DOJ, Microsoft take on Windows 98

In a brief filed today in federal appeals court, the government accused Microsoft of ignoring for months the possibility that the order applied to the successor version of Windows 95, and then--just weeks before its release--taking the position that it would be irreparably harmed if the order did apply to Windows 98. U.S. District Judge Thomas Penfield Jackson issued the preliminary injunction last December that ordered Microsoft to separate the Internet Explorer browser from Windows 95.

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"Microsoft's attempt to use exigent circumstances entirely of its own making as an excuse for bypassing the district court should not be condoned," the government argued. "Microsoft was free to seek clarification from the district court at any time as to whether or how the preliminary injunction, which covers 'any successor version' of Windows 95, might apply to Windows 98."

Microsoft's filing said that applying Jackson's order to cover Windows 98 would be "plainly improper" given that the Justice Department did not present any evidence to Jackson before the injunction was issued.

"Given the complete absence of evidence in the record regarding Windows 98, the district court had no basis for awarding any relief with regard to that new operating system, which is different from Windows 95 in material respects, particularly with regard to the central role played by Internet-related technologies," Microsoft attorneys argued.

They went on to say that both Microsoft and the public at large would be harmed if the injunction were construed to forbid the offering of Internet features incorporated into Windows 98, a central theme in a recent public relations campaign Microsoft and its partners have initiated.

The Justice Department's filings include transcripts of depositions taken earlier this year from Microsoft executives Paul Maritz and Jim Allchin. Both testified that Microsoft did not seriously consider offering a version of Windows 98 in which Internet features were removed. This was case even after the issuance of Jackson's order, which explicitly forbade Microsoft from bundling its Internet Explorer browser with any operating system software "including Windows 95 or any successor version thereof."

Under questioning from David Boies, the Justice Department's special consultant on Microsoft, Maritz said that company executives had discussed only briefly the possibility that the preliminary injunction might require the software giant to offer a version of its operating system that did not include the browser. But he went on to say that they did not see any meaningful way to do so.

"Everyone was in agreement, almost without need for extensive discussion, that the notion of taking IE 4 technologies out of Windows 98 would mean a radically different product and [would be ] just so unthinkable that we just dismissed it almost out of hand," Maritz said.

In its brief, Microsoft released a transcript of oral arguments last month before a three-judge appeals panel hearing the case. Assistant attorney general Doug Melamed was quoted in the transcript as saying that "there may be no basis" for preliminarily forbidding Microsoft from including Internet features in Windows 98, adding that "we're not here to tell you that Windows 98 is prohibited by a preliminary injunction."

Jackson issued the injunction in response to allegations the Justice Department made in October that Microsoft's bundling of Internet Explorer with Windows 95 violated terms of a 1995 consent decree the two parties negotiated in an effort to head off an earlier antitrust action. The government asked that Microsoft be found in contempt of court and fined $1 million for each day it continued the practice. Microsoft argued that the consent decree explicitly permitted it to integrate new features into Windows.

Jackson ruled that Microsoft's reading was "plausible" but not necessarily "correct," and named a "special master" to collect evidence and propose a legal outcome. He ordered Microsoft to offer a version of Windows 95 that did not include Internet Explorer in the meantime. Microsoft's appeal of that preliminary injunction is now on appeal. Despite extensive filings in the appeal from both sides, neither directly addressed whether the injunction applied to Windows 98, which Microsoft slated for release in the second quarter of 1998 more than six months ago.

The government's motion argues that Microsoft violated court procedure by seeking a stay from the appeals court, which appears much more sympathetic to its case, rather than seeking it from Jackson, who has been visibly angered by a number of Microsoft's actions.

As widely reported, the Justice Department is considering filing a new, broader lawsuit based on the Sherman Act. Up to 13 states are deciding whether to bring a similar suit, though it likely would be narrower in scope. Federal and state officials appear to be close to making their decision.