Q & A on Sun's Filings in U.S. District Court

Sun Microsystems Teleconference 5/12/98

POULSON: Thank you. Thanks everyone for joining us. I'm sure almost all of you are aware of what news we are filing today. The press release is on the wire as well as our web site. I have with me Alan Baratz who is President of Sun's Java(TM) Software Division as well as Michael Morris who is Sun Microsystems Inc., General Counsel. Alan will have prepared remarks and then we will move to about 30 minutes of Q&A.

BARATZ: Thanks Lisa and thank you all for taking the time to be here with us this morning. As you all know, in October 1997, Sun took legal action against Microsoft in an attempt to bring the company back into compliance with the terms of its license from Sun Microsystems for the Java technology. This action was taken to maintain the integrity of the Java platform and to stop Microsoft from breaching its contractual obligation to delivering compatible implementation of the Java technology in Internet Explorer and its software development kit for building Java applications. In November, Sun filed for a preliminary injunction to prohibit Microsoft from using the Java Compatible(TM) logo to promote and distribute the incompatible Internet Explorer 4.0 and related products.

The court granted that injunction in March. We had hoped this action and the court's very strong accompanying opinion would persuade Microsoft to come into compliance with the original licensing agreement. But, clearly, that has not happened. And now, we are nearing the time when Microsoft says it will release Windows 98 which Microsoft has said integrates still further an incompatible version of the Java technology. Accordingly, we are today taking additional steps to defend the Java platform. We are seeking further injunctive relief asking the court to require Microsoft to accomplish any one of the following three things at their option:

  1. That Microsoft ship Windows 98 with a fully compatible version of the Java technology or,
  2. If they continue to ship their incompatible implementation of the Java technology in Windows 98, that they be required to ship Sun's Java run time environment also bundled with that product or,
  3. That Microsoft simply remove any incompatible versions of the Java technology from Windows 98.

So, let me be clear about what we are not asking the courts to do. We are not seeking an injunction to stop the shipment of Windows 98. We are simply seeking to ensure that if Windows 98 includes any implementation of the Java platform, that it includes a fully compatible version of the Java platform. We are principally asking the court to ensure that pending a trial on the merits of the lawsuit, that software programmers and customers have access from Microsoft to a compatible implementation of the Java technology.

In addition to this, we are asking the court to require that Microsoft's tools for building Java applications be allowed to ship only if those tools create fully compatible Java applications. We are also asking the courts to stop Microsoft from engaging in exclusionary licensing practices and unfair Win 32 logo practices.

Finally, we are asking the court to prohibit Microsoft from shipping Sun's code as part of an incompatible implementation from Microsoft. Our actions today are based in part on our review of portions of source code for Internet Explorer which Microsoft was required to deliver to Sun for evaluation as part of the court order in March. We only recently completed our review of that code and it is very clear that Microsoft is continuing to seek ways to flout it's contractual obligations.

The most egregious example of these activities is that Microsoft made changes to specifications for the Java language within their implementation. To put this latest maneuver into perspective, let's look back at Microsoft's activities with respect to the Java platform. After licensing the technology in 1996, Microsoft made attempts to defeat the Java technology in the market place by creating a wrapper technology known as ActiveX. The market rejected this product in favor of JavaBeans(TM) components.

In the summer of 1997, Microsoft tried again by creating proprietary Windows dependent class libraries known as the AFC or the application foundation classes. The market recognized immediately what Microsoft was up to and rejected this technology in favor of the Java Foundation Classes. Realizing these efforts were not accomplishing their goal, Microsoft stepped over the line attempting proprietary changes to the common core of the Java platform, an action that violated their contract with Sun Microsystems. It was at this point, that we took legal action last fall.

Since none of the attempts, either through market muscling or other improper activities have succeeded, Microsoft is trying again this time by attacking the very heart of the Java technology, the language specifications. It is clear that Microsoft is unable to stop the Java momentum through legitimate competition and continues to look for improper ways to defeat it. We cannot and will not let that happen.

We are taking this action today, with the same goal we had last October
-- to require Microsoft to live up to its contractual obligations and should make compatible implementations of the Java platform. And, we will not lose focus on that goal. In fact, we are obligated to take this action on behalf of our other licensees, the hundreds of thousands of Java programmers in the industry which have invested in and supported the Java platform. It is their efforts that have made this technology so important and so valuable. And, with that, I will turn it back over to Lisa who will open it up for questions.

POULSON: OK thanks very much Alan. We'll have about 30 minutes for questions. A couple of housekeeping details I'd like to get across right away. To schedule a follow-up interviews with Alan Baratz and Mike Morris or other Sun spokespersons, try the PR hotline which is 408-863-3321 or call Eliza Osborn at 408-863-3424. We will have on the website today our press release. The motions however, have been filed under seal. Mike Morris can explain that during the Q&A but we do not have permission from the court to put the motions on the website today. Having said that I think we are ready to start taking questions.

OPERATOR: Niall McKay from InfoWorld

McKAY: According to Tod Nielsen, it said both companies had agreed not to seek injunctive relief. Is that correct?

BARATZ: That is absolutely not true.

MORRIS: This is Mike Morris. That same assertion was made, I think by him several months ago when we first filed the case. I don't know where he was when we got the injunction that was granted in March but that alone ought to be proof that his assertion has no basis in fact.

OPERATOR: Nick Patience from ComputerWire.

PATIENCE: I'm just trying to find exactly what you mean by changes in the core language. Last time it was omitting the Java native method in the base and the remote method . Are we talking about something different now or something much further deep down?

BARATZ: Yes. When we originally filed the lawsuit they were a set of modifications that Microsoft had made to the Java technology that included changes of Java class hierarchy, the Java depth star classes that included elimination or non-implementation of the Java native method, native method interface and that included not making available the remote method invocation class libraries. At this time, Microsoft is also planning to introduce, we understand from them, an implementation of the Java virtual machine that includes changes to the language specifications. Specifically, the introduction of new keywords into the language and the introduction of compliers directives into the language that in net result is that applications written using these keywords and complier directives can be compiled by only Microsoft compliers and the resulting code will run on only the Windows platform.

OPERATOR: Ashok Ahuja, Icor Corp.

AHUJA: If Microsoft doesn't take any of the three alternatives you've given them, are you given basically the same choice to the courts to impose one of the three or what happens in that case.

BARATZ: What we are asking is that the courts impose on Microsoft this set of options. Namely, the court tells Microsoft they must select one of these three options.

OPERATOR: Judith Hurwitz with Hurwitz Group.

HURWITZ: Two questions. One is, what is the possibility of a standards body at some point being given authority over this specification of the language and the second one what are the implications of what Microsoft and HP are doing with their Java virtual machine?

BARATZ: Let me start first with the standards body question. As you are probably aware, Sun for quite some time has been very interested in moving the Java technology into standardization and in fact, we applied almost a year ago to the International Standards Organization to be able to be what is called the submitter of Publicly Available Specificaitons. Meaning that Sun would be able to take the specification that we developed through our very open, very industry-participative process working with many companies around the world and submitted those directly to ISO or standardization. The International Standards Organization voted overwhelming, 20 countries yes, 2 countries no, to accept Sun's proposal to be a submitter of Pubicaly Available Specificaitons. Sun Microsystems is now doing the work to transpose the specification for submission to the International Standards Organization. So, our intent is to absolutely to standardize per ISO the specifications for the Java technology.

The second question regarding indications of the Microsoft HP acknowledgment around and implementation of technology from HP that incorporates some Java capabilities, the actions that we are discussing here today is totally independent of that technology created by HP or the relationship announced between HP and Microsoft. The action that we are taking here today is focused specifically on the licensing agreement between Sun and Microsoft under which Microsoft has access to Sun's technology for implementing the Java platform and under which Microsoft is contractually obligated to deliver the Java platform within their products.

OPERATOR: Dan Goodin from C/Net.

GOODIN: My understanding of the licensing agreement that Sun and Microsoft entered into was that Sun was not entitled to any injunctive relief that would require Microsoft to remove code or stop using Java code and only gave Sun the right to seek monetary damages and to remove the Java logo.

POULSON: Mike Morris can answer that question.

MORRIS: I've already answered this question once. That assertion has been made in the past by Microsoft. The court has not agreed with it. That is not a proper interpretation of the contract. We are quite confident and as a matter of fact, we have an injunction in place. Microsoft made this argument to the court when our first injunction was filed and it failed to persuade the court that injunctive relief was not appropriate as the court obviously agreed with us and imposed the injunction.

OPERATOR: John Rymer with Upstream.

RYMER: What about the parts of the contract that would obligate a vendor such as Microsoft to--the tools vendors to only ship tools that would generate your platform. Is that actually covered in the contract? Can you describe it.

POULSON: Mike you want to take that one?

MORRIS: We are not talking about third party vendors of tools. We are talking about Microsoft as the tool vendor and Microsoft's ability to ship Java related product is all subject to the technology license agreement for Java. Accordingly, they do not have the right under that license, to ship any product, whether it is tools or anything else that incorporates incompatible technology.

BARATZ: The licensing agreement with Microsoft gave Microsoft access to Sun's Java technology but only so long as when you delivered their products in the market place that incorporated Java technology with products incorporated in compatible implementation of the Java technology.

OPERATOR: Kim Nash from Computerworld

NASH: I'm wondering, you obviously know you are not filing a suit in a vacuum and there are a lot of anti-trust investigations going on. What kind of influence on your decision to file this suit now was the speculation that Microsoft in its tangling with the Department of Justice may arrive at some sort of settlement that could water down some previously filed suit.

BARATZ: The short answer is speculation surrounding whether the Federal Government or the states will file anti-trust actions had no effect, zero effect on our decision. Our decision is based simply on our contract with Microsoft and nothing else. With respect to speculation about whether or not Microsoft might settle with any one of the state agencies or the Federal Government, I have no more information about that then you do. I know no more and I don't think anybody else does in what they read in the newspapers.

MORRIS: I think it might be worth being clear on why we are taking the action we are taking at this point in time. It is really based on the fact that we have just now been able to complete the evaluation of the Java technology source code that Microsoft was required to make available to us last March and Microsoft is indicated that it is this code base that it will be incorporating within Windows 98 which will be shipping very shortly. It is that influence of factors that has caused us to take this action at this point in time.

OPERATOR: Gina Smith from ABC News.

SMITH: You are saying that is not your intent to enjoin the shipment of Window 98 but, do you realistically expect that they can change their implementation of Java in just two or three days?

BARATZ: As a matter of fact, yes. And, the reason is we are not actually asking them to change their implementation of Java. We are giving them several options. One of the options is to simply take Sun's fully compatible implementation of Java and write that on to the CD that contains Windows 98. And, if any of you are interested in how quickly that can be done, just provide me with a CD with Windows 98 and I'll give it back to you in about 24 hours with our implementation of Java bundled on that CD and acceptable from Windows 98.

OPERATOR: Sean Davis with Dow Jones News Service.

DAVIS: You said that your court action today also asks the court to stop improper licensing and unfair Win 32 logo practices. Are you saying these requests dovetail with the lawsuit the states and the Federal Government is contemplating, anti-trust related request?

BARATZ: Let's take this one step at a time. First of all, if you were to go look at the Microsoft website where they provide the license for use of the Java compatible logo. What you would find that in that license is the following text: To qualify for the logo, a Java application when running on a Windows PC must use and redistribute the Microsoft Win 32 virtual machine for Java. So, Microsoft is tying the use of the compatibility logo to its application vendors redistribution of the Microsoft incompatible Java virtual machine. Well, this is absurd. This is much like saying that a spreadsheet developer like Lotus or Corel can not get certified as Windows compatible unless they use the Microsoft computational engine for computing values in the spreadsheet. It is ridiculous. What you are asking is that that practice be stopped. In addition, we have learned that Microsoft has recently signed some agreements with some of their customers which require those licensees, those customers, to use nobody else's Java virtual machine other than the Microsoft JVM and to use only the native method interfaces that are employed within the Microsoft Java virtual machine. These are examples of what we mean by exclusionary licensing practices and unfair Win 32 logo practices and as a part of this filing, we are asking the courts to require that Microsoft stop this unfair competition practice.

MORRIS: In regard to whether or not what we are doing today dove tails or doesn't dove tail with what the states or the Federal Government may do, our action today is premised on the contract that we signed with Microsoft and its violations of those agreements, as well as copyright infringements. None of that has anything to do with what the states may or may not decide to file. I don't know what they are going to file. They certainly have not, neither the states nor the Federal Government, consulted with Sun about the filing and we have no knowledge of that. We have to defend our own rights under this contract. This action arises and these motions arrive out of our contract with Microsoft. It is our obligation to defend our rights and those of the Java community that arise out of that contract. The Federal Government can't do that nor can the state. We are the only ones that can do that and that is why we filed.

OPERATOR: Bruce Francis with CNBC news.

FRANCIS: Can you clarify some of the timing about when you received the code in question that you have from Microsoft. Whether that was in compliance with the court order in your view. When you did the testing and specifically, do you think that what we are talking about is an example of anti-competitive behavior on Microsoft's part that should be subject to a broader review than of the legal action being contemplated here?

MORRIS: With regard to a standing competitive, clearly these exclusionary agreements that we understand require some of Microsoft customers only to use Microsoft's native method interfaces as a condition for getting access to Microsoft's tools, we think is anti-competitive given their domination of the desktop for operating systems. In addition to that, clearly they could not impose the Win 32 logo restriction on people if they have the market power to force them to do something that otherwise they wouldn't naturally do. So certainly, there are aspects of Microsoft market probably there is evidence there. But the principal focus of these motions today arises out of Microsoft's behavior with respect to our license with them and that would be improper whether they had market power or not.

BARATZ: With respect to the code when the judge ruled last March in favor of Sun request for an injunction that Microsoft stop using Java compatible logo in connection with incompatible product, the judge also required that Microsoft deliver to Sun the source code for their implementation of the Java technology. The fact of the matter is that we have still not yet received all of the source code required under that ruling. So, it is being done very slowly and we have been doing the testing as soon as we have received code drops and it was just very recently that we were able to complete enough testing to verify that there were remaining problems in the codes and some new problems introduced in the code particularly, in respect to modifying the language specification.

FRANCIS: Did that timing have anything to do with the release of Windows 98. Did they get it to you in suitable time before?

BARATZ: There was nothing in the judge's ruling last March that said we had to have this before Windows 98 shipped.

OPERATOR: Brendon Daly with CBS Market Watch.

DALY: This is a question regarding a couple of points that Alan made in his speech, in his preliminary remarks. If the market is doing such a good job at rejecting Microsoft, why not go ahead and turn it all over to the market and let them decide if they want to go with your take on the best version of Java whether it be Microsoft or go to Java compatible. Why not leave it in the ultimate authority of the market?

BARATZ: Of course we are leaving it to the industry, to the developers to the end users to decide which implementation of the Java technology they chose to utilize. At this point we are in a situation where Microsoft is about to bundle directly within their operating system an implementation of the Java technology. That is admittedly a very strong distribution channel and we are simply saying that until the court is able to decide when our original breach of contract lawsuit, we want to ensure that distribution channel and others that Microsoft might use are used to deliver both compatible implementation and any incompatible implementations that Microsoft might chose to put on the market thereby insuring that the playing field remain as it is today. It doesn't bias toward Microsoft in any way while we are going through this period where the courts are trying to decide on the lawsuit.

DALY: But Microsoft has an advantage in that they have these distributions so you are sort of coat tailing along with them.

BARATZ: No, we are not coat tailing. The whole reason Sun signed the licensing agreement with Microsoft almost two years ago was in fact to get the benefits of the Microsoft distribution channel. The reason why Microsoft signed presumably was to get the benefit of the Java technology. There was a quid pro quo here. But, our reason for entering into the agreement was to be able to benefit from the Microsoft distribution channel. We have been very clear about that from the outset and what is happening now is that Microsoft is utilizing Sun technology to deliver a tainted implementation of a platform through their channel rather than to deliver a compatible implementation as required by the contract. We are simply asking now that going forward until this case is decided by the courts that there be an injunction that ensures that that channel be used fairly in the distribution of the Java technology as Microsoft is going to deliver tainted technology through that channel then they should offer to deliver fully compatible technology through that channel.

MORRIS: There is one other point. Microsoft has misappropriated their use Sun's technology which was licensed to them. We are not going to let the market decided whether or not it is OK to get away with that sort of misappropriation. That is always wrong. We will always enforce our rights against Microsoft or anyone else. That is not the kind of thing that we or any other responsible company would leave to the market.

OPERATOR: Debbie Gage from Smart Reseller.

GAGE: Microsoft has always said to me that developers who use J++ have a choice. That they are not forced to use Microsoft implementation of Java. That was one thing and the other thing was I was wondering about Java Activator. That was supposed to ensure that the complete Java platform got on all platforms. Wondered if you could comment on those two things.

BARATZ: With respect to Java Activator, the uptake on Java Activator has been very significant. In fact, more rapid than we had expected. It has been available on our website in beta form for a number of months. We just delivered it in FTS form. It is being incorporated by many application developers. It is being utilized in many enterprise environments and that is another very important channel that we are using to deliver a fully compatible implementation of the Java technology in the Windows environment as well as in other operating system environments. So, that is working well for us. At this point, we entered into an agreement with Microsoft that allowed Microsoft to be a distribution channel for Sun technology. Microsoft has breached that agreement. They are using our code to deliver tainted technology through their distribution channel and we are asking the courts to rectify that situation and create a level playing field at least until a full case can be heard and a decision is made. Which, of course, we believe in any case will come out in Sun's favor and we think Microsoft will be required to deliver only fully compatible implementations of Java platform.

OPERATOR: Miguel Helft, San Jose Mercury News

HELFT: I was wondering if you could explain a little bit more about what you are asking the court to require Microsoft to do with respect to the tools as they apply to visual J++ and Mike could you say why this was filed under seal?

MORRIS: The reason some of these filing was made under seal is that the parties are subject to a protective order that is on file with the court. This is not unusual in high technology cases. The purpose of the protective order is to protect the parties from disclosing outside the folks who are identified in that protective order trade secrets or other highly confidential information. There is a procedure whereby material is filed under seal can be unsealed. We filed it under seal because some of our documents incorporate materials and information which we received from Microsoft that are subject to the protective order. Accordingly, we can not unilaterally make that public. The procedure that we will follow is this. We today are sending a letter to Microsoft requesting their concurrence that these filings be unsealed. The process is that they have ten days to respond to that. If they agree then these materials will be unsealed and everyone can see them. If they either disagree or the ten days runs out and they haven't responded then we will ask the court to have the documents unsealed and then it will be up to the judge to decide whether or not to do so. Obviously we would have preferred to file these in an open fashion but, the terms of the protective order did not permit us to do so.

BARATZ: With respect to the tools, we are talking specifically about Microsoft's SDK for Java and Microsoft's Visual J ++. We are asking that those tools incorporate a fully compatible implementation of the Java platform and we are asking that the codes that they generate be fully compatible Java code.

OPERATOR: Mike Tarsala from Investors Business Daily.

TARSALA: If somebody could please identify themselves if they want to answer this question. It's a follow up to the original question asked about the Java licensing contract with Microsoft. I have a copy of that which I downloaded from Sun's website. We were talking about whether you could ask for injunctive relief. I'm not a lawyer but I'm clearly reading in Section 11.2(d) that the non breaching party so remedied shall be able to seek monetary damages in a court of competent jurisdiction. How else could that be interpreted?

BARATZ: First of all, what you're doing is reading just one clause from the agreement. Frankly, that clause refers to only certain types of breaches and there are other causes that refer to different more egregious types of breaches where there is no limitation on the action that can be taken with respect to remedy. You do not have to take Sun's word for this. The judge has already ruled on this. Sun already asked for an injunction and Sun was already granted that injunction by the judge. The judge reviewed the contract, the judge made the determination that Sun had the right to ask for an injunction, and the judge granted that injunction. I think the right way to handle this is to leave it to the courts to decide and the judge has already decided to grant an injunction at Sun's request. We are simply asking for further injunctive relief.

MORRIS: By the way what I'd like you to do is visit our website. The court's opinion in the prior injunction matter is up and you can see his full discussion and analysis of this injunctive question and satisfy yourself.

OPERATOR: Eric Brown, Forrester Research.

BROWN: My question has to do with the language around compatibility. Obviously Write Once, Run Anywhere means that it's important for Sun that in the application run effectively under Microsoft's Java virtual machine. Does that mean Microsoft is not allowed to make innovation but that people could specifically Microsoft targeted Java application? It sounds like you were taking exception to their enhancement and extension of the Java language.

BARATZ: The core value proposition underlying the Java technology is Write Once, Run Anywhere. The mechanism for ensuring that that value proposition is preserved is that all licensees of the Java technology are required to deliver within their products only compatible implementations of that Java technology where compatible means passes the compatibility test we associated with each new releases of the Java technology.

BROWN: No supersets allowed?

BARATZ: No. No subsetting, no changing is allowed. However, we are allowing, in fact encouraging, our licensees to innovate on the Java platform to create new opportunities for using the Java platform and we work very closely with them to try to identify cases in which that innovation is innovation that it would make sense to re-integrate back into the platform. However, if you look at the issues we have with Microsoft they consist of not shipping the JNI; that's subsetting not enhancing. Not shipping RMI; that's subsetting not enhancing. Modifying the Java class hierarchy; that's changing not enhancing. The Java language changes are modifications, not enhancements. In fact, if you look at the changes that Microsoft is making to the language and to the VM, as a result of what we're expecting them to release with Windows 98, what you will find is that the goal in those changes is a goal that Sun has understood for over a year. Sun formed an expert working group to figure out what modification should be made to the language to support that functional goal, and in fact, through that working group Sun and its partners made modifications to the language that enabled the functionality that Microsoft is trying to go after here with their changes. So what we have is Microsoft introducing a different way of doing the same thing that Sun has already addressed through its open industry-participative process with its partners.

I think you might be further interested to know that in fact the changes that Microsoft has put in are the result of work done by an engineer they hired from a different company and this engineer while working at a different company had proposed these changes to the expert group as a part of Sun's original work in this area, and those changes were very seriously considered, in fact prototyped, but rejected by the expert group with participants from many companies because there was a better solution to providing that capability. So this is once again about Microsoft changing and Microsoft subsetting, not about enhancing for the benefit of the community.

OPERATOR: Louise Kehoe from Financial Times.

KEHOE: If you could go back to the exclusionary licensing issue, it's not clear to me how that directly relates to your complaint and therefore why you would include that unless you are asking for some further damages?

MORRIS: Well, the exclusionary licensing practices is something that we've only become aware of literally within the past month or two as discovery has gone on. Had we been aware of some of the stuff that we've recently become aware of we would have included it in the original complaint. A lot of that data is stuff that we can't share with you because it's been subject to the protective order.

BARATZ: The other thing to keep in mind is that these exclusionary licensing practices and unfair Win 32 logo practices were designed to promulgate the incompatible technology that Microsoft has created through breach of our agreement. So the two are related in the sense that Microsoft got access to the Java technology originally through our licensing agreement. Microsoft had created an incompatible implementation using our code as a basis, thereby breaching our agreement. And now their licensing practices and their logo practices are designed to promulgate that incompatible, illegal implementation. Illegal as a result of having been created through breach of our agreement.

POULSON: Okay, that's all the time we have today. Thank you very much for listening. I'm sure there are a lot more questions. Let me go through some housekeeping things here to conclude. To listen to a replay of the call, dial 800-633-8284. The reservation number is 427 0030. To schedule follow up interviews try the PR hotline at (408) 863-3321. We will post a transcript of this teleconference on the website this afternoon and we're working on getting a Q&A document done shortly as well to augment the press release which is on the website now. Thanks very much.