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MS: DOJ aims to stall upgrades

Microsoft says the Justice Department's antitrust case is aimed at stalling improvements to its Windows software and should be thrown out.

In a harshly worded response to the Justice Department's antitrust lawsuit, Microsoft (MSFT) said that the government is trying to prevent it from improving its products and that the DOJ's case should be thrown out.

"The petition is aimed squarely at preventing Microsoft Microsoft under the gun from including improved features and functionality in upgraded versions of Windows 95," the software giant said in a 48-page brief filed with the U.S. District Court last night.

Rather than try to fetter Microsoft's development, the brief contends that the "DOJ should be encouraging Microsoft to disseminate such new technologies to consumers as quickly and as broadly as possible."

In a press conference today, William Neukom, Microsoft's vice president of law and corporate affairs, categorized the software giant's legal battle with the DOJ as "first and foremost a contract dispute." He said that the key will be interpreting language of the consent decree that was "negotiated in clear language and preserves Microsoft's right to continue to be able to innovate and offer integrated products to its customers."

Addressing the DOJ's specific complaints--that Microsoft is illegally trying to bundle its Internet Explorer browser with Windows 95--the software giant said it "retains unfettered freedom" to add new functions to Windows 95 and insisted that Internet capabilities are just another function. Microsoft asserted that its actions are in complete agreement with the 1995 consent decree and, as a result, "the DOJ's position is without merit, and its petition should be dismissed."

Microsoft continues to contend that the DOJ has been aware of plans to include Internet capabilities in Windows 95 "before the start of the negotiations leading up to the consent decree." The company said that the DOJ did not object until after Microsoft launched the fourth version of Internet Explorer on September 30.

According to Neukom, the Justice Department, as early as 1993, subpoenaed information from Microsoft showing that the company was planning for the inclusion of Internet access functionalities in its operating system. "There were even press reports that showed Microsoft evangelizing its intent to integrate Internet technologies in Windows 95," he said.

Since the case hinges on the interpretation--or face-value meaning--of the words "integrated products" in the proviso of Section IV(E)(i), Microsoft makes clear in the brief that what was meant by the word "integrated" in the consent decree negotiations is nothing more than products that are "combined," "united," or "incorporated into," as defined by Webster's Third International Dictionary.

To further illustrate the point, Microsoft said that it had integrated the functionalities of Windows 3.1 and MS-DOS 6 into a new product--Windows 95--even though the two products continued to be available separately. "The DOJ never contended that Section IV(E)(i) of the consent decree (or the general law of tying, for that matter) prohibited Microsoft from including the functionality of the two products in Windows 95."

In an interview with NEWS.COM, Brad Chase, vice president of Microsoft's application and Internet client group, responded to Justice Department arguments that IE and Windows must be considered separate products by virtue of the fact that they are sold and marketed separately by calling it "one of the biggest misunderstandings" about the case.

"In the operating system business, it is common for the vendors to make technology available on other platforms," Chase said, pointing to Apple Computer's multimedia software, Quicktime, which is available as part of the Macintosh OS but is marketed for other platforms as well.

"The whole point of the phrase in the consent decree is to handle exactly this case," Chase said, who added that, just because a battery and a car may be sold separately, it doesn't mean that the two can't be integrated. "Somehow, there is this perception that, if things are available separately, they're not integrated."

During a conference call today, Chase was hard-pressed to answer what, if any, applications would be inappropriate to "integrate" in an operating system. "It is up to the customer to determine what should be integrated into an operating system," he said.

In the brief, the company also attacked the government's charge that the company places excessive restrictions, in the form of nondisclosure agreements (NDAs), on companies that license Microsoft products.

Microsoft asserted that such NDAs are "routine" in the software industry and that, "more importantly, such NDAs are nowhere addressed in the consent decree," and as a result are not a proper part of the DOJ's petition.

Justice has said repeatedly that Microsoft's NDAs hinder the government in its investigations of the company and prevent companies with information or complaints from coming forward.

In a deposition included in Microsoft's court filing, however, Dell Computer (DELL) was among a group of personal computer makers who said Microsoft's licensing arrangements would not stop them from offering other Internet browsers.

"The fact that the Internet Explorer technology in Windows 95 includes a Web browser does not diminish our willingness to provide a different Web browser such as Netscape Navigator," said William Morris, Dell's senior manager in charge of online content and marketing.

In the filing, Microsoft also accused Justice of disclosing confidential company information and argued that key documents should remain sealed, an issue the software firm first brought up at a hearing held last month.

Justice now has ten days to file a reply to Microsoft's brief. The next hearing is scheduled to be held December 5.

Reuters contributed to this report.