORPORATION,
Respondent-Appellant,
v.
UNITED STATES OF AMERICA,
Petitioner-Appellee.
ON APPEAL FROM THE UNITED STATES DISTRICT
COURT FOR THE DISTRICT OF COLUMBIA
BRIEF OF APPELLEE UNITED STATES OF AMERICA
Of Counsel
CHRISTOPHER S CROOK
PHILLIP R. MALONE
STEVEN C. HOLTZMAN
PAULINE T. WAN
KARMA M. GIULIANELLI
MICHAEL C. WILSON
SANDY L. ROTH
JOHN F. COVE, JR.
Antitrust Division
U.S. Department of Justice
450 Golden Gate Avenue
San Francisco, CA 94102
|
|
JOEL I. KLEIN
Assistant Attorney General
A. DOUGLAS MELAMED
Deputy Assistant Attorney General
CATHERINE G. O'SULLIVAN
MARK S. POPOFSKY
Attorneys
Antitrust Division
U.S. Department of Justice
601 D Street, NW
Washington, DC 20530
(202) 514-3764
|
CERTIFICATE AS TO PARTIES, RULINGS, AND RELATED CASES
- Parties And Amici.
All parties, intervenors, and amici appearing before the district court and in this
Court are listed in the Brief for Appellant Microsoft Corporation ("Microsoft").
- Ruling Under Review
The description of the ruling under review appears in the Brief for Appellant
Microsoft.
- Related Cases
This case is related to No. 98-5012, which involves a petition for a writ of
mandamus and which was consolidated by this Court with this case for the purposes of oral
argument on February 2, 1998.
TABLE OF CONTENTS
CERTIFICATE AS TO PARTIES, RULINGS, AND RELATED CASES
TABLE OF CONTENTS
TABLE OF AUTHORITIES
GLOSSARY
STATEMENT OF SUBJECT MATTER AND APPELLATE JURISDICTION
STATEMENT OF ISSUES PRESENTED FOR REVIEW
STATEMENT OF THE CASE
- Background
- The Final Judgment
- Windows 95
- Internet Explorer And The "Browser War"
- Course of Proceedings
- The United States' Petition And Microsoft's Response
- The December 5, 1997, Hearing
- The December 11, 1997, Order
- Events After The Preliminary Injunction
- Microsoft's Response
- The United States' Motion For Civil Contempt
SUMMARY OF ARGUMENT
ARGUMENT
- THE DISTRICT COURT ACTED WITHIN ITS AUTHORITY IN
TREATING THE MATTER AS AN ACTION FOR DECLARATORY
AND INJUNCTIVE RELIEF
- THE DISTRICT COURT PROPERLY ENTERED THE PRELIMINARY
INJUNCTION
- The District Court Properly Declined To Hold An Evidentiary Hearing
- Microsoft Received Adequate Notice
- The District Court Fully Complied With Rule 52(a)
- The Preliminary Injunction Properly Preserves The Competitive Status Quo And The Court's Ability
To Fashion Meaningful Relief
- The Preliminary Injunction Should Remain In Place Even If A
Remand Is Necessary
- THE DISTRICT COURT CORRECTLY DETERMINED THAT THE
UNITED STATES HAS A SUBSTANTIAL LIKELIHOOD OF
SUCCESS ON THE MERITS
- Section IV(E)(i) Prohibits Microsoft From Conditioning An OEM
Windows 95 License On An OEM's Licensing That Which
Microsoft Treats, And Antitrust Tying Jurisprudence Defines, As A
Separate Product
- The District Court Properly Determined That Internet Explorer And
Windows 95 Are Separate Products
CONCLUSION
CERTIFICATE OF SERVICE
CERTIFICATE PURSUANT TO D.C. CIR. RULE 28(d)(1)
TABLE OF AUTHORITIES
Cases Pages
Alberti v. Klevenhagen, 46 F.3d 1347 (5th Cir. 1995)--------------- 17, 27
Amoco Prod. Co. v. Gambell, 480 U.S. 531 (1987) --------------- 6, 26
* Aoude v. Mobile Oil Corp., 862 F.2d 890 (1st Cir. 1988) --------------- 19-20, 31
Applewood Landscape & Nursery Co. v. Hollingsworth, 884 F.2d 1502
(1st Cir. 1989)--------------- 29
Brewster v. Dukakis, 675 F.2d 1 (1st Cir. 1982) --------------- 18
* Campbell Soup Co. v. Giles, 47 F.3d 467 (1st Cir. 1995) --------------- 19, 25
D. Patrick, Inc. v. Ford Motor Co., 8 F.3d 455 (7th Cir. 1993) --------------- 15, 27
EEOC v. Safeway Stores, Inc., 611 F.2d 795 (10th Cir. 1979) --------------- 15
Eng v. Smith, 849 F.2d 80 (2d Cir. 1988) --------------- 31
Firefighters Local Union No. 1784 v. Stotts, 467 U.S. 561 (1984) --------------- 27
Grappone, Inc. v. Subaru of New England, Inc., 858 F.2d 792 (1st Cir. 1988) --------------- 35
Herbert Rosenthal Jewelry Corp. v. Grossbardt, 428 F.2d 551 (2d Cir. 1970) --------------- 19, 25
In re Data General Antitrust Litig., 490 F. Supp. 1089 (N.D. Cal. 1980) --------------- 40-41
* Interdynamics, Inc. v. Wolf, 698 F.2d 157 (3d Cir. 1982) --------------- 15-16
International Brotherhood of Teamsters v. Teamsters Local Union 714, 109 F.3d 846
(2d Cir. 1997) --------------- 27
International Longshoremen's Ass'n v. Philadelphia Marine Trade Ass'n,
389 U.S. 64 (1967) --------------- 36
International Salt Co. v. United States, 332 U.S. 392 (1947) --------------- 2
Inverness Corp. v. Whitehall Labs., 819 F.2d 48 (2d Cir. 1987) --------------- 28, 32-33
Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2 (1984) --------------- 23, 40-41
Leatherman v. Tarrant County Narcotics Intelligence & Coordination Unit, 28 F.3d 1388
(5th Cir. 1994) --------------- 27
McCawley v. Ozeanosun Compania Maritime, S.A., 505 F.2d 26 (5th Cir. 1974) --------------- 28
McComb v. Jacksonville Paper Co., 336 U.S. 187 (1949) ---------------------------- 33, 36
Mayo v. Lakeland Highlands Canning Co., 309 U.S. 310 (1940) --------------- 28
Poliquin v. Garden Way, Inc., 989 F.2d 527 (1st Cir. 1993) --------------- 19
* Rosen v. Siegel, 106 F.3d 28 (2d Cir. 1997) --------------- 32-33
Ross-Whitney Corp. v. Smith-Kline & French Labs., 207 F.2d 190 (9th Cir. 1953) --------------- 19, 31
Schultz v. Williams, 38 F.3d 657 (2d Cir. 1994) --------------- 19
SEC v. Frank, 388 F.2d 486 (2d Cir. 1968) --------------- 19
Shakey's Inc. v. Covalt, 704 F.2d 426 (9th Cir. 1983) --------------- 35
Sims v. Greene, 161 F.2d 87 (3d Cir. 1947) --------------- 19
* Socialist Workers Party v. Illinois State Bd. of Elections, 566 F.2d 586 (7th Cir. 1977),
aff'd, 441 U.S. 173 (1979) --------------- 24, 27-28
Tanner Motor Livery, Ltd. v. Avis, Inc., 316 F.2d 808 (9th Cir. 1963) --------------- 31
TEC Engineering Corp. v. Budget Molders Supply, Inc., 82 F.3d 542 (1st Cir. 1996) 29
Toledo, AA & NM Ry. v. Pennsylvania Co., 54 F. 730 (C.C.N.D. Ohio),
appeal dismissed, 150 U.S. 393 (1893) --------------- 31
Tom Doherty Assocs., Inc. v. Saban Entertainment, Inc., 60 F.3d 27 (2d Cir. 1995) --------------- 29
Ty, Inc. v. GMA Accessories, Inc., 132 F.3d 1167 (7th Cir. 1997) --------------- 21, 25
United States v. ASCAP, 157 F.R.D. 173 (S.D.N.Y. 1994) --------------- 35
United States v. Crescent Amusement Co., 323 U.S. 173 (1945) --------------- 36
United States v. Fisher, 864 F.2d 434 (7th Cir. 1988) --------------- 18
United States v. Greyhound Corp., 508 F.2d 529 (7th Cir. 1974) --------------- 33
United States v. Marine Shale Processors, 81 F.3d 1329 (5th Cir. 1996) --------------- 32
United States v. Microsoft Corp., 56 F.3d 1448 (D.C. Cir. 1995) 3, 16
United States v. Microsoft Corp., 1995-2 Trade Cas. (CCH) ¶ 71,096 (D.D.C. 1995) --------------- 2
United States v. Siemens Corp., 621 F.2d 499 (2d Cir. 1980) --------------- 31-32
* United States v. Western Elec. Co., 12 F.3d 225 (D.C. Cir. 1993) --------------- 18, 36-37
* United States v. Western Elec. Co., 894 F.2d 1387 (D.C. Cir. 1991) --------------- 15, 34, 36
United States v. Western Elec. Co., 907 F.2d 160 (D.C. Cir. 1990) --------------- 15
* Vertex Distrib., Inc. v. Falcon Foam Plastics, Inc., 689 F.2d 885 (9th Cir. 1982) --------------- 16-17
White v. Roughton, 689 F.2d 118 (7th Cir. 1982) --------------- 36
Wynn Oil Co. v. Purolator Chem Corp., 536 F.2d 84 (5th Cir. 1976) --------------- 28
Xerox Fin. Servs. Life Ins. Co. v. High Plains Ltd. Partnership, 44 F.3d 1033
(1st Cir. 1995) --------------- 27
Statutes and Rules
15 U.S.C. 1 2
15 U.S.C. 2 2
Fed. R. Civ. P. 52(a) 28
Fed. R. Civ. P. 65(a) 26
Other
10 Phillip E. Areeda et al., Antitrust Law (1996) --------------- 39-40
<http://www.microsoft.com/corpinfo/1-22doj.htm>--------------- 13
Infoweek, Survey Reveals Corporate Technology Managers Do Not Want Internet
Explorer Integrated Into Microsoft's Windows Operating Systems (Feb. 9, 1998)
<http://biz.yahoo.com/bw/980209/cmp_media_4.html>. 13
9A Charles A. Wright et al., Federal Practice and Procedure (2d ed. 1995) --------------- 28
11A Charles A. Wright et al., Federal Practice and Procedure (2d ed. 1995) --------------- 22, 26, 31
GLOSSARY
Br. |
Brief for Appellant Microsoft Corporation |
CIS |
Competitive Impact Statement |
CJA |
Confidential Joint Appendix |
JA |
Joint Appendix |
OEM |
Original Equipment Manufacturer |
OS |
Operating System |
OSR |
OEM Service Release; the version of Windows 95 supplied to OEMs for
preinstallation onto new personal computers |
PC |
Personal Computer |
SCHEDULED FOR ORAL ARGUMENT APRIL 21, 1998
IN THE UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT
No. 97-5343
MICROSOFT CORPORATION,
Respondent-Appellant,
v.
UNITED STATES OF AMERICA,
Petitioner-Appellee.
ON APPEAL FROM THE UNITED STATES DISTRICT
COURT FOR THE DISTRICT OF COLUMBIA
BRIEF OF APPELLEE UNITED STATES OF AMERICA
STATEMENT OF SUBJECT MATTER AND APPELLATE JURISDICTION
Appellant Microsoft's brief sets forth the basis for subject matter and appellate jurisdiction.
STATEMENT OF ISSUES PRESENTED FOR REVIEW
- Did the district court correctly treat the United States' Petition, which requested a judgment
of civil contempt and injunctive relief, as additionally seeking a declaration that Microsoft's forced
licensing of Internet Explorer to computer manufacturers violates the Final Judgment?
- Did the district court appropriately enter a preliminary injunction designed to enforce an
outstanding order of the court when (i) Microsoft received notice that the United States requested
permanent injunctive relief and, in responding to that request, addressed the issues relevant to entry of
preliminary relief; (ii) the absence of additional proceedings caused Microsoft no prejudice; (iii) the
court adequately explained the basis for the injunction; and (iv) the injunction preserves the competitive
status quo and the court's ability to fashion appropriate permanent relief?
- Did the district court correctly determine that the United States demonstrated a substantial
likelihood of success on the merits?
STATEMENT OF THE CASE
- Background
- The Final Judgment
The United States commenced this action to enforce a court order. That order, a consent
decree, was entered as a Final Judgment in a suit brought by the United States to enjoin Microsoft from
employing certain terms in its licensing agreements with original equipment manufacturers ("OEMs")
that unlawfully maintained Microsoft's monopoly in personal computer ("PC") operating systems
("OSs") in violation of Sections 1 and 2 of the Sherman Act, 15 U.S.C. 1-2. See United States v.
Microsoft Corp., 1995-2 Trade Cas. (CCH) ¶ 71,096 (D.D.C 1995).
The Final Judgment terminated those licensing practices. It also prohibited practices beyond
those charged in the Complaint. Such additional restrictions are common in antitrust judgments; without
them the enjoined party might achieve its anticompetitive goals by using a different device. See
International Salt Co. v. United States, 332 U.S. 392, 400 (1947).
As the Competitive Impact Statement ("CIS") and other Tunney Act filings explain, Section
IV(E)(i) of the Final Judgment, at issue here, was such an additional restriction (JA 101-02, 227-28,
231). Section IV(E)(i), which Microsoft itself terms an "anti-tying" provision (Brief for Appellant
Microsoft Corporation ("Br.") at 31), prohibits Microsoft from conditioning an OEM license to certain
OS products on the OEM's licensing, inter alia, any "other product." Reflecting the rationale for
antitrust scrutiny of tying arrangements, Section IV(E)(i) was intended to prohibit Microsoft from
employing conditioned licenses involving its monopoly OS products "to extend or protect [Microsoft's]
monopoly" (JA 231).
- Windows 95
As this Court observed in ordering entry of the Final Judgment, "Microsoft dominates the world
market for operating systems software that runs on IBM-compatible personal computers." United
States v. Microsoft Corp., 56 F.3d 1448, 1451 (D.C. Cir. 1995). Microsoft's Windows 95 is the
successor to MS-DOS 6 and Windows 3, which together dominated the market at the time of the Final
Judgment's entry (JA 136-37). Because of Microsoft's monopoly power, OEMs believe it is essential
to offer Windows 95 (JA 78, 139, 155, 178-79, 191-92, 212-13); indeed, when Microsoft threatened
to withdraw a leading OEM's Windows 95 license, that OEM quickly capitulated to Microsoft's
demands (JA 215-18, 278, 280). Microsoft projected that its share of OEM-installed OSs would
approach 86% by mid-1997 (JA 77).
- Internet Explorer And The "Browser War"
As the Internet's World Wide Web ("web") grew increasingly popular, companies developed
Internet web browsers, which permit users to find and retrieve documents located on the web.
Netscape released its Navigator web browsing product in late 1994 (JA 359). Microsoft responded to
the new demand by releasing its own web browser, Internet Explorer, in the summer of 1995 (JA
1276), the same period during which Microsoft released Windows 95.
Although characterizing Internet Explorer in this litigation as a component of or "upgrade" to
Windows 95 (Br. at 4-5; JA 469-70), Microsoft in fact treats Internet Explorer as a separate product
in the usual commercial sense. Microsoft vigorously promotes Internet Explorer as a separate product,
distributes Internet Explorer in the retail channel, offers it bundled with various software applications
and third-party hardware products, permits it to be redistributed by Internet Service Providers, and
makes it available for separate "downloading" over the Internet.(1) Indeed, Microsoft views Internet
Explorer as locked in a "browser battle" with Netscape Navigator (JA 374; CJA 288). Microsoft
carefully tracks the share of both products in what it sometimes calls a browser "market" and has made
gaining significant browser market share a central corporate goal; and just as Netscape has done with
its competing Navigator product, Microsoft has created versions of Internet Explorer for OSs other
than Window 95, including that for the Apple Macintosh.(2)
To help win the "browser war," Microsoft conditioned its OEM licenses to Windows 95 on
OEMs' licensing Internet Explorer (CJA 414). Microsoft included the first three versions of Internet
Explorer on the Windows 95 "master" disk supplied to OEMs for preinstallation onto new PCs (JA
1277-78). Microsoft has made clear that its licensing agreements leave OEMs with no "choice about
whether . . . they load Internet Explorer onto [PCs] that have Windows 95" (JA 255). OEMs,
moreover, are "not allowed" to delete Internet Explorer or any component of it once preloaded (JA
255). For instance, Microsoft has enforced its licensing agreements to prevent OEMs from removing
the Internet Explorer icon from the Windows 95 desktop (JA 278, 280) and has made clear that it
would invoke its licensing agreements to deny similar requests (JA 256, 273).
Microsoft introduced its latest browser, Internet Explorer 4, in September 1997. For several
months, Microsoft offered it available to OEMs, end users, and others only as a separate product on a
separate CD-ROM. Moreover, Microsoft did not require OEMs to license Internet Explorer 4, but
rather gave OEMs the option of shipping it to customers as a separate disk placed in the same box with
a new PC (or in a few cases preinstalled on that PC). Starting in February 1998, Microsoft intended to
invoke provisions in its licensing agreements to require that OEMs license and redistribute the separate
Internet Explorer 4 CD-ROM disk with new PCs (JA 265).
- Course of Proceedings
- The United States' Petition And Microsoft's Response
In response to Microsoft's announcement that it would soon require OEMs to ship the Internet
Explorer 4 CD-ROM in the box with new PCs, the United States filed its Petition seeking to hold
Microsoft in civil contempt. The United States explained that Section IV(E)(i) of the Final Judgment
prohibits Microsoft from conditioning a Windows 95 license on OEMs' licensing what in an ordinary
antitrust sense is, and Microsoft itself treats as, a separate product. The United States attached
documents, affidavits, and deposition transcripts demonstrating that Internet Explorer and Windows 95
are separate products and, therefore, that Microsoft's plans with respect to Internet Explorer 4, and its
ongoing forced licensing to OEMs of Internet Explorer 3, violated Section IV(E)(i) (JA 85-99).
In addition to a judgment of civil contempt, the United States requested permanent injunctive
relief. The United States asked the court, inter alia, to order Microsoft to "cease and desist" from
requiring OEMs "to license any version of Internet Explorer as an express or implied condition of
licensing Windows 95 or any [other] product" covered by the Final Judgment (JA 41). The United
States further requested "such orders as the nature of the case may require and as the court may deem
just and proper to compel obedience and compliance with the orders and decrees of this Court" (JA
43).
Microsoft responded by filing a lengthy Opposition with several hundred pages of exhibits,
including several third-party declarations. Going well beyond the question whether the Court should
issue an Order to Show Cause, Microsoft fully addressed the merits (JA 458-76). Recognizing that the
United States requested a permanent injunction, which could issue only following a traditional balancing
of the equities, see, e.g., Amoco Prod. Co. v. Gambell, 480 U.S. 531, 546 n.12 (1987), Microsoft
also addressed in substance whether the requested relief was equitable. Pointing to its several hundred
pages of supporting exhibits, Microsoft asserted, among other things, that permitting OEMs the option
of shipping Windows 95 without Internet Explorer would "degrade" the OS (JA 449-50, 472-73).
Because the proper reading of Section IV(E)(i) presented the only disputed issue on the merits
(JA 982, 1002), the United States, to expedite the dispute's resolution, agreed not to contest pertinent
facts concerning the Final Judgment's negotiating history contained in Microsoft affidavits (JA 983).
This concession, the United States explained in its Reply Brief, eliminated any genuine issue of material
fact and permitted the court to rule on the merits "as a matter of law" (JA 1003). The United States
further urged the court to "rule expeditiously" on the legality of Microsoft's impending forced licensing
of Internet Explorer 4 because OEMs would "immediately" need to take steps to comply with it (JA
983, 996). Because Microsoft distributed Internet Explorer 4 "only as a separate, stand-alone
product," the United States proposed that the court simply prohibit Microsoft from requiring OEMs to
license that product (JA 995-96).
The United States also proposed that Microsoft be required to offer OEMs the option of
licensing a version of Windows 95 that did not include "the software code Microsoft separately
distributes at retail as 'Internet Explorer 3.0'" (JA 996). Recognizing that Internet Explorer 3 as
distributed apart from Windows 95 contains a number of shared program libraries that, when installed,
upgrade and replace certain essential Windows 95 files, the United States, contrary to what Microsoft
contends (Br. at 21), made clear that it did not mean for Microsoft to offer a version of Windows 95
that was nonoperational for want of essential shared program libraries (JA 997).(3) The United States
also explained that simply permitting OEMs to disable the Internet Explorer 3 web browsing
functionality would "achieve much of the value of complete relief and would be consistent with the Final
Judgment" (JA 996).
Microsoft filed a sur-reply along with further declarations, in which it did not contest that
immediate relief with regard to Internet Explorer 4 would impose no burden. With respect to Internet
Explorer 3, Microsoft asserted that the permanent relief suggested by the United States would degrade
Windows 95, although it acknowledged that the United States did not intend for Microsoft to market a
version of Windows 95 that lacked system files essential for its operation (JA 1196-98). Finally, in
response to the United States' point that Microsoft advertises that Internet Explorer 3 "uninstalls easily
if you want to . . . simply get rid of it" (JA 996), Microsoft expressly --------------- and, as was later demonstrated,
falsely --------------- stated that it was not possible to use Windows 95's built-in Add/Remove Programs utility to
"uninstall" Internet Explorer 3 from OSR 2 --------------- the version of Windows 95 supplied to OEMs (JA
1198).(4) The United States, in response, noted that OSR 2 includes the Add/Remove Program utility
and that Microsoft's declarant failed to explain why Microsoft could not "easily enable the program" to
"uninstall the copy of IE 3.0 that it requires OEMs to install with Windows 95" (JA 1210).
- The December 5, 1997, Hearing
At the subsequent hearing, both parties addressed whether Microsoft's conduct violated the
decree (JA 1236). While Microsoft requested an evidentiary hearing to explore the decree's
negotiating history (JA 1257), it acknowledged that the United States had agreed to treat the pertinent
facts of that history asserted by Microsoft as true (JA 1241). Microsoft pointed to no other facts that it
believed were both disputed and relevant to determining whether its forced licensing of Internet
Explorer to OEMs transgressed the Final Judgment.
The parties also addressed relief. Microsoft pointed to no facts contradicting the United States'
evidence that Microsoft easily could maintain the status quo with regard to Internet Explorer 4. With
respect to Internet Explorer 3, counsel for the United States conceded that factual issues pertaining to
appropriate permanent relief remained (JA 1260). The United States reiterated, however, that ordering
more limited forms of relief --------------- such as "uninstalling" Internet Explorer 3 --------------- "would be effective in
accomplishing the purposes of the decree, extremely simple technologically for Microsoft to impose,
[and] would cause none or virtually none" of the ill-effects Microsoft alleged (JA 1237).
- The December 11, 1997, Order
The district court issued a ruling on December 11, 1997. The court declined to hold Microsoft
in civil contempt, finding Section IV(E)(i)'s application ambiguous (JA 1289-90); but it recognized that
it did "not necessarily follow that Microsoft's licensing practices are, in fact, in compliance with the
terms of the Final Judgment" (JA 1290). The court accordingly treated the Petition as a request for
declaratory and injunctive relief, ordered further proceedings, and referred the matter to a special
master to "propose findings of fact and conclusions of law" to be "consider[ed] by the Court" (JA
1301).
Invoking its inherent power to enforce its orders, the court also entered a preliminary injunction.
Observing that Microsoft's reading rendered Section IV(E)(i) "essentially meaningless," the court
tentatively agreed with the United States that Section IV(E)(i) prohibits Microsoft's forced licensing
with Windows of what in an antitrust sense is a separate product (JA 1293). Because the uncontested
evidence demonstrated that Internet Explorer and Windows 95 are separate products, the court
reasoned that the United States had a substantial probability of success on the merits (JA 1296). The
court found that preliminary relief would impose no significant burden on Microsoft (JA 1296-97), and
that it would advance the public interest because it appropriately preserved the competitive status quo
and the court's ability "to fashion the least disruptive remedy if the evidence warrants" (JA 1295). The
court explained that Microsoft's forced licensing of Internet Explorer was of particular concern because
rival browsers might develop into a threat to Microsoft's monopoly (JA 1297-98). Because
Microsoft's licensing practices might impede the development of such competition and garner for
Microsoft "yet another monopoly in the Internet browser market," the court concluded, "[t]hose
practices should be abated until it is conclusively determined that they are benign" (JA 1298).
The court accordingly enjoined Microsoft from licensing "any Microsoft personal computer
operating system software . . . on the condition, express or implied, that the licensee also license and
preinstall any Microsoft Internet browser software" (JA 1300). Reflecting the court's careful refusal to
intrude into product design, the Order by its terms does not require Microsoft to terminate the
forbidden conditioning in any particular way. Rather, when read in light of the court's objective of
ensuring that competition on the merits determine how OEMs meet their separate demand for a web
browser (JA 1297-98), the injunction plainly required Microsoft to grant OEMs the option of licensing
a commercially viable version of Windows 95 absent that which satisfies that separate demand for a
web browser: the ability to browse the web (browser functionality) (JA 1424-29).
The preliminary injunction thus effected no "radical[] alter[ation] of the status quo" (Br. at 13).
When the United States brought suit, Microsoft offered Internet Explorer 4 to OEMs only on a
separate CD-ROM; Microsoft could (and ultimately did) comply with the court's Order by not
effectively requiring OEMs to license that separate disk (or a subsequent version of Windows 95 that
placed Internet Explorer 4 on the same OEM installation disk). With respect to Internet Explorer 3,
the preliminary injunction did not, as Microsoft asserts, require it to remove every shared program
library Microsoft includes with Windows 95 and labels "Internet Explorer 3.0 technologies" (Br. at 13).
Rather, Microsoft could have offered OEMs the option of a version of Windows 95 that did not include
browser functionality, and could thereby have complied with the preliminary injunction, simply by
permitting OEMs to "uninstall" Internet Explorer 3 from OSR 2 using procedures Microsoft built into
Windows 95 and advertises to end users (JA 1365, 1422-31).
- Events After The Preliminary Injunction
- Microsoft's Response
Although it easily could have complied with the preliminary injunction, Microsoft chose not to
do so. Instead, Microsoft read the preliminary injunction to require it to offer OEMs an inoperable
version of Windows 95 (JA 1320-22). Because, as Microsoft knew, no OEM would license this
commercially worthless product (JA 1280), Microsoft's purported compliance with the preliminary
injunction effectively required OEMs wishing to license Windows 95 also to license Microsoft's web
browser. In other words, Microsoft read the preliminary injunction to command the very conditioning
the court expressly declared must "abat[e]" (JA 1298).
As it does in this Court (Br. at 13), Microsoft justified its stance by reading the district court's
statement that "[e]njoining Microsoft pendente lite from forcing OEMs to accept and preinstall the
software code that Microsoft itself now separately distributes at retail as 'Internet Explorer 3.0' [will]
impose[] no undue hardship on Microsoft" (JA 1296-97) to require that Microsoft remove from its
OEM version of Windows 95 every file Internet Explorer 3 supplies, including shared program libraries
that Internet Explorer upgrades and replaces in Windows 95 when installed, some of which are
essential for Windows 95's operation (JA 1391). The district court, however, acknowledged
Microsoft's concern that removing certain shared program libraries would cause Windows 95 to
"'break'" (JA 1294-95) and made clear that it did not intend Microsoft to offer a nonfunctional version
of Windows 95 (JA 1297 n.8). Thus, the United States explained, Microsoft's decision to give this
passage from the court's opinion --------------- which is not the injunction's actual language --------------- a wooden reading
that compelled the very conditioning the injunction was intended to end was patently unreasonable (JA
1422-32).(5)
Although Microsoft chose to read the preliminary injunction to require what Microsoft itself
described as a "sense[less]" result (JA 1376), and raises in this Court a number of procedural
objections to its issuance, Microsoft neither moved the district court to reconsider the Order nor sought
clarification of its obligations. Rather, Microsoft implemented a reading of the injunction it believed
made "little sense" (JA 1376) and immediately appealed, thereby preventing the district court from
modifying its Order should circumstances warrant.
- The United States' Motion For Civil Contempt
The United States moved to hold Microsoft in contempt of, and to enforce, the preliminary
injunction (JA 1316). The evidence at the subsequent hearing demonstrated, among other things, that,
despite Microsoft's earlier assertions to the contrary, Internet Explorer 3 can be "uninstalled" from
OSR 2, and its web browsing functionality rendered nonoperational, using Window 95's Add/Remove
Programs utility (JA 1365, 1545-46, 1550, 1603, 1610-11, 1687-88). Indeed, Microsoft's own
witness explained that Microsoft designed Internet Explorer 3 to be "uninstalled" in response to
corporate customer demand for a version of Windows 95 that did not permit employees to "access the
Internet and spend all their time surfing the web" (JA 1641, 1685-87).(6)
The United States and Microsoft agreed to resolve the United States' motion through a
stipulation the Court entered on January 22, 1998 (JA 1780). Confirming that the preliminary
injunction imposes no burden on it, Microsoft agreed, among other things, to permit OEMs to install the
OSR 2 version of Window 95 "modified to reflect the set of changes that would be made" by
"uninstalling" Internet Explorer 3 (JA 1780). Microsoft has since explained that this means of
complying with the preliminary injunction will not impair any features of Windows 95 except "a few
features [which] relate[] to Internet access." <http://www.microsoft.com/corpinfo/1-22doj.htm>.
SUMMARY OF ARGUMENT
In consenting to the Final Judgment, Microsoft committed not to use its monopoly power in
operating systems to force OEMs to license any "other" product. Microsoft broke that promise and
violated the court's order by conditioning Windows 95 licenses on OEMs' licensing Internet Explorer,
a web browser Microsoft undeniably treats as a distinct commercial product in every relevant sense.
The United States thus sought a judgment of civil contempt and injunctive relief. Microsoft contested
both the merits of the government's case and the propriety of the suggested remedy. On a well-developed record, the district court tentatively held Microsoft's conduct unlawful, ordered further
proceedings, and entered a preliminary injunction.
Microsoft now objects to the procedures followed below, but its formalistic objections lack
substance. The district court, finding Section IV(E)(i) ambiguous, properly ordered further proceedings
to clarify its meaning. Contrary to what Microsoft argues, the United States in substance requested a
declaration that Microsoft's conduct was unlawful. Even absent such a request, the court was entitled
to take steps to clarify the decree on its own motion and to do so without regard to the "rigorous
standards applicable to civil contempt" (Br. at 15).
Microsoft's contention that the preliminary injunction is "invalid" under the federal rules is
similarly groundless. The court was entitled to take appropriate steps to enforce the Final Judgment
without a specific request from the parties. Doing so deprived Microsoft of neither adequate notice nor
an evidentiary hearing. Microsoft's response to the United States' request for a permanent injunction
addressed the issues relevant to preliminary relief; the court had an adequate record for ruling on the
pertinent issues; and Microsoft points to no facts or argument it was prevented from advancing that
might have changed the result.
Indeed, Microsoft's belated compliance with the preliminary injunction shows that the court's
actions caused Microsoft no prejudice and that Microsoft's contrary contention is merely continued
gamesmanship. Without seeking clarification, modification, or even a stay from the court, Microsoft
construed the preliminary injunction to require precisely the conditioning the court expressly sought to
preclude. To resolve the ensuing contempt motion, Microsoft agreed to provide OEMs the very option
that it had earlier represented was impossible. Because compliance with the preliminary injunction
causes no hardship, and because Microsoft unreasonably responded to its issuance, Microsoft should
remain subject to the injunction even if this Court were to conclude that different procedures should
have preceded its entry.
Finally, the district court properly determined that the United States demonstrated a substantial
probability of success on the merits. Microsoft's construction of Section IV(E)(i) impermissibly renders
it meaningless. By contrast, the United States' reading --------------- that Microsoft violates Section IV(E)(i) by
compelling OEMs to license what Microsoft itself treats as, and in antitrust terms is, a separate product
--------------- gives meaning to both the section's prohibition and proviso and implements the section's purpose.
ARGUMENT
- THE DISTRICT COURT ACTED WITHIN ITS AUTHORITY IN TREATING THE
MATTER AS AN ACTION FOR DECLARATORY AND INJUNCTIVE RELIEF
- It is settled that a court, incident to its power to enforce a consent judgment, may issue
declaratory rulings specifying whether particular conduct violates the judgment. See, e.g., United States
v. Western Elec. Co., 894 F.2d 1387, 1388-91 (D.C. Cir. 1991); United States v. Western Elec. Co.,
907 F.2d 160, 163 (D.C. Cir. 1990); Interdynamics, Inc. v. Wolf, 698 F.2d 157, 164-65 (3d Cir.
1982). This manner of enforcement is especially appropriate when a court finds that a provision's
application to particular facts is unclear. See EEOC v. Safeway Stores, Inc., 611 F.2d 795, 798 (10th
Cir. 1979). Clarifying a decree informs a subject party of its obligations and removes objections to
subsequent enforcement through contempt. See D. Patrick, Inc. v. Ford Motor Co., 8 F.3d 455, 461
n.2 (7th Cir. 1993).
Indeed, were the law otherwise, a party subject to a consent judgment could render particular
provisions unenforceable, and undermine the public interest, by successfully asserting the existence of
ambiguity. A consent judgment, however, is not so easily evaded. For instance, when this case was
last here, this Court responded to the suggestion that the Final Judgment's applicability to Windows NT
was unclear by giving seemingly conflicting provisions a "logical interpretation" which eliminated any
"continuing ambiguity." United States v. Microsoft Corp., 56 F.3d 1448, 1462 (D.C. Cir. 1995). A
court confronted with such a suggestion post entry may similarly clarify a judgment's operation. See,
e.g., Vertex Distrib., Inc. v. Falcon Foam Plastics, Inc., 689 F.2d 885, 892 (9th Cir. 1982).
It is precisely this authority to enforce a decree by clarifying it that the district court exercised
here. Although declining to hold Microsoft in contempt on the ground that Section IV(E)(i)'s operation
was unclear, the court observed that it did "not necessarily follow that Microsoft's licensing practices
are, in fact, in compliance with the [Final Judgment's] terms" (JA 1290). The court thus ordered
further proceedings on the "ultimate question" of "whether Microsoft is actually violating" the Final
Judgment as well as the United States' "prayer for permanent injunctive relief" (JA 1294-95).
- Microsoft nonetheless argues that the court acted "beyond its jurisdiction" because its
"denial of the DOJ's request for a finding of contempt . . . disposed of the only pending claim for relief"
(Br. at 27-28). Microsoft elevates form over substance. Although captioned a request for a judgment
of civil contempt, the Petition itself expressly requested injunctive relief and "such further orders as . . .
the Court may deem just and proper to [ensure] compliance" (JA 40-43). Because "a court is not
bound by the procedural labels attached to the proceeding by the moving party," the district court
properly treated the action as one for declaratory and injunctive relief. Interdynamics, 698 F.2d at 165
& n.5 (upholding district court's declaratory judgment when the plaintiff sought only a judgment of civil
contempt through an order to show cause).
Microsoft seeks to avoid this simple legal principle by arguing that the United States at the
December 5 hearing abandoned any request for relief not predicated on a finding of civil contempt (Br.
at 25-26). But the district court found no waiver; and that determination is not clearly erroneous.
Indeed, when the court asked whether it should read the Petition as a request for "specific
enforcement," government counsel responded, "that is exactly how the Court should read it" (JA at
1236). As Microsoft points out, counsel added that the United States "believ[ed] the Court can find
Microsoft in contempt and can impose th[e] specific relief to remedy the contempt" (JA at 1236).
While that statement confirmed that the United States did not abandon its contempt argument, the
colloquy as a whole makes clear that the United States also did not intend to abandon other avenues to
terminating Microsoft's unlawful conduct. As counsel for the United States put it in a passage
Microsoft omits, "appropriate action by the court would be to find Microsoft's behavior . . . to be a
violation of the decree" and to impose injunctive relief (JA 1237-38).
In any event, the court had authority on its own motion to order further proceedings designed to
clarify the decree. For instance, in Vertex Distributing, the district court, as in this case, refused to hold
the defendants in civil contempt on the ground that the decree was ambiguous. Nonetheless, the court
of appeals explained, "the district court could properly clarify that ambiguous language, and this it did,
requiring defendants to change their future [conduct] to comply with the consent judgment, as clarified."
689 F.2d at 892; cf. Alberti v. Klevenhagen, 46 F.3d 1347, 1365 (5th Cir. 1995) (explaining that a
court may modify a consent judgment "regardless of the parties' silence or inertia" (internal quotations
omitted)).(7)
- Finally, Microsoft argues that the finding of ambiguity required dismissal of the action
because, Microsoft asserts, a court clarifying a decree must apply the "standards applicable to civil
contempt," including that "any ambiguities in the Consent Decree be resolved in Microsoft's favor" (Br.
at 13, 28, 33 & n.10). But the "standards" to which Microsoft points are intended to protect against
the inappropriate imposition of possibly severe contempt sanctions; they do not supply general
principles applicable to interpreting consent judgments. Indeed, the very case Microsoft cites explains
that an action for contempt "entail[s] procedures and standards of proof not applied" in an action for
declaratory and injunctive relief. Brewster v. Dukakis, 675 F.2d 1, 3-4 & n.2 (1st Cir. 1982)
(emphasis added). And this Court, in actions seeking declaratory relief under a consent decree,
construes ambiguous terms "in such a way to effectuate the [Decree's] purposes," rather than resolving
ambiguities against enforcement. United States v. Western Elec. Co., 12 F.3d 225, 233 (D.C. Cir.
1993).
- THE DISTRICT COURT PROPERLY ENTERED THE PRELIMINARY INJUNCTION
The district court issued the preliminary injunction based on a well-developed record. The
parties, through lengthy briefing and extensive evidentiary submissions, had fully addressed issues
pertaining to whether Microsoft's forced licensing of Internet Explorer to OEMs violated Section
IV(E)(i) of the Final Judgment. The parties also had addressed the feasibility of granting the injunctive
relief the United States requested and whether granting that relief was equitable and in the public
interest.
Although it chose to adduce extensive evidence and argument contesting the merits of the
government's Petition and its request for permanent injunctive relief, Microsoft now contends that the
preliminary injunction is "invalid" for failure to afford Microsoft notice and an opportunity to be heard.
Microsoft is attempting to have it both ways. But "litigation is [not] a game, like golf, with arbitrary
rules to test the skill of the players." Poliquin v. Garden Way, Inc., 989 F.2d 527, 531 (1st Cir. 1993).
The record before the court was sufficient for it to rule, and any failure to hold further proceedings
caused Microsoft no prejudice.
- The District Court Properly Declined To Hold An Evidentiary Hearing
A preliminary injunction's resolution of issues "is designed to be tentative." Aoude v. Mobile
Oil Corp., 862 F.2d 890, 894 (1st Cir. 1988). For this reason "an evidentiary hearing is not an
indispensable requirement when a court allows . . . a preliminary injunction." Id. at 893. Rather, "in
certain settings a matter can adequately be 'heard' on the papers." Id. at 894; see also Ross-Whitney
Corp. v. Smith-Kline & French Labs., 207 F.2d 190, 198 (9th Cir. 1953).
Contrary to what Microsoft contends (Br. at 18-19), this is true even when "the written
evidence reveals a dispute as to material facts." When disputed issues do not turn on the credibility of
affiants or declarants, such as when knowledge and intent are at issue, see, e.g., SEC v. Frank, 388
F.2d 486, 491 (2d Cir. 1968); Sims v. Greene, 161 F.2d 87, 88 (3d Cir. 1947), "the documentary
evidence [before the court may be] sufficient to permit an informed, albeit preliminary, conclusion that
injunctive relief [is] warranted." Campbell Soup Co. v. Giles, 47 F.3d 467, 472 (1st Cir. 1995); see
also e.g., Schultz v. Williams, 38 F.3d 657, 658 (2d Cir.1994) (per curiam); Herbert Rosenthal
Jewelry Corp. v. Grossbardt, 428 F.2d 551, 554 (2d Cir. 1970). In light of these principles, the
district court did not abuse its discretion in declining to hold an evidentiary hearing here.
- As to the merits, the district court faced no disputed issues of material fact and, therefore,
was entitled to resolve the matter without an evidentiary hearing. See, e.g., Aoude, 682 F.2d at 893.
The United States argued that Microsoft's forced licensing of Internet Explorer with Windows 95
violated Section IV(E)(i) because (1) that provision prohibits Microsoft from conditioning an OEM
license to Windows 95 on OEMs' licensing what Microsoft and antitrust tying law treat as a separate
product, and (2) under this test, Internet Explorer and Windows are separate products.
The proper construction of Section IV(E)(i) presented a question of law that was fully
addressed in the parties' submissions and at the December 5 hearing. While Microsoft contested the
United States' reading of Section IV(E)(i), arguing that Internet Explorer and Windows 95 are part of a
single "integrated" product and, therefore, that Section IV(E)(i) did not prohibit Microsoft's conduct
(JA 459-60, 460-67), that argument raised no disputed issue of material fact. The only potentially
disputed relevant facts involved Microsoft's account of the decree's negotiating history; and United
States agreed for the purpose of the district court's ruling not to contest Microsoft's description of the
"the written communications and exchanges between the parties" (JA 983). Although arguing that "the
court ought to proceed on the basis of a full record that will explore what was intended by th[e]
provision" (JA 1257), Microsoft expressly recognized that the United States did "not contest" the facts
contained in Microsoft's submissions (JA 1241). The United States' concession thus eliminated any
issue of material fact and permitted the court to construe Section IV(E)(i) without holding an evidentiary
hearing.(8)
The district court similarly faced no issue of material fact in determining that Internet Explorer
and Windows 95 are separate products. The United States introduced ample evidence demonstrating
that Microsoft markets Internet Explorer apart from Windows 95 and that consumers separately
demand browsers and OSs. Although Microsoft contested other issues and introduced significant
evidence in support of its arguments, it did not contest these issues. Instead, Microsoft argued only that
this evidence was irrelevant.(9)
Having elected to contest neither the existence of separate consumer demand nor that it
markets Internet Explorer and Windows 95 separately, Microsoft can hardly complain that it was
improperly denied an evidentiary hearing. In any event, Microsoft has failed to demonstrate, as it must,
that an evidentiary hearing "would [have been] productive." Ty, Inc. v. GMA Accessories, Inc., 132
F.3d 1167, 1171 (7th Cir. 1997). Microsoft now asserts (Br. at 19) that it would have sought to
introduce further evidence demonstrating "there is no interest on the part of OEMs in licensing a version
of Windows 95 with its Internet Explorer technologies removed." But additional evidence on this
question would have served no purpose. The United States did not contend that demand exists for
Windows 95 without that which Microsoft labels "Internet Explorer technologies," which include the
shared program libraries that Microsoft makes available for distribution with both Internet Explorer and
numerous other Microsoft and non-Microsoft applications (JA 1700-10). Rather, the United States
demonstrated that there is demand for Windows 95 without the web browsing functionality that Internet
Explorer provides (JA 92), and the district court was entitled to find separate consumer demand on the
basis of this uncontested evidence. See infra pp.39-40.(10)
Microsoft complains on appeal that it was denied the opportunity to "cross-examine any oral
testimony offered by the DOJ" (Br. at 19). But the United States had no duty to offer oral testimony
for Microsoft's convenience.(11) In any event, even if the court erred in failing to hold an evidentiary
hearing, that error was harmless. Microsoft's own evidence at the subsequent hearing on the United
States' motion for contempt confirmed the requisite separate demand (JA 1641, 1685-87).
Finally, Microsoft asserts that, if granted an evidentiary hearing, it would have introduced
additional evidence that forcing OEMs to license Internet Explorer with Windows 95 "does nothing to
prevent OEMs from preinstalling Netscape Navigator on their computers" (Br. at 19). But such
evidence would have been irrelevant. Tying arrangements harm competition merely by satisfying a
demand rivals otherwise might meet. See generally Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466
U.S. 2, 12-15 (1984). Section IV(E)(i) thus says nothing about --------------- and plainly does not contemplate a
defense based on --------------- an OEMs' contractual freedom to license competing products. Such "negative"
tying is proscribed by a separate provision of the decree, Section IV(E)(ii).
- The district court did not err in imposing relief relating to Internet Explorer 4 without an
evidentiary hearing. When the United States brought its Petition, Microsoft distributed Internet
Explorer 4 to OEMs only on a separate disk, and it planned to require OEMs to distribute that
separate disk in the box with new PCs early in 1998 (and, perhaps, subsequently to require OEMs to
preinstall that disk). The United States demonstrated that enjoining this impending requirement would
impose no burden on Microsoft (JA 995-96, 1220-21, 1224, 1236-37, 1259-60) and that
preservation of OEMs' freedom to select among competing web browsers required immediate relief
(JA 996, 1236-37). At the December 5 hearing, Microsoft offered no facts to contest these assertions.
Indeed, it confirmed that a substantial percentage of OEMs would soon lose their freedom to choose
whether to license Internet Explorer 4 (JA 1250-51). The record thus presented "no genuine issue of
material fact" (JA 1224).(12)
- The record before the district court also supported its conclusion that Microsoft could offer
OEMs the option of a version of Windows 95 without Internet Explorer 3 browser functionality.
Despite its detailed submissions, Microsoft had failed to explain why it could not offer a version of OSR
2 that included all shared program libraries yet otherwise omitted Internet Explorer 3 as separately
distributed by Microsoft (JA 997). And, as the United States pointed out, Microsoft had also failed to
explain why it could not offer OEMs the option of "uninstalling" Internet Explorer 3 from OSR 2 (JA
1210).
Moreover, even if the district court should have held a further evidentiary hearing on the relief
with respect to Internet Explorer 3, its failure to do so caused Microsoft no prejudice. As explained
above, Microsoft could have complied with the Order simply by permitting OEMs to "uninstall"
Internet Explorer 3 from OSR 2. Despite Microsoft's prior representations to the contrary (JA 1198),
the evidence showed this can be easily accomplished through procedures Microsoft explains to end
users, thus confirming that, as Microsoft advertises, "Internet Explorer uninstalls easily" (JA 1088,
1365, 1553-58, 1610-11, 1694-97). Microsoft offered no evidence suggesting that OEMs could not
implement these procedures or that Microsoft could not easily provide OEMs with a version of OSR 2
from which Internet Explorer 3 had been "uninstalled." Indeed, Microsoft's subsequent agreement to
permit OEMs to exercise that option (JA 1780) demonstrates that compliance with the injunction
imposes no hardship. See Socialist Workers Party v. Illinois State Bd. of Elections, 566 F.2d 586,
587 (7th Cir. 1977) (upholding entry of permanent injunction without an evidentiary hearing because
facts defendant claimed it was improperly denied the opportunity to present, "if proved, would [not]
have altered the result"), aff'd, 441 U.S. 173 (1979).
There is also no merit to Microsoft's assertion that it had "no opportunity" to introduce
evidence that "the fragmentation that would result from allowing OEMs to decide what portions of the
operating system to install on their computers would undermine the utility of Windows 95 as a stable
and consistent development platform" (Br. at 19). To the contrary, Microsoft introduced several
declarations in support of that argument. And these declarations, which the court was entitled to
assume further "testimony would . . . have duplicated," Ty, 132 F.3d at 1171, actually demonstrated
that, because tens of millions of PC users operate prior versions of Windows and lack the latest
versions of Internet Explorer, significant "fragmentation" would exist whether or not Microsoft forced
OEMs to license Internet Explorer (JA 611, 616, 966; see also JA 1166). Thus, the United States
explained, "all the declarations Microsoft has submitted from application developers state that their
products include the necessary services provided by Internet Explorer 3.0 or 4.0 to ensure that the
products will run whether or not Internet Explorer is pre-installed on any particular user's computer"
(JA 997-98; see also JA 944, 949, 953, 965-66, 1168-69).
Because Microsoft's own evidence demonstrated that the preliminary injunction did not
"undermine the utility of Windows 95 as a stable and consistent development platform" (Br. at 19), the
court was entitled without further proceedings to conclude that Microsoft's argument did not preclude a
preliminary injunction. See Campbell Soup, 47 F.3d at 471-72; Herbert Rosenthal, 428 F.2d at 554.
Indeed, Microsoft had long permitted end users to "uninstall" Internet Explorer 3, even if OEMs
provide it (JA 1696), so the preliminary injunction, which Microsoft complied with by permitting OEMs
also to uninstall Internet Explorer 3, did not increase the uncertainty application developers confront.
- Finally, Microsoft's reliance on the district court's statement that "disputed issues of
technological fact, as well as contract interpretation, abound as the record presently stands" (JA 1294)
is misplaced. The court did not mean that the parties's arguments on the merits presented genuine
issues of material fact. Rather, as the next paragraph made clear, the court determined that exploration
of other avenues might be appropriate before issuing a definitive ruling on the merits. The court also
recognized that the government's request for more extensive permanent relief raised factual issues (JA
1294-95). Neither of these matters, however, precluded a preliminary injunction, and the court
committed no reversible error in entering such relief on the record before it.
- Microsoft Received Adequate Notice
Microsoft's argument (Br. at 17-18) based on the district court's failure to notify the parties
that it intended to issue a preliminary injunction is without merit. Microsoft relies on Rule 65(a). The
Rule's purpose, however, is to permit a party "to marshall the evidence and present arguments against
the issuance of the injunction." 11A Charles A. Wright, et al., Federal Practice and Procedure § 2949,
at 213 (2d ed. 1995). Microsoft did just that.
Although Microsoft now argues that only a request for an Order to Show Cause was before the
district court (Br. at 17), Microsoft did not treat the proceeding as so limited. Instead, it filed a
voluminous response replete with assertedly relevant evidence, and joined issue on both the merits of
the United States' Petition and the request for permanent injunctive relief. Because the "standard for a
preliminary injunction is essentially the same as for a permanent injunction with the exception that the
plaintiff must show a likelihood of success on the merits rather than actual success," Amoco Prod. Co.
v. Gambell, 480 U.S. 531, 546 n.12 (1987), Microsoft's response to the United States' request for
permanent relief effectively addressed the factors that govern the issuance of a preliminary injunction.
The request for injunctive relief gave Microsoft notice, and the scope of its response demonstrated that
such notice was adequate.
Microsoft argues that it had "no reason to anticipate" that the court might issue a preliminary
injunction because "a final judgment ha[d] already been entered in this action" (Br. at 17). It is not
"unorthodox" (id.), however, for a court to enter a preliminary injunction to enforce a consent
judgment. See, e.g., International Brotherhood of Teamsters v. Teamsters Local Union 714, 109 F.3d
846 (2d Cir. 1997) (per curiam); Xerox Fin. Servs. Life Ins. Co. v. High Plains Ltd. Partnership, 44
F.3d 1033 (1st Cir. 1995); cf. Firefighters Local Union No. 1784 v. Stotts, 467 U.S. 561, 587 (1984)
(O'Connor, J., concurring). Nor is it "inappropriate" (Br. at 17) for a court to enforce an outstanding
court order, including a consent judgment, on its own motion when the circumstances so warrant. See,
e.g., Alberti v. Klevenhagen, 46 F.3d 1347, 1365-66 (5th Cir. 1995) (holding that a court has the
discretion "regardless of the parties' silence or inertia, to modify a decree," that is, to act "sua sponte,"
"when the court sees that the factual circumstances or the law underlying that decree has changed").
In any event, "surprise alone is not a sufficient basis for appellate reversal; appellant must also
show that the procedures followed resulted in prejudice." Socialist Workers, 566 F.2d at 587; see
also D. Patrick Inc. v. Ford Motor Co., 8 F.3d 455, 459-60 (7th Cir. 1993) (same); cf. Leatherman v.
Tarrant County Narcotics Intelligence & Coordination Unit, 28 F.3d 1388, 1398 (5th Cir. 1994)
(finding failure to provide notice prior to granting summary judgment sua sponte harmless error). Here,
the court's failure to inform Microsoft that it intended to issue a preliminary injunction was, if error,
harmless. Microsoft has pointed to no new significant, relevant evidence or argument that it would have
brought to the court's attention; and subsequent events confirm that the preliminary injunction imposes
no burden on Microsoft and, therefore, that the court's balancing of the equities was correct. See
supra pp.23-25. "A more formal notice," in short, "would not have provided [Microsoft] with a greater
opportunity to alter th[e] result." Socialist Workers, 566 F.2d at 587.
- The District Court Fully Complied With Rule 52(a)
Microsoft is also wrong that the "District Court entered [the] preliminary injunction without
making any findings of fact" (Br. at 22). "The purpose of Rule 52(a), pertinent to injunctions, is to
provide the appellate court with a clear understanding of the decision." Wynn Oil Co. v. Purolator
Chem. Corp., 536 F.2d 84, 85 (5th Cir. 1976). Accordingly, contrary to what Microsoft implies (Br.
at 22), there is "fair compliance with Rule 52(a)," Mayo v. Lakeland Highlands Canning Co., 309 U.S.
310, 316 (1940), when a "court's opinion, read in conjunction with the record of the proceedings
below" provides a "sufficient basis for the court to consider the merits." McCawley v. Ozeanosun
Compania Maritime, S.A., 505 F.2d 26, 30 n.4 (5th Cir. 1974); see also Wynn Oil, 566 F.2d at 85-86. See generally 9A Charles A. Wright, et al., Federal Practice and Procedure § 2580, at 549-50
(2d ed. 1995).
Here, the court's Memorandum Opinion more than adequately discloses the "underlying
rationale," Inverness Corp. v. Whitehall Labs., 819 F.2d 48, 51 (2d Cir. 1987) (per curiam), for
entering the preliminary injunction. The district court addressed each of the four pertinent factors; the
court succinctly explained its reasons for finding that each factor pointed toward the injunction's entry;
and (as discussed throughout this Brief) the facts supporting the district court's findings are readily
apparent from the record. No more was required. See Applewood Landscape & Nursery Co. v.
Hollingsworth, 884 F.2d 1502, 1503 (1st Cir. 1989) ("[T]he judge need only make brief, definite,
pertinent findings and conclusions upon contested matters; there is no necessity for over-elaboration of
detail or particularization of facts." (internal quotations omitted)).
Microsoft's specific complaint --------------- that the district court acknowledged that the parties were
"sharply divided on numerous material issues of fact" (Br. at 22) concerning whether Microsoft was
violating the decree, but nevertheless entered a preliminary injunction without making findings of fact ---------------
is twice flawed. First, as explained above, the district court faced no genuine issues of material facts in
ruling on the merits. Second, the district court's basis for concluding that the United States had a
reasonable probability of success on the merits is apparent from its opinion and the record. See infra
pp.34-40. This is not a case where the court of appeals must "speculate as to the basis of the district
court's ruling." TEC Engineering Corp. v. Budget Molders Supply, Inc., 82 F.3d 542, 545 (1st Cir.
1996).
- The Preliminary Injunction Properly Preserves The Competitive Status Quo And The
Court's Ability To Fashion Meaningful Relief
Microsoft further errs in contending that the district court abused its discretion by issuing an
injunction without applying a "heightened standard" (Br. at 24). Microsoft argues that such a standard
is required simply because a preliminary injunction grants "substantially all the relief [the United States]
could have obtained after a full trial on the merits" (Br. at 23). To the contrary, as explained in the very
case Microsoft cites: "If the use of a heightened standard is to be justified, the term 'all the relief to
which a plaintiff may be entitled' must be supplemented by a further requirement that the effect of the
order, once complied with cannot be undone." Tom Doherty Assocs., Inc. v. Saban Entertainment,
Inc., 60 F.3d 27, 34-35 (2d Cir. 1995). That is plainly not the case here. The preliminary injunction
concerns Microsoft's ongoing licensing to OEMs; if Microsoft were to prevail on the merits, the
preliminary injunction would not thereafter prevent Microsoft from again compelling OEMs to license
both Windows 95 and Microsoft's web browser.(13) Moreover, the preliminary injunction, as previously
explained, provides less extensive relief than the government requested.
Nor was the preliminary injunction a "mandatory" injunction that "radically alter[ed] the status
quo" (Br. at 23-24). With regard to Internet Explorer 4, the injunction simply preserved the status quo.
OEMs had not previously been required to license Internet Explorer 4, and Microsoft responded to the
preliminary injunction by promising that "[i]nstallation of Internet Explorer 4.0" would remain "optional"
(JA 1403).(14) The conclusion is the same with respect to Internet Explorer 3 because Microsoft could
have complied, and eventually did comply, with the preliminary injunction simply by declining to enforce
its licensing agreements to prevent OEMs from "uninstalling" that product (JA 1423-29, 1780).
Permitting OEMs to take advantage of the "uninstall" option that Microsoft makes available to end
users required from Microsoft no "positive act" (Br. 23).
Indeed, even if the injunction were "mandatory" or altered the status quo, no heightened
standard follows. See Aoude, 862 F.2d at 893 (explaining that the "status quo doctrine is one of
equity, discretion, and common sense, not woodenly to be followed"); Tanner Motor Livery, Ltd. v.
Avis, Inc., 316 F.2d 808, 809 (9th Cir. 1963) (same). A traditional function of a preliminary injunction
"is to prevent irreparable injury." Ross-Whitney Corp. v. Smith Klein & French Labs., 207 F.2d 190,
199 (9th Cir. 1953). As then-Judge Taft explained: "it sometimes happens that the status quo is a
condition not of rest, but of action, and the condition of rest is exactly what will inflict the irreparable
injury . . . . In such a case courts of equity issue mandatory writs before the case is heard on the
merits." Toledo, AA & NM Ry. v. Pennsylvania Co., 54 F. 730, 741 (C.C.N.D. Ohio), appeal
dismissed, 150 U.S. 393 (1893).(15)
The district court confronted threatened irreparable injury here. Failure to impose a preliminary
injunction might have undermined the court's ability to fashion appropriate final relief. As the court
explained, if "Microsoft continues with its 'integration process' in the expectation that its licensing
practices will continue to make it ever more profitable to do so, the cost of compulsory unbundling of
Windows 95 and [Internet Explorer] in the future could be prohibitive" (JA 1297).
Moreover, Microsoft's licensing practices threatened irreparable harm to the competitive status
quo. Because the United States sought to enforce an antitrust consent decree designed to prevent
potentially anticompetitive conduct, such harm may be presumed. See United States v. Siemens Corp.,
621 F.2d 499, 506 (2d Cir. 1980) (presumption invoked when government showed a likely Clayton
Act Section 7 violation); but the court did not rest on the presumption. As Microsoft's own documents
revealed (JA 261-62, 318, 321, 328, 337; CJA 152, 249, 371, 414), and the district court tentatively
found (JA 1297-98), the success of competing web browsers might erode Microsoft's PC OS
monopoly, and Microsoft viewed its forced licensing of Internet Explorer as a weapon with which it
might prevail in its "battle" against the Netscape Navigator browser. Thus, as the district court
concluded, "the probability that Microsoft will not only continue to reinforce its operating system
monopoly by its licensing practices, but might also acquire yet another monopoly in the Internet
browser market, [was] simply too great to tolerate indefinitely until the issue is finally resolved" (JA
1298).
- The Preliminary Injunction Should Remain In Place Even If A Remand Is Necessary
The district court properly entered the preliminary injunction. But even if the court had
committed reversible error, this Court should not, as Microsoft insists (Br. at 14), vacate the
preliminary injunction. This Court has equitable discretion to keep the injunction intact during the
district court's reconsideration of its issuance. See Rosen v. Siegel, 106 F.3d 28, 33 (2d Cir. 1997)
(injunction held in place despite district court's "failure to give notice and opportunity to be heard" or to
include "specific findings"); see also United States v. Marine Shale Processors, 81 F.3d 1329, 1360
(5th Cir. 1996) (insufficient findings); Inverness Corp. v. Whitehall Labs., 819 F.2d 48, 51 (2d Cir.
1987) (per curiam) (same). This power is appropriately exercised when traditional equitable criteria
support the injunction's issuance or it is otherwise inequitable to vacate the injunction. See Rosen, 106
F.3d at 33; Inverness, 819 F.2d at 49.
Here, there are compelling reasons to uphold the injunction. "On the record developed to date,
there are sufficiently serious questions going to the merits to be a fair ground for litigation and the
balance of hardships tip[s] decidedly" in favor of issuing the injunction. Inverness, 819 F.2d at 51. The
district court correctly determined that the United States has a substantial probability of success on the
merits. See infra pp.34-40. Compliance with the preliminary injunction imposes on Microsoft no
significant burden, see supra pp.23-25, and Microsoft did not even seek a stay. The preliminary
injunction also serves the public interest by ensuring that competition on the merits determines which
web browsers OEMs license. There is little reason to vacate the preliminary injunction when the district
court, based on these considerations, will in all probability reinstate it.
Microsoft, moreover, does not come to this Court with clean hands. Although Microsoft
inveighs that the preliminary injunction suffers from numerous procedural defects and "radically alter[ed]
the status quo" (Br. at 24), Microsoft neither sought a stay of the district court's order nor asked the
court for clarification. Nor did Microsoft bring its objections to the district court through a motion for
reconsideration. Rather, "mak[ing] its own determination of what the [injunction] meant," McComb v.
Jacksonville Paper Co., 336 U.S. 187, 192 (1949), Microsoft read the Order to require it to offer a
product that would not work (JA 1729-30); and Microsoft knew that this would effectively require
OEMs wishing to license Windows 95 also to license Internet Explorer web browsing functionality,
thereby turning the preliminary injunction on its head and "for all practical purposes[] render[ing it] a
nullity," United States v. Greyhound Corp., 508 F.2d 529, 533 (7th Cir. 1974). Having caused the
very mischief for which it now blames the district court (Br. at 21), Microsoft should remain subject to
the preliminary injunction if the district court is required to reconsider it.
- THE DISTRICT COURT CORRECTLY DETERMINED THAT THE UNITED STATES
HAS A SUBSTANTIAL LIKELIHOOD OF SUCCESS ON THE MERITS
The district court properly determined that the United States has a substantial likelihood of
success on the merits. Microsoft's construction of Section IV(E)(i) contravenes fundamental
interpretive principles by rendering the provision's prohibition meaningless. By contrast, the United
States' reading of Section IV(E)(i) gives meaning to each of the section's terms, is faithful to its
purposes, and is consistent with the extrinsic evidence to which Microsoft points.
- Section IV(E)(i) Prohibits Microsoft From Conditioning An OEM Windows 95
License On An OEM's Licensing That Which Microsoft Treats, And Antitrust Tying
Jurisprudence Defines, As A Separate Product
- The language, structure, and applicable context of Section IV(E)(i) make clear that its
purpose is to prohibit Microsoft's use of tying arrangements. Section IV(E) originated in allegations
that Microsoft tied MS-DOS to Windows 3.1 to the detriment of competing OSs (JA 751-55). As
ultimately adopted, the decree's "anti-tying provision" (Br. at 31) does not simply proscribe that
particular tie. Rather, Section IV(E)'s two subsections broadly prohibit what in antitrust parlance are
certain "positive" and "negative" tying arrangements and categorically bar such arrangements for the
very reasons the Sherman Act may condemn them. As explained in the CIS, a document from which a
court may glean "the parties' jointly intended purposes in entering [into] the Decree," United States v.
Western Elec. Co., 894 F.2d 1387, 1391 n.7 (D.C. Cir. 1990), Section IV(E) was designed to
prevent Microsoft from "attempt[ing] to extend or protect its monopoly in any covered product" (JA
231). This, of course, restates a principal vice antitrust tying doctrine seeks to guard against. See, e.g.,
Grappone, Inc. v. Subaru of New England, Inc., 858 F.2d 792, 795-96 (1st Cir. 1988) (Breyer, J.).
- Notwithstanding that Section IV(E)(i) plainly was intended to prohibit Microsoft's use of
certain potentially anticompetitive tying arrangements, Microsoft insists upon a construction of the
provision that would effectively nullify its "anti-tying" prohibition. According to Microsoft, Section
IV(E)(i)'s proviso --------------- which permits Microsoft to "develop[] integrated products" --------------- exonerates from
the decree Microsoft's forced licensing to OEMs of any product that Microsoft deems to be
"integrated" into the covered OS product. Microsoft thus argued explicitly that the proviso gives it
"unfettered liberty" to create whatever "packages" of products it chooses and to compel OEMs to
license those packages (JA 458, 467). This reading of Section IV(E)(i), which Microsoft repeats in
more muted terms here (Br. at 31-33), would render Section IV(E)(i) meaningless because it would
permit Microsoft to defeat its operation whenever Microsoft chooses to do so. As the district court
recognized, however, a consent decree, like any other contract, ought not to be read in a manner that
renders a substantive prohibition "essentially meaningless" (JA 1293). See, e.g., Shakey's Inc. v.
Covalt, 704 F.2d 426, 434 (9th Cir. 1983); United States v. ASCAP, 157 F.R.D. 173, 201-02
(S.D.N.Y. 1994) (refusing "to condone" application of antitrust consent decree provision in a manner
that essentially rendered it "illusory" and thus "nullif[ied] the necessary protection from restraint of trade
that the [provision] offers").
- Because Microsoft's construction of Section IV(E)(i) flouts elementary principles of
interpretation, and because Section IV(E)(i), as explained above, was intended to prohibit certain
potentially anticompetitive tying arrangements, the district court properly concluded that it should turn to
tying law principles for guidance in determining whether there is an "other product" to which a license to
a "covered product" has been conditioned within the meaning of Section IV(E)(i). This does not, as
Microsoft contends, improperly read the decree by "reference to the legislation the [plaintiffs] originally
sought to enforce" (Br. at 30 (internal quotations omitted)). A consent decree, like any contract, must
be read in light of "the circumstances surrounding [its] formation," including "the purpose of the
provision in the overall context of the judgment at the time the judgment was entered." Western Elec.
Co., 894 F.2d at 1390-91 (internal quotations omitted); see also Western Elec. Co., 12 F.3d at 233;
White v. Roughton, 689 F.2d 118, 119 (7th Cir. 1982). In the case of an antitrust consent decree
entered following judicial scrutiny under the Tunney Act, those purposes include the parties' intended
resolution of antitrust issues. See Western Elec., 894 F.2d at 1390-92.
Microsoft objects that "if Section IV(E)(i) did incorporate general tying concepts --------------- requiring
case-by-case analysis to determine whether conduct violates the Consent Decree --------------- then it would be
invalid for failing to specify with the requisite clarity the conduct it describes" (Br. at 31). Microsoft is
wrong. A Sherman Act decree may contain prohibitions that require case-by-case application. See,
e.g., United States v. Crescent Amusement Co., 323 U.S. 173, 185-87 (1945) (revising decree
fashioned after judgment to prohibit certain acquisitions "except after an affirmative showing that such
acquisition will not unreasonably restrain competition" (internal quotations omitted)).(16) A decree is
invalid for excessive generality only if it is "unintelligible" or "defies comprehension." International
Longshoremen's Ass'n v. Philadelphia Marine Trade Ass'n, 389 U.S. 64, 76 (1967) (cited in Br. at
31). That is plainly not true of the objective tying-law criteria that determine whether there is one
product or two. If Microsoft believes its obligations unclear, Microsoft may seek a clarification of the
decree's operation; the possible need for clarification, however, does not render a decree invalid. See,
e.g., Western Elec., 12 F.3d at 230-33.
- Finally, the district court's conclusion that the United States is likely to prevail on the merits
neither renders illusory Section IV(E)(i)'s "developing integrated products" proviso nor is inconsistent
with Microsoft's account of the decree's negotiating history. Microsoft is permitted by the proviso to
develop any integrated product it wishes without violating Section IV(E)(i). Microsoft "develop[s an]
integrated product" within the meaning of Section IV(E)(i), for example, when it incorporates new
features (even if they might otherwise comprise a distinct product for tying law purposes) into an OS
product and offers the new product to OEMs. Microsoft would obviously not violate Section IV(E)(i)
if it gave OEMs the option of taking the OS without the new features. And the proviso ensures that
Microsoft will not be held to violate the decree simply by its decision to incorporate the features into the
OS (that is, to "develop" the "integrated" product), even if it does not offer OEMs the "unbundled"
option of the OS without them.(17)
But the proviso does not permit Microsoft to require OEMs to take the OS and other features
as part of a package when Microsoft simultaneously treats those other features as, and antitrust law
regards them as, a distinct commercial product. In such circumstances, OEMs would be forced to
license the functional equivalent of what they would receive if compelled by Microsoft to license two
distinct products as part of an ordinary commercial tie. Such forced licensing is not the "develop[ment
of an] integrated product[]." This distinction between forced licensing and product development not
only gives meaning to each of Section IV(E)(i)'s terms, but also is faithful to its anti-tying purposes.
The core Section IV(E)(i) concern, that Microsoft might "extend or protect its monopoly power" in
Windows through conditioned licenses, is at its zenith when Microsoft not only forces OEMs to take
with Windows 95 what in antitrust terms is a separate product, but also markets that separate product
in different channels and for other OSs.
This reading of Section IV(E)(i) also comports with the pertinent extrinsic evidence on which
Microsoft relies. That evidence shows that Section IV(E)(i) was included in the Final Judgment in
response to allegations that Microsoft conditioned licenses to Windows 3.1 on licensees taking MS-DOS 6 --------------- a product which, like Internet Explorer, Microsoft marketed as a distinct commercial
product in its own right (JA 751, 754). By contrast, as Microsoft argues (Br. at 31-32), Windows 95
was the paradigmatic case of the development of an "integrated product" because it did not simply
bring together the preexisting Windows 3.1 and MS-DOS 6 products; rather, Windows 95
incorporated into a single, new product a new graphical user interface and new MS-DOS component,
neither of which Microsoft marketed separately as distinct products.(18) The response to public
comments to which Microsoft points (Br. at 33 n.9) similarly did not involve Microsoft's distribution of
a product simultaneously with and without the OS.
- The District Court Properly Determined That Internet Explorer And Windows 95 Are
Separate Products
Microsoft further errs in asserting that the district court misapplied tying law principles in finding
that Internet Explorer and Windows 95 comprise separate products. Microsoft does not contest the
district court's finding that there is separate demand for browsers (including Internet Explorer) apart
from OSs (including Windows 95) --------------- and for good reason. The United States adduced ample evidence
demonstrating the existence of such demand. Web browsing software, including Internet Explorer, is
independently marketed directly to end users through a variety of channels. See supra p.4; see also
e.g., JA 378. This is evidence from which antitrust courts commonly find separate demand. See
generally 10 Phillip E. Areeda et al., Antitrust Law ¶¶ 1744-45, at 194-224 (1996).
Rather, Microsoft quarrels with the district court's finding of "separate demand for OSs that do
not provide web browsing functionality" (Br. at 34). But Microsoft's own documents showed that it
designed Internet Explorer 3 to be "uninstalled" from Windows 95, a procedure which eliminates the
end-user's ability to browse the web. That Microsoft, a monopolist, voluntarily created this option is
particularly telling evidence of separate demand for a browserless OS. See 10 Areeda, supra, ¶
1744g, at 206. Confirming this, Microsoft's own witness explained at the contempt hearing that
Microsoft developed the "uninstall" feature for Internet Explorer 3 precisely because consumers
demanded Windows 95 without the ability to browse the web (JA 1685-87, 1691).
In support of its contrary contention, Microsoft points to a declaration asserting that "all modern
computer operating systems include Web 'browsing' functionality" (JA 596). But the existence of
substantial demand for OSs with web browsing functionality obviously does not preclude the existence
of sufficient demand for OSs without such functionality, to which a competitor's product might be
added. See In re Data General Corp. Antitrust Litig., 490 F. Supp. 1089, 1104 (N.D. Cal. 1980)
("[T]he relevant inquiry is not whether the two items must be used together but whether the two items
must come from the same seller."). To the contrary, consumers commonly use web browsers other
than those preinstalled on their PCs (JA 374, 1088; CJA 353, 372, 396). This, along with Microsoft's
development of the "uninstall" option, readily evidences the requisite separate demand. See Jefferson
Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 22-23 (1984); In re Data General, 490 F. Supp. at
1108-09 (CPU and memory boards found distinct products, among other reasons, because consumers
replaced memory boards with those obtained from competitors).
To the extent Microsoft implies that, even if separate end-user demand for an OS without the
ability to browse the web exists, there is no such separate demand by OEMs (Br. at 19, 34-35),
Microsoft is wrong. The United States' evidence demonstrated that OEMs have expressed interest in
obtaining from Microsoft a version of Windows 95 without operational Internet Explorer web browsing
functionality so that OEMs could highlight competing web browsers (JA 156-57, 215-18). This is
plainly evidence of OEM demand for a browserless OS. See Jefferson Parish, 466 U.S. at 22-23; In
re Data General, 490 F. Supp. at 1108-09.
Indeed, what animates this action is precisely the concern that competition on the merits should
determine which web browsers OEMs license. This case does not, as Microsoft contends, involve an
attempt "to turn Microsoft into a regulated company" or to impede Microsoft's ability to "innovate" (Br.
at 35-36). Microsoft is free to offer any combination of products it chooses; it simply must, as the
decree requires, provide meaningful options to ensure that consumer demand --------------- rather than
Microsoft's OS monopoly --------------- determines whether those products are purchased. Thus, far from serving
"[n]o procompetitive purpose" (Br. at 21 n.3), the United States' present action strives to hold
Microsoft to the promise it made not to distort competition by compelling OEMs to license what
Microsoft itself treats as a separate product.
CONCLUSION
For the foregoing reasons, the Court should affirm the December 11, 1997, Order entering the
preliminary injunction and remand the case for further proceedings.
Respectfully submitted.
Of Counsel
CHRISTOPHER S CROOK
PHILLIP R. MALONE
STEVEN C. HOLTZMAN
PAULINE T. WAN
KARMA M. GIULIANELLI
MICHAEL C. WILSON
SANDY L. ROTH
JOHN F. COVE, JR.
Antitrust Division
U.S. Department of Justice
450 Golden Gate Avenue
San Francisco, CA 94102
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JOEL I. KLEIN
Assistant Attorney General
A. DOUGLAS MELAMED
Deputy Assistant Attorney General
CATHERINE G. O'SULLIVAN
MARK S. POPOFSKY
Attorneys
Antitrust Division
U.S. Department of Justice
601 D Street, NW
Washington, DC 20530
(202) 514-3764
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March 2, 1998
CERTIFICATE OF SERVICE
I hereby certify that on March 2, 1998, I caused the foregoing BRIEF OF APPELLEE
UNITED STATES OF AMERICA to be served by hand upon:
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Richard Urowsky, Esq. c/o
Sullivan & Cromwell
1701 Pennsylvania Avenue, NW
Washington, DC 20006
and to be served by overnight courier upon:
Richard Urowsky, Esq.
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
William H. Neukom, Esq.
Microsoft Corporation
One Microsoft Way
Redmond, Washington 98052
James R. Weiss, Esq.
Preston Gates Ellis & Rouvelas Meeds
1725 New York Avenue, NW
Washington, DC 20006
_________________________
MARK S. POPOFSKY
Attorney
Antitrust Division
Appellate Section
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CERTIFICATE PURSUANT TO D.C. CIR. RULE 28(d)(1)
I hereby certify that the foregoing Brief of Appellee United States of America contains no more
words than permitted by D.C. Circuit Rule 28(d)(1).
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________________________
MARK S. POPOFSKY
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FOOTNOTES
1. See, e.g., JA 256-57, 285, 1057, 1083-84, 1088; CJA 254, 284-85, 363, 371-72, 386.
2. See., e.g., JA 303, 336, 352, 373-74; CJA 249, 254, 258, 272, 285-88, 352-54, 360-64, 369-73, 376-86.
3. Shared program libraries are groups of files that perform certain functions (which Microsoft calls
"operating system services" (Br. at 5)); applications are commonly written to call upon such libraries to
use the functionality they provide (JA 1571). Shared program libraries, including those provided by
Internet Explorer as it is separately distributed, are commonly redistributed by various Microsoft
application products and by third-party Independent Software Vendors with their application products
to ensure that they function no matter which version of Windows 95 a user's PC contains (JA 1166,
1168, 1171, 1572-75, 1705, 1708).
4. Windows 95's Add/Remove Programs utility, when invoked by a user to "uninstall" a particular
application program, typically deletes files essential for an end user to run the application but leaves
behind other files the application might have supplied, including shared program libraries (JA 1577-78,
1681-84).
5. Reinforcing this conclusion is that Microsoft "voluntarily" offered OEMs the additional option of an
operable, yet outdated version of Windows (JA 1391). That "option" was also commercially worthless
to OEMs and thus failed to comply with the preliminary injunction (JA 1280, 1321-22, 1428). But the
fact Microsoft hedged its bets with that option, which Microsoft never contended the preliminary
injunction compelled it to supply, demonstrates that Microsoft recognized that its construction of the
Order made "little sense" (JA 1376).
6. A recent survey of 200 information technology managers reported that 34% "want the browser to
remain separate" from Windows and that only 28% want the browser to be included with Windows.
Infoweek, Survey Reveals Corporate Technology Managers Do Not Want Internet Explorer
Integrated Into Microsoft's Windows Operating Systems (Feb. 9, 1998)
<http://biz.yahoo.com/bw/980209/cmp_media_4.html>.
7. Microsoft contends that the Final Judgment confines the court to "ruling on applications [or other
motions] made by the parties" (Br. at 28 n.7). But a provision declaring that a court retains jurisdiction
for certain purposes, such as that to which Microsoft points, does not limit a court's inherent power to
enforce its orders. See, e.g., United States v. Fisher, 864 F.2d 434, 436 (7th Cir. 1988) (explaining
that a provision retaining jurisdiction to enforce a decree is "superfluous").
8. Microsoft asked the Court to take evidence on "the history of the technology under review here"
(JA 1257). This request appeared to pertain to Microsoft's contention that the Petition should be
dismissed on equitable estoppel grounds because the United States allegedly knew Microsoft would
include Internet Explorer with Windows 95 at the time of the decree's fashioning (JA 418, 476-77), a
claim the United States demonstrated was untrue (JA 989-993, 1000-02). Because Microsoft does
not challenge the preliminary injunction on this basis, its request is of no relevance here.
9. See JA 469 ("The existence of separate consumer demand for particular features and functions of
the operating system, however, does not mean that those features and functions cannot be elements of a
single 'integrated product' for purposes of the proviso of Section IV(E)(i)."); id. at 470 (arguing that
Microsoft's separate marketing of Internet Explorer is "irrelevant to whether Internet Explorer is part of
an 'integrated product' under Section IV(E)(i)").
10. Contrary to what Microsoft contends, a software product such as Internet Explorer properly is
defined by its "functionality" rather than "a block of software code" (Br. at 21 & n.3). This is because
certain programs frequently "share" code. For instance, Microsoft Word, a word processing
application program, may upgrade and replace certain shared program libraries when installed on a PC
containing Windows 95 (JA 1574-75). When a user "uninstalls" Microsoft Word from that PC using
Windows's 95 Add/Remove Program utility, these shared program libraries remain, and only a subset
of files (which could not themselves supply Word's functionality) are removed. Nonetheless, from the
user's perspective, the Microsoft Word product has been removed because the user may no longer
invoke its functionality (JA 1575-76).
11. Microsoft also contends that it was deprived of an opportunity to argue that the United States'
evidence included inadmissible hearsay (Br. at 19), but it is settled that such material may be considered
in entering a preliminary injunction. See generally 11A Charles A. Wright et al., Federal Practice and
Procedure § 2949, at 214-15, 219-20 (2d ed. 1995).
12. At about the time of the hearing, Microsoft began distributing Internet Explorer 4 to OEMs
preloaded on a new version of Windows 95, OSR 2.5, instead of on a separate CD-ROM (JA 1269).
Microsoft ultimately complied with the preliminary injunction by keeping OSR 2.5 optional for OEMs
(JA 1781).
13. The stipulation entered on January 22, 1998, requires Microsoft to offer OEMs the option of
licensing Windows 95 without Internet Explorer web browsing functionality for 90 days following
termination of the preliminary injunction (JA 1780-81). This requirement, to which Microsoft
consented, demonstrates that the preliminary injunction is not burdensome.
14. As explained above, at about the time of the district court's hearing, Microsoft began distributing
Internet Explorer 4 to OEMs on the OSR 2.5 CD-ROM. OSR 2.5 contained certain "updates" to
OSR 2 (JA 1390, 1400), and the United States expressed concern that including such updates only
with OSR 2.5 altered the status quo by effectively conditioning an OEM license to a fully updated
Windows 95 on an OEM's licensing Internet Explorer 4 (JA 1426). Microsoft agreed to resolve these
concerns by making the updates available to OEMs licensing OSR 2 (JA 1781).
15. Precisely because a traditional function of a preliminary injunction is to prevent irreparable harm,
distinguishing between the standard for issuing mandatory and prohibitory injunctions "has been subject
to academic and judicial criticism." Eng v. Smith, 849 F.2d 80, 82 (2d Cir. 1988). See 11A Charles
A. Wright et al., Federal Practice and Procedure § 2948, at 137-38 (2d ed. 1995).
16. Similarly, decrees prohibiting a party from violating certain statutes, which inherently require case-by-case analysis, are also unobjectionable. See, e.g., McComb v. Jacksonville Paper Co., 336 U.S.
187, 191-92 (1949) (Fair Labor Standards Act).
17. The proviso also ensures that Microsoft would not violate Section IV(E)(i) simply by designing
Windows 95 to be incompatible with a rival's browser or other product --------------- a form of "technological
tying" --------------- and thereby implicitly requiring OEMs to take Microsoft's competing browser or other
product.
18. Microsoft (Br. at 32) relies on an affidavit reporting several years after the fact that one of its
negotiators asserted that "nothing in section IV(E)(i) could be construed to limit Microsoft in the area of
product design" (JA 761). Assuming this statement, which does not appear in the affiant's
contemporaneous notes (JA 915-18), is properly considered, it must be read in the context of the
negotiator's prior statement (which does appear in those notes) that Microsoft intended by the proviso
"to make explicit that Microsoft retained the absolute right to offer 'merged product' or products
embodying 'integrated technology' (such as Chicago [the code name for Windows 95])" (JA 761). As
explained, the United States's reading permits precisely such integration. In any event, this proceeding
raises no issue about Microsoft's freedom "in the area of product design."
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