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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
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Summary: letter from apple to judge re: microsoft
Keywords: microsoft
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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)