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From: bos...@well.sf.ca.us (Gerard Van der Leun)
Newsgroups: misc.legal
Subject: Apple Letter Accusing Microsoft
Date: 23 Feb 1995 05:49:52 GMT
Organization: The Whole Earth 'Lectronic Link, Sausalito, CA
Lines: 226
Message-ID: <3ih7m0$7nu@nkosi.well.com>
NNTP-Posting-Host: well.sf.ca.us
Summary: letter from apple to judge re: microsoft
Keywords: microsoft
X-Newsreader: NN version 6.5.0 #1 (NOV)

FORTUNE On COMPUSERVE Exclusive: 
Look in FFORUM -- Section 1 News & Views
To Read Apple's Letter to Federal Judge Sporkin Accusing 
Microsoft of Bullying Tactics


The simmering, decade-old rivalry between Apple 
Computer and Microsoft is  boiling over. On February 13, 
the day before Judge Stanley Sporkin made his now famous 
decision to strike down the Justice Department's 
controversial anti-trust consent decree with Microsoft, 
Apple Computer delivered an envelope of documents to the 
judge's chambers.


Those papers, which Judge Sporkin quietly placed in the 
public record of the case on Tuesday, February 21, give 
details of what Apple called anticompetitive practices of 
Microsoft in recent weeks.  The papers include an 
incendiary account of a January 13 meeting in which, 
Apple asserts,  Bill Gates personally threatened Apple CEO 
Michael Spindler that Microsoft would stop developing 
applications software for Apple's Macintosh if Apple didn't 
abandon its work on a software development tool called 
OpenDoc.   Microsoft is developing a similar object-
oriented development tool, OLE, that it hopes to make an 
industry standard.


Microsoft's reaction to the letter was terse.  Senior vice 
president Bill Neukom told Fortune late Wednesday night:  
``If the Apple believes it has some legal concerns about 
how Microsoft does business, they know how to find 
Microsoft and its law department. They haven't approached 
us yet.''


As a service to its Compuserve subscribers, FORTUNE is 
posting  a  electronic copy of the full text of the cover letter 
that accompanied the Apple court filing.  It summarizes the 
company's provocative allegations. For a glimpse of the 
*real* Silicon Valley, go to News & Views in the Fortune 
Forum. (GO FFORUM)  The letter was written by Apple's 
vice president, general counsel and secretary, Edward B. 
Stead.

===

Text of Letter from Apple to Judge Sporkin Re: Microsoft

====

February 13, 1995

BY HAND

The Honorable Stanley Sporkin
United States District Judge
District of Columbia
United States Courthouse
3rd & Constitution Avenue, N.W.
Washington, D.C.

Re: United States of America v. Microsoft Corporation

Dear Judge Sporkin:

I am writing on behalf of Apple Computer, Inc. ("Apple") to 
bring to the Court's attention certain anticompetitive practices 
of Microsoft Corporation ("Microsoft") in its recent dealings 
with Apple. Apple raises these issues now because the events 
of the last several weeks have convinced us that, without the 
continuing oversight of the Court, Microsoft will not honor the 
letter or spirit of the Final Judgment it negotiated with the 
Department of Justice which is now before you in U.S. v. 
Microsoft, Civil Action No. 94-1564.

The enclosed declarations of five Apple employees establish 
that Microsoft has repeatedly attempted to leverage its 
monopoly power in the market for desktop computer operating 
systems to expand its positions in the markets for development 
tools and applications software. Microsoft has attempted to: (1) 
bully Apple into dropping a copyright lawsuit brought to 
protect Apple proprietary software by threatening to deny and 
severely delaying access to the beta (developmental) version of 
its new Windows 95 (Chicago) operating system; and (2) 
pressure Apple into abandoning the development of a new 
software development tool, OpenDoc. a direct competitor of 
Microsoft's OLE, by threatening to discontinue altogether the 
development of Macintosh software applications. In each 
instance, Microsoft's conduct was approved, if not directed, by 
the highest level of company management.

The attached declarations relate the following series of events. 
Approximately a year ago, the manager of Apple's Cross-
Platform Product group, David Daetz, contacted Microsoft to 
obtain a copy of the beta version of Microsoft's newest 
operating system product, Windows 95.  Apple's Cross-Platform 
Development Group needed this beta release to ensure that the 
personal computers it is building operate with the 
DOS/Windows operating system as well as with Apple's own 
Macintosh operating system, and are fully compatible with the 
most recent version of Windows.  However, in response to his 
repeated requests for access to Windows 95, Mr. Daetz was 
advised by two different Microsoft employees that access to 
the beta release was being withheld because of litigation that 
was hanging like a "cloud" over the issue. The litigation referred 
to was Apple's long-standing copyright 
action against Microsoft over the Windows graphical user 
interface and, more recently,a lawsuit Apple filed in early 
December 1994 against a small software developer, the San 
Francisco Canyon Company ("Canyon").  Microsoft has been 
particularly concerned about the Canyon lawsuit, although 
Microsoft was not named as a defendant, Apple alleged in its 
complaint that Microsoft's Video for Windows software product 
contains the infringing "Canyon" code. 

Apple's Cross-Platform group's difficulty in obtaining access to 
the Windows 95 beta was explained to Apple's President and 
Chief Executive Officer, Michael Spindler. Mr. Spindler met with 
Microsoft CEO Bill Gates on January 13, 1995, and the Windows 
95 beta release was one of the topics discussed.  At the 
meeting, Mr. Gates stated that Microsoft's withholding of the 
beta code was "cause and effect": since Apple sued Canyon, Mr. 
Gates personally decided that Microsoft would not deliver the 
beta of Windows 95 to the Cross-Platform Group. (Nagel Decl. 1 
4) Mr. Gates agreed to provide the beta code only after Mr. 
Spindler agreed to telephone Mr. Gates personally before 
adding Microsoft as a defendant in the Canyon matter. Despite 
the agreement, the Windows 95 beta was not released to 
Apple.

A!so at the meeting on January 13, Mr. Gates threatened that 
Microsoft might cease developing application software for the 
Macintosh platform if Apple continues its development of 
OpenDoc, an open (non-proprietary) object-based compound 
document architecture that will present a competitive 
alternative to Microsoft's proprietary OLE architecture. 
Microsoft previously made known that it would prefer that 
Apple cease development of OpenDoc so that OLE will become 
the de facto industry standard. Since Microsoft is the largest 
supplier of software applications for the Macintosh, this threat 
was a serious one.

During the same period in 1994 that Mr. Daetz was requesting 
access to the Windows 95 beta, one of Apple's in-house law 
yers, Oscar Rosenbloom, negotiated a non-disclosure agreement 
("NDA") with Microsoft pursuant to which three unrelated 
groups within Apple were given access to an earlier beta 
release of Windows 95. However, when Mr. Rosenbloom later 
approached Microsoft about adding other Apple groups to the 
NDA and replacing defective copies of the Windows 95 beta. he 
was met by the same response as Mr. Daetz: Microsoft won't 
release the beta because of the Canyon lawsuit. In fact, Mr. 
Rosenbloom was advised in a voice-mail message from a 
Microsoft lawyer that Microsoft was evaluating terminating the 
existing NDA because of the Canyon litigation. 

Mr. Rosenbloom's supervisor, Cynthia Cannady, Apple's Director 
of Law for Manufacturing and Development, followed up on the 
voice-mail message left for Mr. Rosenbloom by contacting and 
meeting with the Microsoft lawyer involved. (Cannady Despite 
Despite Ms. Cannady's intervention, however, by the end of 
January Microsoft had still not authorized release of the beta 
version to Apple's cross-platform group. Mr. Spindler sent Mr. 
Gates a letter expressing his disappointment on January 31, 
1995, to no avail.

Finally, last week I personally telephoned Assistant Attorney 
General Anne Bingaman and brought these matters to her 
attention. I indicated that a filing with Your Honor might be 
necessary. Thereafter, I understand Ms. Bingaman telephoned 
Mr. Bill Newcombe, Microsoft General Counsel, and urged him 
to release the beta version of Windows 95 to Apple's Cross-
Platform Group. I also understand that Ms. Bingaman 
mentioned the possibility of Apple filing papers in the 
proceeding before you as an added incentive to Microsoft. Only 
after this Saturday night phone call from the Assistant 
Attorney General for Antitrust did Microsoft relent. Apple 
received the beta version of Windows 95 for the Cross-
Platform Group on February 8, 1995, nearly a year after our 
first request. 

Microsoft's actions are clearly aimed at forcing Apple to 
abandon intellectual property rights that Apple obtained 
through its own development efforts, thus permitting Microsoft 
to use Apple's property without compensation. There can be no 
question that this conduct constitutes unlawful leveraging of 
Microsoft's monopoly control over the DOS/Windows platform 
to control other markets.

The Department of Justice has alleged that between 1988 and 
July 1994 (the month in which the proposed Final Judgment 
was negotiated), Microsoft Corporation employed unlawful and 
anticompetitive practices to maintain its monopoly power in 
the world market for operating systems for personal 
computers. This charge of dereliction is far broader than the 
offense to which Microsoft confessed and which formed the 
basis for the consent decree. Based on Apple's most recent 
experience, there is a serious question as to Microsoft's good 
faith in entering into a narrow settlement agreement 
negotiated by the Department. Therefore, it is crucial that the 
Final Judgment contain amendments providing for the court's 
continued jurisdiction and supervision, redress for those third 
parties who may be subjected to Microsoft's anticompetitive 
acts, and compliance with the letter and spirit of the 
agreement. To this end, Apple suggests that the attached 
jurisdictional provision (Attachment F) be included in the Final 
Judgment as well asParagraph (b), (c), (d), and (e) of the court's 
order of January 19, 1995.

Apple provides the court with these materials fully aware that 
it is taking a substantial risk of retaliation from Microsoft- 
Microsoft's threats of witholding [sic] beta code and 
discontinuing the development of Macintosh software 
applications, if carried out, would be commercially devastating. 
Unless the court includes Apple's requested provisions in the 
Final Judgment, what recourse will we, other competitors and 
computer users have? Microsoft will be unfettered in pursuing 
its stated goal of "eliminating choice from the market".

Sincerely,

(Edward B. Stead)



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