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DOJ facing Windows 98 deadline

Investigators are facing a rapidly approaching deadline as Microsoft prepares to release its Windows 98 operating system.

Antitrust regulators investigating Microsoft are facing a rapidly approaching deadline as the company prepares to release its Windows 98 operating system.

To make Windows 98 available to consumers by June 25, Microsoft must put the final product in the hands of PC makers by May 15 at the latest. That leaves precious little time for the Justice Department to build a case that would take aim at the licensing and marketing of the new operating system, which would succeed Windows 95.

Separately, executives for Microsoft will meet later this week with Joel Klein, head of the Justice Department's antitrust division, to discuss the agency's ongoing investigation, said two sources familiar with the matter. The significance of the meeting was unclear. Traditionally, Justice Department officials have met with executives of companies about to be sued, in attempts to head off court action. But according to one source, Microsoft requested the meeting more than two weeks ago in hopes of improving communication between itself and the DOJ.

If government attorneys seek an injunction See related story: 
DOJ searching for legal remedies affecting Windows 98, they will feel considerable pressure to file the suit before the product leaves the Redmond, Washington campus, legal observers and people familiar with the case said.

CNET's NEWS.COM reported Friday that the Justice Department has sent out another round of civil subpoenas to Compaq Computer Hewlett-Packard, and other PC makers. Sources also said the Justice Department is looking at other issues as well, including the marketing of the Windows NT corporate operating system, Microsoft's actions in the Java market, and its partnerships with Internet content providers.

A spokesman for Compaq confirmed that the company has received a government subpoena, known formally as a civil investigative demand, or CID. Hewlett-Packard also has received a subpoena, according to a person familiar with the matter.

An HP spokeswoman said she was not aware of such a request for information. Besides selling personal computers, HP recently announced that it would create and market its own version of Java, the programming language developed by Sun Microsystems.

Other manufacturers, including Dell Computer, Gateway 2000, and Micron Electronics, did not return phone calls seeking comment.

Regulators' renewed interest in the computer makers comes just weeks after members of the Senate Judiciary Committee offered evidence that seemed to contradict testimony from Dell's chief executive. Testifying at a special hearing last month on competition in the software industry, Michael Dell said that Microsoft in no way bars his company from preinstalling competing Web browsers on the computers it sells.

Evidence gathered from computer makers has played a central role in the Justice Department's current case, which alleges that Microsoft has violated the terms of a 1995 consent decree. Specifically, the Justice Department used evidence provided by Compaq to allege that Microsoft engaged in strong-arm tactics. Correspondence and oral testimony showed that Microsoft had threatened to revoke the company's Windows 95 license if it did not preinstall the Internet Explorer icon.

Microsoft spokesman Jim Cullinan played down the significance of the civil subpoenas.

"I don't think it's surprising that the Justice Department is talking with some of our largest partners, and we're confident that once they take a look at what Microsoft is doing, in terms of our business practices, they will see we are complying with the law and are focused on building great software products," he said.

The Justice Department has confirmed that it is engaged in a broader investigation but has declined to give more details. Evidence sought in the new round of subpoenas most likely would help regulators in bringing any new case based on the Sherman Antitrust Act.

Compaq declined to say what information the Justice Department is seeking in its latest requests for information. Sources familiar with the case say it may want information that will help regulators decide what types of remedies to seek should a new, broader lawsuit be filed.

While outside observers generally agree that the imminent release of Windows 98 is putting pressure on the government to file a suit aimed at the new OS sooner rather than later, there is less agreement about what effect a scheduled April 21 hearing before a federal appeals court might have on timing. The Justice Department has good reason to wait until after the hearing to file any new suit, so that attorneys have the benefit of any comments made by the three-judge panel.

At the same time, however, the issues on appeal before the U.S. Court of Appeals for the District of Columbia are becoming increasingly moot each day, since they are focused narrowly on the packaging of the Internet Explorer browser with Windows 95. What's more, the decidedly conservative makeup of the panel has led some legal experts to predict that the DOJ is likely side with Microsoft Both factors could steer government attorneys in favor of filing a new case before suffering an embarrassing appearance before the appeals court.

Among the evidence the Justice Department has gathered is a confidential April 1996 memorandum from Microsoft senior executive Brad Chase, who has headed developer relations for the company's applications and Internet client groups. Chase called Netscape's lead in the browser market "scary," and called on managers to enter into "exclusive licensing of Internet Explorer" with the top five Internet service providers in each country where Internet Explorer was being marketed at the time.